Microsoft has announced that the Nokia Lumia brand is dead; there will be no more Nokia-branded Windows Phones. Instead, we’ll now get Microsoft Lumia devices — and in the next few days, all of the existing branding, websites, and social channels will be rebranded as Microsoft Lumia. It will be interesting to see how the Lumia range does, now that it has been fully excised from Nokia. Microsoft’s (MSFT) latest Q1 2015 earnings, released yesterday, highlight that sales of Lumia devices were only slightly up over the last year — and I doubt that the transition to Microsoft branding will help matters.
Back in September 2013, Microsoft announced that it would acquire Nokia’s phone business for $7.2 billion. At the time, it was given a temporary license to use the Nokia name on products — but now it’s time for Microsoft to relinquish one of the world’s top phone brands and forge ahead with making its own name. Incidentally, the other half of Nokia — the network equipment company that retained the right to the “Nokia” brand — is having a whale of a time since it palmed off the devices division to Microsoft; yesterday, it announced that it had its best quarter in long time, finally returning to profitability.
Things aren’t so good over at Microsoft. During its Q1 2015 earnings call yesterday, CEO Satya Nadella said the company had sold 9.3 million Lumia Windows Phones — only slightly up from 8.8 million during the same quarter last year. Considering the Lumia brand essentially is Windows Phone, that doesn’t bode well for Windows Phone’s continuing fight against iOS and Android. (For comparison, Apple sold about 40 million iPhones last quarter. We can only guess at how many Android phones were sold worldwide — but probably upwards of 100 million.)
Nadella also admitted that most of the Lumia gains last year were in Europe with lower-priced devices — a region that is historically a Nokia stronghold. Microsoft strategically maneuvered towards low- and mid-range phones last year when it realized that it couldn’t compete against iOS and Android in the flagship segment — but I’m not sure how well Microsoft will do in these markets once the Nokia label is replaced by Microsoft. Remember that, for some 10 years prior to the first iPhone, Nokia had a complete stranglehold on the mobile phone market in these poorer, non-Western countries — Microsoft, however, was just the software company that made your pirated copy of Windows XP.
It’ll be interesting to see how Microsoft mixes things up in the wake of the departing Nokia brand. The first Microsoft Lumia device will be unveiled “soon,” according to an interviewwith Microsoft’s head of phones marketing — though we have no idea what that device might be. Moving forward, the word “Microsoft” will replace the iconic “Nokia” at the top of every new Lumia handset, and “Microsoft” along with the flag logo will appear on the back of the phone as well. Funnily enough, while Microsoft can no longer use the Nokia name on its Lumia handsets, it has a 10-year license to use the name on entry-level phones such as the Nokia 130 — so, if Windows Phone doesn’t work out, I guess Microsoft always has that incredibly low-margin business to fall back on.
In other news, Microsoft’s Q1 2015 earnings were actually quite strong — $23.2 billion in revenue, $4.5 billion profit — with most divisions posting decent gains. Cloud revenue grew a massive 128%, and Server posted strong gains of 13%. Perhaps most importantly, Surface revenues were $908 million, up from $400 million during the same quarter last year — presumably because of strong sales of the Surface Pro 3. (“Presumably” because Microsoft still refuses to release actual sales figures for the Surface tablets.)