Nokia's disastrous quarter spells big trouble for Windows Phone 7

Nokia's just-released disastrous results for the second quarter aren't just bad news for Nokia --- it means big trouble for Microsoft and Windows Phone 7 as well. At this point, it looks as if two drowning mobile efforts are trying to save each other. Will they go down, or help buoy each other?

The quarter was about as bad as it gets for Nokia. Net sales of €9.275 billion were down 7% compared to a year earlier, and the company reported an operating loss of €487 million. A year ago, it reported an operating profit of €295 million.

Things go downhill from there. Possibly the worst news, and certainly the worst news for Microsoft, is that smartphone salesare way down --- 34% fewer of them were sold.

That's bad news for Microsoft, because if Nokia smartphone sales continue to plunge, the Nokia brand could be seriously compromised in consumers' eyes by the time Nokia starts pumping out Windows Phone 7 devices, either at the end of this year, or early next year. In addition, lagging smartphone sales may make it difficult for Nokia to get carriers to give sufficient resources to promote and sell Windows Phone 7 devices when they finally ship.

Nokia CEO Stephen Elop did his best to sound upbeat about Nokia's future on his conference call with analysts. ZDNet reports that Elop said that "With Windows Phone 7 there are market opportunities that open up to us," in particular CDMA markets such as the United States.

But analysts aren't expecting the release of the first Windows Phone 7 devices to save the company. The Wall Street Journal says that Geoff Blaber of research firm CCS Insight says that merely introducing a high-end Windows Phone 7 devices won't be nearly enough to save the company. Instead, Nokia needs to pump out many of them, and many price points:

"I think the important question isn't when Nokia will ship its first high-end Windows device, but when it will be able to get a complete portfolio of Windows handsets out, at a range of price points."

That's certainly what's happening with Android; there are a flood of Android devices on the market, targeted at many niches, demographics, and price points.

This latest earning report for Nokia certainly doesn't spell doom for Windows Phone 7. But it makes it clear that Microsoft merely inking a deal with Nokia won't save Windows Phone 7. At this point, it looks as if Windows Phone 7 needs to save Nokia, rather than the reverse, and that's a very tall order.