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How Nokia Must Fight Back In U.S.

Nokia has a lot of work to do in the U.S. smartphone market if it wants to regain lost ground with Windows Phone 7 devices like the new Lumia models.
Ten years ago, Nokia held 50% of the U.S. wireless phone market. Motorola held the other half. Nokia maintained a good market position in the United States for several years into the early 2000s, but its U.S. share accelerated downward as more competitors (Samsung, LG, Sony Ericsson) entered the market. Today, Nokia's market share in the United States is well under 7%. What can it do to fix that?

Nokia has several problems that need to be addressed.

First, it needs to repair its relationships with the U.S. network operators. Like it or not, AT&T, Sprint, T-Mobile USA, and Verizon Wireless set the tone for which phones are sold in the United States, what they cost, and what features they have. For years, Nokia insisted on making phones the way it wanted to and was not willing meet operator requests.

The result? U.S. operators don't sell (many) Nokia phones. And the Nokia phones the carriers do sell are the lowest-margin, entry-level handsets that Nokia churns out in the hundreds of millions for emerging markets. Nokia has hopefully learned that it needs to work better with U.S. operators if it wants to sell devices that run on U.S. networks.

Without U.S. network operator support, Nokia isn't going to gain any traction in the U.S.

[Nokia is betting on Microsoft to help it reclaim its stake in the U.S. mobile market. Learn about Nokia's U.S. Plan: Windows Phone 7 Stands Alone.]

Second, Nokia has to offer features and devices that U.S. consumers want. In the past, Nokia has modified phones primarily targeted at Asian and European markets to work in the United States rather than design new phones specifically for the United States. (CDMA-based feature phones aside.) More often than not, this meant dropped features.

Let's look at the recently announced Windows Phone-based Lumia 800 and 710 as examples of what Nokia is doing wrong. Right now, the features that help to sell bucketloads of Android smartphones and iPhones are things such as user-facing cameras for video chats, expandable memory, mobile hotspot support, 4G support, huge high-def screens, dual-core processors, near-field communications, and so on. The Lumia 800 and 710 leave out most of these features. Though some of this is to blame on the specs for Windows Phone 7.5 Mango, Nokia (and Microsoft) need to move past these limitations and design some great hardware for the United States.

That's not to say that the Lumia 800 and 710 aren't compelling products, because they are. They're just not entirely what U.S. users want when you look at the nitty gritty details (beautiful hardware only gets you so far, after all).

Thankfully, Nokia CEO Stephen Elop said at the Nokia World event in London that the company plans to address the U.S. market specifically with devices catered to U.S. networks (read, CDMA and LTE 4G Nokia phones). Elop didn't say if they will be modified versions of the Lumia 800 and 710, or if they will be brand new phones.

It would be better for Nokia to introduce brand-new phones that will only be sold in the United States, but I have doubts it will do that.

Beyond operator support and hardware features, Nokia's mindshare in the United States is extremely low. Apple's iPhone, Google's Android, and RIM's BlackBerry are what U.S. consumers think of when they think smartphones. To combat this, Nokia said that it is undertaking a huge marketing campaign. The company revealed several television commercials it plans to air in order to remind people that Nokia is still a player in the mobile market. It is also setting up promotions with its network operator partners and working with retail partners to make sure employees are trained and able to really sell Windows Phone 7 as a platform.

The company is going all-out to make sure its Windows Phone 7 smartphones are successful. If Nokia can't make its new smartphones a hit with buyers, both it and Microsoft will be in a lot of trouble. They have to succeed. But will they?