Should Nokia Be Worried About Samsung's Early Announcement Of A Windows Phone?

Sep. 4.12 | About: Nokia Corporation (NOK)

Last week, Samsung (OTC:SSNLF) just went ahead and announced its new phones for the Windows Phone 8 operating system. Many people think that this will be a major blow to Nokia Corporation (NYSE:NOK), which wanted to be the first company to announce a new phone for the operating system of Windows Phone 8. I don't really agree that this will be such a big blow for Nokia. The way Samsung announced its new Windows Phone was more like, "hey, we have 8 new Android phones for consumers to choose from, oh by the way, we also have a Windows Phone if they want to buy one." Nokia's announcement is set to be completely different, with the Windows Phone taking on the starring role.

Nokia's announcement will be made jointly with Microsoft Corporation (NASDAQ:MSFT), and it will be a huge marketing event. Some of the biggest carriers in the world such as AT&T Inc. (NYSE:T) and Verizon Communications (NYSE:VZ) will also be there to promote the new Nokia phones.

Besides, just because Samsung announced its Windows Phone a few days earlier doesn't mean that consumers will choose Samsung's Windows Phone over Nokia's. You're not likely to hear a consumer saying, "well Nokia's phone is better in many ways, but Samsung announced its phone four days earlier, so I will stick with Samsung's phone."

Samsung's new Windows Phone is called ATIV S and it will come with 4.8-inch display, 8-megapixel camera and 1.9-megapixel front facing camera. Nokia's Pureview technology is able to produce mobile phones with near 40-megapixel cameras and many people expect Nokia to include this technology in its new phones. There is a big chance that Samsung's Windows Phone models will be buried under Samsung's own Android models whereas Nokia's Windows Phone models will take the front seat. In order to position itself better against Apple's (NASDAQ:AAPL) lawsuits, Samsung might shift more of its focus on Windows Phone models; however, the company's main driver of profit continues to be the Android phones.

Some analysts argue that by allowing Samsung to announce its next Windows Phone before Nokia, Microsoft shows to the world that it will not favor one company over another. Nokia put all its eggs in one basket, while Samsung didn't - and Microsoft rewards Nokia by paying it cash on quarterly basis. Samsung is expected to release many more Windows Phone models in the near future, while Nokia continues to dominate Windows Phone ecosystem. I am sure Nokia will continue to receive special treatment from Microsoft, as the company is ran by a former Microsoft executive and the two companies have a strong relationship.

I think Samsung's entrance to the Windows Phone 8 market might be even bullish for Nokia. Until recently, many people didn't even know about the existence of Windows Phone ecosystem. Obviously, Nokia and its mobile carrier partners, such as AT&T didn't do a good job of marketing the ecosystem. Samsung is known for its heavy marketing and the company will bring in a lot of visibility for the Windows Phone 8 models. Now, consumers will be aware that there is a third ecosystem in the market, apart from Apple's iOS and Google's (NASDAQ:GOOG) Android.

Globally, Nokia is still a strong brand name, and the improved recognition of the Windows Phone models will make Nokia phones more attractive to the general public. It's not uncommon for people to say, "I would buy a Nokia phone if only it had a good operating system." If people see that the Windows Phone 8 is a good operating system, more of them might switch to Nokia.

Nokia continues to be the world leader in low-end and medium-end phones, while Samsung and Apple dominate the more profitable high-end market. In the next five to 10 years, many of the low-end and medium-end phone users will switch to high-end phones as the global economy continues to develop. The potential for the next decade is about 1-2 billion conversions from the low-end market to the high-end market. If the millions of Nokia users are happy with their low-end phones, they are likely to upgrade to a high-end Nokia phone when they are able to afford these phones. Having a strong brand name in regions like Africa and India will help Nokia greatly in the next 5-10 years as the people in these regions upgrade their phones.

Globally, the Windows Phone operating system has a market share under 4% in the smart phone market, while Android phones enjoy a market share of 68% and Apple enjoys a market share of 17%. This could be both good news and bad news for the Windows Phone ecosystem. The good news: there is so much room for growth. The bad news: this will be an uphill battle with many powerful adversaries.

Nokia's new phones will come with many features other phones will not have. Pureview is just one of these things that will set Nokia apart from the competition. Many consumers aren't even aware of Nokia's existence in the smartphone market. In fact, many of the people that are supposed to market these phones, such as the sales people at AT&T, seem to be unaware of these phones. At this point, Microsoft has to be very noisy about the Windows Phone operating system. I don't know if Nokia has the resources to advertise its new line of phones heavily, and we know that marketing is not one of Nokia's main strengths.

Nokia is good at producing high quality products that meet or exceed many standards, but it is not good at marketing these products. Microsoft has every resource in the world and the company should use plenty of money to advertise the Windows Phone ecosystem. If Microsoft wants to have a piece of the smart phone market and challenge Apple's dominance, it has to use a significant portion of its cash to market what it calls the biggest release in its history since Windows 95.

This week, we will finally get to learn about Nokia's new set of phones. It will be exciting, but scary at the same time, because the company's very survival will depend on these phones. I continue to be long Nokia because I believe that the company will turn around successfully. I've never seen a company put up as good quality products as Nokia on its way to bankruptcy.

Disclosure: I am long NOK, AAPL, MSFT, GOOG, T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.