Microsoft Corp's phone chief hates to call the new Nokia Lumia 521
cheap, but the lower-priced smartphone launching in the United States is
the company's boldest move yet to win mass market share from leaders
Apple Inc and Samsung Electronics.
The world's largest software
company has so far focused on putting its Windows Phone software into
expensive, high-end devices - chiefly from Nokia and HTC Corp.
the new model will go on sale at Walmart later this month at an
unsubsidized price under $150, relatively cheap for a new phone running
up-to-date software without a long-term contract.
"There is an
opportunity for us to offer a very high quality device in the
mainstream," said Terry Myerson, head of the Windows Phone unit, at
Microsoft's campus near Seattle last week. "That's where we've made
progress in the last couple of months and it's a strategy we'll continue
to explore in the United States."
The Nokia Lumia 521 went on
sale on the Home Shopping Network (HSN) last week, where it has already
sold out. The 4G phone, sold overseas as the Nokia 520 (Review I Pictures), is essentially a
mid-range phone with some high-end features, such as four-inch touch
screen, five megapixel camera and high-definition video display.
week the phone will go on sale at less than $150 at Walmart, along with
T-Mobile US Inc's $30 per month unlimited data and text plan, which
works out much cheaper over the long run than heavily subsidized iPhones
and upscale Android devices that generally come with pricy long-term
The early popularity of the Lumia 521 on HSN is a minor
boost for Microsoft, whose mobile plans have stuttered and stumbled
since Apple's iPhone destroyed its early dominance in the smartphone
market in 2007.
After completely redesigning its software,
Microsoft-powered phones now have 3.2 percent of the U.S. smartphone
market, compared to 39 percent for Apple and 52 percent for Google Inc's
Android system, according to comScore.
Nokia, which now only
makes smartphones running Windows, sold 5.6 million of its Lumia
handsets in the first quarter, up 27 percent from the previous quarter,
although that is still dwarfed by 37 million iPhone sales.
does not detail overall Windows phone sales or financials, but did say
last quarter that phone-related revenue rose by $259 million, which
includes licensing revenue from Android phones, which use some
technology patented by Microsoft.
Windows phones tend to fare
better overseas, where they have as much as 20 percent share in some
markets such as Mexico and Poland, and almost 7 percent in Britain,
according to Microsoft.
That is partly because the role of
powerful carriers such as AT&T Inc and Verizon Wireless, which
dominate U.S. phone retail, is less pronounced in overseas markets.
and Verizon have been great partners," said Myerson. "But where the
market dynamics are different, and where the operators play a different
role, we have done better."
Heavy up-front subsidies from AT&T
and Verizon, in return for long-term service contracts, mean U.S.
customers can afford the best hardware from Apple and Samsung. Even
though Windows phones are also subsidized, Myerson admits it has been
hard to break that lock on the home market.
"It (subsidization) is
a compelling business model for them. If you are Samsung, Apple,
AT&T or Verizon, it's where everything's working, you are growing
share, you are growing profits," said Myerson. "If you are an incumbent
with a successful business model, you're not going to be jumping to
throw it out."
As a challenger to those incumbents, Myerson says Microsoft has to differentiate on more than just price.
introducing "killer hardware", he says the next task for Windows phones
is to leverage Microsoft's Office and Xbox products to make a genuinely
new phone experience, whether as a work tool or advanced toy.
don't think we've come near to the full potential," he said. "Those are
our two dimensions here, Office and Xbox. We want to bring to life
getting work done and bring to life that serious fun, here on this thing
in your pocket. That's going to develop over time."
Myerson played down reports that Microsoft was working on a phone of its own, to follow up on its Surface tablet.
"Nokia's doing a great job," he said. "They really are receiving all of our go-to-market energy right now."
© Thomson Reuters 2013
Mobiles launched in April 2013