Will the Nokia, Microsoft tag-team on China save Windows Phone?

Will the Nokia, Microsoft tag-team on China save Windows Phone?

Summary: China matters more than ever to Nokia and Microsoft, who are joined at the hip over their shared, mutual mobile venture. Here's why.

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China will be a key market for Nokia to claw back if it has any hopes of survival in the coming year, as the Finnish phone maker continues hemorrhaging cash each quarter, and battles in the face of a near-financial meltdown.

With so much invested in Windows Phone, which has only ever been able to scrape the barrel of the worldwide market share, both Nokia and Microsoft are tag-teaming to crack the Chinese market in order to save not only Nokia, but also the Windows Phone platform.

lumia-china-zaw2

This week, Nokia struck a deal with China Mobile to offer the Windows Phone 8-powered Lumia 920T in the country. China Mobile has more than 703 million subscribers, taking around 53 percent of the country's 1.34 billion-strong population.

Meanwhile, Microsoft has reportedly signed an alliance with China Unicom to bring its Windows Phone platform to a series of more innovative smartphones to the Chinese market, reports the China Daily (via TechCrunch). The carrier has around 70 million subscribers, or around 10 percent of China Mobile's subscriber base. HTC, Samsung, Qualcomm and Intel are also part of the alliance in order to boost the Windows Phone platform's growth in the region.

The two deals are separate, and Microsoft's push into China with the Windows Phone platform does not benefit Nokia, while Nokia's more plucky push into a much larger segment of the Chinese market will ultimately help both Nokia and Microsoft.

This may well be what Microsoft has been pushing for. Instead of ditching its "special relationship" with Nokia, or developing its own branded smartphone -- recent rumors have suggested Microsoft will build a 'Surface phone' -- the software giant is instead pushing its platform brand (rather than the Lumia smartphone series) to an mostly untapped yet burgeoning market. 

Nokia's push to get its Lumia range of smartphones with China Mobile, the country's largest network, comes as little surprise considering Nokia's Q2 net sales in China dipped by 6 percent, and then by a further 49 percent in Q3. Year-over-year, that's a 78 percent drop in sales, and Nokia is rightfully feeling the pinch.

Screen Shot 2012-12-12 at 11.04.28
Source: Nokia Q2/Q3

It's a worrying time for Nokia. The Windows Phone platform is a strong contender for the December holiday season. It's received rave reviews, it's a capable platform, and those who bought one seem have fallen head over heels with the software and hardware combos.

The tricky part is getting consumers through the door and convincing them that it's the right device for them.

While Apple is taking on North America and Europe first, with China set in its sights, and Android phones are universally trending worldwide, the other phone makers outside the top duopoly are fighting for the Asian markets in a bid to claw back lost revenue from their rivals who have the developed markets covered.

China is a growing market for smartphones, tablets and post-PC devices on the whole, and not just because it has the world's largest population. There is no 4G connectivity in the country -- licenses are expected to be issued in 2013 -- and China's 3G network is still in development and carriers are still working on gaining faster speeds for end-consumers.

Nokia has also made its pitch to the emerging market, not just China. Other areas in Asia will be key for Nokia to crack -- such as Indonesia, with a population of 240 million, which Research in Motion has recently pitched its last-ditch pre-BlackBerry 10 salvation on -- will come under Nokia's scope to hit Asia with all guns blazing. The low-cost Lumia 620, priced at $249 and contract free, will launch first in Asia and then slowly rollout to Europe and the Middle East.

Microsoft's path is slightly different. Unlike Nokia, it doesn't have a company to save, but it has to save the platform it has invested so much time and money in. Nokia has not done a good job of it so far -- neither has any other Windows Phone manufacturer -- so the software giant is intervening in the only place the platform has a chance of succeeding.

Microsoft's Windows Phone platform holds only 3 percent of the U.S. and Chinese market respectively. In the U.S., the firm's market share is falling month on month as consumers sway towards iPhones and Android-based smartphones. 

Screen Shot 2012-12-12 at 12.26.17
Credit: comScore

There are two things at play: Nokia is falling down, and so is the Windows Phone platform. The two are not directly connected, but Microsoft's invested interest in Nokia has not played out as well as the software giant had hoped.

Together, the strategy could work. While Nokia pursues the Lumia line-up with China's largest mobile carrier in a bid to save itself, it will also give a much-needed push to Microsoft's ailing platform. At the same time, Microsoft is allying with other partners -- Nokia's rivals, such as HTC and Samsung -- in a bid to separately push the platform to a wider audience.

For now, Nokia's push to get its flagship Lumia 920 -- running the latest Windows Phone 8 mobile operating system -- could be the firm's final push before it edges dangerously close to bankruptcy.

Topics: Microsoft, Nokia, Smartphones, Windows Phone

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24 comments
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  • I did not realize Windows Phone was in trouble

    and needed saving. It appears that Windows 8 is runnng on a larger selection of phones then before, and most of them of high quality. and for the first time, a variety at Verizon. All they had before was the HTC Trophy.

    I think you (and many bloggers) view large corporations in a perspective that matches what they understand: their lives. If you live paycheck to paycheck, that does not mean that large corporations need to do so, also. They can take their time and grow a product.

    I imagine that if you go back into ZDNet's archives, you will discover how many of the prominent bloggers of the time referencing the same thought process about XBox

    "PlayStation is the far and away the leader here, Microsoft must pull off a miracle, and quickly or XBox will go the way of the dinosaur."
    John Zern
    • Deja vu

      Windows phones never had a chance, and probably never will. Microsoft dug their own grave the last time. They had no app support, that killed their Zune and their phones. Windows phones are easy to use and I like the UI, but thats about it. Most of the major apps are not on windows, and if they don't get on windows soon their phones will die like their Zune. Xbox has never been in trouble, they have been in a back and forth fight for ages and will be for quite a while. Xbox has a better online community then PS. PS is number one in world market, but Xbox in number one in the US market. The US is the number one in the gaming market. So having the number one spot in the US matters more then world wide. US spends the most on games and development of them.
      nbdeath
      • Playstation...

        Is behind the Xbox in global sales. Go educate yourself.
        kstap
        • You keep repeating that lie

          However, no matter how may times you do, it will never be the truth. Microsoft does not count actively used units, but shipped units. If a warranty replacement unit (refurbished) is shipped three times Microsoft counts that one three times. I know persons that have had units shipped 8 times due to RRoD issues, I also know that many have at lest two, so while waiting the 6 to 12 weeks, for repairs they have a "backup". Then they get a used unit, which is counted as new by the Monkies at Microsoft.
          Troll Hunter J
          • They count sold units. No used units are counted as new or anything else.

            And there haven't been rrod problems for many years, and xbox is #1 worldwide. You're just all kinds of wrong today. Not that this article has anything to do with xbox. Also yes almost all the major apps are on WP and the rest are due soon.
            Johnny Vegas
          • Your an idiot

            Point to some sort of evidence that Playstation is behind XBOX? haha!
            harley22x
          • Wow. So you think the readers here are that stupid?

            You keep throwing the same lies out there, while believeing the people here are idiots. I think most are looking at you wondering if you even have a clue

            "If a warranty replacement unit (refurbished) is shipped three times Microsoft counts that one three times"

            BS time again, I see. only a fool (are you a foo?l) would believe the SEC would let MS get away with that when they report sales numbers. Please tell us where you heard that from. (a "friend" that works for MS?) ;)

            "I know persons that have had units shipped 8 times due to RRoD issues"

            More BS. No one is that incompetent. (Well, maybe you?)

            I also know that many have at lest two, so while waiting the 6 to 12 weeks, for repairs they have a "backup". Then they get a used unit, which is counted as new by the Monkies at Microsoft."

            Well that second one IS a sale (they bought it) while the other doesn't get counted as a sale.

            Are you really THAT desparate that you'll continue to to make yourself look like an a$$, all for the sake of trying to discredit MS?

            Thats' really sad. I had no idea someone's life could get that bad.
            William Farrel
      • "Most of the major apps are not on windows...."

        You obviously do not know what you are talking about. WP has all but a few of the top apps on iOS an Andriod. I know it doesn't have Instagram (I don't care) or Pandora (coming soon), but I can't name another in the top 50 that WP does not have.
        toph36
    • Re: I did not realize Windows Phone was in trouble and needed saving.

      Typical of the complacency which has so thoroughly permeated Microsoft's entire corporate culture: just because it's got the "Windows" name on it means it will succeed.

      Only it's not. Microsoft is having its arse handed to it by Android.
      ldo17
      • A newborn baby will also have its arse handed to it by a 20 year old...

        Comparing apples and oranges does not give you any kind of credibility. In fact, you never had any to begin with.

        Microsoft's platform has barely been out a month, and you're going to claim that it has lost the long-term race? That is logic that only someone with a brain the size of a worm's would agree with.

        If you want to compare apples to apples, then, compare Android to Apple's device, which would pit Android's smartphones against the iPhone, and there, you would be right, and where Android is handing Apple its arse, as far as sales is concerned. But, comparing a newborn platform to a platform which has been out for years, is totally asinine.
        adornoe
  • Too quick to judge

    Based on the statistical diagram Windows Phone 8, Lumia 920 and other WP 8 were released early November there maybe reasons for the October decline but the definitive answer will be next quarter next year.

    Apple and Android had the luxury of being first in the mobile business and Microsoft came in when these 2 competing platforms already have huge following. So it will be doubly hard for Microsoft to sway these followers into there platform but for those upcoming new smartphone users WP8 is a great alternative.

    I believe WP8 success relies heavily on Windows 8 success. It's too early to judge both and most people who constantly bash the platform here are the non users and those who prejudged before actual use. I tried Windows 8 and it seems to be a welcome change especially how fast and fluid it is and IE10 is a big improvement.
    imscythe
  • Insightful article, Need better references after at least 1Q of WP8

    Hi Zack,

    Good and insightful article based on wrong premises. All statistics are pre-WP8. All statistics are skewed due to the poor strategy and communication of MS/nokia during the migration of WP7.5 to WP8.

    The article does not integrate the response to WP8 by the Chinese market (Please note they only started taking pre-orders yesterday). neither does it take into account the positive responses so far to the limited supplies of WP8 handsets.

    This article does not integrate the agreements between China unicom, China mobile and local banks for mobile payments using NFC (for which WP8 and Android are ideally placed). WP8 could make a killing here with the right apps, better security and less clutter as can be found on Android

    The article t takes into account the potential impact of the N620 but does not use hindsight to build on the impact the n610 before it (which had a much more limited feature set and higher price), within the Chinese market.

    Your points are clear but a little bit more context and thought into how other markets work, different from the subsidized model in the US and most of Europe would be welcome.

    Additionally, in markets such as China and most emerging markets, integrated services such as NFC related payment services, navigation, local news and search, and a clear support plan as it seems to be the case with WP8 now, will be a big differentiating factor towards a much faster adoption of WP8. Note that these markets are the markets making more use of mobile payments. The integrated passbook and wallet in WP8, NFC along with better security puts WP8 as a go to platform for any financial service provider with a long term plan compared to Android and the current model offered through iOS.

    Will this translate into record sales? I think so initially. However, due to unsubsidized handsets, the renewal process may not be yearly and we could easily see WP8 rise very fast but peak due to these bi-annual or triannual renewal cycles.

    Kind regards,
    Tirius
    Elrius
  • Good times ahead for Nokia.

    Lumia 920 is impressive and has the best Camera and a much superior WP8 platform. My useless bloggers and sites may play the app card to trash WP8, but If Nokia can follow up with some more killer devices like 920, they can easily be the king of smart phones once again. For WP8 platform MS needs partners like Samsung doing a full hearted job, so far their Ativ is a no-show.
    Owlll1net
    • Good times?

      For whom? Microsoft, spyware on every device, is not my idea of a good time.
      "You may submit certain information about yourself (for example your name, e-mail, and phone number) and we may automatically collect other information in connection with the services. This information may also be analyzed and used to develop and improve features and services offered on the phone and other Microsoft products and services, unless more limited purposes are specified in the Specific Features section below. "

      Windows phone 7 sent WiFi data back to Microsoft, and it looks as if Windows phone 8 does the same. Why does Microsoft need all the MAC addresses of WiFi hotspots, Cell tower locations, and GPS coordinates? Why are they all tied to a "Unique" identifier on the specific phone? So they can track your every movement. If you've seen The Minority Report, that's the future Microsoft has in mind, except the Police would be under the Direction of Microsoft, and using Non-Microsoft approved hardware (and software) would be illegal.
      Troll Hunter J
      • You're sad

        This is what you choose to attack MS on? Like Apple and Android aren't as bad or worse with the information they gather and track.
        postulation
      • Thats a horrible argument

        Knowing the fact that Google is notorious for data collection... Same with Apple. Read the info that Apple collects as well.
        harley22x
  • I waited for WP8 & the 920

    I hung on to my old iPhone way past its upgrade point because I was waiting for the release of Windows 8, Windows Phone 8 & the Nokia Lumia 920. I now have windows 8 on my core i7 (non touch) Sony vaio and it is brilliant. It only took a few days to get used to the different layout and I am whizzing round it as easy as anything. It is fast, it is smooth and I love the new start menu - brilliantly simple, yet powerful as I need it to be. I have just got the Nokia Lumia 920 and it is a superb piece of hardware and Windows Phone 8 is smooth, fast and brilliantly simple. I loved my iPhone for what it did but Windows phone 8 & Nokia are in a different league altogether. Not everybody will agree with me - but choose a phone that suits you. I hope that it will take off - but I'm not going to judge it just yet - as there is not enough data in. Wait a few years and see.
    psychobdelic
  • Will the Nokia, Microsoft tag-team on China save Windows Phone?

    Microsoft Windows Phone is doing just fine so it doesn't need saving. This tag team will definitely increase sales for both companies and I'd like to see it become more popular and get a few more apps into the store.
    Loverock-Davidson
  • The comments are more insightful & accurate than the article...

    Once again, Zack leaves out important facts or relies on old data, and then makes assumptions based on that data. It's exhausting trying to correct every story from this guy. Thank goodness others have done it for me in some of the comments above. *sigh*
    newyorkcitymale
  • Do the 3rd quarter results show a drop in gross shipments for WP?

    Or just in market share, i.e. the market as a whole grew, WP shipments grew (but not as quickly as iOS/Android)?

    Those are two very different pictures.

    Don't get me wrong, I hope it goes down in flames, but you have to interpret statistics correctly.
    daboochmeister