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Summary:

The new Nokia N8 has the dubious distinction of being both the first and the last N-series handset to run Symbian^3 — new high-end devices will run on MeeGo. A product strategy in constant transition isn’t one that will attract developers or customers to Nokia.

If you were in the handset business and were about to launch a flagship device, how would you build buzz around it? I can think of a number of ways, but with the Nokia N8, the Finnish company has done the opposite of every one of them. The new phone has the dubious distinction of being both the first and the last N-series handset built atop the new Symbian^3 platform. Nokia this week confirmed to CNet that going forward, all N-series phones will run on MeeGo, the open-source Linux-based operating system created by the merger of Intel’s Moblin and Nokia’s Maemo platforms this past February.

To some degree, Nokia’s move towards MeeGo for high-end smartphones is actually old news. This past December, Nokia outlined a strategy that included delivery of the first Maemo 6 device in the second half of 2010. Maemo morphed into MeeGo two months later, so while the planned platform did shift, it was clear late last year that a change was underfoot. But Symbian was still in the mix at that time, with Nokia saying it would “re-engineer our Symbian user interface” in 2010. From what I’ve seen of  Symbian^3 so far, Nokia is making progress, but now that progress will be applied to lower-end smartphones — even after it designed a potentially high-margin, flagship Symbian^3 device. As far as I’m concerned, that means Nokia still hasn’t quite figured out what it takes to compete well in today’s high-end, smartphone market.

Rafe Blandford from All About Maemo provides an interesting editorial take on Nokia’s strategic plans for MeeGo and the N-series devices, suggesting the web is making much ado about nothing:

One of the consequences of the narrowed scope of Nseries devices and fierce competition at the high end is that Symbian-powered Nseries devices make up only a small proportion (12% in Q1 2010, less now) of Nokia’s total Symbian device sales. The perception that the majority of Nokia’s Symbian devices are Nseries is simply inaccurate. As such, the end of Symbian-powered Nseries devices will have a relatively small impact on Nokia’s overall Symbian sales.

The figures Rafe quotes actually indicate to me that the problem is bigger than some perceive. If Nokia’s high-end smartphone series — where profit margins and opportunities for value-add services are greater — is small and shrinking, how is that a good thing? Yes, Nokia rules the worldwide roost when it comes to feature phones and the company has stemmed somewhat its smartphone market share losses. But Nokia would face a bleak future by relying on low-cost, low-margin feature phones over the long term as trends indicate a gradual shift away from feature phones to smartphones.

Perhaps I’m reading into Nokia’s reliance on feature phones too much. If that’s the case, how does the company plan to compete against Apple, Google, and Research In Motion? A history lesson might answer that question — how has Nokia competed over the last few years?

  • 2007 – This year brought the first Apple iPhone as well as the highly touted Nokia N95. Running Symbian S60 3rd edition, the slider had no touchscreen and just a QVGA display. Even with an excellent 5-megapixel camera paired with Carl Zeiss optics and front-facing camera, Nokia’s worldwide smartphone share began to decline. According to figures from Canalys, Nokia’s share in the fourth quarter of 2007 fell to to 52.9 percent from 53.8 percent in the same quarter of 2006.
  • 2008 — Apple introduced both the App Store and iPhone 3G, while very late in the year, Google launched its first Android device. Nokia’s revised the N95 with the N96, still running Symbian S60 3rd edition, but with feature pack 2. Others in the line included candy bar handsets such as the N78, N79 and the N85 slider, none of which helped Nokia add market share. In the second quarter of 2008, Canalys data measured a 45.5 percent share for Nokia smartphones worldwide.
  • 2009 — Google Android devices really begin to proliferate, especially in the last quarter of the year due to Android 2.0 and the Motorola Droid , while Apple launched the iPhone 3GS. Nokia introduced the Symbian-powered N86 and N97 but also took experience from Internet Tablet products — the N770, N800 and N810 — and created the N900 handset running Maemo. Om felt that Nokia was on the right track, but “on a very slippery slope and unless it fields a competitive device, it will continue to see its share of the smartphone market erode.” For the third quarter of the year, Canalys reported Nokia’s share to be 39.7 percent of worldwide smartphone sales.

