Nokia’s Lumia 610 Is a Big Gamble

To say that Nokia has a lot riding on the freshly unveiled Lumia 610 is something of an understatement.

Billed as the €œmost affordable€ Lumia smartphone, the new device has one goal: sell in volume. Once a considerable force in the global smartphone arena, Nokia has seen its overall market share degraded by a flood of inexpensive Google Android devices. In the face of that competition, Nokia CEO Stephen Elop opted to largely abandon Symbian (and mothball MeeGo, its other homegrown operating system) in favor of Windows Phone.

But Microsoft originally developed Windows Phone as a high-end operating system along the lines of Apple€™s iOS, meant for more expensive hardware. In order to load it onto devices at the lower end of the price spectrum, Microsoft apparently had to modify the software to support lower memory and processor requirements.

The question now is whether a lower-end Windows Phone can carve out a space for itself on that lower end. For Nokia, the answer will determine whether it regains its former prominence; for Microsoft, a successful foray into the other end of the market could eliminate doubts about its longer-term viability in the smartphone market. In recent months, executives from both companies have talked extensively about offering an array of Windows Phones at a variety of price points.

€œThe combination of Nokia, Microsoft, an aggressively marketed mid-range Windows Phone device, and an appealing array of Nokia developed-applications look strong on paper,€ Tony Cripps, an analyst with research firm Ovum, wrote in a Feb. 27 research note. €œHowever, should the offering fail to kick-start demand, both companies€™ hopes for renewed relevance in the smartphone market will be seriously dented.€

New data from research firm Strategy Analytics suggests that Nokia has become the world€™s largest Windows Phone vendor, at 33 percent of the market, surpassing the individual efforts of HTC and other manufacturers. The company announced it had sold 1 million Windows Phone units in the fourth quarter of 2011, surpassing some analyst expectations.

Windows Phone might occupy a tiny percentage of the smartphone market, but Microsoft is famous for playing the long game with many of its products. It seemed more than willing to take losses on the Xbox for years, until the gaming platform turned profitable. Its cloud initiatives, including Office 365, were launched with the expectation that profits are several quarters€”if not years€”away. And given the growing importance of mobility within the tech segment as a whole, it€™s nigh inconceivable that Microsoft would abandon its smartphone platform, effectively ceding the space permanently to the likes of Apple and Google.

For Nokia, though, the stakes are much higher.

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