No-Windows-Phone-8-Upgrade Decree No Good For Nokia

Microsoft's upcoming Windows Phone 8 is poised to breathe new life into Windows-based phones, with new features for near-field communication, voice recognition and support for high-definition resolutions.

But Nokia may not be able to reap the benefits -- at least not with its Windows Phone 7.5-based Lumia smartphones. Microsoft said devices running the current or earlier iterations of its Windows Phone OS will not be able to fully upgrade to the new Windows Phone 8 platform, a move analysts predict could deal the already struggling Nokia a significant blow.

Malik Saadi, an analyst with Informa Telecoms & Media, believes sales of Nokia's current line of Lumia smartphones will suffer, as customers will likely hold off on purchasing a Windows Phone 7.5 device in anticipation of Windows Phone 8 devices launching later this year.

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"Because Windows Phone 7 is not truly upgradeable to Windows Phone 8, this could have a negative impact on sales of existing Windows Phone 7 smartphones, Nokia's Lumia devices in particular. Operators and users will hold [off] until the new devices are in the market this coming autumn," Saadi wrote in a blog post Thursday. "This will have a serious impact on Nokia's financial performance the coming quarter as the company relies strongly on Windows Phones as the main platform for its smartphones."

Gartner analyst Carolina Milanesi agreed that sales of Nokia's Windows Phone 7.5-based Lumia models may take a hit, as customers opt to wait for Windows Phone 8 devices instead.

"If Nokia does its job right consumers will want to upgrade to the next Lumias anyway so those models better come fast as 800 and 900 will stall," Milanesi tweeted Wednesday.

Upgrading from earlier Windows Phone platforms to Windows Phone 8 is not possible because the new OS was designed to run on hardware containing dual-core processors, which aren't found in many of the Windows Phone handsets on the market today.

That said, Microsoft is offering handset makers and current users on the Windows Phone 7.5 platform an interim Windows Phone 7.8 release, a trimmed-down version of Windows Phone 8. The update will deliver the same new start screen native to Windows Phone 8 but not the full suite of new features.

While Windows Phone 7.8 will give Nokia's Lumia lineup a new user interface, the update is minimal compared to the breadth of new functionality available with Windows Phone 8, Saadi wrote.

"Although the existing Windows Phone 7 will be upgraded to include some high-level features of WP8, the true capabilities of this platform will sparkle only when new enabled devices are launched," his blog post read.

NEXT: Nokia Says It's 'Excited' About Windows Phone 8

Doug Dawson, Nokia's director of communications, said that despite its inability to upgrade its current line of Lumia smartphones to Windows Phone 8, the Finnish handset maker is optimistic about the new release.

"We are excited by the Windows Phone 8 update. Windows Phone 8 will now share the same core OS technologies as Windows 8, providing a platform for accelerated innovation," Dawson wrote in an e-mail to CRN. "It includes a new UI, new app capabilities, IE10, new hardware support such as NFC, a choice of three display resolutions, SD cards and multicore processors. With support for 52 languages and with apps available in over 180 countries Windows Phone becomes a global experience with Windows Phone 8."

Nokia, along with Samsung, HTC and Huawei, will be some of the first smartphone manufacturers out of the gate with Windows Phone 8 devices later this year, according to a blog post Tuesday from Windows Phone Corporate Vice President Joe Belfiore.

As for its existing lineup of Lumia smartphones, Nokia's Dawson said the company will transition them to Windows Phone 7.8, an upgrade for which the company is "equally excited."

"The Lumia 900, Lumia 800, Lumia 710 and Lumia 610 will receive an update with new Windows Phone 8 features, including the new start screen," Dawson told CRN. "Current Lumia owners will also receive a pattern of updates from Nokia that will deliver new features like Wi-Fi tethering, flip-to-silence and media content streaming, as well as new exclusive applications like Camera Extras, games coming from Zynga -- the maker of FarmVille -- as well as updates to Nokia Drive and other signature experiences."

Dawson declined to comment on how many Lumia smartphones Nokia has sold to date. Earlier this month, however, Nokia lowered its second-quarter financial outlook for fiscal 2012, due to competition in the smartphone market having reached a "greater extent than previously expected."

The company also revealed plans to cut approximately 10,000 jobs through the end of 2013 and close three of its major manufacturing sites in an attempt to reduce operational costs.