If the history lesson were to end here, one would expect that the N900 would be Nokia’s gateway to the future in this world of iPhones and Android handsets. But along came Symbian^3 in February of 2010 and with it, many expectations that this platform would be used for high-end Nokia phones. In April, I said that Nokia needed to step on the Symbian^3 gas pedal and a week later, the Nokia N8 was announced, which brings us full circle as both the first and last N-series device to use Symbian^3. Making matters slightly worse: Nokia hasn’t announced future upgrade support for the N900. In effect then, both the 9-month old N900 and the unreleased N8 already have an end-of-life tag on them. Meanwhile, Apple sold an estimated 1-1.5 million iPhone 4 devices on launch day and Google is enjoying 160,000 Android activations daily — an annual rate of 58.4 million units, assuming no additional growth.

With such a rich history as a leader in the handset market, the sentimental side of me wants to see Nokia succeed in the smartphone space. But a product strategy that appears to be in constant transition isn’t one that attracts either developers or customers, which makes it difficult to combat Apple and Google. So far the only thing such an approach has attracted is declining market share and reduced revenue forecasts. My hope is that the trend reverses with MeeGo — or will it turn around with the next platform after that?

Related research report from GigaOM Pro (sub req’d):

The App Developer’s Guide to Choosing a Mobile Platform

  1. With such a rich history as a leader in the handset market, the sentimental side of me wants to see Nokia succeed in the smartphone space.

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  2. great article. well written, nice summary of nokia’s regression. no obvious biases.

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  3. This article would make more sense if the N series were Nokia’s real smartphones but that’s not true, feature for feature the E series are the real smartphones and they are still Symbian. The N series are the consumer touch screen handsets and the E series are the feature packed business handsets which, with the exception of the touchscreen i/f, have all of the N series features plus many more. A little research wouldn’t go amiss. Visit the Nokia site and compare the phones.

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    1. Dave, I’m very familiar with the differences between E- and N-series devices. So what you’re saying is that the small screened, keyboarded E-series devices are what will propel Nokia’s smartphone future going forward?

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  4. Good article, Kevin. As you would expect I have a few counterpoints. ;)

    Firstly I think the N8 will be a series of phones – an N8-00, N8-01, etc. These will have some variations – perhaps a physical keyboard amongst other things. It is Nokia’s current flagship offering and it’ll be interesting to see how it does. Of course it won’t sell well in the US but Europe and Asia are the key markets here. Bluntly if it stops the rot – that is defections to Android and the iPhone it will have succeeded. As for end of life, Symbian^3 will support the Qt framework and will be useful for about two to three years which is fine for a smartphone given replacement cycles.

    Secondly, the E and X Series will continue to support Symbian. These represent about 80% of Nokia’s smartphone sales and this will only increase as the market shifts from featurephones to smartphones. These will be pitched at various price points from low end through to high end. Therefore to suggest that they will all be low margin products doesn’t quite ring true. Some, yes, but not all. This is a key point – a smartphone is not just a high end touchscreen device, it’s a range of products and if the market is moving towards them then the companies that succeed will be those with a wide range of products for a wide range of pockets. It’s not all or nothing.

    The C series will, of course, continue to support the low end with S40.

    MeeGo and the N Series is an interesting one. My thoughts are that Symbian is just not perceived as a sexy modern OS no matter what they do to it and Nokia need a new product to excite the tech community so to me this is as much about marketing as it is performance. I don’t think it’s an accident that Android give codenames to their OS variants and Apple recently rebranded Mobile OS X as iOS.

