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China, India the key to Micr-okia's fate says IDC

Low-budget Lumia, Asha overhaul needed but lack of apps still a problem

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The mega-markets of China and India, and more broadly the rest of the Asia Pacific region, will be key to Microsoft’s success in the handset space with its newly acquired Nokia assets, according to analyst IDC.

China is the number one market for Lumia shipments, with India in second, Vietnam in eighth and Thailand tenth globally, IDC senior research manager Melissa Chau told The Register.

“Asia Pacific stands out as a key market Microsoft will have to approach,” she added.

“Nokia’s strategy has always been on emerging markets but this is where it gets dicey – we don’t know how the management will change. The concern in the past is that Microsoft has been very US-focused.”

That said, even with Nokia on board, Microsoft will face significant challenges. In India, where Nokia has a strong brand thanks to its feature phone business, its stature with operators has been severely diminished over the past few years “because its ability to push out handsets has decreased”, Chau argued.

She added that Microsoft’s biggest problem, the lack of an app ecosystem to match iOS and Android, will not be solved by the acquisition and at best will only help Redmond consolidate its position against Blackberry as the third placed mobile ecosystem.

The Nokia buy will certainly not be enough to attract more developers or OEM handset makers on board, in fact, it may be enough to persuade Samsung, HTC, ZTE and Huawei to drop their half-hearted Windows Phone efforts altogether, she argued.

Another important success factor in the region will be Micr-okia's efforts to produce a low cost smartphone that average citizens in the region can afford. Last year, for example, analyst Canalys predicted that nearly half of China’s smartphone market will comprise handsets under $200 (£127) by 2015.

Microsoft could do two things to bring the cost of a new Lumia handset down, according to Chau.

Firstly it could scrap the licensing fee, which at present is built into the cost of the phone, knocking around $10 off per handset.

“Secondly it could work more closely on tweaking the OS to run on certain hardware specs more suited to a lower price point. In that way the price could come down,” she said.

Another strategy would be to make Nokia’s Asha handsets more attractive to buyers in markets like China and India by pre-loading them with "first party" apps such as mapping, with the intention of up-selling these punters in the future onto low-cost Lumia phones.

“The one complication is that the Nokia brand won't be on Lumia (only on Asha), but in theory, if Microsoft could help put a couple first-party 'Microsoft-specific' apps on Asha, it could help to maintain that bridge for users to eventually migrate to Lumia,” Chau explained. ®

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