The two year old Windows Phone partnership between Nokia and Microsoft, once lampooned by Google Vic Gundotra in a tweet that "two turkeys do not make an eagle," is facing new problems on both the hardware and software fronts.
Source: Nokia
Nokia's hardware features "continue to lag behind"
On the hardware front, a report by Barron's cited a note by Credit Suisse analyst Kulbinder Garcha, who gave a pessimistic appraisal of Nokia's latest Lumia 1020.
The new phone boasts an impressive camera and optics, but Garcha stated that its "hardware features continue to lag behind some of the flagship devices like Samsung Galaxy S4," which is both lighter and thinner despite having a larger screen and faster processor.
Garcha added that Nokia's $300 entry level price for the 1020, and its exclusive availability on AT&T in the U.S., "does not look encouraging†when compared to the $200 starting price for the lower end of the iPhone 5 and Galaxy S4 lines.
While Nokia's phone boasts more storage than the entry level 16GB models of its leading competitors, its high starting price means it can't attract a significant number of buyers looking at options that cost less up front.
Given the increasing competitive pressure among higher end smartphones as the bounds of the finite market are reached, the "Peak Smartphone" issue facing Apple and Samsung will also impact Nokia's premium phone ambitions.
One year ago, Nokia banked upon getting more traction out of its campaign mocking Apple's iPhone by advertising that the "smartphone beta test is over" while attempting to resurrect the then two year old Antennagate "death grip" meme launched by Gizmodo, but despite the negative ads, Lumia hardware isn't exactly flying off the shelf.
It was also one year ago that AT&T boasted that its Lumia launch with Nokia would be a "notch above anything we've ever done," involving $100 million of advertising pooled by Microsoft among its Windows Phone partners, and AT&T's designation of Nokia's Lumia models as a "hero" status to be heavily promoted in its retail stores.
Microsoft's software also continues to lag behind
On the software platform side, Nokia is depending on Microsoft to finish a series of core enhancements to Windows Phone, but those fixes are now being pushed off into 2014 as the company scrambles to dribble out incremental, minor updates that catch up to Apple's releases from a year or two ago.
A report by The Verge says Microsoft has outlined a package of minor updates it calls "General Distribution Release 2," which includes browser updates, data use reporting, and other features the site summarized in saying, "overall the changes are very minor for an update eight months after the original Windows Phone 8 release."
More substantial features are being reserved for "Windows Phone Blue," an update expected in early 2014, including a notification center, improved multitasking, and screen rotation lock.
Some of these features might be released sooner in a "General Distribution Release 3" service pack later this year, but the report noted that progress has been delayed by problems "testing new chipsets" and working out bugs specific to particular WP models. "Windows Phone software and ecosystem still lags the competition."
"One particular bug with unbranded devices not sold by carriers is said to have affected the way a handset is identified on a network," the report stated. "We're told that Microsoft had a hard time fixing this particular problem, resulting in delays to other planned work."
The complexity of rolling out patches, fixing bugs, advancing new features while catching up to competitors highlights the advantage Apple holds as a vertically integrated company that builds its own hardware and software in tight coordination.
Microsoft's problems "leaves Nokia and other phone makers having to rely on hardware selling points, knowing full well that the Windows Phone software and ecosystem still lags the competition," the site observed.
Windows Phone apps also continue to lag behind
In addition to struggling to catch up in hardware and software, Windows Phone as a platform is also finding it difficult to attract third party app development. The platform hasn't yet attracted even the attention of Facebook's Instagram, which remains one of the five top titles for Android one year after its release for that platform.
Instagram launched on iOS in October 2010, and remained an iOS exclusive until April 2012, the same month it was acquired by Facebook. Apple's ability to foster exclusive new iOS development that doesn't reach other platforms for years, if ever, serves as a strong attraction for customers, an issue Microsoft is acutely aware of as the developer of the Xbox gaming platform over the last decade.
Despite announcing tools (back in 2011) to help iOS developers port their apps to Windows Phone, Microsoft's mobile platform remains devoid of compelling exclusive apps and has failed to spark significant third party development on par with Apple's App Store.
Microsoft initially downplayed the value of mobile apps, suggesting that Windows Phone didn't need third party "developers, developers, developers" after many years of its chief executive Steve Ballmer popularizing that phrase as a foundational strength of the PC Windows platform in a sweaty, impassioned chant.