* Doubts over Windows choice resurface with warning
* Analysts say 2012 not a recovery year
* H2 launch of new Windows models crucial
By Tarmo Virki
HELSINKI, April 18 When Stephen Elop bet Nokia's
future on a deal with Microsoft, he was hit with a barrage of
criticism. After a year of respite, the chief executive is again
being haunted by a decision that is costing the shrinking mobile
phone company sales and favour.
Nokia switched from developing its own Symbian
operating system for the as-yet untried Windows Phone software
in February 2011 and is now stuck in a sales gulf between
phasing out its old smartphones and ramping up production of the
Sales of the Lumia range that runs on Windows have fallen
short of forecasts. Nokia issued a profit warning last week
ahead of first quarter results due on Thursday and its shares
fell below 3 euros this week, their lowest in 15 years.
In the meantime, Apple's iPhone and Samsung's Galaxy range,
which runs on Google's Android system, continue to steam ahead
in the smartphone market, leaving what was once the strongest
brand in mobile phones way behind.
"Nokia should have bet on Android. That would have been a
powerhouse in terms of mobility, search, etc," said one telecoms
industry executive who has done business with Nokia for years.
"Elop had one bet to make and he made the wrong bet."
Elop joined Nokia from Microsoft in 2010. The
following year, his previous employer said it would pay Nokia
billions of dollars in their partnership and pay $250 million a
quarter to support the platform.
At first, critics said Nokia should have stayed with Symbian
or done a deal with Android, which like Apple now has hundreds
of thousands of apps available, against Windows Phone's 80,000.
Nokia also dropped its second operating system Meego which
it only used in its full version on one Nokia phone.
Nokia says Windows gives it the best chance to stand out in
the crowd of similar smartphone models on the market.
"Windows Phone provides Nokia with an attractive and vital
point of differentiation," said Jo Harlow, chief of Nokia's
smartphone business. "We are building something exciting. People
who try a Lumia device are telling us loud and clear that they
love the Windows Phone experience."
Analysts mostly came round to the idea that Microsoft could
be the best bet and that business could pick up in 2012 but
several European telecoms operators told Reuters this week they
were unconvinced by the new Windows models.
"Windows is a great operating system, but it seems that
customers aren't buying it," said Juhani Risku, a former
innovation chief at Nokia, who left in 2009 and is now a
designer and analyst. He is one of Nokia's most vocal critics.
"It is dangerous to go only with one system, even more so
when it's not your own."
GIVING UP THE UPSIDE
Not having its own system could also cost Nokia the ability
to make money from software development and services.
"They gave up the upside. Now they're a hardware producer,"
said Harry Jarn, CEO of Finnish virtual operator Cubio, who
worked at Nokia for more than 13 years. "Nokia is, without a
doubt, a much smaller firm in the future."
Nokia is still using Symbian in some smartphones but will
only support it until 2016, which will put off buyers who tend
to load their phones with apps and content that they want to
keep for several years.
Analysts said any real sign of recovery for Nokia is now
likely to come in 2013 at the earliest, rather than this year as
previously hoped, and will depend on better products and
improvements in the Microsoft software.
A new version of Windows Phone is due later this year.
Microsoft also plans to use its phone design - with boxes that
automatically update even if the app is shut - on computers,
which should improve people's familiarity with the system.
"In the fall there will be new family of products which will
put Nokia on the same line with rivals. Currently, there are
still gaps in the high-end," said Nordea analyst Sami Sarkamies.
One bright spot is that Nokia's fight for recovery is
forcing the Finnish company to move more quickly. While it used
to take two years to develop a new model, Elop brought the first
two Windows phones to market within a year.
"If Nokia could have demonstrated this speed in the last few
years, some of its current problems may have been avoided," said
Pete Cunningham at research firm Canalys.
He added that partnering with Android might have caused
another problem as other phone makers using the system are
struggling to compete with Chinese firms Huawei and ZTE, which
are selling smartphones for as little as 100 euros, which leaves
very little room to make any profit.
Nokia sells its new Lumia smartphones for an average of 220
euros, which is already lower than analysts expected.
Nokia plans to take on the lower-end Android smartphones
with their own advanced feature phones running on an operating
system developed on top of Microsoft's rival Linux software
later this year.