Nokia enjoyed a pretty healthy fourth quarter 2012, at least in terms of its Lumia smartphones performing better than expected. While that’s certainly good news for the struggling Finnish phone-maker, it still faces sizable hurdles in the smartphone arena.
During the quarter, Nokia sold 4.4 million Lumia smartphones—a significant rise from the previous quarter, which featured sales of 2.9 million Lumia devices. The Lumia line runs Microsoft’s Windows Phone operating system, which largely replaced Symbian as Nokia’s smartphone software of choice. (Despite that shift, Nokia still sold 2.2 million Symbian smartphones during the quarter.)
But that spike in sales could be short-lived: Nokia also indicated in a public release that a combination of “competitive industry dynamics” and a traditionally slow first quarter could drag down the Lumia line in the first months of 2013.
Back when he took Nokia’s reins in 2011, former Microsoft executive Stephen Elop compared the company to a burning oil platform in the North Sea. “I have learned that we are standing on a burning platform,” he wrote in a widely circulated memo. “And, we have more than one explosion—we have multiple points of scorching heat that are fueling a blazing fire around us.”
Competitors such as Apple and Google, he added, had “poured flames on our market share.” His solution was to abandon Symbian and other homegrown operating systems in favor of Windows Phone.
Making the bet extra-risky was the fact that Windows Phone had paltry market share in comparison to Apple’s iOS or Google Android. Elop was tying the fortunes of an old and venerated company to software that, despite some positive reviews from the tech press, simply wasn’t in very many users’ hands.
And for some time, it was looking as if Elop had bet on the wrong horse: sales of Nokia devices running Windows Phone spiked briefly, to 4 million units in the second quarter of 2012, before nose-diving to 2.9 million units in the third quarter. Meanwhile, Apple and the various Android manufacturers continued to sell tens of millions of units.
That dip in Windows Phone sales may have had something to do with Windows Phone 8, which Microsoft announced over the summer. Windows Phone 7.x devices aren’t capable of upgrading to Windows Phone 8, a consequence of Microsoft’s decision to have the latter share a kernel, file system, graphics support, and other elements with the upcoming Windows 8. Nor will Windows Phone 7.x devices run Windows Phone 8 apps.
Nokia responded to Microsoft’s refresh with the Lumia 920, a flagship Windows Phone 8 device with features such as built-in wireless charging and an augmented reality app. But the question remains whether Nokia should have gone with Windows Phone in the first place, or embraced an alternate platform such as Android; in addition, an anti-Elop camp has emerged in recent months, arguing that Symbian was still a viable platform before Elop consigned it to the dustbin of tech history.
For now at least, both sides seem to be right: Symbian still sells despite Nokia’s attempts to take it increasingly offline, and Lumia phones are selling well. It’ll take more time—perhaps a lot more time—before the ramifications of Elop’s bet become clear.