Why the Nokia X is the best phone you'll never buy

 

While 2014 will likely be remembered for its Samsung, HTC, LG, Sony and Apple flagships, it's a trio of budget Nokia handsets that have been among the most unexpected and surprising releases so far.

We're talking of course about the dramatically named Nokia X and its siblings the Nokia X+ and Nokia XL. They're phones which had tongues wagging ever since they were first rumoured for the simple reason that they were Nokia devices running Android.

When they were finally revealed there was perhaps a sense of disappointment at just how low end they were, but that hasn't stopped the Nokia X from selling. 

According to Saulo Passos, Head of Communications, Mobile Phones at Microsoft Devices Group it's "getting a tremendous consumer response. In Russia, for example, it is the number one smartphone according to GfK market research firm. 

"The phone also enjoys that position in Pakistan. We are seeing great momentum also coming from China, Indonesia and Brazil." So what's the key to its popularity?

The most obvious answer is that it's cheap, as in really cheap, so of course it's likely to sell well. That's even more the case when you consider that it's aimed primarily at developing markets, such as India and China where there are a huge number of people but many of them either haven't owned a smartphone before or can only afford entry level devices.

Even so, you'd think there'd be a lot of competition. Nokia itself makes the Asha feature phone series which goes down well in many such markets while there are a number of locally made budget handsets in India from companies such as Karbonn, Lava and Micromax.

It's all in the name

Yet just as we'd be sceptical about the quality of such unknown quantities here, so too are Indian consumers according to The Times of India, which argues that before the arrival of the Nokia X the only real brand name smartphone available to entry level buyers was the Samsung Galaxy Star.

With so little choice it's no wonder the Nokia X is doing well and speaking of brand names, Nokia is one which people trust. It's been around for a long time and even in developing markets a lot of people have had experience of it thanks to the Lumia 520, the Asha range and earlier feature and dumb phones.

Indeed Azeem Ullah Hassan, a writer at the Pakistan based ProPakistani, tells us that "it is a huge influencing force in this region when buying a phone. Most people have bought a Nokia as their first phone so it remains a huge factor. Needless to say, then, that a large number of people buying the phone are buying because of the name."

So the Nokia X is selling on its name and its price tag, but there's a lot more to it than that, after all if that's all it took then Nokia could just throw out another Asha or low end Lumia and be done with it.

Robot love

What we inevitably come back to is what we started with - the fact that the Nokia X runs Android. Even over here where we're drowning in Android phones that's an intriguing notion, as the much loved Finnish firm has long been in bed with Microsoft, so an Android handset has been nothing more than a fantasy until now.

But Android is far and away the most popular smartphone OS on Earth with a 78.6% global smartphone market share in 2013 according to IDC, so for a popular smartphone maker to get on board with such a popular operating system was bound to lead to sales.

Yet with all that Android competition there could have been a risk of the Nokia X getting lost in a sea of similarly specced handsets. But that was avoided too because the Android you get on the Nokia X is not Android as you know it.

It's more akin to Amazon's take on the open source OS, in that it's taken Android as its basis but stripped out all of Google's services (including access to Google Play) and put Nokia and Microsoft services in their place.

The absence of Google Play sounds like a big deal, but in some places it might not be such a factor. Passos explained that "there are many countries, such as China, where Google Play is not available. In others, it's not the primary choice" and users still have access to third party app stores.

The Nokia X and its siblings have also been heavily skinned to include a tile based interface that looks more than a little like Windows Phone. 

So it stands out from the Android crowd and buyers of the handset can fall safely into the arms of Android while experiencing many aspects of Windows Phone, potentially pushing them to switch to a true Windows Phone handset when they upgrade. More specifically a Lumia handset, since this is a Nokia phone we're talking about and it's even decked out like a Lumia.

Indeed that's clearly part of the strategy, as Passos explained that "Lumia remains our primary smartphone strategy, while the Nokia X family, which includes the X, X+ and XL, serves as an introductory system to Lumia. The Nokia X user interface ties directly into our strategy of providing an 'on ramp' for Lumia."

Of course even users that stick with the Nokia X will find themselves in Microsoft's fold, as the handset uses Bing, One Drive and other Microsoft and Nokia services in place of their Google counterparts.

Passos agreed, saying that "one of the great benefits of the Nokia X family is that it will help to introduce millions more people to popular Microsoft services that work across Nokia X and Lumia. Those services will become central to the online lives of the next billion and they will be able to access them using either Android or Windows phones." 

And the key point is that this is a strategy that is getting users over to Microsoft's side rather than Google's. It's using Android to keep users away from, well, Android. 

That's something that wouldn't be as easy with Windows Phone, as it's a relatively unpopular operating system, with a global smartphone market share of just 3.3% in 2013 according to IDC, but with the heavy skinning of the Nokia X the awareness of the Windows Phone experience will grow, even while people aren't actually using Windows Phone itself.

And by offering three different handsets in the 'X' range Microsoft arguably has the low end of the market sewn up, with the Nokia X being aimed at the very entry level, the Nokia X+ aimed at those who want slightly better specs and the XL at users who want something with a larger screen.

Looking forward

Passos wouldn't be drawn on what the future of the Nokia X brand will be, but it's seemingly been a hit so far and the Nokia X2 is now launching in various countries around the world, just half a year after the initial model was announced.

So it seems that Microsoft is committed to the brand for now at least and while it's too early to get sales figures for the X2 we'd expect that it will do well.

That said, the X2 is almost as low-end as its predecessors so it seems more aimed as a replacement for the Nokia X than a higher end option. By sticking to low-end devices Microsoft and Nokia are presenting anyone who wants to upgrade with a tough choice: either ditch Microsoft's services and move to a standard Android handset or ditch Android and move to Windows Phone.

