OPINION: Nokia, Running On Fumes

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The Nokia Lumia 800 - its first new smartphone running WP7

Despite reporting an operating loss of over 1 billion dollars, Nokia managed to pull off a feat to mollify the investors – 1 million Lumia Windows Phone device sales. That’s actually quite a respectable result considering the device has yet to make a showing in markets such as North America and Australia.

But aside from that, Nokia’s future doesn’t appear to be looking any brighter than it was a year ago, in fact maybe it’s even a little bleaker. What Nokia use to have in the market was exclusivity and scale. The tandem of those two factors ultimately led to Nokia’s commanding success.

Nokia has neither of these two factors today, aside from the exclusivity of being a 100% committed Windows Phone partner, but really that’s only working for Microsoft. The N9 running Meego Harmattan was certainly an exclusive, but with the promised commitment to run full steam with Windows Phone, Meego Harmattan’s potential may never be realised, or at most, a peripheral pursuit.

Of course, it’s not like Meego Harmattan had a big chance anyway.

And scale, is something Nokia simply can’t obtain given the R&D required to build any good smartphone, especially if you’re Nokia and really trying to deliver with a bang. Nokia’s now signature polycarbonate shell in the N9 and Lumia 800, 900 models is a feat of engineering that simply couldn’t have been achieved if the company had floored it and delivered a tsunami of Windows Phones in generic form factors and hardware variations.

The only segment where any economy of scale is possible, is in feature phones, once Nokia’s money-reeling gem but now declining precipitously in developed markets. Of course, there’s still money to be made there, and with most cellphone vendors relaying their focus to encompass smartphones 100%, Nokia is really in a position to take full control of the feature phone market. But there’s a reason why the world and the industry is stepping with both feet into the smartphone pool, it’s because not doing so would be committing to a world that will cease to exist in a very short time.

For Nokia, it’s even more crucial than this. As a company undergoing a brand image overhaul, investing excessively into feature phones would do nothing but hamper Nokia’s planned course to become viewed as a forward thinking company. Consumers can’t think of Nokia and see number keypads anymore.

Aside from the fact that Nokia no longer has significant leverage in the development chain to pump their business anymore, there’s also the issue of getting consumers to sign a contract to their phones which run on a platform that hasn’t gained the amount of traction that the company probably thought it would. Aside from getting the nod from reviewers, consumers are yet to see the great value proposition in Windows Phone.

Sure, 1 million sales exhibits promise, but it’s early days. The company has most likely skimmed the piece of market that gravitated towards Nokia in the first place, but from now on, it’s war and Nokia needs to pose some real fight – not only to lure consumers away from the eminent iOS and Android, but also to funnel them away from the other Windows Phone vendors in HTC, LG and Samsung among others.

The latter, an easy task that the company should win, but the former being a spectacularly tall order.

It stands to beg the question of why Nokia didn’t pursue the Android paved path in the first place. I can imagine it being an appealing option, Nokia’s acclaimed hardware quality and design paired with an OS that has solidified its position in the marketplace. It’s always nice to be on a winning team. But Nokia took a risk with Windows Phone, as a consumer I applaud the path they’ve taken, and from Nokia’s vantage, I would’ve done the exact same thing.

Success in Windows Phone will yield a significantly greater reward that would be irksome to supplant, whereas success with Android would simply be providing another option, as opposed to a different option.

It’s an uphill climb from here, and by sucking dry their loyal customer base in the first million sales, Nokia is essentially running on fumes. But since when is business not an uphill battle?  Build beautiful things, make sure people know about it and you can’t really go wrong.