Nokia’s secret OS to address sliding position in emerging markets

As Nokia fights to regain its footing, the company recently abandoned Symbian and MeeGo to instead adopt Windows Phone in an effort to stabilize its declining smartphone business. But that move only addresses half of Nokia’s problem. A firm position in the big-margin smartphone market will be paramount to the vendor’s success moving forward, but the market for low-cost devices is still massive. Just as Nokia’s smartphone sales have spiraled downward in recent quarters, Nokia’s feature phone business been in sharp decline as well. Nokia took drastic measures in an effort to turn its smart device business around, and it now appears as though the Finnish phone maker also has big plans for its low-end phones. Read on for more.

BGR recently revealed exclusive details surrounding Nokia’s next-generation mobile platform, a Linux-based operating system currently being developed behind closed doors. The OS was later discussed in a job listing on Nokia’s website uncovered by IntoMobile. Nokia’s forthcoming OS — initially thought to be code-named “Meltemi,” though it may bear a different name — will allow the phone maker to offer devices with smart capabilities at rock bottom prices, extending well beyond the company’s potential reach with Windows Phone in emerging markets.

Nokia’s smartphone shipments plummeted 34% in the second quarter but feature phone shipments also took a hit, dropping 16% to 71.8 million units as channel sales declined in regions where Nokia has historically been an overwhelming force. And just as Nokia has been out-innovated in the smartphone market in recent years, the company has been slow to adapt in developing markets where share is being stripped by other big players and gray market handset vendors alike.

“Phones powered by Nokia’s next-generation entry-level operating system will not be smartphones at all, and the standings of Windows Phone with Nokia doesn’t change a bit,” Pyramid Research analyst Stela Bokun told BGR. “The new platform is on the one hand very much aligned with Nokia’s mobile phone strategy stated earlier in the year (‘connecting one billion to the internet…’), but it’s also a competitive response to the newest trend seen in the gray handsets markets in the emerging world.”

Bokun mentioned Africa specifically as a market where Nokia is being outclassed by gray market handset vendors, who have identified market needs that Nokia has not met. “First you had a total fiasco of the formal market vendors with none of them recognizing (timely) that dual SIM handsets would sell great in the developing world,” the analyst said. “So, Nokia, while being quite loud about its new dual SIM phone was de facto late with launching this type of handset in Africa.”

By the time Nokia finally launched a dual SIM device, Bokun added, gray market vendors had already made a significant dent in Nokia’s market presence.

“Now, Shanzhai vendors — often on MTK platforms — are producing quasi-smartphones, another potentially unmet demand segment,” Bokun continued. “This is where Nokia’s new platform will come into [play], providing a smartphone lookalike that will essentially be a feature phone to address the demand for these phones in the emerging world and, Nokia hopes, preempt competition from the gray market vendors as well as their main nemesis in this segment – Samsung.”

All eyes are on Windows Phone as we approach Nokia World 2011, where Nokia is expected to unveil its first batch of smartphones powered by Microsoft’s Windows Phone 7.5 “Mango” operating system. But Windows Phone is only part of the puzzle Nokia is now in the process of piecing together, and its upcoming proprietary OS will play an equally important role in helping Nokia re-establish its position as a global leader.

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