Nokia Bets The Company: New Windows 8 Phones Key To Recovery

Ailing Finnish smartphone maker Nokia Oyj (NYSE: NOK) is betting the company that two new Lumia smartphones based on the new Windows 8 OS from Microsoft (Nasdaq: MSFT), the world's biggest software company, will be international hits.

The phone are scheduled to be introduced in New York on Wednesday, with appearances by Nokia's American CEO, Stephen Elop, 48, a former Microsoft VP, as well as Microsoft CEO Steve Ballmer, 56, who first announced the phones at the International Consumer Electronics Show in January.

For Nokia, the introductions can't come soon enough, especially after the company reported its second-quarter loss surged 70 percent to €826 million (US $1 billion). Elop also announced it would fire 10,000 of its 122,000 employees, close research units in Germany and Canada, a factory in Finland and try to sell patents.

Last month, Nokia sold 500 wireless patents to Vringo (NYSE: VRNG) for an undisclosed sum and dumped an application tools unit onto a local partner.

To date, Nokia has reported selling only about 4 million Lumia phones loaded with Windows 7. Last week, Samsung Electronics (Seoul: 005930), the biggest smartphone maker, introduced its first Windows 8 model, the ATIV S, at a Berlin trade show.

Microsoft, of Redmond, Wash., has invested billions in Windows 8 and has also recruited more smartphone makers including Taiwan's HTC (Taipei: 2498) and China's Huawei Technology (Shenzen: 002502) to design Windows 8 phones.

Unfortunately for Microsoft, Windows phones hold less than an 4 percent market share now, reports IDC, with about 68 percent based on Android phones with the OS from Google (Nasdaq: GOOG), the No. 1 search engine and about 26 percent for the iOS from Apple (Nasdaq: AAPL), the world's most valuable technology company.

On Tuesday, Apple, of Cupertino, Calif., announced plans to introduce a new iPhone next Wednesday in San Francisco, with invitations including a 5, indicating it's likely the iPhone 5.

So Elop and Nokia are betting the company the new Lumia 920 and 820 models, with the new Snapdragon 1.5 GHz dual-core processor designed by Qualcomm Inc. (Nasdaq: QCOM), the No. 1 mobile chip designer, will be hits. They'll have to offer sufficient apps to compete with the 500,000-plus available for both Apple and Android phones, embed sufficient picture-taking and other features and be priced to sell.

Nokia will get some support from the top U.S. wireless carriers. AT&T Inc. (NYSE: T), the No. 1 telecommunications carrier; Verizon Wireless, a unit of Verizon Communications (NYSE: VZ); Sprint-Nextel Corp. (NYSE: S) and T-Mobile USA all said they'll handle Windows-based smartphones.

So for Elop, the ball's in his court. Nokia's American Depositary Receipts have already plunged 40 percent this year and 55 percent in the past 52 weeks.

By coincidence, troubled BlackBerry maker Research in Motion (Nasdaq: RIMM), also loss-ridden and with a proprietary OS, has lost 54 percent this year and 78 percent in the past 52 weeks. Its new CEO, Thorsten Heins, has recently suggested the whole company might be put up for sale.

Nokia's market value has shriveled to only $10.8 billion, compared with RIM's 3.5 billion.

Nokia ADRs were at $2.89, up 7 cents, in Tuesday afternoon trading.