Device operating systems

Price Is Right for Nokia's Windows Phone

Falling smartphone prices are one reason why Windows Phone, despite a slow start, is well positioned to overtake Android in market share as soon as 2013.

Pyramid Research 's forecast that Microsoft Corp. (Nasdaq: MSFT)'s operating system would lead the pack by 2015 attracted skepticism when it was first published in May, but just two months later, market dynamics continue to support the fact that Windows Phone is off to a good start. (See Why Windows Phone Will Beat Android and Windows Phone & World Domination.)

The main reason is price. Nokia Corp. (NYSE: NOK) is rumored to soon be reducing prices on its Symbian Ltd. -based handsets by 10 percent in an effort to slow the decline of its market share as it transitions to Windows Phone. It's a mode of damage control, says Pyramid Research analyst Stela Bokun. (See Nokia Lowers Outlook, Shares Slump and Symbian Is Dead. Long Live Windows Phone.)

"For Nokia, it’s about making sure that they keep the loyal customers until they are ready to entertain them with the new devices," Bokun wrote in an email to LR Mobile. Nokia would prefer to transfer these consumers from Symbian to WP7 rather than have to fight for them back once they've gone to a competitor.

At the same time, Microsoft is preparing to lower prices, as it expects the production cost for WP devices to decline to $100 to $150 next year. This will have major implications for the price of Windows devices, as well as their appeal to consumers, carriers and hardware makers, Bokun says.

The result of the falling prices at Microsoft and Nokia could be a very good start for the Windows Phone ecosystem. Nokia will likely retain some market share despite an early slide, more hardware makers will consider building WP7 devices given the lower production costs, and more consumers will look at the phones given their lower price tags.

Of course, Android's scale is driving its prices down as well, but the recent scuffles between Apple, High Tech Computer Corp. (HTC) (Taiwan: 2498) and other Android partners may have some handset makers diversifying to rely less heavily on the OS. Windows Phone could be the most attractive alternative. (See Apple Wins Patent Victory Over HTC and Wireless Competition's Courtside Seats .)

"With the change in the price of WP devices, and the multivendor strategic approach of Microsoft, the main advantage of Android -- scale -- may be removed," Bokun said back in May. (See Nokia Boss Declares War on Android.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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