Nokia, Microsoft Pin U.S. Hopes on Windows Phone

NEWS ANALYSIS: Nokia once owned the U.S. handset market. But now Nokia has taken a backseat to Apple and Android. Is its partnership with Microsoft enough to save the company?

One of the big questions for mobile in 2012 is whether Nokia's partnership with Microsoft will help Nokia regain a successful entry into the U.S. market, where the Finnish company has been conspicuously absent for the past couple of years. A lot could be decided this month as reports surfaced that T-Mobile and Nokia plan to make the Lumia 710 smartphone its first device available in the United States with the Windows Phone operating system.

It wasn't too many years ago that Nokia was the market leader in the United States with their famous "candy bar" phones running the Wireless Application Protocol (WAP) browser that provided a pre-defined list of apps that were embedded by the wireless operator and not updatable.

But that all changed when Motorola stormed the market with the introduction of the clamshell RAZR in 2004 that was the thinnest flip phone to come to market. This was followed by Apple launching the iPhone in 2007 with a sleek new interface. Research in Motion kept rolling along with the BlackBerry Bold in 2009 that included a larger keyboard and display. During each of these major introductions, Nokia saw their U.S. market share drop as consumers flocked to these newer form factors and software platforms. With no response from Nokia, the company's board decided it was time for major changes.

In 2010, Nokia hired Steven Elop from Microsoft. He put all of the software platforms under review including Symbian and MeeGo, which was joint venture with Intel for a Linux-based OS for smartphones. The company considered keeping Symbian or migrating to either Google Android or Microsoft Phone 7.

Everyone knows by now that Nokia's management team decided to create a major partnership with Microsoft. What most people don't know is that the decision wasn't a foregone conclusion simply because Elop came from Microsoft. Rather, it was reported later that Android was the leading contender until Microsoft swooped in and offered a far-ranging partnership that included sharing of valuable intellectual property.

With the new Lumina Windows Phone 7 smartphone now shipping in Europe, the next big move by Nokia is to re-enter the North America market with Phone 7-based smartphones in 2012. The stakes are high for Nokia as the North America market has already converted over to mostly purchasing smartphones. Feature phones are no longer seriously considered by most buyers.

But, other vendors, most notably Samsung and HTC have been manufacturing Windows Phone 7 smartphones for most of 2011 without much market adoption. Frost & Sullivan reports that Microsoft Phone 7 holds less than 10 percent of the North American smartphone market. It looks as if Microsoft and Nokia may have an uphill battle to realize much success in the North American market. Frost & Sullivan reports that the iOS and Android platforms are already commanding a 19.6 percent and 23.2 percent respectively or 41.8 percent of the market.

How are Nokia and their partner Microsoft going to succeed in the North American market? It appears that the outcome here could have a tremendous effect on Nokia's future. If you want to succeed in smartphones, you have to succeed in North America. It's possible that Nokia could continue operations without the North American market, but it makes their future brighter if they can be successful here. The "center of momentum" for smartphones is in the United States because the software running these devices is all produced in North America by Google (Mountain View, Calif.), Apple (Cupertino, Calif.) and Microsoft (Mountain View, Calif. and Redmond, Wash.).

I believe that Nokia's best opportunity in North America is to focus (at least initially) on the enterprise market. RIM is in a precarious position right now. The BlackBerry has "owned" the enterprise market for years. But, both Apple with iOS devices and Android partners such as Samsung and HTC are taking market share away from RIM.

Microsoft has a number of excellent resources they can to its relationship with Nokia in its effort to gain enterprise market share in North America including:

Easy synchronization with ExchangeLocal Outlook client that provides familiar email user interfaceIntegration with the Office application suite including Word, PowerPoint and ExcelAccess to Sharepoint files and folders providing secure access to enterprise informationLeveraging access to Microsoft Office 365 for online access of email and documentsProviding VPN services to manage secure connectivity to the enterprise network

Once the email accounts have been set up on the Windows Phone 7 devices (including Nokia and others), then the employee has really easy-to-use mobile device that works with the organization's network resources. It's possible to set up these things using the iPhone or Android devices, but it's more complex, takes more IT staff time and isn't as seamless a solution.

Nokia needs to ensure that they have the best solution available for the enterprise compared with other excellent suppliers such as Samsung and HTC to be successful in the enterprise market. Then, Nokia can readdress the consumer market and leverage Microsoft's gaming, music and video services.