2012 Will be Nokia’s Year of Reckoning

Nokia (NYSE:NOK) marked January 11th as the official date on which it re-enters U.S. smartphone market with an entry-level smartphone powered by Microsoft’s (NASDAQ:MSFT) latest Mango software, at a launch event co-hosted by T-Mobile Wednesday. ^[1] Lumia 710, the lower-end of the two Lumia phones jointly unveiled in October, is Nokia’s debut Windows Phone in the U.S and will be launched on T-Mobile’s network for $49.99. Nokia had earlier announced that the company is moving away from the Symbian platform and focusing entirely on its Windows phones to win back market share from Apple (NASDAQ:AAPL), HTC and Samsung in the U.S. smartphone market.

See our complete analysis for Nokia stock here

Nokia is banking on its Microsoft partnership to help it stem market share losses in the developed markets, and we will follow Nokia’s progress closely with Lumia and other Windows Phones scheduled to launch in 2012 to see how the bet pans out. As for now, we maintain a conservative stance and expect its market share to continue to decline, albeit at a less rapid pace before stabilizing in the next few years.

Nokia plays it safe

In an earlier article, we talked about Nokia’s lower risk strategy in the U.S. as it launches a low-end smartphone on the smallest of the four national carriers after the holiday season to avoid facing greater competition from the smartphone giants in the U.S. (see Nokia Plays it Safe with Windows Phone Launch Planned for Next Week) Its entry-level phone is targeted at first time smartphone users, which according to Nokia’s press release, numbers no less than 150 million in the U.S.

This will undoubtedly give it a big enough market to sell its phones to and gain a toehold in a market it has not been able to penetrate despite repeated attempts. However, we believe that at $50, it will attract a lot more price-conscious customers than just those looking to buy one for the first time.

Relationship with carriers vital to Nokia’s plans

One of the major reasons for Nokia’s earlier failed attempts in the U.S. was the lack of a good relationship with the carriers, who have been the backbone of the burgeoning U.S. smartphone industry. Nokia is addressing that concern this time around.

According to some reports, Nokia is planning something big for the bigger carriers such as AT&T and Verizon. ^[2] It is testing out a 4G LTE version of its higher-end Lumia 800 smartphone to gain their approval. This phone will most likely run on Tango, Windows’ update to the Mango that will include LTE support. We believe that Nokia is trying aggressively to forge a healthy relationship with the carriers by paying heed to their individual requests and that surely bodes well for Nokia’s plans for the U.S.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Nokia re-enters U.S. market: $50 Lumia 710 for T-Mobile launches January 11th, BGR.com, December 14th, 2011 [↩]
2. AT&T, Verizon test 4G LTE Nokia Lumia phone, CNET, December 12th, 2011 [↩]