Did the deal for Windows Phone with Microsoft help knock Nokia off its roost as worldwide phone leader?

Nokia, which has been the world's largest cell phone maker for the last 14 years, will be dethroned by Samsung this year and fall to second place, reports IHS iSuppli. One reason may well be the Nokia-Microsoft deal in which Nokia bet its future on the struggling Windows Phone platform.

IHS iSuppli says that Samsung will have a 29% share of worldwide phone shipments by the end of 2012, with Nokia coming in at number two with 24%. Last year, Nokia was the top dog with 30%, and Samsung had 24%.

The reason, iHS iSuppli says, is simple: Smartphone sales are booming, and Samsung is selling plenty of them, while Nokia isn't. Wayne Lam, senior analyst for wireless communications at IHS said in a statement:

"The competitive reality of the cellphone market in 2012 was 'live by the smartphone; die by the smartphone.' Smartphones represent the fastest-growing segment of the cellphone market -- and will account for nearly half of all wireless handset shipments for all of 2012. Samsung's successes and Nokia's struggles in the cellphone market this year were determined entirely by the two companies' divergent fortunes in the smartphone sector."

As to why Samsung has flourished in the smartphone market, iHS iSuppli says that the company monitors smartphone trends, finds what users want, and then creates dozens of new smartphones every year that address multiple market segments, from the high end to low end. Samsung does this by primarily using Android as its operating system, although it has also been manufacturing some Windows Phone devices as well.

Nokia, on the other hand, signed a deal with Microsoft in the first half of 2011 in which it decided to leave behind the Symbian operating system for smartphones and bet its future on Windows Phone. Ever since then, its market share has been plummeting. Lam says:

"Finnish-based Nokia is mired in transitioning its smartphone line to the Windows operating system, resulting in declining shipments for the company. Sales of the company's older Symbian-based phones have plunged, while its new Microsoft Windows 7-based handsets haven’t been able to make up for the loss so far."

Apart from Lam's misnaming Microsoft's smartphone operating system (it's called Windows Phone 7 and the newest version Windows Phone 8, not Windows 7) he's on target. Windows Phone sales have been dismal. IDC reports that Windows Phone will have a mere 2.6% market share by year's end. Android, on which Samsung has bet, will have a 68.3% market share. By 2016, IDC says that Windows Phone will rise to 11.4% market share, still far behind Android's at an estimated 63.8%.

Nokia may have fallen from its top perch even if it hadn't decided that Windows Phone was its future. But betting on Windows Phone most likely accelerated its decline.

Copyright © 2012 IDG Communications, Inc.

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