Presumably Microsoft is banking on the latter happening, but Hassan is sceptical, saying that "I think most people will buy an Android device (for their next phone). The idea of migrating to a less-mature OS with lesser apps seems unlikely. It's highly probable that the phone will be higher end and Nokia doesn't make a higher-end Android phone right now. 

"Yes, Nokia has worked hard to transmute the OS into Windows Phone but I don't think most people can be lured."

Passos meanwhile is optimistic about the Nokia X range, saying that "one billion more people will be connected to the internet in the next few years. We know that they live mainly in high growth markets, they are mostly young people and their first experience of the Internet will be on a mobile device. 

"We see this as a huge opportunity to place mobile phone innovation and Microsoft services into their hands, to enable their first experiences of the internet, apps and the cloud."

In other words Microsoft wants to be at the forefront of bringing in the next billion smartphone users and with the Nokia X and Nokia X2 it just might manage it, but whether those users will stick around when they need a new phone is another matter entirely.

Why Microsoft is killing Nokia X

The Nokia X phones that Microsoft discontinued this week blend two rival operating systems, but leave out the best of each.

As a result, the devices didn't become a runaway hit as Nokia's low-cost answer to serving emerging markets.

Nokia X phones were devised to be a gateway to the company's pricier Lumia phones. The operating system that runs the phones was to blend the core technology found in Google's Android system with services and designs found in Microsoft's own Windows Phone system. Nokia looked to Android as a way to sell phones with locally tailored apps unavailable on Windows.

But Microsoft completed its deal to buy Nokia's phone business in April, and Nokia X is gone less than three months later.

"Nokia tried to bring the best of both worlds on this device, but once you play around with it, this phone kind of falls short of how fantastic it could be," said Ramon Llamas, an IDC analyst who follows phones.

Although sales figures aren't available, Llamas said his research showed Nokia X was "not the one that everybody seems to be flocking to."

The Nokia X project is an example of clashing priorities that Microsoft CEO Satya Nadella is trying to curb with a refocusing effort that includes 18,000 job eliminations over the next year. In Thursday's announcement of the cuts, Microsoft said it will shift future Nokia X product designs to its Lumia line of Windows devices.

Although Microsoft Devices chief and former Nokia CEO Stephen Elop pinned the move on a need to align Nokia's strategy with Microsoft's, two other factors contributed to the downfall: Nokia X lacked an identity, while Windows got better.

Now, Microsoft is left to target emerging markets with Windows alone.

Nokia and Microsoft had been partners long before Microsoft bought the phone business. To maintain the relationship, Nokia sought to appease Microsoft by replacing many of the Google services on Android with Microsoft's services. Android staples such as Gmail, Google Maps and Google's app store are nowhere to be found. Instead, Nokia X phones have Here Maps from Nokia and Skype and OneDrive from Microsoft. The Nokia X home screen looks nothing like Android, but resembles Windows.

The thinking was that once Nokia X users were ready for higher-end phones, Lumia would be their choice because they are already accustomed to Microsoft services and designs.

But Nokia adapted Android so much that it affected functionality. Software developers had to tweak some of their apps because Nokia X lacks key Google services. For instance, location services have to use Nokia's Here rather than Google Maps. In-app payments also had to be tweaked to allow billing through mobile carriers, something Nokia X enabled because many people in emerging markets lack credit cards.

Meanwhile, even as Nokia adopted the look of Windows, it didn't adopt its ease of use. It was more like a knockoff version of Windows.

Windows devices set themselves apart by offering colorful home-screen tiles stuffed with content. Instead of just a logo of Facebook, for instance, you get the first several words of notifications. For email, you get the email's sender and the start of the subject line, so users know whether there's anything worth opening the app for. Windows also lets you create tiles to serve as shortcuts to specific tasks within apps - such as places you go often using the mapping app.

Nokia X has none of that. Its home-screen tiles are static, like overblown versions of Android icons.

Now, Llamas said, Microsoft is under even more pressure to succeed with Windows in emerging markets. Although recent improvements help, he said, many phone makers by now have settled on Android for cheaper devices.

Nokia X did succeed at keeping prices low. Its four models range from $120 to $150. By contrast, Nokia's Lumia Icon costs $550 without subsidies that come with two-year service contracts. Apple's iPhone 5s and Samsung's Galaxy S5 cost even more.

In killing Nokia X, Microsoft isn't changing Nokia's commitment to serving emerging markets. Microsoft knows those regions are high-growth areas, as many people in the United States and other industrialised markets already have smartphones. Microsoft is also aware that those devices need to be affordable.

The day before Nokia announced its Android phones at a February wireless show in Barcelona, Spain, Microsoft unveiled plans to update its Windows Phone system. Among other things, the software runs more efficiently, so it doesn't require as much processing power. That update, Windows Phone 8.1, came out in May. Microsoft also began giving the Windows software to phone makers for free, the way Google has with Android. And it relaxed requirements for physical buttons. All that has made Windows phones cheaper to make.

The Nokia X phones do have some good touches, including slots for two SIM cards - something important for emerging markets, where phone rates vary so much that people often switch services depending on whom they are calling or texting. Windows didn't allow that until the May update.

The improvements made to Windows ultimately reduced the need for Nokia X. But even if that hadn't happened, it was doubtful Nokia X would have survived under new owners.

In his memo, Elop pointed out that "the role of phones within Microsoft is different than it was within Nokia."

Nokia's business had been to make phones. With Microsoft, the phones are a way to showcase the company's other offerings in services and software, including the Windows Phone system.

And Nokia X had no role in that.