When Nokia (NOK) dumped its Symbian operating system in favor of Microsoft's (MSFT) Windows Phone operating system, many investors and consumers were angry at the company. These people were not angry at Nokia for dumping Symbian, but for picking Windows Phone as its operating system instead of the highly popular Android (GOOG). Even Intel's (INTC) CEO Paul Otellini said that if he was leading Nokia, he would have gone with Android instead of Windows. Basically, the company put all its eggs in one basket and many thought this decision showed that the company's CEO Steve Elop was still as committed to Microsoft as he was to Nokia. Of course, the fact that he was a former executive at Microsoft didn't help the matters either.
For a long time, it looked like Nokia and Microsoft had a special bond. We all knew that Samsung and others would also be producing phones running on Windows Phone 7 and Windows Phone 8, but still, we thought there was something special going on between the two companies. On Wednesday, when Microsoft's CEO Steve Ballmer made an appearance at the announcement of HTC's new Windows phone, it drew suspicion of many investors of Nokia. Is Microsoft having "affairs" with other phone companies, and is it necessarily bad for Nokia?
HTC's new Windows phone will be in available through 150 carriers in 50 different countries. Normally most of HTC's phones run on Android, and this is where the company generates the most revenue. On the other hand, the company's low prices eat into its margins and the company is struggling to generate a positive cash flow. The company hopes to increase its margins with the new Windows phone, which will look a lot like Nokia's Lumia model.
On a positive side, both HTC and Samsung will spend their resources to market their Windows 8 phones, and these companies will help the ecosystem gain visibility. The positive visibility of Windows Phone 8 ecosystem might encourage the customers of Nokia, who love the brand but are hesitant of Windows ecosystem, to buy Nokia's Lumia phone. Compared to HTC's Windows Phone, Nokia's phone is superior in many aspects including but not limited to overall quality, the camera, and the Nokia-specific apps such as Nokia Maps, Nokia Music, Nokia City Lens, Nokia Transit and Nokia Drive. Nokia's head of marketing Chris Weber also acknowledged this by saying that Nokia is the only company that is fully committed to the Windows ecosystem and that HTC's entrance in Windows 8 ecosystem was good for the ecosystem.
Today is more good news for the Windows Phone ecosystem. While others may choose to tactically re-brand their products, Nokia is driving an industry-leading smartphone franchise - that we call Lumia -- exclusively around Windows Phone. With Lumia, we are creating truly differentiated experiences like PureView imaging, location and navigation, wireless charging and Nokia Music. And we're just getting started!
As for Microsoft, the company only cares about its own good and there is nothing wrong with that. In the business world, profits come before everything else including friendships and partnerships. Microsoft desperately wants Windows Phone 8 ecosystem to compete with Google's Android and Apple's (AAPL) iOS, and the company will need many partners in this quest. Ethically, the company could give more preference to Nokia who risks its very existence by putting all its eggs in Microsoft's basket; however, in the business world, profit comes before everything else.
Don't get me wrong, I actually like the fact that Microsoft is desperate. It should be desperate! The company's desperation will push it to spend its resources to market Windows Phone 8 ecosystem. During the holiday season, Microsoft will have to market its ecosystem very heavily and this will be good for companies like Nokia. In the last few years, Nokia lost many of its customers to Apple, Samsung and other companies; but this wasn't necessarily because Nokia's phones were bad. This was because Nokia's phones didn't have an appealing operating system for the customers. Many customers stopped buying Nokia's phones once the company opted for Symbian over Android. Now, if the Windows ecosystem gains attention, Nokia will be the first company to benefit from it because the company still has many loyal fans who believe that the company's products are great as long as they come with a decent operating system.
Microsoft's Mr. Ballmer defined HTC's new phone as:
Truly a Windows Phone hero product.... Together with HTC, we have a very clear branding and go-to-market strategy.
I find this particularly interesting because Mr. Ballmer might not be able to say the same things about Nokia. It looks as if Nokia doesn't have a clear branding and go-to-market strategy. The company didn't even announce the carriers that will get the Lumia 920. We don't even know when the phone will be available in most countries. The phone is expected to hit the shelves in the US and select European countries by early November but there is no word on other countries such as India and China where Nokia has strong fan bases.
Nokia's management looks too comfortable for a company that might go bankrupt in a matter of quarters. I don't see sense of urgency in the company's management. The company has done a great job of coming up with a high quality phone; however, success takes more than just building great products. What's the use of building the best product in the world if you can't convince people to take a look at it?
If Steve Elop came on stage today and told people that Nokia's Lumia 920 will be available on X date in 100+ countries through 300 carriers and the phone's price will be X dollars, and removed the uncertainty surrounding the product, many of the company's consumers and investors would be very happy. Instead, the company stays quiet about details.
Soon Windows Phone 8 commercials will be on TV, on the internet and in newspapers. I am very curious to see the TV commercials of Microsoft and Nokia during this time. Knowing that this may be Nokia and Windows Phone ecosystems' last chance against Apple and Samsung, I hope to God that they do a really good job of advertising their products. The final front of this war is about to be fought, and while I am not impressed with the marketing capabilities of Nokia's management, I will continue to put my faith in them for the time being. This holiday season will determine whether Nokia will be able to stand up by its own or Microsoft will have to acquire its partner to keep Windows ecosystem alive.
I am long Nokia but the company's shares make a small percentage of my portfolio. Apple makes up the largest portion of my portfolio.
By the way, feel free to check out this poster comparing iPhone 5 with Lumia 920: