Nokia's plan to fight cheap Androids: Low-cost Windows devices, more S40 innovation

Nokia will use a Windows Phone-S40 pincer movement to tackle the threat posed by low-cost Androids, particularly in China.
Written by Liam Tung, Contributing Writer

All eyes are on the performance of Nokia's Lumia smartphones in the West, but an equally large question is whether Nokia's Asha 308 and 309 S40-based touchscreen handsets can withstand the onslaught of very low-cost Androids.

Nokia Asha phone
Nokia Asha phone

In its financial results published on Thursday, Nokia said it had sold 9.3 million of full touch Asha devices in the fourth quarter of 2012, up from six million in quarter before. But several analysts on Nokia's earnings call questioned whether the uptick would be short-lived in the face of more sub-$100 Android devices hitting the market.

Nokia's line of touchscreen Asha 308 and 309 devices have done well in India, Russia and Pakistan, but, unless the pace of innovation on the S40 can match that of Android, several analysts noted these strongolds could go the way of China, where sub-$100 Androids are gaining popularity.

According to Nokia chief Stephen Elop, Asha consumers were responding well to the "lower overall total cost of ownership" the line offered, thanks to features such as technologies to optimise data consumption, along with its core apps, like Facebook, dual-SIM Ashas for India, and longer battery life than low-cost Androids.

Elop refrained from divulging the developments in store for S40 platform, but said Nokia would continue to tackle Android at the low-end on two fronts: by bringing Windows Phone devices to lower price points, while innovating on the S40 and focussing on low-cost production. Elop pointed to its new facility in Vietnam as one example of developments that will underpin the move.

"We are innovating with Microsoft around Windows Phone and are focussed on taking that to lower and lower price points. You will see that over time compete with Android," said Elop.

"But at the same time, and we've said consistently -- and you're just beginning to see it in the Asha line with the full touch products -- that we will continue to innovate around Asha smartphone line in order to compete with the very lowest levels of Android."

Despite recent (wrong) reports that Nokia was open to considering using Android in future, a few factors make that unlikely, even as a replacement for its low-end S40 Asha line. Besides Nokia's Windows Phone agreement for Lumia devices – under which Microsoft pays Nokia $1bn a year - building low-cost phones running Android would put it in the same position as Asia's largest ODM manufacturers that build whitebox Android devices. Over the past two years, Microsoft has struck deals with around half of all ODMs to take out licences for patents it alleges Android and Chrome infringe upon. While terms have not been disclosed, some reports suggest these have been as high as $15 per device.

Although there's no synergy between the S40 platform used by the Asha and Windows Phone used by the Lumia line, Elop said Nokia's pitch to Windows Phone developers was "an opportunity to make their applications visible and marketed to a very much larger customer base than virtually any ecosystem".

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