    So Nokia’s strategy seems to be to create two or more markets. There will be a market for the tech community featuring the new and shiny MeeGo and there will be a market for the general consumer who does not read tech journals and makes their decision based on what’s in the shop, what has the best features, price point and cool factor for them. Of course the price points of the MeeGo devices and the higher end Symbian devices will be very similar.

    Finally, as I’ve mentioned before, raw percentages do not account for regional variations when it comes to market share. Nokia has little to no presence in the US which now accounts for 20-25% of the smartphone market now. Unit sales and unit sale growth tell a more interesting story.

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    1. Great points as always, Mark. You’re right about the E and X series, but my gut says the long-term future is in what the N-series could offer. I like your viewpoint on the two markets, but I think Nokia could better off if both of them were supported by a single device, much as we’ve seen Android / iPhone gain enterprise features while BlackBerry has moved towards consumer functions.

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  5. I am currently using a Nokia N900 with Maemo OS. It is competent. Meego should be good enough from an OS perspective, rest is all marketing.

    Nokia’s problem is marketing, sales and distribution — they need to improve the way they market to end consumer, work on their channel relationships e.g., US carriers, and get more handsets being sold through WalMart and such.

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  6. You don’t mention Qt anywhere in the article. Apps and games written in Qt will run on the N900, MeeGo devices as well as Symbian N8, N9 etc … A lot of work has gone into making this happen.

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    1. Good point, Dave. We’ll have to see if developers embrace Qt for Nokia devices or not.

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  7. Making matters slightly worse: Nokia hasn’t announced future upgrade support for the N900. In effect then, both the 9-month old N900 and the unreleased N8 already have an end-of-life tag on them.

    And therein lies the problem. Nokia still sees itself primarily as a hardware manufacturer, not a software developer, because their margins are still in the hardware business. Thus there is no incentive for them to support any devices for any length of time – much better for them to enforce obsolescence for some arbitrary reason. Meanwhile, Apple, of all companies, continued to support the original iPhone for three years with incremental updates, and I switched away from Nokia for that very reason.

    How sad. I wish Nokia had a strategy for their various mobile products, executed it, and remained on their strategy for longer than six months at a time. It seems to me just as soon as they announce a strategy, they decide to abandon it: witness the end of Symbian on the high-end, witness the death of the “Six Step Maemo” strategy.

    Nokia is dead.

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    1. What a ridiculous statement. The 5800 is on V50 firmware and the N95 has had firmware updates for over three years. Nokia gives excellent support to its popular handsets.

      As for enforcing obsolescence, why do you think Apple drip feed features? I think they know their target audience very well.

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      1. Nonsense! Their version of software support for the N95 is just bug fixes to their obsolete S60v3.1, not OS upgrades like the iOS 4 for the 3GS. I wish I could see S60v3.2 on my N95. I have NEVER seen Nokia provide an OS upgrade to any of their products, which gives their products the image of no future.

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      2. Gene, if you believe that the addition of features like A-GPS support introduced in the v12 firmware for the N95 or the full kinetic scrolling introduced in the v20 firware for the X6 are bug fixes then you are somewhat deluded.

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      3. No, I think comparing the support Nokia gives to their products to the support Apple and Google gives to their products is delusional. We’re talking a light year difference, even to your myopic point of view. Kinetic scrolling in 2010 for X6? A-GPS in latter 2007 for N95? This became standard by the time they were released. What happened to destinations support for N95? What about Nokia Maps for N95? How about better 3d support? Why can’t I install the new Sportstracker on my N95 but can on my N97 or my wife’s E72? What are you going to counter with? Nearly unadopted front facing camera? Putting out more phones to correct the mistakes of their previous phones in a matter of 4 months? Nokia’s strategy and customer support, just like their ideas.symbian.org website, is all over the place and unfocused. As I said, I’ve never seen any OS upgrade on any of their phones, and if you say otherwise, you are truly LYING.

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      4. Gene, are you saying that an original iPhone released in 2007 can support every feature iOS offers in 2010 that an iPhone 4 can, for example Face Time and multitasking? Also, can every Android handset released in 2007 support all the features available on Froyo, for example Flash 10.1 playback?

