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With Stakes High, Nokia Bends for Lumia Users

Stocks in this article: NOK

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- Barely have the wraps been taken off the new Lumia 900 before a glitch has surfaced with the phone that is causing a loss of data connectivity.

To Nokia's (NOK) credit, they not only acknowledged the issue just two days after the launch but also promised a quick software fix for the bug by April 16. Moreover, the company is also offering to credit the AT&T (T) accounts of all those who buy the Lumia 900 before April 21 with $100 as a goodwill gesture. If one needed further proof of how important this launch is for Nokia in the face of increasing competition from Apple's (AAPL) iPhone as well as Android smartphones, this is it.

See our complete analysis for Nokia

Do or Die for Nokia

The $100 credit effectively makes the smartphone free with a two-year contract. Given that Nokia is willing to eat the cost in order to get the phone in as many hands as possible is a strong indicator of how desperately Nokia needs Lumia to give some life to its sliding brand. Only three years back when Nokia was at its peak, it commanded a market share of more than 25% in developed markets. Growing popularity of competing smartphones such as the iPhone and Android based ones has since forced Nokia to exist the U.S. and the figure has slumped to less than 18% in 2011.

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A big reason why Nokia failed to stand up to the emerging competition was that it couldn't come up with a software platform that could address the changing needs of its customers. While competitors Apple, Samsung and HTC either developed a smartphone OS of their own or jumped on an open source mobile software developed by Google especially for smartphones, Nokia chose to stick to its older Symbian platform. The bet proved costly for Nokia as its Symbian smartphones fared poorly in the marketplace and Nokia lost significant market share.

However, now with Windows Phone, Nokia finally has a smartphone operating system capable of standing up to iOS and Android and giving it a fighting chance to stake a claim on the lucrative smartphone market. In Microsoft, it has a deep-pocketed partner that is as desperate as it is for a bigger share of the market.

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