Eight months after the announcement of the companies’ strategic partnership, Nokia (NYSE:NOK) and Microsoft (NASDAQ:MSFT) finally have shown their first united round of smartphones at the Nokia World conference in London. The new Lumia line of smartphones includes two models, including a high-end device named Lumia 800 — a handheld similar to Nokia’s abruptly cancelled N9 — and the inexpensive, few-frills Lumia 710. Both phones use Microsoft’s Windows Phone 7.5, or Mango, operating system.
For investors curious as to whether these new devices are the future for both companies — in Nokia’s case, a return to market leadership; for Microsoft, relevance in the mobile space — take note: The Lumia is not the destination for the NOK/MSFT partnership. It’s just the map.
The most significant announcement at Nokia World on Wednesday wasn’t the reveal of the company’s Lumia smartphones, but word of when and where they will be released. Only Russia, Hong Kong, India, Singapore and Taiwan will see both Lumia phones before the year is out. The high-end Lumia 800 will make it out in a few western European countries, including the United Kingdom, France, Italy, Germany, Spain and the Netherlands, where it will retail for 420 euros (around $579) without a contract.
Nokia and Microsoft are holding off on bringing their phones to the U.S. and China — the two biggest phone markets in the world — until sometime during the first half of 2012, according to a report in All Things Digital. It’s not as though the companies are trying to give the new Apple (NASDAQ:AAPL) iPhone 4S time to cool off in those markets, either, since the Lumia is going head-to-head with Apple’s handset abroad. The slow rollout instead is trying to gauge whether Nokia’s most loyal customers are taken with the new phones and t! heir att endant services.
The Lumia’s release in India this year will be the true litmus test for Nokia. That country represents the third largest mobile market in the world. As of the second quarter of 2010, Nokia controlled 81% of the smartphone market in India, making it the last bastion for the Finnish company’s Symbian-based handhelds. However, according to research firm Gartner, that share had crumbled to 48% by September, Nokia’s customers lured away by Samsung’s Google (NASDAQ:GOOG) Android-powered smartphones.
This drop in market share was even more disastrous for Nokia considering recent declines in mobile revenues from India. Nokia pulled in around $5.1 billion in revenue from India in FY08 and just $3.8 billion in FY09. Sure, that’s only a fraction of Nokia’s total annual revenue, but that total revenue also is shrinking at an alarming pace — Nokia pulled in $56 billion last year, down from $74 billion in FY08.
Right now, the initial feature set of the Lumia is familiar. Nokia emphasized the free Nokia Drive GPS app and MixRadio, a free music streaming service — features already present in swiftly selling phones — at the Lumia’s reveal. HTC’s Thunderbolt, a hit with Verizon (NYSE:VZ) in the U.S., does free GPS turn-by-turn directions, and most phones support Pandora‘s (NYSE:P) streaming music service. Nokia needs Windows’ apps and services like Office 365 to distinguish its phones. Right now, though, that simply might not be enough.
But if Nokia can prove that the Lumia is a product that its once-devoted Indian consumers like, the product line might be ready for the U.S. and China. If not, expect Microsoft and Nokia to circle the wagons once again and wait for Windows 8-capable, 4G handsets to be ready for the market in late 2012 or even 2013.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Fo! llow him on Twitter at?@ajohnagnello?and?become a fan of?InvestorPlace on Facebook.
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