Microsoft Corporation (MSFT), Nokia Corporation (NOK): Quality Over Quantity

Nokia Corporation (ADR) (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT) have been partnering in the smartphone battle, which might make sense. Microsoft – which is a favorite stock in 95 of the hedge funds we track, the sixth-most-held stock in U.S. hedge funds – has been late to the smartphone wars with its Windows Phone operating system, and Nokia was getting lapped in the smartphone wars by Apple Inc. (NASDAQ:AAPL) and Samsung in gaining handset market share. Nokia had a foothold in the low-budget and mid-range feature phones in emerging markets, but neither company has made much inroads in established markets since the iPhone debuted in 2007.

However, over the last few weeks, both companies have reported seeing some progress in market share when it comes to the Lumia handsets that run the Windows Phone 8 OS. At the Mobile World Congress in Barcelona this week, Nokia Corporation (ADR) (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT) were trying to spin their relative lack of apps in the Windows Phone marketplace compared to more established platforms like iOS and Android. The two companies were touting their 130,000 “quality” applications and noted that Windows Phone has surpassed the 1 billion-download mark of those apps.

Brian Biniak, vice president of Nokia Corporation (ADR) (NYSE:NOK) for app development, maintains that the business model with Windows Phone apps and Lumia handsets is consistent for apps and developers as it has been with the OS and the handsets – quality. “Our attitude and it sums up the entire strategy with Windows Phone is to take it slowly, do it right and aim for quality first. It’s not about quantity – we’ve no interest in trying to catch up by playing the volume game. We want the best apps in the world that will create a halo around the new devices,” Biniak said.

Is slow and steady winning the race for Microsoft Corporation (NASDAQ:MSFT)?

“The phones we have now are the best we’ve ever had and we’d rather take our time and work with developers to create apps that are flagships for our phones. … A lot of the app stores never talk to the developer, the apps just pop up there and the developer hopes it works out,” Nokia’s Biniak said.

After getting off to a rough start after a Nokia Lumia launch getting “botched” in the opinion of many observers, Microsoft Corporation (NASDAQ:MSFT) and Nokia Corporation (ADR) (NYSE:NOK) are claiming they are making some significant progress in market share in the weeks since the Christmas holiday season.

“We’re very encouraged by the progress so far,” said Bill Cox of the Windows Phone Division at Microsoft Corporation (NASDAQ:MSFT). “Our research shows us that three times as many people as a year ago are coming into stores and asking for the Windows Phone and four times as many as a year ago are leaving stores with purchased Windows Phne devices. We’re seeing real progress. We got out of the gate with the Windows Phone 8 in October and the reception has been great. You are seeing beautiful devices from our partners hit the market with great new features for people and they have this connection to the broader Windows ecosystem.”

What do you think about how Nokia Corporation (ADR) (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT) are handling their foray into the smartphone market? Can these companies become viable in mobile in the long term? We’d like your thoughts in the comments section below.

DISCLOSURE: I own no positions in any stock mentioned.

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