Nokia has been nearly locked out of the smartphone market in the U.S. even though it is the largest handset maker in the world. Its global share is 35%. Nokia has been so desperate to pick up its sales in the sector that it has tied itself to another product that has done poorly — Microsoft’s mobile OS 7. Nokia can count on the tremendous firepower that Redmond has to market the new handset — and its OS software. The available funds may even be greater than those of Research In Motion (NASDAQ: RIMM) and Apple (NASDAQ: AAPL). Microsoft has shown its resolve in the video game and search markets with investments that are both unprecedented and risky. The effort worked for the Xbox, but so far has failed for Bing.
It is unfair that new tablet PCs and smartphones are judged by the media and analysts within days after they are released. But that is the case. Launches are compared to those of the Apple iPhone 4S, which was successful, or the RIM Playbook, which was not. Playbook sales were slow early. The press said that meant there would be no market for the tablet. By doing so, it nearly guaranteed that the product would fail.
Nokia and Microsoft have to face the bias that they never can create smartphones with the features of the iPhone and Google (NASDAQ: GOOG) Android devices. No matter what the investment, the Lumia 710 will be torn apart by the media before it is a few days old, unless sales surge well beyond expectations.
Douglas A. McIntyre
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