Report: Microsoft Gave Nokia a $250M USD Windows Phone Payday in Q4
January 26, 2012 1:22 PM
comment(s) - last by
Deal shows some signs of progress
Nokia Oyj. (
) and Microsoft Corp. (
) shocked the mobile phone world in Feb. 2011 when they
announced a deep strategic partnership
, which spelled the end of the competitive Symbian platform. The criticism was
quick to come
and the union was
slow to deliver
But with in late 2011 the pair began to turn the corner.
I. What did $250M USD Buy? 1M Windows Phones, Thus Far
The story is in the spotlight today after Nokia revealed in an earnings conference call that it had received $250M USD as part of a series of "platform support payments". The revelation pulled back the cloak that Microsoft had been keeping over the deal, commenting only that it had made "significant investments" in Nokia.
Clearly Microsoft is living in bizarro world,
a third-party $250 USD per handset, approximately. By contrast Apple, Inc. (
approximately $600 USD per handset
$6.6B USD in profit for the quarter, so it has some money to play with. And at this point Microsoft doesn't have much choice, as customers simply aren't lining up in the heat or cold to wait for the latest Windows Phone.
When looking the $250M USD payout, the big question is -- was it worth it?
The bad new is that Nokia did lose a massive €954M ($1.254B) for Q4, despite the payment. The loss plunged its fiscal calendar 2011 to a loss of €1.073B ($1.411B). For the quarter Nokia
clung to its top spot
in global feature phone sales, shedding only 1 percent. But smart phone sales plunged by almost a third (31%).
Aside from the sales, further signs of Nokia's struggles can be seen in its €1.090B ($1.434B) partial impairment (reevaluation of assets) concerning "goodwill" -- an accounting term that indicates brand reputation. In other words, Nokia admits financially, at least, that its brand took a massive hit in 2011.
The pressing question is what will happen next. Nokia's biggest problem is that it's scrapping its Symbian smartphone lineup, but lacks as diverse a Windows Phone family to replace it at present. Nokia did sell 1 million Windows Phones in Europe in Nov.-Dec. 2011 with only two models --
the Nokia Lumia 710 and 800
The Nokia Lumia 800 (left) and 710 (right). [Image Source: Nokia]
With U.S. sales kicking off with the Lumia 710, which just went on sale on Deutsche Telekom AG's (
) T-Mobile USA, and with a slick new superphone --
the Lumia 900
-- landing in the U.S. and Europe later this year, Nokia has the potential to pick up some steam.
The Nokia Lumia 900. [Image Source: Nokia]
Nokia financials -- while seemingly bad -- were better than analyst expectations, as were its smartphone sales. Analysts expected Nokia to only sell ~18.5 million smartphones for the quarter, but the better-than-expected Windows Phone launch dragged in 19.6 million. By contrast Apple sold 37 million smartphones for the quarter -- putting it in first place globally -- followed closely by Samsung Electronics Comp., Ltd.'s (
) 35 million Android smartphone sold.
II. 2012 is Windows Phone's Biggest Test Yet
The big test will come this year as Microsoft and Nokia work to bring Windows Phone to emerging markets -- a place where Nokia's budget smartphones have traditionally outperformed Apple and Samsung. Nokia is the
top smartphone seller in China
, which recently passed the U.S. to become the biggest market. It outsold Samsung smartphones nearly 2-to-1 in China.
Nokia and Microsoft have what looks to be a winner -- attractively packaged smartphones with a slick, intuitive, colorful operating system. The key test in terms, aside from the transition on the budget smartphone end in China, will be how much traction Nokia can get with U.S. carriers.
Nokia faces unique challenges both in the U.S. and abroad [Image Source: Nokia Blog]
AT&T, Inc. (
) has announced that it will be carrying the Nokia Lumia 900. Given AT&T's focus on the Lumia 900 at CES 2012, it can be presumed that AT&T will market this as the "premium" Windows Phone model (despite the HTC Corp. (
carrying slightly better specs).
