Analysts: Nokia still has a mountain to climb

The company has to convince consumers to consider Windows Phone

Getting two Windows Phone-based smartphones ready for Nokia World was quite an accomplishment for the phone maker, but it still must overcome many challenges to turn around its smartphone business, according to analysts.

Nokia announced on Wednesday the Lumia 800 and the Lumia 710, which will start shipping in November and at the end of the year, respectively. Stephen Elop, who took over as CEO a year ago, announced in February that Nokia planned to use Windows Phone as its primary smartphone operating system.

"The thing that impressed me the most was that Nokia managed to get two phones out the door after a standing start eight months ago," said Ben Wood, director of research at CCS Insight.

Francisco Jeronimo, research manager at IDC, was also surprised by the time it took the company to ready two phones, with more on the way. "It is not easy for a company to launch a completely new operating system from scratch," he said.

People may not remember that at this time last year Nokia was imploding, according to Wood.

"The CEO had gone, [executive] Anssi Vanjokki had resigned, and Stephen Elop had been appointed, but it was far from clear where he was going to take the company, but here we are," said Wood.

The company has gotten itself to the start gate, but now Nokia has a big mountain to climb to get itself back into the smartphone business, according to Wood.

To become successful it has to resurrect the Nokia brand, and also get consumers to try Windows Phone, because unless they do, it will be difficult to get them to buy one of Nokia's devices, said Wood.

Nick Dillon, analyst at Ovum, shares that view: "Many potential Windows Phone customers will have already bought an Android or iPhone and will have some form of attachment to those platforms," he said.

Those customers are familiar with the way their Android or iPhone phone works and have likely spent money on applications. "Nokia will have a challenge to convince them to switch to what is a largely unknown, and therefore risky, alternative," he said.

Also, when users go into stores to buy a new phone, they will still be met by an avalanche of phones based on Android as well as the new iPhone, which is not easy to compete with.

"The most important task Nokia has is to make sure that users think about Windows Phone the next time they buy a smartphone," said Jeronimo.

An important part of Nokia's resurrection strategy will be to work on what will help set its phones apart from the competition. At Nokia World, the company highlighted its design, navigation application Drive, music services and a sports hub developed with ESPN.

"It is vanilla Windows Phone with a few tweaks. This time next year we will see the fruits of the labor of Nokia and Microsoft working deeply together, and to me that is the next step," said Wood.

Today, that still leaves the question of why consumers would choose a Nokia device. Samsung makes a nice Windows Phone, as does HTC, according to Jack Gold, analyst at J.Gold Associates, who was underwhelmed by Nokia's Windows Phone launch, and wanted the vendor to talk more about its plans for North America, as well as for the enterprise.

Nokia said it will start selling smartphones based on Windows Phone in the U.S. early next year, but didn't offer more details, other than saying that it will offer a portfolio of products.

Send news tips and comments to mikael_ricknas@idg.com

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Tags mobileMicrosoftsmartphonesNokiaconsumer electronicsMobile OSesWindows Phone

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Mikael Ricknäs

IDG News Service
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