* Nokia unveils new Lumia handsets next week
* Phones will feature Microsoft's new Windows Phone 8 system
* Loss-making Nokia needs phone to be hit
* Microsoft's mobile ambitions may hinge on launch
By Sinead Carew and Bill Rigby
NEW YORK/SEATTLE, Aug 31 Microsoft Corp (MSFT.O)
and Nokia Oyj NOK1V.HE(NOK.N) are loading up for their best --
and possibly last -- shot at denting a smartphone market
dominated by Apple Inc's (AAPL.O) iPhone and Google Inc's
(GOOG.O) Android mobile software.
If the new Lumia phones do not appeal to consumers when they
are unveiled next Wednesday, it could mean the end for Nokia,
and a serious blow to Microsoft's attempts to regain its footing
in the mobile market, analysts and investors said.
"This is very high stakes," said Canaccord Genuity analyst
Michael Walkley. "Nokia bet everything on Windows, and if this
doesn't succeed the next step might be having to do what's best
for shareholders, and that might include selling off key assets
or selling the whole company."
The Finnish handset maker has logged more than 3 billion
euros in operating losses in the last 18 months, forcing it to
cut 10,000 jobs and pursue asset sales.
Its share of the global smartphone market has plunged to
less than 10 percent from 50 percent during its heyday before
the iPhone was launched in 2007.
For Microsoft, a successful Lumia launch would convince more
handset makers and carriers to support its latest phone
software, which is based on the same code as the upcoming
Windows 8 computing system, and promises faster performance and
a customizable start screen.
Windows phones have only captured 3.7 percent of the global
smartphone market, according to Strategy Analytics. Android
phones have 68 percent, while Apple has 17 percent.
The new Lumia phones will hit the market just as the world
of Android reels from a potentially crushing legal blow, and as
Research In Motion Ltd's RIM.TORIMM.O BlackBerry continues
A California jury decided last week that some of Samsung
Electronics Co Ltd's (005930.KS) hot-selling Android smartphones
copied features of the iPhone, which may result in import bans
and drive handset makers to put more resources into making
Windows-based phones. [ID:nL2E8JP2NV]
The judgment opens a window for Microsoft to exploit -- but
it first needs to find favor with consumers.
"Windows Phone really is going to have to stand or fall on
its own, it's going to have to appeal to consumers," said Jack
Gold, an independent mobile analyst who runs consultancy J. Gold
Graphic of smartphone market: link.reuters.com/zuc42t
Samsung's new Windows phone [ID:nL6E8JTKY7]
Latest on Apple-Samsung dispute [ID:nL2E8JT06X]
Microsoft's Windows Phone 8 launch [ID:nL1E8HK8OK]
Nokia is expected to launch two new Lumia phones on Sept. 5,
on the same day that phone maker Motorola, now owned by Google,
also unveils a new product.
It kicks off a busy fortnight for mobile devices, with
Amazon.com Inc (AMZN.O) expected to introduce new Kindle tablets
on Sept. 6. Apple is seen unveiling the newest iPhone on Sept.
The costlier of the two Lumias will go up against the
iPhone, and is expected to feature a larger, brighter screen; a
powerful camera on both sides; Qualcomm Inc (QCOM.O) dual-core
chips; Skype calling; voice recognition; short-range radio
technology for wireless payments and built-in maps for
But Lumia will need something completely different to beat
the iPhone and Android, such as a bold new shape, exceptional
camera quality or a mini-projector, said Tero Kuittinen, an
analyst at mobile diagnostics company Alekstra.
Part of the problem is that Windows Phones have only 100,000
or so apps, compared with about 500,000 for Android or iPhones.
"Developers want to see more devices, and people want to buy
only when they see more apps," said Sid Parakh, an analyst at
fund firm McAdams Wright Ragen. "I'd say it will take years,
they are so far behind."
Nokia may not have years. Finland's most famous company,
relegated to second place in the global cellphone market by
Samsung after more than a decade at the top, has bet its
smartphone future on Microsoft.
Samsung stole some of Nokia's limelight by being the first
to unveil a phone based on Windows Phone 8 software on
Wednesday, a week before Nokia's event. Canaccord's Walkley
expects Samsung to offer steep price discounts for Windows
phones in markets where Nokia is also launching its phones.
While Samsung, HTC Corp (2498.TW) and Huawei Technologies Co
[HWT.UL] are also making phones based on the new Windows
software, only Nokia is focused entirely on Windows Phone 8.
This means that Nokia should be able to deliver more
sophisticated Windows phones.
SUPPORT FROM CARRIERS
The job of saving Nokia, and getting the new Windows Phone 8
software off to a strong start, falls to Nokia Chief Executive
Stephen Elop, the former Microsoft star who forged the agreement
between the two companies.
One thing Elop has in his ammunition bag is support from big
U.S. mobile service providers who want see Windows become a
third strong smartphone platform to counterbalance the market
heft of Android and Apple, which charges a heavy price premium.
Top U.S. wireless providers Verizon Wireless (VZ.N)(VOD.L),
Sprint Nextel Corp (S.N) and Deutsche Telekom's (DTEGn.DE)
T-Mobile USA have all said they will support Windows Phone 8,
and AT&T Inc (T.N) said it will sell Nokia phones based on the
"Everybody's liking what they see coming from Microsoft with
the Windows 8 (mobile) platform from the user experience
perspective and the integration perspective," said Bill Versen,
a Verizon Wireless executive who works with business customers
on their smartphone strategies.
"Enterprises have Windows-based platforms they're using for
their businesses. They've been waiting for Microsoft to mobilize
that in a user-accepted way," he added.
Because Microsoft's new phone software is similar to the
upcoming Windows 8 desktop and tablet software - to be released
on Oct. 26 - developers can more easily write apps for both,
which should help the platform's popularity and may even lead
developers to eventually build apps for Windows before Android,
Current Analysis analyst Avi Greengart said.
Microsoft actually makes more money from royalties on
Android products than it does on sales of its own phone
software, but "can't afford not to have a significant position
in the global smartphone market," said CCS Insight analyst John
Microsoft needs to get at least a 10 percent share of the
smartphone market by the end of 2013 to be a contender,
Canaccord's Walkley added.
(Additional reporting by Tarmo Virki; Editing by Jeffrey
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Keywords: NOKIA MICROSOFT/
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