Nokia shares plummeted 16 percent Wednesday after the company failed to wow investors with the introduction of its first smartphones designed with Microsoft’s new Windows software.
The two companies are making a high-stakes bid to join the smartphone revolution, but the sell-off as well as analysts’ downbeat remarks about the new phones cast a shadow over the joint venture.
A failure to break into the market by Nokia would hold dire consequences for the Finnish company, which once was a leader in the business but has fallen way behind Apple and its rivals whose smartphones are now dominant.
Meanwhile, Nokia and Microsoft have introduced two generations of Windows phones since they combined forces in 2011 but have yet to make more than a dent in the market.
“For Nokia coming up on the first anniversary of being on Windows, the analyst community was expecting Nokia to hit a home run,” said IHS senior analyst Wayne Lam. “The sad fact is that building a new platform takes time — more than a year. To expect Nokia to pick up and reassume their dominant position is too much to ask from it.” Nokia’s stock closed at $2.38 per share.
Nokia’s phones, called the Lumia 920 and the Lumia 820, introduced at a press event in New York, have the potential to grow Nokia’s smartphone success, other analysts said, with features such as wireless charging and a camera that minimizes photo blur.
But with new offerings coming from Apple, Motorola and HTC this month, consumers may not give the company the time that it needs to catch up.
“They actually fulfilled everything they started out to do with the Microsoft partnership, they said they were going to bring it to market,” said International Data Corporation analyst William Stofega. “You get this sense that they’re moving forward. But this is going to require some money and investment in time.”
Microsoft has a lot at stake, too, as it tries to revitalize its brand with a new Windows operating system that would work on computers, laptops and tablets. Earlier this year, it introduced a new tablet called the Surface.
The moves were essential, given that mobile gadgets such as tablets are now eating away at personal computer sales.
In a sign of how much Microsoft cares about the development of Nokia’s devices, Microsoft chief executive Steve Ballmer made an appearance at the unveiling of the Lumia phones to talk about how Nokia phones exemplify the best attributes of the Windows Phone software.
Nokia also gave Microsoft a lot of say in the first designs of the phones, Stofega said. But Nokia needs to develop an identity of its own to survive. It is not only competing against Apple and smartphones that run Google's Android software, but also other device makers for Windows software.
“They were being stifled a bit,” Stofega said of the company. “Now they’ve launched a second-generation device that’s not just a Windows device, it’s a Nokia device that runs Windows.”