Sexy Lumia has Microsoft and Nokia gunning for iPhone

@CNNMoneyTech April 5, 2012: 6:17 PM ET

NEW YORK (CNNMoney) -- A sexy, award-winning smartphone is going on sale Sunday at half the price of the iPhone, and it's launching on a blazing fast 4G network.

What's the catch? Two things: The phone, called the Lumia 900, is made by Nokia -- and it's running Microsoft's Windows Phone software.

They may be household names, but Microsoft (MSFT, Fortune 500) and Nokia (NOK) are unproven in the U.S. smartphone space. Nokia hasn't ever sold a major smartphone in the United States, and it has been almost invisible in the North American market for the past five years.

Meanwhile, Microsoft had a big, expensive, but tepidly received launch of Windows Phone 7 in late 2010. The software giant has actually lost market share since then.

Putting Microsoft and Nokia's efforts together to create a third major challenger to the iPhone-Android smartphone duopoly is kind of like putting Linux on a Sony (SNE) Vaio to take a run at HP (HPQ, Fortune 500) and Dell (DELL, Fortune 500). In the United States, Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500) control a combined 80% share of the smartphone market, according to comScore. Microsoft has less than 4%.

But if ever there were a time to make a run, it'd probably be now.

The Lumia 900 is a visually dazzling smartphone that's generating a lot of chatter after it took home the Best of Show award at this year's Consumer Electronics Show in Las Vegas. Windows Phone has already gone through its first major update to clear away the early bugs and has 77,000 apps in its app store. And Nokia's phone is compatible with AT&T's new ultra-fast 4G LTE network, making it the first LTE-capable Windows Phone device.

To top it all off, AT&T (T, Fortune 500) is selling the Lumia 900 for just $100.

The iPhone is a nightmare for carriers

"We have a great amount of consumer buzz, so we feel good about our ability to take off in a really big way," said Chris Weber, president of Nokia's North American business. "But we've got to have a great device that is super compelling to do that. We think we have that."

As Microsoft's Aaron Woodman, the company's Windows Phone director, put it: "There is an enormous amount of momentum, and now is the time to strike."

The Lumia 900 is not the first Nokia Windows Phone device to launch in the United States. That was the Lumia 710, an entry-level device that went on sale on T-Mobile's network in January.

But Nokia's new Lumia 900 device is the first Windows Phone that stacks up well against the big boys -- the iPhones and the Samsung Galaxies of the smartphone world. Nokia's expensive ad campaign for the phone goes for the jugular, attacking the iPhone's Antennagate issue, as well as rival smartphones' fragile cases and poor screen performance in sunlight.

The jabs play to Nokia's strengths. Cased in a polycarbonate shell, the Lumia 900 lacks any paint -- it is blue, black, or white all the way through, making the device appear scratch- and crack-resistant. It feels solid, though at 5.6 ounces it's a bit on the heavy side. The device's large, eye-popping screen performs quite well outdoors.

But is that enough to persuade former Android and iPhone customers to switch?

Microsoft thinks they're ready.

"There is a sense of fatigue with Android, which really makes you do a lot of work -- that's true for Apple as well," Woodman said. "Since we arrived late to the game, that allowed us to solve a lot of problems that people were having with their smartphones."

Microsoft thinks sales will really take off after Windows 8 launches later this year. The company's reimagined Windows for PCs will look and feel a whole lot like Windows Phone.

Windows 8: It's a game changer

"A successful Windows 8 and a congruent platform across phone, tablet, PC, TV and cloud is the vision they are going for," said Al Hilwa, analyst at IDC. "That is going to take a few years to execute on."

That means Microsoft will have to be patient -- but it's always been willing to play the long game. It plowed billions into its Xbox division, which was unprofitable for years, and continues to lose billions each year on Bing and its online services.

"The critical question is, 'Will they be able to ride out short-term failures and moderate successes with the aim of creating a long term viable third ecosystem?'" said Jagdish Rebello, director at IHS iSuppli. "I believe that the answer is yes."  To top of page

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