Nokia and Microsoft: Oh, So Close!

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The party's over in Abu Dhabi. Nokia closed the doors on its annual Nokia World event after unveiling several new devices and an expanded menu of apps for its -- and by extension Microsoft's  -- new mobile devices. There wasn't much in the way of surprises; most Nokia fans were expecting a smartphone or two, phablets, and its first foray into the tablet market.

Unfortunately, Nokia didn't know when to say enough was enough. After announcing that Instagram was (finally) coming to its Windows Phone OS slate of mobile devices, introducing a host of new apps utilizing its high-def imaging and map capabilities, along with a slew of games, we got what amounts to a Microsoft RT tablet: Ouch.

First, the good news
As expected, Nokia followed up Microsoft's recent announcement that its Windows 8 OS update supports larger mobile device screens with a new phablet. Actually, make that two new phablets. Nokia, unlike chief smartphone rival Apple , has nothing against the low-end hybrid smartphone market, and proved it once again by offering users two phablets with six-inch screens -- the Lumia 1520 and Lumia 1320.

The Lumia 1520, Nokia's high-end phablet, will retail for $749 before subsidies, compared to $339 for the 1320. And AT&T, in what could be a real coup for Nokia/Microsoft, will offer the Lumia 1520 phablet to consumers ahead of the all-important holiday shopping season. As for Apple, it may or may not enter the phablet market at all, even though phablets are expected to generate $46 billion in sales this year, and that is anticipated to more than double in just a few years.

Apple's decision to stay high-end in all things mobile, as it demonstrated yet again with yesterday's new iPad Mini with Retina priced at $70 more than last year's model, leaves a gaping hole for its competitors. That's a hole that Nokia and Microsoft are primed to exploit with the new Lumia phablets.

Taking on Apple in the high-end, saturated smartphone market, especially as relative newcomers, is a tall order to say the least. Phablets? Samsung and others are players, but there's a niche there that's just waiting to get exploited.

Nokia also introduced a few new Asha smartphones that are equipped with even better cameras -- already a Nokia strength -- and offer users "affordable smartphone innovation." For countries that don't subsidize their smartphones in exchange for a long-term data contract, a low-end, high-quality device makes perfect sense. Nokia sold 53.7 million mobile devices last quarter -- most of which were low-end phones -- demonstrating there's some real opportunity in that piece of the market.

Now, the not so good news
Like the gambler on a hot streak who plays just one more hand, Nokia should have stopped after announcing the new Asha lineup and the even more exciting phablets. But no, Nokia also unveiled its new tablet, the Lumia 2520, featuring the same Windows OS as Microsoft's epic failure, the Surface RT. You remember the RT -- it's the reason Microsoft wrote off a whopping $900 million last quarter.

At least Apple with its new iPad is clearly targeting a specific market -- customers who are willing to pay for quality, along with a well-known brand. Nokia and Microsoft? The Lumia 2520 is priced at $499, which is $100 more than the new iPad Mini, and the same as Apple's really high-end, and ultra-thin, iPad Air. Time will tell of course, but it appears the 2520 is little more than an RT in a different package, and that doesn't bode well for either Nokia or Microsoft.

Foolish final thoughts
Nokia and Microsoft have a real opportunity. Phablets are one of the few unsaturated mobile computing markets around, and if the estimates turn out to be anywhere close to expectations, there's a large piece of a soon-to-be $100 billion pie that Nokia and Microsoft are primed for with the Lumia 1520 and 1320 devices. As for the new Nokia Lumia 2520 tablet? That's another inventory-related writedown just waiting to happen.

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The article Nokia and Microsoft: Oh, So Close! originally appeared on

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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