New Smartphones May Be Nokia’s Last Stand

In perhaps its last shot at making inroads in a market dominated by battling rivals Apple and Samsung, Nokia launched a new line of smartphones in New York this morning with the new Microsoft Windows Phone 8 operating system.

Among other features, the Lumia 920 includes an enhanced camera with Carl Zeiss lenses and software that works better in low-light situations, smoother HD video technology, and a pad for wireless charging. It also has an augmented reality feature called “Nokia City Lens”—if you point the camera at a building, the phone will give you information about a store or restaurant on the site.

The phones are crucial for Nokia, which once dominated the mobile phone market but more recently had to cut 40,000 jobs because of poor sales of its existing Lumia models. Regardless of how snazzy the new phones are, “to be considered credible by the ecosystem—especially developers—they have to make a big dent in sales,” says Chetan Sharma, an industry analyst in Seattle. “Nokia’s destiny might get defined by the 2012 holiday season.”

Both Nokia and Microsoft face a long uphill climb. In the second quarter, Windows phones held only 3.7 percent of the global smartphone market, according to a study by Strategy Analytics. Android phones have 68 percent, and Apple has 17 percent. One positive sign for Microsoft is that Samsung, HTC, and Acer also are working on models that use Windows Phone 8 as their operating system.

It is a busy month for smartphone launches. Motorola Mobility—now owned by Google—joined up with Verizon this afternoon for the unveiling of new phones. Both Nokia and Motorola are trying to get a jump on Apple’s expected announcement of the iPhone5 next Wednesday. In addition, Amazon is expected to introduce new Kindle tablets tomorrow.

Nokia may have gotten a slight indirect benefit from the $1 billion verdict Apple won over Samsung in a patent case last month (see “Apple/Samsung: The Verdict on Innovation”). That ruling tarnished Google’s Android operating system, which was installed on Samsung’s phones, while Nokia has a large storehouse of mobile communications patents (see “Nokia’s Patents Are Its Last Line of Defense”).

However, the legal issues still have years to play out, says R. Polk Wagner, an intellectual property law expert at the University of Pennsylvania. “It is all very early in what is likely to be a long battle. Certainly from a manufacturer point of view, it makes Android somewhat less attractive, because of the risk of infringement. But whether that additional risk is enough to overcome other advantages in favor of Android is very unclear,” Wagner says.

Among other differences, Windows Phones have only about 100,000 apps available, while there are around 500,000 for Android phones or iPhones. But the overall global smartphone business keeps exploding: estimates from CCS Insight hold that some 700 million smartphones will be shipped by the end of this year, outstripping PCs.