Photo: Steve Kovach, Business Insider
This is a big week for the Microkia alliance, with the US release of the flagship Windows Phone, the Nokia Lumia 900.The early reviews are tepid. SAI’s gadgets editor Steve Kovach says in a nutshell that the Lumia 900 is pretty good, but not as good as Android and iOS’s flagship phones, the Samsung Galaxy S II and Apple iPhone 4S. This has prompted many commentators, including SAI editor Matt Rosoff, to say this is further evidence that Windows Phone is toast. We don’t see it that way, and we’d like to reiterate our cautiously optimistic case for Windows Phone.
When it comes to the case of the Lumia 900, critics who note that the phone is slightly inferior to the Galaxy S II and iPhone 4S are missing a crucial point: the Lumia 900 retails for $100 on AT&T while its competitor phones retail for $200 on most carriers. A car that’s almost, but not quite as good, as the most popular cars on the market, but sells for half the price and gets a similar mileage, will in all likelihood do very well.
Photo: Pew Research centre
In the US, as we noted in our presentation on the future of mobile, the population is roughly halfway through the “dumbphone conversion cycle” (see chart). In other words, by definition, the people upgrading to smartphones now are not early adopters. They are going to be people who will want a nice, user-friendly phone to browse the web and play games. They will want a good selection of apps, but not having the best selection of apps—Windows Phone’s biggest failing, which it will definitely need to correct long-term—will not be a dealbreaker for most of these people. And, crucially, they are the kind of people who will prefer to buy “good enough” at $100 rather than “the best” at $200. Does this mean that the Lumia 900 is going to singlehandedly crush Android and iOS overnight? Of course not.
Right now the Lumia is only on one carrier. The iPhone is still the star of smartphones with a tremendous brand, software and platform advantage. Carriers are still pushing Android heavily. But as an opening move to establish a beachhead in the smartphone market, the Lumia 900 strikes us as a very good one, for the reasons outlined above.
In other words, while most market observers view the Lumia 900 as yet another proof that Windows Phone is DOA, we view it as confirmation of our cautiously optimistic case.
As a reminder, here are the key points of our case:
- The smartphone market is not a winner-take-all market and there is good reason to think there is room for a third player in the long term. We explain this in our note on the network effect in mobile platforms.
- It is still VERY early. See our update to the one chart you need to see to understand mobile.
- There is tremendous room for growth in the emerging markets (see chart), where Nokia is particularly strong and has the world’s best distribution network.
- Microsoft has a lot of cash to push Windows Phone to consumers and developers. That plus Nokia’s distribution and Microsoft’s experience building developer platforms means Microkia can buy market share. The $100 Lumia is a good example of this.
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