The real test is whether Nokia can "
pull a Samsung
" and crank out a repackaged Lumia 900 (or some similar high-end offering) to sell on America's largest carrier, Verizon Wireless (Verizon Wireless is a joint subsidiary of Verizon Communications Inc. (
) and Vodafone Group Plc. (
If Nokia can manage to squeeze on Verizon and get a firm commitment out of the top U.S. carrier, it will have devices available to around 80 percent of American consumers. That's a big deal.
So to recap, Nokia's earnings are better then expected, but a loss is still a loss. Nokia's homework in 2012 will be to:
Successfully transistion its budget lineup to Windows Phone
Carry out a strong Lumia 900 launch on AT&T
Lure Verizon into a H2 2012 launch
Even if they don't like Nokia's devices, Windows Phone fans should be rooting for Nokia to pull off this turnaround. Because for better or worse, both companies' smartphone futures are now intimately tied to each other in terms of brand image and finances.
This article is over a month old, voting and posting comments is disabled
RE: Funny how the carriers tie in
1/26/2012 3:18:55 PM
"Verizon sells far more Android than iPhone."
Not anymore. iPhone sales account for more than half of Verizon's smartphone sales last quarter, and Android isn't the only other smartphone platform they sell.
RE: Funny how the carriers tie in
1/26/2012 4:57:55 PM
I had not seen their numbers yet when I posted. Pretty amazing quarter for Apple.
Still seems like Verizon favors Android over Windows Phone - comments like they made about LTE support make me think that. Windows Phone now has several models with LTE support but none are on Verizon, even after Verizon made a stink about it.
"I f***ing cannot play Halo 2 multiplayer. I cannot do it." -- Bungie Technical Lead Chris Butcher
Apple's iPhone Outsells All Android Phones Combined at Verizon
January 24, 2012, 4:18 PM
Nokia Makes Very Soft "Aggressive" Launch of Lumia 900 LTE Windows Phone
January 9, 2012, 6:50 PM
CES 2012: HTC Titan II is Windows Phone's First LTE Handset
January 9, 2012, 5:09 PM
Nexus LTE, World's First Android ICS Phone Lands on Verizon Today
December 15, 2011, 11:41 AM
Samsung's Cell Phone Sales Surpass 300 Million
December 12, 2011, 9:08 AM
AT&T Will Also Receive the HTC One (M8) for Windows
August 19, 2014, 9:27 PM
Sharp's "Edge-to-Edge" AQUOS Crystal Smartphone Coming to Sprint for $239 Off-Contract
August 19, 2014, 7:31 PM
After 34 Years With Microsoft, Steve Ballmer Parts Way to Focus on LA Clippers
August 19, 2014, 4:17 PM
HTC One (M8) for Windows Officially Announced for Verizon Wireless
August 19, 2014, 12:15 PM
Quick Note: ASUS Readies Smartwatch for IFA 2014, Shows Teaser Image
August 19, 2014, 9:30 AM
LG Already Gearing Up for G Watch Sequel Next Month
August 19, 2014, 7:54 AM
Most Popular Articles
Lumia 830 Gets Major Upgrades Including New 20.1 Megapixel Toshiba Sensor
August 15, 2014, 6:00 PM
With USB Type-C Spec Finalized, Reversible Cables Will Soon Be Upon Us
August 13, 2014, 8:46 AM
Windows Phone, BlackBerry Smartphone Market Share Falls to 2.5%, 0.5% Respectively
August 15, 2014, 9:44 AM
Update: Samsung Gets Official With 4.7”, Aluminum-frame Galaxy Alpha Smartphone
August 14, 2014, 8:56 AM
GM Concedes That the Cadillac ELR Doesn’t Really Compete with the Tesla Model S
August 15, 2014, 5:42 PM
Latest Blog Posts
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information