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Reality Slaps Microsoft And Nokia In The Face After Lumia Launch

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 Reality Slaps Microsoft And Nokia In The Face After Lumia Launch

Yesterday was a big day for Nokia Corporation (NYSE:NOK). The company was set to launch two new phones, the first to take advantage of Microsoft Corporation (NASDAQ:MSFT) Windows Phone 8 software, and another turn in what has been a twisted year for the Finnish handset manufacturer. The firm’s shares opened at $2.86 in New York yesterday morning. After the dust of the launch had settled, the company’s shares had fallen to $2.38.

The question that had many puzzled after the shares slumped was, what exactly the company did wrong? We’ve already covered one of their major mistakes. The company failed to address the issue of availability and distribution in any meaningful way. This did not come across as a mysterious Apple Inc. (NASDAQ:AAPL) homage, but rather a mark of disorganization at the company.

Microsoft Corporation (NASDAQ:MSFT) will be disappointed by the ineffectiveness of the launch. The road to being a player in the smart phone market is going to be much harder than had been previously anticipated. Nokia’s new phones the Lumia 920 and the Lumia 820, were solid updates in a solid line up of phones.

A report on the launch, released by Credit Suisse, suggests that things will get worse before they get better for Nokia Corporation (NYSE:NOK). The analyisis appreciates the efforts being made to target the launch to “specific markets”, but notes that this will almost certainly hurt the company in the short term.

Nokia Corporation (NYSE:NOK) will now be offering Windows 8 phones in certain markets, while other markets have to remain content with older models. The company has already made clear that there will not be any upgrades to older phones, including the Lumia 800, released just a few months ago. This, the report projects, will result in dramatically lower sales of the older smart phone models in a market that will not see the release of the Lumia 820 quickly.

Coupled with sales pressure from higher performing products, like Samsung’s Galaxy S3, and the assumption of a more powerful iPhone 5, Nokia is likely to see a significant contraction in its market share in the coming months.

The analysis projects that the company’s share of the smart phone space will shrink from its current standing of 7%, to 3% in 2013. The company held 16% of the market in 2011, though that was mostly due to its moribund Symbian operating system, which is still retaining a hold on the lower end of the market.

Losses will also continue at the company. In 2012 the firm is predicted to lose 2.6 billion euro. In 2013 the firm is projected to eke out a small profit of around 75 million euro. The majority of that turnaround is expected to come not from Revenue increases, but from massive cuts to the company’s cost base.

The most important word in reference to this launch is base. Nokia Corporation (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT) are looking to build a base in the smart phone market. The launch of the Lumia 800 failed to achieve this, the launch of the Lumia 820 looks to do little better.

Nokia’s base in lower end feature phones is quickly eroding. Analysts have been suggesting for months that the company spin off the feature phone business. Branding suffers from connotations with cheaper less lifestyle focused phones.

Branding will be all important in building a base of smart phone users that associate with the product, and are likely to be repeat purchasers. With the launch of Windows 8 in a few short weeks, consumer consciousness of Windows Phone 8 should increase dramatically. A positive reaction to the PC OS will result in positive ripples for the mobile version.

Windows Phone 8 has not been launched yet, but it has already hit its first hurdle, both Microsoft Corporation (NASDAQ:MSFT), and Nokia Corporation (NYSE:NOK) will have to accustom themselves to a new strategy, that is, if they want to truly succeed in the mobile market.

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Paul Shea

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