Budget handsets seem to be driving a pickup in sales

While flashy handsets like Nokia/Microsoft Corp.'s (MSFT41 megapixel Lumia 1020 have captured the bulk of advertising and tech blog attention, it appears to be budget devices that are buoying Windows Phone sales

I. Windows Phone Sees Booming Demand for Lumia 521

It hasn't been an easy road for Windows Phone, which struggled to even make it third place, following its launch in Nov. 2010.  But much like Google Inc.'s (GOOGrelationship with Motorola Mobility and later HTC Corp. (TPE:2498) helped to elevate it Android brand from obscurity in its early days, Microsoft's relationship with Nokia and patient financial commitment to maturing is platform is at last starting to pay off.

And much like Android the biggest gains have come on the low end.
Lumia 20
A Nokia Lumia 520 budget WP8 device

Much of the best insight into Windows Phone use comes from a cross-platform, global advertising network AdDuplex, which releases monthly reports examining which Windows Phone devices connect to its network.  While unit sales doth not connections make, the figure still gives a rough idea to which devices are most used.

New data released by AdDuplex shows that the Lumia 521 -- which launched near the end of April -- has abruptly leapt from 8 percent of the market in August to 19.2 percent in September, a jump that makes it the top Windows Phone device.  The higher end Lumia 920 dipped from 16 percent of total connections to 12.9 percent, as it was outpaced by the sales growth of its budget kin.

Take a look at the August data....

AdDuplex WinPhone Stats

...versus the data for this month.

AdDuplex WinPhone Stats

According to AdDuplex it's less an issue of poor sales on the high end and more a tale of faste growth on the low end.  Both HTC's popular 8X and the Lumia 822 on Verizon Communications Inc. (VZ) subsidiary Verizon Wireless (the largest carrier in the U.S.) saw similar dips in WinPhone-specific market share, despite selling strong.

AdDuplex stats
AdDuplex's own numbers show the Lumia 1020 (shown here in weekly ad connections v. the Lumia 928) is selling relatively well, though. 

This reflects commentary from Canaccord Genuity Group Inc.‘s (TSE:CF) Mike Walkley, who in an early September research note observed:

Our surveys indicated positive sales rep reviews and decent sales for the Lumia 1020 at AT&T. Further, our surveys indicated positive reviews though modest sales for the entry- level Lumia 521 and high-tier Lumia 925 at T-Mobile. However, our global surveys indicate gradually improving Windows Phone 8 smartphone sales due to strong sales of the Lumia 520 and other mid/low-tier Lumia smartphones. In fact, our surveys indicated solid Lumia 520 sales not only in emerging markets such as Russia and key APAC region countries but also in developed markets such as the UK and the US. We believe the growing Lumia sales, especially in the harder-to-track mid/low-tier smartphone segments, are leading to gradual WP8 smartphone share gains.

The Lumia 521 is reportedly doing very well in emerging markets like India and China.  It's a much-needed development for Nokia who is likely looking to eventually mothball its higher end feature phones, such as the Asha line, which run a non-Microsoft operating system (likely scheduled for mothballing now that Microsoft is running the show).

Aside from the HTC 8X, the only other charting non-Lumia phone was the Huawei Technologies Comp. (SHE:002502Ascend W1.  The Huawei device was the cheapest Windows Phone 8 device at the time of its launch earlier this year, and is proving a tough competitor for the Lumia 521 on the low end.

II. Back Button Isn't Being Killed After All

In other related news The Verge is reporting that its sources are indicating that the piece from top Windows blogger Paul Thurrott regarding the premature death of the hardware back button appears to be a misunderstanding.  It didn't take long for sites to seize on the piece, which Mr. Thurrott made clear was a rumor.  And by and large the terms used were much more sensation -- e.g. "Microsoft KILLS the Back Button".

Needless to say, for the small, but growing contingent of Windows Phone users, this evoked mixed reactions.

Lumia 900
(Click image to enlarge) [©: Jason Mick/DailyTech LLC]

But the new piece from The Verge claims Microsoft is not killing the button at all, but rather loosening its hardware spec to allow developers to replace the Windows (home), Back, and Search buttons with touch-screen virtual button equivalents, which would appear on a reserved black space on the bottom of the screen on participating devices.

The latest report cites a source as explaining that virtual buttons would be allowed "in an effort to lower costs for device manufacturers".  Indeed, not including touch screen button hardware could trim at $10-20 USD off a Windows Phone device -- good news for budget Windows Phone growth.


The Nexus 4 excercises a similar strategy to Microsoft's reported plan for softbuttons.
At the same time it's possible you may see the occasional all-touch premium handset (as is the case with the menu bar on Google's Nexus line), but overall most OEMs are expected to keep hardware buttons in place -- including the back button -- in their higher end models, assuming the report is accurate.

The new Windows Phone 8.1 update -- codenamed "Windows Phone Blue" is expected to launch sometime next month; unlike last time most, if not all Windows Phone 8 devices should be eligible for this upgrade.

Sources: The Verge, AdDuplex [1], [2]

"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer

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