Nokia Shouldn't Fiddle While Its Market Leadership Burns

16 Comments

Nokia posted a 30.5 percent drop in earnings today on sales of 12.2 billion euros ($16.5 billion). This wasn’t surprising as the Finnish phone maker had warned the world last month that this would happen. But it’s frustrating that the company, which saw its market share erode by 2 percent from the previous quarter, would blame price cutting by its competitors for taking buyers. Part of the problem is that Nokia’s late to the game when it comes to giving buyers what they want.

Sure, price-cutting is a pain to deal with, but since Nokia said it doesn’t plan to answer those price cuts with cuts of its own, it needs to get in gear and focus on boosting sales of its high-end phones. Although, price cuts in that market are coming too.

Nokia has made some brilliant phones but has lagged when it comes to building new ones targeted at the consumer population, which is snapping up smartphones at a rapid clip. An analyst told Forbes that half of the total value of the cell phone market will comes from sales of smartphones next year. But the people spending those dollars aren’t the business users who have purchased Nokia’s N or E series of devices — they want music players, touch screens and whizzy apps that allow them to see their social networks. Nokia’s getting started with the launch of its 5800 XpressMusic handset earlier this month, so we’ll see if that will help keep it on top.

Also as part of the earnings call, Nokia revealed that it would pay Qualcomm 1.7 billion euros ($2.29 billion) in the fourth quarter as part of a patent settlement made earlier this year. I’m hoping this means good news for getting Nokia phones on Verizon’s CDMA network.

16 Comments

Mark Squires

Syamant,

Cool post, thank you. As promised I’m going to make sure that our head of services comms gets this link.

I’m not going to try and tackle all your questions except for one, I used the digital pen for some time to complete my internal paperwork – the forms were electronically sent and backed up, it was interface heaven.

Syamant

Mark , to me it is the experience or rather the completeness of the experience.

Having had the higher end phones of both the N and E series , I have been baffled by some of the functional classifications but accepted them. I have read about subsequent Nokia releases and I have even visited the stores…. tempted not quite.

When I talked about the complete experience , take the example of Nokia Maps. Since it is a subscription based product. Think about how seamless the payment mechanism could be given the market realities of where i am , India. Nokia share is huge in India. There has been advertising but i would be very curious about adoption.

Nokia Business applications are many, and probably higher than some competitors, but are designed for a certain level of enterprise scale. What about the mid market average user. The catalog or downloads needs to improve significantly. Trust factor could do with some improvement. Does a user feel secure enough about transactions from the Nokia Software Market ?

Some thoughts that you might consider :

1. Better Blog Readers with synchronisation with a users blog aka Flock or WordPress.
2. Making it Easier to setup mail accounts. I know there is Nokia Email but it needs better wizards . Simplicity. Again Payments in Local currency.
3. Social Application interfaces such as LinkedIn for E Series etc. The current web approach is mimimalistic compared to well iphone.
4. PodCasting integration in the PC Suite . Quality of Pod available in the standard directories needs to improve dramatically. Perhaps a less resource hungry PC Suite
5. Feature parity in terms of camera etc at equivalent price points for the N and E.
6. Although it may be because are in India, there is still no connect with Ovi etc.
7. Magic in explaining features about phones at stores. Did you know i still dont know why i would use a digital pen with my E-Series phone. And I am curious to know its features.
8. Spam Management for SMS , Unwanted call management etc out of the box for N Series etc.
9. I am quite curious about the next generation of E90 and frankly i have wondered if it would really replace my laptop during work travel.
10. Would there be something that would make it easy for me to present from a phone at the kind of resolution that a laptop will deliver or even a netbook? I have read about projectors being embedded but what does it mean in application terms.
11. Frankly the camera of the N95 is nice but one must switch to E90 simply because quickoffice for editing facilities is inexplicably on the E Series. Balance here perhaps.
12. Comes with Music is interesting .. would it be available on E Series . Seem to me No..so then why not. The business user is not a drone.

These are more personal observations that are more or less off the cuff. I might think more as to what would qualify as an inspiring enough purchase. Wifi was inspiring on the E61( and my talking ended up resulting in abt 15 people in my social circle buying that phone ( no hyperbole here )) and Keyboard on E90 but since then nothing that I would say inspiring.

