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Stephen Elop and the Nokia crew

During today’s earnings call, Nokia CEO Stephen Elop, when asked if the lack of upgradeability to Windows Phone 8 of current Lumia devices would pose a problem, basically blew off the question.

He said that 80 percent of Android devices being sold currently do not have the latest version of Android on them and still sell well, and many won’t be upgradeable either. He also stated that the current Lumias running WP7 will stay in market after release of WP8 to “differentiate” the device market (meaning, at lower price points no doubt).

While its true that the majority of Android phones out there are not the latest version of the OS (and in fact it’s probably closer to 90% or more), this totally misses the point. Nokia (and Windows Phone) are trying to differentiate and garner customer enthusiasm and loyalty. After customers go out and buy a new PC with Windows 8 (or upgrade their current one as many will do), will they still be satisfied with an older OS on their phones? After all one of the selling points of WP8 will be its affinity to the PC and tablet.

It’s true that the average life of a smartphone is only about 18 months before users upgrade, but the notion that you are buying a device that ties you to what you have now is not something that sits well with the faithful. Certainly the competition, which is not just Android, but also Apple, does provide an upgrade path for many devices. Even Microsoft provides an upgrade path for Windows on PCs. So will WP customers expect different?

And why did Nokia and Microsoft (remember this is a close partnership so it was likely a joint decision) decide not to provide an upgrade? We’re not talking about some old hardware that couldn’t run the new OS. The Lumia 800 and 900 have some pretty significant processing power built-in (though perhaps not at the same level as the new devices with have dual or quad-core processors and more memory). But if the decision was based on the fact there is not enough horsepower to run WP8 on the current Lumia, than I worry that WP8 won’t be a very good performer.

The fact is, once WP 8 is released, it’s very likely that sales of current Lumias will fall drastically. They are already selling at $49 with contract (no doubt in an attempt to get rid of inventory before the new devices with WP8 are released). I think Nokia is in for a rude awakening if it thinks that its current base of Lumia users will not care about the upgrade. And I think the carriers will have a customer satisfaction problem as well.

The decision not to offer upgrades to older devices by Microsoft and Nokia is a wrong headed decision, in my opinion. It will alienate the people they need most to attract – the trend setters and early adopters who then go out and evangelize for them, building sales momentum (albeit slowly). Disaffecting these users is a mistake.

While Nokia did manage to sell 4 million Lumias this past quarter, it’s likely going to be a tough sell for them going forward as we get closer to launch of WP8 this fall, and as users fully understand they will not be able to get an upgrade. It’s also true that many purchasers of current Lumia devices are locked into a 2 year contract and won’t upgrade until that is done. Having just bought a subsidized device, will they opt to buy an unsubsidized device at significant expense to get the latest OS? Unlikely.

While I’d like to see Nokia succeed in the market, as it has some pretty good hardware and more competition is a good thing for everyone, I’m afraid that the decision to forgo upgrades may signal a real sales catastrophe for them. We’ll have to wait and see what the next 2-3 quarters bring, but at this point, I am not very bullish on the prospects.

Jack Gold is the founder and principal analyst at J.Gold Associates, based in Northborough, Mass. He covers the many aspects of business and consumer computing and emerging technologies.

Photo: Nokia CEO Stephen Elop with his crew; Devindra Hardawar/VentureBeat


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