Do Nokia and Windows Phone Have Any Hope for 2012?

Ben Bajarin / January 12th, 2012

There were a number of priorities for me at this years CES.  One of my top priorities was to better understand Nokia’s strategy for Windows Phone and the US Market.  Secondarily to Nokia’s US strategy was Microsoft in general and whether Windows Phone can grow in market share in the US in 2012.   

As I have written before, Nokia has again entered the conversation at large, but more importantly, they have become relevant in the US smart phone market.  I have expressed my belief that they contain some fundamental strengths, like brand, quality design, and marketing smarts, to at least compete in the US.

For Nokia, this years CES bore two important and timely US events.  The first was that their US presence was solidified when the US sales of their Lumia 710 officially became available at T-Mobile this week.  The second was the announcement at this years CES of the Lumia 900 which will come to market on AT&T.   

Both products are well designed and the Windows Phone experience is impressive.  That being said, Nokia’s and Microsoft’s challenge is primarily convincing consumers that Windows Phone is an OS worth investing in.

I use that terminology because that is exactly what an OS platform is asking consumers to do.  Not only invest but allow this most personal device to become a part of their life.

Currently, only a small fraction of consumers are convinced that they should buy into Windows Phone 7 and it will take quite a bit more convincing for most.  Nokia and Windows Phone face stiff competition with the army of Android devices and the industry leader in Apple. If anything, Nokia and Windows Phone have a small window of opportunity to rise above what is the Android sea of sameness – but it is only a small window. This is because many more of Android’s core and loyal (on the surface) partners will continue to invest resources in Windows Phone over the next few years. If Microsoft and Nokia are successful the result should be that the market will contain not only a sea of Android devices but of Windows Phone devices as well.

This is why the battle will again turn to differentiation across the board on both the Android and Windows Phone platform. I have previously dared the industry to differentiate and this will need to be the focus going forward.

As I look at where we are right now, it appears that Nokia is faced with an unfortunate dilemma.  Nokia now bears the difficult task of not only spending money to develop their brand in the US but to also help Microsoft convince consumers Windows Phone is the right platform for them.

Microsoft is unfortunately not building or investing in the Windows Phone consumer marketing as aggressively as they should on their own.  So rather then be able to simply focus on their brand, Nokia must also invest in marketing Windows Phone. This will inevitably help Nokia but also their competitors in the long term.

All of this, however, presents Microsoft with what is the chance of a lifetime and it all relates to Windows 8.  The importance of Windows 8 to Microsoft seems to be wildly shrugged off by many.  But I believe that if Microsoft does not succeed in creating consumer demand with Windows 8, they will begin to loose OS market share even faster than they are right now.  

Windows Phone’s success in 2012 can pave the way for Windows 8.  If Microsoft can, at the very least, create some level of interest and ultimately generate demand for Windows Phone, it will almost certainly do the same for Windows 8.  This is because once you have gotten used to the user experience of Windows Phone, it creates a seamless transition to the Windows 8 experience.   

If Microsoft can generate some level of success for Windows Phone in 2012, it will build a needed level of momentum for Windows 8. Primarily because the Windows Phone and Windows 8 Metro UI are very similar.  All of these steps are necessary for Microsoft to not only create demand for their OS platforms but to also create demand for their ecosystem.  I have emphasized the importance of the ecosystem in past columns and Microsoft must leverage their assets to create loyal consumers.

So what is my conclusion for 2012?  Simply put, and to use a sports analogy, it is a rebuilding year for Microsoft and Nokia.  Both companies need to view 2012 as a “laying-a-foundation-for-the-future” year.  I do expect Windows Phone and Nokia to grow in market share in the US but I am not sure if we can count on double digit growth. If both companies play their cards right in 2012, then 2013 will present them with the growth opportunities they both desire.

Past Columns Mentioned:
Why Nokia is Interesting
Dear Industry – Dare to Differentiate
Why It’s All About the Ecosystem

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
  • Lucidthinker

    I respectfully disagree that the wide adoption of Windows Phone 7 will help drive the adoption of Windows 8. While there are some UI similarities between Windows Phone 7 and Windows 8, the similarities are minimal (in my view). In Windows 8, you still have to deal with a mouse, keyboard, file management, drivers, etc. etc. Smart Phones and PCs are two totally different animals and each has their pros and cons.

    Additionally, the fact is that based upon browser statistics close to 50% of internet users are still using Windows XP. Windows 7 has been out for over 2 and a half years and it only has 37% browser statistics share. For the VAST majority of people out there, email, web surfing, and light document/photo creation/editing encompasses the majority of what people do with their PCs and unless their PC breaks they can do those things just fine on a windows XP box or for that matter a tablet or smartphone.

    I think that the key thing driving purchases of new PCs is replacements for a broken one. You get a new OS as part of the package. Also, typically a Windows XP era PC tends to run Windows 7 or 8 for that matter poorly. In this economy, most people will choose not to upgrade when they can do what they need to do now with their current machine. This may be why we still only see a 37% penetration for Windows 7. Unlike the Windows 98 to XP transition which happened quite a bit faster.

    So, you have the fact that a percentage of potential buyers for new PCs are being siphoned off to tablets/smart phones coupled with the fact that the upgrade path from XP to Windows 7/8 generally requires a whole new PC are primary drivers as to why you saw PC shipments fall the last quarter of 2011. In fact, PC shipments have been flat or down for quite a while now.

    http://www.infoworld.com/t/desktop-computers/give-ipad-some-credit-apples-brisk-mac-sales-183931

  • Alfiejr

    i agree Windows Phone will pick up some momentum once Windows 8 and full XBox integration are finally welded with it into a complete MS ecosystem in 2013. assuming it “just works.”

    but Apple and Google are getting there way before MS. not just in a technical sense, but even more important, in consumers’ minds.

    which means Windows Phone is destined to always be a distant third in the US market for as long as we can foresee (unless Android gets badly hobbled by the lawsuits).

    and without an exclusive right to Windows Phone, as the article notes Nokia is really being set up by MS to be hung out to dry. having to split Windows Phone’s small US market share with all the other OEM’s will leave it with small potatoes sales even tho it will be the high-end flagship.

    worldwide, Nokia might do better with Windows Phone thanks to it larger base. but i have the feeling we are looking at the next Saab – another Scandinavian company with well-regarded products now facing bankruptcy due to cutthroat global competition.

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