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Nokia's fall from grace

Armando Rodriguez | July 16, 2013
Windows Phone is holding back one of the most promising phone makers in the industry.

What should have been a day of pride for Nokia served only to remind the world how far the company has fallen. At last week's Lumia 1020 event in New York, it became clear that the company has no plans to change its ways--even if its stubbornness means sliding into irrelevance in the smartphone market. As Apple and Samsung duke it out for first place, Nokia is left fighting for the scraps along with BlackBerry and every other unlucky device maker in the smartphone game.

How did the number one phone maker in the world end up an also-ran? Simple: it bet the house on Windows Phone.

Nokia's mistakes
In 2011 Nokia and Microsoft established a strategic partnershipin which the Finnish phone manufacturer agreed to make smartphones that ran on Microsoft's mobile operating system, while simultaneously phasing out Symbian. Earlier Windows phones from the likes of HTC and Samsung hadn't been all that impressive, but people were confident that Nokia--already beloved around the world for its durable and colorful handsets--could save the platform from obscurity.

The Lumia 800, Nokia's first Windows Phone, was well-received abroad, and the U.S. public seemed excited at the idea of a Nokia smartphone that would work with U.S. carriers. But the first Windows Phone that Nokia brought stateside was the Lumia 710--a phone that lacked the polish and style of the 800 and was limited to one of the smaller nationwide mobile carriers (T-Mobile). The Lumia 900, which followed a year later, was a much better handset, but once again its distribution was limited to a single carrier (this time, AT&T).

These single-carrier deals arose partly because Nokia didn't (and doesn't) have the clout necessary to release a phone on all four major carriers at once. Even before it made smartphones, Nokia was more popular in other parts of the world than it ever was in the United States, where its name doesn't carry the same gravitas that Apple or Samsung does. Without a huge success under its belt, Nokia must launch its phones with carrier exclusives and co-marketing deals.

Owing to limited phone availability and an overreliance on Microsoft's phone OS (which wasn't gaining traction in the marketplace), Nokia's earnings in the fourth quarter of 2011 dropped by an astounding 73 percent, and at the beginning of 2012 the company had sold just 1 million Windows Lumia phones since launch--far fewer units than its Apple and Android competitors had sold during the same period. Even so, people remained hopeful that Nokia would catch on.

Gartner analyst Carolina Milanesi told Reuters that Nokia needed to step up its marketing efforts to drive sales of Lumia phones and recoup some of its losses. She explaine, "Android is still an easy sale. Nokia needs to convince the sales people in stores to sell Nokia."

 

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