In what to many investors must seem like a slow-motion effort to revive the company, Nokia Corp. (NYSE: NOK) today will introduce its latest smartphones running the Windows Phone 8 operating system from Microsoft Corp. (NASDAQ: MSFT). The introduction comes one week ahead of an expected announcement from Apple Inc. (NASDAQ: AAPL) for its latest smartphone, the iPhone 5.
There’s a lot at stake for both Nokia and Microsoft today. The Finnish company needs a blowout winner on the order of the Galaxy S III from Samsung Electronics, which is currently selling better than the iPhone 4S. For its part, Microsoft needs to gain a firmer toehold in the smartphone operating system space.
But what is good for one is not necessarily good for the other. Samsung and other smartphone makers have said that they will manufacture and sell Windows-based phones. Nokia, which currently holds more than 80% of the (small) market for Windows-based phones, will certainly lose share to Samsung, HTC Corp. and Huawei Technologies.
The spread of the Windows Phone operating systems to other makers is not particularly good for Nokia, but it could be even worse for Google Inc. (NASDAQ: GOOG) and the company’s Android operating system. HTC and other smartphone makers already pay Microsoft a licensing fee for each Android phone that the makers sell. Microsoft probably makes more money off Android than Google does.
For Samsung and the others, it may be cheaper to just license Windows Phone and ditch Android, especially if the new operating system gains a significant following. Microsoft wins in such a scenario, but what about Nokia? Will the company’s hardware compete successfully at multiple price points in multiple markets over a significant number of years? One successful product will not turn the Nokia ship around.
Nokia’s shares are trading down about 0.4% in premarket activity this morning, at $2.82 in a 52-week range of $1.63 to $7.38. Two years ago, Nokia shares traded at more than $9.00.
Paul Ausick
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