Hope this was useful and this is more a end user perspective. The experts would obviously have more to share.

Rita El Khoury

Stacey,

I do agree with everything that Mark stated, and YES, that means me agreeing on the fact I don’t like my own comment either. I apologize for it being rude. For my own defense, I had already read a lot of “analysis” of the Nokia situation yesterday that seemed to me like they missed the point, the fanboy’ism kicked in, and I had to express my anger somewhere. Unfortunately, it happened to be here. Sorry again.

One thing to stress on, though, is what Mark said at the end: “I enjoyed the article, but I didn’t agree with it because it’s an assessment of a global business from a local view point.” I would really love if writers took the time to place that sentence at the end of each analysis they post, because, at the end, the way someone sees a company or a product is objective and very biased by the culture he/she lives in. I lived in Lebanon all of my life, and I came to France a month ago. You learn to see the world differently here, and I have been very observative of people’s behavior around me. Paris is a wonderful city that buzzes with different nationalities, especially since I live in the International City For Students. It’s a Mini World, and it’s amazing to try to get the general scheme of each culture’s behavior, be it in tech-related issues, or in speech, cooking, dressing… I will write an article about it later, when I feel the subject has fermented enough in my head.

Anyway, back to the topic now, I want to point out what Mark talked about, Comes With Music and the “Internet company”, and relate that to what I wrote earlier about Nokia focusing on Software and Services. Honestly, I think they are trying to carry 10 watermelons in one hand, but if one company can get out of a situation like this alive and successful, it’s Nokia. The Open Sourcing of Symbian, the switch from S60 3rd to the touch-based S60 5th and the implementation of Ovi (with Maps, Music Store and Comes With Music, Share on Ovi, Files on Ovi, Ovi Sync, N-Gage): NO COMPANY has tried to do so many things before, and that’s still while trying to keep a hand on a multitude of products across different ranges, and while introducing new ones too. This is the “innovation” Mark said any blogger or reader should know about. Personally, I would love to step back, and applaud. Just for the effort. I would also give them at least one more year to get it together. No company succeeded in one year, not even the all-mighty Google. It took them a while to become THE search engine that almost everyone uses. So I would love to cut Nokia some slack, and say that the drop this quarter was due to them having their minds elsewhere.

On a side note, my guts say “wait for February 2009”. That’s Mobile World Congress and that’s when Nokia is known to reveal important handsets. I don’t have insider info though, heh, far from that.

Another thing you mention is an idea for Nokia to focus on developed markets, and leave developing markets since it can’t cut smartphone prices. Allow me to contradict that, and to mention that this is where your “local point of view” comes into play. Nokia’s strength RELIES in developing markets, also Nokia’s focus SHOULD be developing markets, and from the pieces I’ve read recently, it IS. There were a few articles on Nokia Conversations regarding that. You can find them if you look for Africa or Jordan or India. The fact that they carry so many handsets across the widest range amongst competitors is their winning point.

Nokia’s General Manager in the Levant area told me that they have something for everyone. He is absolutely right. They cater to each budget, each need, each style. And their wide range of S60 devices, from the new but “basic” 5320 XpressMusic, to the ultimate N96 and N85, passing by the hip touchscreen 5800 XpressMusic and the classy 6120 Classic and the old but powerful N95 8GB and N82, gives them a smartphone price range from 150EUR to around the 700EUR, unsubsidized. That’s a HUGE range and most importantly a weapon to target developing countries. From the articles I read, Nokia believes in mobility, in mobile internet and that many people in developing countries will experience the internet for the first time through their mobile device and not their computers. I think they are right in that. That’s a major point in their worldwide strategy, and one of the major reasons that made them shift their strategy from being a manufacturer, to a manufacturer who provides services and software.

Before I end this very lengthy comment of mine, I want to point out that VOIP will be implemented through 3rd parties on newer S60 devices and Fring has already their client up and running. Nokia just removed their built-in application for it, or at least, so I understand. I am definitely not an expert on the topic of VOIP.

