Early in 2011, Nokia abandoned its homegrown operating systems -- including Symbian -- and bet the farm on Microsoft's Windows Phone platform.

According to Nokia's Jan. 26 earnings statement, Microsoft paid the manufacturer a $250 million "quarterly platform support payment," as part of the two companies' broader strategic agreement. "Over the life of the agreement, both the platform support payments and the minimum software royalty commitments [which Nokia will pay to Microsoft] are expected to measure in the billions of dollars," that statement added.

T-Mobile USA sells the Windows Phone-based Lumia 710 for $49
(Click to enlarge)

The falloff in Nokia's year-over-year financials wasn't unexpected by analysts, who uniformly seemed to realize the company's decision to kill off Symbian would translate into a decline in sales and market share. Research notes produced in the wake of Nokia's earnings announcement seemed duty-bound to highlight the company's current rough period -- as well as the dangers that possibly await in 2012.

"Given a measured WP7 rollout and subsistence on an end-of-life Symbian portfolio, we see scope for m/share disappointment again in [the first half of 2012]," Lee Simpson, an analyst with Jefferies & Co., wrote in a co-authored Jan. 26 research note. "With the ecosystem ceded to Microsoft, Nokia resembles a low-margin box maker rather than a firm returning to its strident past."

Those sales headwinds, the note continued, are balanced out somewhat by Nokia's improved market execution and cost cutting, along with its strong wireless patent portfolio -- all positive factors that could help make Nokia's fiscal 2012 "a transition year."

For Nokia, navigating that transition is fully dependent on handling the various facets of its Windows Phone deployment. "The key to success in many markets will rest on how much Nokia invests in promoting its Windows Phone devices," Ken Hyers, a senior analyst with Technology Business Research, wrote in a Jan. 26 note, "including promotions, subsidies, and training of phone sales staff in carrier stores and retail sales outlets."

Nokia's Lumia 900
(Click to enlarge)

What might ultimately help Nokia and Microsoft carve off more market share from their competitors, he added, is keeping smartphone pricetags noticeably low. The midmarket Lumia 710 currently retails for $49 with a two-year contract, and the higher-end Lumia 900 (above) will reportedly hit the market in the U.S. at a $99 price point.

"At these prices, Nokia can expect to be viewed as a strong alternative to competing platforms, particularly for the more than one-half of the U.S. population that does not yet have an Android or Apple smartphone," Hyers wrote.

In remarks accompanying Nokia's earnings report, CEO Stephen Elop acknowledged his strategy for the company, centered on Windows Phone, was still very much a work in progress: "We still have a tremendous amount to accomplish in 2012, and thus, it is my assessment that we are in the heart of our transition."

Further information

More detail regarding Nokia's Q4 2011 financial results can be found on the company's website.

Nicholas Kolakowski is a writer for eWEEK.

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