Making a bigger splash in tablets makes sense for Nokia Corporation (ADR) (NYSE:NOK). The market is growing faster than Nokia Corporation (ADR) (NYSE:NOK)’s smartphone stronghold, and it’s not as if the once dominant handset company has made the most of the opportunities in its flagship niche. However, Nokia Corporation (ADR) (NYSE:NOK)’s decision to accept billions from Microsoft Corporation (NASDAQ:MSFT) in exchange for supporting Windows as its mobile operating system of choice has proved to be more costly than lucrative. Analysts see Nokia Corporation (ADR) (NYSE:NOK)’s revenue sliding 19% this year.
Backing Windows RT is a peculiar choice for Nokia Corporation (ADR) (NYSE:NOK). It’s been a colossal flop since rolling out late last year as a scaled-back operating system that doesn’t run older Windows programs, as the beefed-up Windows 8 Pro does. Tech tracker IDC reported earlier this year that just 200,000 of the 50 million tablets shipped worldwide during this year’s first quarter were Windows RT devices. That’s 0.4%.
One thing to note is that there will reportedly be a big difference between Nokia’s tablet and Microsoft Corporation (NASDAQ:MSFT)’s Surface, and that’s wireless carrier connectivity. According to The Verge, Nokia’s portable device will be sold through AT&T Inc. (NYSE:T) in this country with LTE support. Getting wireless carriers on board is a big step, but will it make an already overpriced tablet even more expensive?
Who will even buy this thing?
A big selling point for Windows RT is that it does run a modified version of Microsoft Corporation (NASDAQ:MSFT)’s iconic Office productivity suite. That doesn’t happen on iOS and Android devices, though there’s naturally no shortage of third-party apps that offer Office compatibility.
The biggest shortcoming for Windows RT is that it lacks developer support, making it ultimately less functional than cheaper Android devices and trendier iPads.
Microsoft Corporation (NASDAQ:MSFT)’s dramatic $150 price cut last month — shaving the Surface RT to as little as $350 — may also get in the way of just how much Nokia will be able to charge for these things. There’s no point in holding out for carrier subsidies until a market develops for Windows RT, since even AT&T Inc. (NYSE:T) has to know it’ll be pushing a product with little chance of gaining traction later this year.
Nokia followed Microsoft Corporation (NASDAQ:MSFT)’s money last year, and look where that got it. Why is it falling into the same trap this time?
The article Nokia Follows Microsoft on the Road to Nowhere originally appeared on Fool.com is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
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