Stephen Elop says Nokia overinvested in Windows Phone on purpose

imageIn an interview with The Hindu newspaper Stephen Elop spoke frankly about the past and future of the company and its handset division.

He addressed the issue of not making Android handsets as a hedge against slow Windows Phone adoption, saying the company is not profitable yet with Windows Phone due to purposeful over-investment, to build momentum for the OS.

He said:

What we figured was that it was important to differentiate. For instance, if you look at the Android-based players now, while there is one player who is successful, there are many others who are not.

What we like about Windows Phone, and this is something you have seen over the last few quarters, is the overall trend. So you are right, it is not profitable, but that was a very conscious decision. When you are starting something new, you have to over-invest, you have to put the money into it.

But if you go back, lets say five quarters ago to now … you can see a clear trajectory of increased sales building up. This is part of the reason that Microsoft is excited to do what they are doing, because this is at a time when the trajectory is heading in exactly the correct direction.

We made a conscious decision as to how much would we invest, that we would over-invest, with the intent of building that momentum. And that’s exactly what we are seeing, so we were pleased to do that.

The obvious next question was if Windows Phone is seeing momentum, who sell now, to which he responded it made most sense in terms of generating share holder value, and that is clearly reflected in the share price, which increased more than the terms of the sale would normally account for.

When asked how he would tackle cheap smartphones like the $60 Micromax Android handset, he said the company would compete head-on at the same price point.

He said:

Well, I would tackle that with $60-70 devices that actually are better designed, that have a better experience, a more responsive touch experience, and so on. You have to compete with them head-on.


We think we can compete vigorously with the low-cost devices from other players.

Regarding the Nokia brand, he confirmed that it will go away for the Lumia handsets, and said a decision on what these handsets will be called will still need to be made.

When asked about Nokia and Microsoft’s clashing product portfolio he confirmed, despite the impeding deal, that the products announced at Abu Dhabi like the Nokia Lumia 1520 and 2520, will continue, but that in the future a joint product portfolio will be generated. He noted this was a positive thing, saying:

More importantly, we have to think about what new innovation we can bring to the table — because Nokia engineers and Microsoft engineers will now be able to work together in ways they couldn’t work before because of limitations on patents and things like that.

Yes things will change, but I know the engineers on our side and on the Microsoft side are excited about that change. It’s a very positive force.

Read the full interview at The Hindu here.

Thanks Tom for the tip.

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