What If Nokia's Windows Phone Gambit Falls Flat?

Nokia has bet the farm in Espoo, so to speak, on Windows Phones. It has seen steadily declining smartphone share in North America and outside the US over the past several quarters. Nokia's biggest markets are now the BRIC developing nations. The company is hoping to reverse the trend with a combination of Microsoft's OS and bold design. (The compelling looking N9 isn't coming to the US or Europe apparently.)

However it may be tough to reverse the slide. Yesterday comScore reported US smartphone market share numbers. Symbian, which is being phased out, continues to see share losses. Yet so does Microsoft despite its new OS, which many have praised

It's not as clear what's happening in Europe, where there are indications of greater consumer uptake of Windows Phones. But so far people aren't buying them in North America and the US in particular.

Mango, the forthcoming Windows Phone software update, offers a range of new features and improvements, though arguably not enough to dramatically advance Windows Phones vs. Android and iOS. So it's quite possible that the first "Nokisoft" phones that show up later this year in Q4 will not fly off the shelves. Pricing will be a key factor, however, and looms large in the initial sales strategy.

I'm betting that the first Nokisoft phones will see modest success -- I would be very surprised if they were a blockbuster hit out of the gate -- but it's also possible that they'll fall completely flat with consumers and disappoint expectations, which are very high. (Nokia will have to carefully manage investor and market expectations.) If they under-perform expectations you'll see investors go crazy and punish both Microsoft and Nokia, but especially Nokia.

Investors will give Nokia roughly two quarters to show traction with the new handsets. If Nokia's gambit doesn't pay off the company may go on the block. All this remains to be seen of course; but the stakes couldn't be higher. 

What Nokia probably should have done, but was probably precluded from doing by its contract with Microsoft, is to embrace both Android and Windows Phones as well as continue developing MeeGo with Intel. The company walked away from MeeGo, much to the surprise of Intel, though the N9 is the first and (apparently) only MeeGo phone. And it declined to work with Google for fear of becoming a "commodity producer" of Android devices. 

Nokia CEO Stephen Elop is of course a former Microsoft employee; some people accused him of being a "Trojan Horse" for Microsoft. But he said several times that he saw a better opportunity for differentiation by working with Microsoft. But by doing so he's limited Nokia's options and outlook if Windows Phones don't entice consumers. 

To use a US baseball metaphor: it's two outs, bottom of the 9th. Nokisoft needs to hit a double, if not a home run.