Market Insight

Big Nokia launches for Microsoft's mobile future

October 21, 2013


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- Nokia announces its first large screen smartphones: the Lumia 1320 and Lumia 1520 both with six inch screens.

- The Lumia 1520 is the first Windows Phone running a quad core chipset (Qualcomm Series 800 chipset at 2.2Ghz) and a full HD 1080 screen. Other notable features in this premium smartphone: 20MP camera with ZEISS optics and optical image stabilization, Dolby sound, Qi wireless charging, micro SD, and has two different 4G/LTE variants for US and rest of world.

- The Lumia 1320 is an aggressively-priced large smartphone with more modest features. While the 1520 costs $749 the 1320 will be just $339 before tax and subsidy for an impressive set of features: 5MP camera, micro SD, 1.7Ghz dual core Qualcomm Series 400, 720P HD screen, with two 4G/LTE variants for China and rest of world.

- The three new Asha models 500, 502 and 503 extend the new software platform based on the Smarterphone acquisition Nokia pioneered with the 501 in Q2. Prices for the new models are $69, $89 and $99. There is no price difference between single and dual SIM versions.

- Asha 503 is the first 3G new Asha phone and is aimed at operator-controlled markets.

- Nokia also unveiled its first tablet, the Lumia 1520, which resembles a large Lumia smartphone complete with the same bright colour polycarbonate design, built-in 4G/LTE, but running Windows RT 8.1. It will cost $499 and launch in the US, UK and Finland initially.

- New software is a core part of Nokia's mobile propositions. Asha gains WhatsApp support. While Lumia smartphones gain Nokia Storyteller, Nokia Beamer and Video Director.

 

Both sets of new handsets are important products for Nokia and Microsoft. The Microsoft acquisition of Nokia's device business is yet to close, so the company must watch and hope Nokia's launches set up a strong foundation for Microsoft's mobile business

While the acquisition is in process, Nokia must continue to innovate in a fiercely competitive handset market. The risk with any major acquisition is that companies become distracted and inward looking rather than delivering compelling products and marketing. This is just as important in the period before an acquisition closes as it is once the legal terms are sealed and the re-organization processes kick in.

The new Asha handsets are a critical holding action against ever cheaper Android smartphones and a way to maintain customers that can later be sold Lumia Windows Phones. While Windows Phone can not yet reach down into this price segment, Nokia is using Asha to deliver a responsive experience with third party app support from LINE, EA's games and now WhatsApp. The new models feature a differentiated innovative industrial design of using a transparent plastic on top of the usual bright finish that Nokia should extend into its Lumia range. The 3G Asha 503 will enable Nokia to address operator-controlled markets in Eastern Europe and Asia that were difficult to reach with the 2G-only 501.

In the first half of 2013, Nokia shipped 9.3 million Asha handsets, 13 million Lumia smartphones and 100.7 million other handsets. But Nokia's share of the smartphone market was just 3%. Windows Phone had a similar woeful 4% of the smartphone OS market. Nokia needs new Lumia smartphones to extend its portfolio's appeal into new consumer markets.

The 1520 and 1320 smartphones are equally important for Nokia because they allow Nokia to target a segment Apple is not in - super large smartphones - so avoiding one major competitor. In this part of the market both Lumia models are differentiated: the premium 1520 by its high end camera and integrated wireless charging, and the 1320 by its compelling price for the 6 inch size screen and 720P HD resolution.

But Nokia is wrongly pulling its punches with the launch timing and geographic focus of the 1520 and 1320. While the 1520 launches widely in North America, Europe and Asia this quarter, the 1320 will not ship until early 2014 and initially just in China and Vietnam. Nokia should be aggressively pushing the 1320 to global markets before its competition launches similar value for money models. It is sufficiently different in price and features to the 1520 for cannibalisation risk to be low. Plus, frankly, Nokia is shipping so few smartphones compared to its rivals, that it will win more than it will lose if the 1320 were to cannibalise more expensive smartphone models.

By announcing the 1320 now, Nokia risks giving its rivals too much advance warning to adapt their product plans to counter the 1320 launch. This resembles the Nokia of old, before Stephen Elop announced Nokia would remove the gap between product announcements and sales. The 1320 will also miss out on the seasonal boost to the market in Q4.

Nokia and Microsoft must accelerate innovation if Windows Phone is to be any more than a niche part of the market. Nokia has been held back from launching 1080P full HD screen smartphones and quad core designs because of lack of support in the Windows Phone OS. The Lumia 1520 still has the odd dual resolution camera capture of the 41MP Lumia 1020 without the ability to share or back-up the high resolution photos from the smartphone itself, again this is a weakness in Windows Phone OS. While the new Lumia handsets are stronger products, they both highlight how much work the two companies have left to do to make Windows Phone genuinely competitive.

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