Will Microsoft Corporation's $70 Lumia 430 Threaten Google Inc. in Emerging Markets?

By Markets Fool.com

Microsoft recently unveiled its cheapest Lumia smartphone to date -- the $70 Lumia 430. The 4-inch phone is equipped with a 2-megapixel camera, 1GB of RAM and 8GB of storage, and runs on a dual-core 1.2GHz Snapdragon processor. By comparison, Microsoft's second "cheapest" Lumia, the $81 Lumia 435, has nearly identical specs but a slightly bigger battery.

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The Lumia 430 will come with Windows Phone 8.1 installed, but it will be upgraded to Windows 10 later this year. The spartan handset also comes with Office, Skype, and 30GB of OneDrive storage.

The Lumia 430. Source: Microsoft.

Devices like the Lumia 430 are intended to shore up Microsoft's defenses against Google , which is trying to consolidate its lead in emerging markets with its Android One initiative. Will Microsoft's devices curb Android's growth in low-end markets, or is Google already too far ahead?

Google isn't invincible
At first glance, Google seems to the king of the mobile world. Android devices accounted for 77% of the global smartphone market at the end of 2014, according to IDC. However, Google's Achilles' heel is Android's fragmentation. According to Google, only 3.3% of all Android devices worldwide run 5.0 Lollipop, which means many of Android's newest features won't work on the majority of its phones.

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ABI Research also estimates that 29% of Android devices shipped in the fourth quarter of 2014 were "forked" ones. Forked operating systems sometimes replace Google's revenue-generating services, like Play and Search, with their own services. Lastly, Samsung , the largest Android manufacturer in the world, launched its own app store and is testing out Tizen, its own OS, on select devices.

Since Google can't monetize Android if its services are removed, it launched its Android One initiative to convince regional OEMs to develop cheap phones which run stock Android 5.0 for around $100. But Google's minimum hardware requirements make it tough for those OEMs to match Microsoft's plunging prices. Nonetheless, some regional non-Android One devices, like the $35 Celkon Campus Nova, still cost less than the cheapest Lumias.

Android One devices. L to R: Micromax Canvas A1, Karbonn Sparkle V, and Spice Dream Uno. Source: Company websites.

Smarter dumbphones, cheaper smartphones
Over the past year, Microsoft made its feature phones smarter and its smartphones cheaper.

In January, it launched the Nokia 215, a $29 Series 30 feature phone which comes with with web apps like Facebook, Facebook Messenger, Twitter, Opera, Bing Search, and MSN Weather preinstalled. The device tethers users to Microsoft's ecosystem while bridging the gap between old "dumbphones" and low-end smartphones like the Lumia 430.

Microsoft's ultimate goal in emerging markets is to grow a market of first-time smartphone users by planting roots in the feature phone market. If that works, Microsoft can expand its ecosystem by gaining more Bing, OneDrive, and Office users, then consolidate the market by upgrading all those devices to Windows 10.

Windows 10 could be a game changer
Microsoft is certainly an underdog in the mobile industry, with only 2.8% of the global smartphone market (IDC), but Windows remains installed on over 90% of the world's PCs. Microsoft wants to unify that market under a single OS by offering Windows 10 as a free upgrade to Windows 7 and 8 users, and even recently extended that offer to include pirated versions.

On the mobile front, Microsoft nixed Windows license fees for phones and small tablets last year to encourage more OEMs to launch Windows-powered mobile devices. Microsoft also revealed that it was developing a ROM to help users install Windows Phone on Android devices.

Microsoft's strategy is simple: to install upgradable versions of Windows on as many devices as possible. If Microsoft pulls this off, the entire range of Microsoft devices -- from the Lumia 430 to a top-tier Surface Pro 3 -- will all run the same OS with access to the same "universal" apps.

The bottom line
In my opinion, Microsoft's approach to the mobile market is much clearer than Google's. As Google struggles to keep its rebellious OEM partners on the same page, Microsoft is laying out the groundwork for a multi-platform Windows 10 blitz that could help it gain considerable ground against Google in key emerging markets like India.

The article Will Microsoft Corporation's $70 Lumia 430 Threaten Google Inc. in Emerging Markets? originally appeared on Fool.com.

Leo Sun owns shares of Facebook. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.