Bloomberg News

Nokia Says Windows Phones Get ‘Remarkably Positive’ Response

November 18, 2011

(Updates with share price in sixth paragraph.)

Nov. 17 (Bloomberg) -- Nokia Oyj Chief Executive Officer Stephen Elop said there has been a promising early response for the company’s Windows Phones and predicts demand will be boosted by Microsoft Corp. spreading the tiled interface to personal computers and tablets.

“The reaction is remarkably positive,” Elop said in Barcelona at a conference organized by Morgan Stanley yesterday. “We need to introduce the experience to consumers to get them to try it because we know once they try it they will like it.” Nokia starts selling the Lumia 800, which Elop calls “the first real Windows Phone device,” in six European markets this month.

Elop, 47, last month unveiled Nokia’s first Windows Phone models after the company lost ground with its own 10-year-old Symbian software. Nokia has lost more than 60 billion euros ($81 billion) in market value since Apple Inc. introduced the iPhone in 2007. The company intends to widen its range from the 420- euro Lumia 800 and 270-euro Lumia 710 with both cheaper and more expensive devices, Elop said today.

Nokia, based in Espoo, Finland, is running advertising campaigns focusing on the handsets’ interface of square tiles that dynamically update with new information.

The phones will benefit as Microsoft puts a similar interface on its Windows 8 software for computers and tablets, which will be in front of “hundreds of millions of people,” Elop said. Nokia hasn’t disclosed any plans for its own tablet though it sees an “interesting opportunity,” he said, reiterating prior remarks.

Nokia dropped 0.3 percent to 4.91 euros in Helsinki trading as of 10:33 a.m. Before today, the stock had declined 36 percent this year.

‘Step by Step’

Nokia teamed up with Microsoft to establish a “third ecosystem” competing with the handset and services offerings of the iPhone and devices running Google Inc.’s Android system, which have gouged its market share. Fourth-quarter sales of the Lumia handset could be between 1 million and 1.5 million units, according to Morgan Stanley’s analysts.

“We have taken a very deliberate strategy to how we roll out the Lumia product line,” Elop said. “We know we have a lot of work to do step by step, so we look at it as a build.”

Nokia is customizing the Lumia and its services packages for each market, he said. The U.S. will get Lumia handsets in early 2012 and China in the first half of the year.

Android Attack

Nokia’s share of the smartphone market declined to 16 percent in the third quarter from 50.8 percent when the iPhone was introduced, according to Gartner Inc. Android is the biggest category of devices with 52.5 percent of smartphone sales, and the iPhone is third. Nokia remains the world’s biggest supplier of mobile devices overall by units.

“Our highest priority is to help the Windows Phone ecosystem compete against Android,” Elop said. There are still millions of Nokia users who have not yet purchased Androids or iPhones, he said.

The CEO, a former Microsoft executive, said he is enforcing clearer decision-making and has removed five layers of management. He’s restructuring Nokia’s sales organization after sales plummeted in the second quarter on inventory build-up at retailers.

Painful Quarter

“The second quarter was very painful for everybody, a self-inflicted problem that shouldn’t have happened,” he said. “When a company shifts from a position of great strength and taking orders to selling and having to drive demand, you have to go through a transition. The only thing that matters is driving sell-out” to consumers.

Changing Nokia also means dealing with the unprofitable Nokia Siemens Networks venture with Siemens AG, the company’s last major non-handset-related asset. Nokia and Siemens appointed Jesper Ovesen, a former chief financial officer of Denmark’s TDC A/S and Lego A/S, as executive chairman of the unit in September.

“What you should expect to see from us is clearly a pattern of very aggressively going after the challenges there and making the changes necessary,” Elop said. “The new chairman is off to a very aggressive start on that already.”

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporter on this story: Cornelius Rahn in Barcelona at crahn2@bloomberg.net Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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