Nokia confines Windows Phone launch to 'select countries'

Nokia is excited about Windows Phone--but rather than a grand global launch, the Finnish company said today it will launch its first phones using Microsoft's mobile operating system only in selected markets this year.

Given Nokia's global scale and the Windows Phone's pivotal importance to the company, that measured debut might come as a surprise. But Chief Executive Stephen Elop defended the plan while talking to analysts after Nokia reported better-than-expected financial results today.

"We are being very deliberate in the sequence. It is a significant shift in the organization for how we sell and how we manufacture," Elop said in the conference call. "There is quite a long list of things to do," he said, mentioning language support for different parts of the world, marketplace capabilities, and operator billing.

Another factor: Nokia doesn't want to needlessly undercut its existing business with the Symbian operating system, which long has been the standard-bearer for the companies smartphones but which Elop decided to phase out.

"We're very thoughtful about how we first launch Windows Phone relative to where Symbian is strong so we get the right balance and right dynamics," Elop said.

Elop is expected to unveil the new phone next week at its Nokia World conference in London.

The global launch timing isn't an issue with business partners, Elop stressed.

"We're very pleased with the degree of operator support, with early signs of commitment, and all those other factors," he said.

The Windows Phone deal is indeed a profound change for the company. It's shucked its two main smartphone operating systems, Symbian and MeeGo, and instead will pay licensing royalties to Microsoft. But Microsoft will pay Nokia directly for activities such as marketing, and Nokia will benefit indirectly as well, Elop said.

Specifically, Microsoft plans next year to release Windows 8--what Elop called "big Windows."

"We will over time see that on hundreds of millions of PCs and tablets. That accrues to the overall power Microsoft will have in the marketplace [and to] ourselves as a lead vendor" of Windows Phone devices, he said.

Nokia's new alliance has a big drawback, though. iOS and Android are designed for tablets, a fast-growing new market, but Windows Phone 7 isn't. So, one analyst asked, will Nokia offer a Windows 8 tablet, too?

Elop wouldn't commit.

"From an ecosystem perspective, there are beneftis and synergies that exist between Windows and Windows Phone," Elop said. "We see that opportunity. We'll certainly consider those opportunities going forward."

Windows Phone gives Nokia an "ability to differentiate," with its own hardware designs, apps, and services, and differentiation means a higher gross margin--a key measure of profitability.

"This is our first entree into the Windows Phone space," Elop said. "Our ability to differentiate with software increases over time as we work with our partners at Microsoft."

Nokia's first Windows Phone model will be a higher-end product, but of course more are planned--a "cascading series of devices that span the price bands, both up and down," he said.

Although Nokia isn't the only Windows Phone player, the company is more concerned about the incumbent forces in smartphone market.

"As you see our first products launch, you will see the first signs of differentiation relative to Android and iPhone and relative to other players in the Windows Phone ecosystem. The former is more important to us than the latter," Elop said.