Nokia’s Woes Mount with Buggy Phone (NOK, T, MSFT, AAPL, GOOG)

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Earlier this morning Nokia Corp. (NYSE: NOK) issued a warning on first and second quarter revenue and earnings, but that wasn’t all the bad news the company had coming today. Nokia’s Sunday launch of its Lumia 900 smartphone has been crippled by reports beginning yesterday of problems with connections between the phone and AT&T Inc.’s (NYSE: T) wireless network.

The problem appears to be that some phones are failing to register properly with the network causing the connection failures. There does not seem to be a problem with the phone’s Windows Phone 7 operating system from Microsoft Corp. (NASDAQ: MSFT).

Nokia had hoped that its first US smartphone, priced at a mere $99.99, would launch the company into a market dominated by the iPhone from Apple Inc. (NASDAQ: AAPL) and phones that use the Android platform from Google Inc. (NASDAQ: GOOG). That parade just got rained on.

A software fix has been completed and will be available on April 16th. Nokia has said that it will give away the phone for a short period of time until the problem is resolved. The phone will still cost $99.99 with a two-year contract, but buyers will receive a $100 credit on their AT&T bills when they purchase the phone. Defective phones are being pulled, so presumably any new phone won’t have the problem.

How big a problem is this for the company? It’s not as bad as the earnings warning, that’s for sure. The glitch does not affect all the phones that were sold and Nokia is making a really good effort to do right by its customers.

That said kicking off your next big product only to discover a bug of this kind doesn’t exactly inspire a lot of trust or confidence in the company or its product. Initial quality remains a huge factor in determining whether or not a customer is satisfied with a product, and perhaps more important with a company.

Getting return customers is what it’s all about and no company does that better than Apple. That’s why any challenger to Apple has such a high wall to scale and why missteps like Nokia’s make that wall even higher.

Paul Ausick