Nokia's Lumia smartphone sales tank -- can Windows Phone survive it?

Just as the deal for Microsoft to buy Nokia's handset division is about to close, Nokia released its latest earnings and sales figures, and it's all bad news. Worst of all: sales of Lumia Windows Phones are dropping at a time they should have hit an all-time high. Can Windows Phone survive many more quarters like this?

There was no significant good news in Nokia's latest earnings report. Overall, Nokia lost $34 million in the fourth quarter of 2013, with smartphone sales hit particularly hard, plunging 29%.

The handset division that Nokia is selling to Microsoft is doing even worse. Sales fell to 2.6 billion euros from 3.7 billion euros a year previous. The division had an operating loss of 191 million euros. A year ago, it had a profit of 97 million euros.

And yes, there's even worse news for Microsoft, which is expected to close the deal to buy Nokia's handset division in the next two months. Sales of Lumia Windows Phone devices smartphones dropped to 8.2 million devices from 8.8 million devices in the previous quarter. That's disastrous, because the fourth quarter covers the holiday buying season, when sales should spike. Instead, they tanked.

On the upside, the 8.2 million Lumia devices sold was about double from a year previous. Optimists may say this means that the glass is half full, not half empty. But let's face it, with Lumia sales dropping during the holiday buying season from the previous quarter, at this point there's not even much water in the glass.

Cockeyed optimists looking for any upside can point out that Windows Phone is outselling the iPhone in Nigeria. In Poland, too. And Microsoft does have some wins, including Samsung likely releasing a high-end Windows Phone.

But beyond that, the news is bad. Windows Phone sales has stalled in the U.S., and can't make any headway in China. The latest figures from Kantar Worldpanel ComTech show a 4.7% market share in the U.S., and a 2.7% share in China. Dominic Sunnebo, strategic insight director at Kantar Worldpanel ComTech, warns:

"You don't have to conquer China and the US to win in the smartphone market, but you do need success in one of them. At the moment there are few signs of progress in either country for Windows Phone and momentum needs to be made soon before OS loyalty severely limits the available market."

In essence, at this point, Nokia's Lumia line is Windows Phone. Having other companies like Samsung make Windows Phone devices is a side show. If Nokia can't sell Windows Phones, nobody can. That makes this latest earnings report particularly disastrous for Microsoft.

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