        Your post is confrontational and nonsensical in equal measure.

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    2. Nonsense Varun, software and services are a clear focus for Nokia, our free navigation service, Ovi mail & Ovi store offerings are excellent and very successful, they clearly show our commitment in this area. These services will continue to grow and will form part of an excellent user experience. As Kevin points out in his post above, Rafe Blandford at AAS, has provided a concise editorial piece from an informed perspective. Our strategy has always been to have MeeGo (MAEMO) as our high end OS (MeeGo is one of those steps you mention) with Symbian being the lead OS for our Smartphone range of devices.
      Nokia is NOT dead
      RayH (Nokia)

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  8. [...] Tofel at Giga also is puzzled. Here is the link to Kevin’s [...]

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  9. I don’t think anyone would deny that Nokia has faced problem with its high-end strategy in the last couple of years. However surely the point about MeeGo is that Nokia is attempting to address it?

    I also think you’re too dismissive of the potential of the mid and low end of the markets. That’s where the biggest growth will be. Sure profits are lower on hardware, but some of that is made up for by volume.

    More critically Nokia’s feature phones are being replaced by smartphones (Symbian phones like the C5 and 5230). This is why Nokia is still the biggest smartphone manufacturer by some margin. These mid tier and low tier smartphones have the potential for value added services (e.g. pre-installed Maps, Messaging, Store etc.) that, as you suggest, are likely critical to future revenue growth. It’s probably fair to say the value added revenue per handset is lower for these handsets (though as a proportion of their cost its probably higher), but again this would be made up by volume.
    That’s really the whole point of Nokia’s dual MeeGo and Symbian strategy – MeeGo to provide competitive devices at the high end, Symbian to provide the volume that is necessary for service success. What you need to understand is that they are complimentary parts of the software strategy.

    And what makes you think Symbian^3 (the N8) will be unsupported or is end of life? There’ll be a variety of Symbian^3 handsets and Symbian^4 ones after that. Symbian (and support for it) will be a mainstay of Nokia for the forseeable future.

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    1. Rafe, first up: that was a great editorial you wrote up – which is why I linked to it in the post. Good stuff.

      “I also think you’re too dismissive of the potential of the mid and low end of the markets. That’s where the biggest growth will be. Sure profits are lower on hardware, but some of that is made up for by volume.”

      You could be right, but let me explain why: that’s been Nokia’s bread and butter for years and if it continues to be how will the company grow profits in the long term? Nokia has an obligation to its shareholders, no?

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      1. Thanks Kevin. I enjoyed your post too, which I is why I posted a comment in the first place.

        I’d say in terms of mid and low end the profit growth will come from a) selling more devices [after all the mobile market is still growing - looking to be 10% this year] – obviously Nokia need to maintain share to do this and b) additional revenue from a service ecosystem (it seems clear the margins are going to better here than on the devices themselves, the question is how quickly will they ramp up). I think it’s worth noting that the emerging markets mean mobile growth is likely to be fastest in the low and mid tier segments (perhaps even more so if you just look at smartphones).

        At the same time I’m sure Nokia will be active at the high end – that what MeeGo and (to some extent – depending on how you define high end) top end of Symbian are about.

        One can of course debate how successfully Nokia will execute in either / both areas.

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  10. Nokia does not have a well thought strategy with regard to the smartphone market. Instead it has a series of ever changing tactics. No company can hope to succeed with that approach. The world is changing quickly around Nokia and they still have not recognized that change. They are literally at sea without a compass. Making a few changes in their OS, here or there will not provide the compass. They need to have strong focused leadership. Instead they have many leaders running in a lot of different directions.

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    1. These comments and articles are getting pretty tiresome. Nokia has a clear strategy based on Symbian, Meego and Qt. We can argue about how well it will work but to suggest that there is no plan at this point is being wilfully ignorant.

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