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New Lumia phones seen winning Nokia more time

Microsoft CEO Steve Ballmer displays a Nokia Lumia 920 featuring Windows Phone 8 during an event in San Francisco, California October 29, 20
Microsoft CEO Steve Ballmer displays a Nokia Lumia 920 featuring Windows Phone 8 during an event in San Francisco, California October 29, 20

By Ritsuko Ando

HELSINKI (Reuters) - Nokia's new Lumia smartphones are trickling into the market and early signs suggest they may sell well enough to give the handset maker more time in its fight against industry leaders Samsung and Apple.

But investors shouldn't expect a quick turnaround for the struggling Finnish cellphone maker, with rival gadgets like mini tablet computers vying for consumers' attention, analysts said.

"Positive reviews are a great start but as we have seen many times before these won't deliver strong sales volumes on their own," said Pete Cunningham, an analyst at research firm Canalys.

Successful sales of the latest Lumia 920 and 820 models are crucial for Nokia's survival. The former market leader is burning through cash while it loses share in both high-end smartphones and cheaper handsets.

FIM Securities analyst Michael Schroder forecast Nokia will sell 1-3 million of the new models this quarter. It sold 2.9 million older Lumia models in the third quarter, compared to Apple's sales of around 26.6 million iPhones in the same period.

"In any case the uptake will not be massive," he predicted.

Lumia's sales could serve a verdict on Chief Executive Stephen Elop's decision in February 2011 to partner with Microsoft instead of using Google's Android or continuing to develop Nokia's own operating system.

Investors had feared poor reviews and weak sales could bring an end to the company's smartphone business early next year.

So far, consumer reviews seem to favor the feel and look of the new models, which include high-definition cameras and the latest Microsoft Windows Phone 8 software.

"It (the Lumia 920) is very similar in appearance to the Lumia 900, but has curved glass, rounded edges, and curved back so it feels great in your hand. It is a dense device, but if you look at all the pros and cons the heft is worth it," said a reviewer for tech website ZDNet.

That's an improvement from the market's reaction when the new model was first unveiled. The shares slumped 13 percent that day with investors citing a lack of a "wow" factor.

MAKE OR BREAK

Nokia is taking a gradual approach to launching the phones, and availability is expected to vary by market for the next few weeks, compared with Apple's iPhone models which usually go on sale on the same day to global fanfare.

"While we are very impressed with the hardware features of the Lumia 920 and the improved software functionality of Windows Phone 8, we believe a focused launch to drive steady sales growth is necessary," said Canaccord Genuity analyst Michael Walkley.

In Canada, one of the earliest launch markets, carrier Rogers Communications has trained its sales staff more to sell the latest Lumias than the previous models, said John Boynton, Rogers' executive vice president of marketing.

He predicted the phones would be popular with first-time smartphone users, thanks to homescreens with tile-like icons designed to help users navigate applications and functions.

"They're a little nervous at some of the more complex smartphones that are out there," he said. "The tile format is a really, really simplified way for people to get comfortable using smartphones."

In France, retail staff have become more confident in explaining Windows Phones to their customers, according to Laurent Lame, devices marketing chief at SFR which is the country's second-biggest mobile operator.

"They know the product better after six months of good sales of the Lumia 610," Lame said, adding he was now more optimistic about the Nokia-Microsoft partnership. "For once, with Windows 8, we are not starting from zero."

Telefonica Deutschland Chief Executive Rene Schuster said he was "very, very pleased" with the early progress of Lumia sales.

Some retailers were more cautious, however, and in some cities there were no demonstration models for customers to test.

A salesman in an O2 store at the Zeil, Frankfurt's busiest shopping area, said the store could take orders for the phone but could not show it. Demand was "okay, but not huge," he said.

Analysts also expect tough competition during the pre-Christmas shopping season from the likes of Samsung's Galaxy S III and Apple's iPhone 5. Taiwan's HTC has also introduced smartphones running Windows Phone 8 software.

Other rival gadgets include Apple's iPad mini as well as cheaper tablets from Google and Amazon.

The stakes could not be higher for Nokia's Elop, who said in February 2011 the company's transition would take two years.

"This is absolutely a make-or-break phone for the Windows Phone strategy," FIM Securities' Schroder said. "If it fails, they have to take a whole new course." (Additional reporting by Allison Martell in Toronto, Leila Abboud in Paris, Harro Ten Wolde in Frankfurt and Tarmo Virki in Helsinki; Editing by Mark Potter)

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