One more thing, Stacey. I don’t know what handset you use now, and I won’t ask you about it. But, in case you didn’t try an N or Eseries before, or in case you tried them but didn’t like them, I beg you to get in contact with WomWorld (www.womworld.com). They are a division of Nokia’s marketing that handles devices to bloggers and writers. I think they’d be more than happy to provide you with one. Should I recommend the N82 black or E71? They’re by far my favorites, and I happened to win both of them on different occasions. Lucky girl, I know. I would be ready to answer any question you have regarding S60. S60 can seem overly complicated when you first try it, stupidly simple when you get used to it but don’t explore it, and passionately amazing when you learn how to push its limits and exploit every aspect of it. I am now running loads of Palm freeware medical applications through StyleTap, on my N82, and it’s awesome to have this versatility of switching between S60 apps and Palm apps on 1 device. It’s also awesome because I have the freedom of adapting it to my own needs, as a new-grad pharmacist and biotech masters student.

P.S: I hope the last line answers “joe”s comment on me being a Nokia employee. I am not, I am very far from it, though a few months ago, I kind of received a proposition. My passion for S60 came when I learned that I could adapt the platform to my lifestyle, and that I can rely on it not to crash very frequently, unlike Windows Mobile 5 which I used for 9 months and which crashed twice each day. This is a link to an article where I told my own S60 story, and asked readers to tell me theirs: http://www.symbian-guru.com/welcome/2008/09/whats-your-s60-story.html . I hope you find it an interesting read.

Mark

Syament – Sell to me? C’mon you can do better than that……Rather than trying to randomly fire sparks of inspiration that may or may not ignite your interest how about telling us what would inspire you? If you do I promisre that I’ll point the right folk towards this thread.

To be fair I’ll tell you what last inspired me: Yesterday I came back home on an aircraft catching up on tv shows that I had (legally) downloaded over wifi at the airport, free, gratis, using my home broadband roaming contract – that was cool. Earlier in the day I had watched one of our SVP’s commenting on another blog, unpromped, because that what he’s into – that inspired me.

Mark

Syamant

Stacey, Thank you for your comments..

Mark , For all the growth that one has seen in Nokia’s share, the next step points to one thing , Re-Inspire your existing customers to a new way of mobility. At the moment as a Nokia customer ,I do not see myself getting inspired to buy the new latest from Nokia or anyone else. If Nokia inspires as it has done in the past it would be interesting , but for now this conversation is interesting.

Mark

First of all I’d like to point out that I work for Nokia.

I didn’t like the critisism of the aurthor of the article or the first commentator, there is nothing wrong with expressing an open opinion as long as it is from an informed source. Because Nokia is a transparent company we are able to have debates like this, and I am allowed to reply to this sort of post in work time with my managers blessing.

There has been much written over Nokia and others products, but the fact remains that telecoms is evolving into a services led market not a hardware business. To that end a previous post has already stated how far Nokia has come towards becoming an Internet company in a very short space of time.

Look at the ‘Comes with Music’ service, somthing that only can be made possible by large companies embracing change together, you get unlimited access to the millions of tracks in the Nokia Music catalogue for one year and once downloaded, they are yours to keep. Once you have bought a Nokia CWM device, there is no per track cost for these unlimited downloads and no maximum of 120 tracks as some media reports have suggested. Music can be downloaded directly to your CWM device or via your compatible PC too. Look forward at what the impact on the market that this sort of initative has for all of us.

Love or loath Nokia you have to acknowledge that the world of telecoms would not have the sweep of products and services without the spur that open platforms, innovative products (how many other major companies would bring out a web pad and support a community for its development) and leadership that has been a hallmark of the company’s growth.

To answer a couple of points raised earlier, you don’t get to be number one by following, copying or waiting, you do it by innovating and leading. This involves change and it should be apparent to anyone who blogs or reads the news that this is an area Nokia excels in. Also it’s been asked why it’s easy for new companies to make successful products. Again its easy to target the gaps in the market rather than meet the fight head on, this is Marketing 101. But look how many companies tried and failed to establish themselves, and then look where the products that have been successful in recent years are being built and their complexity level.

I enjoyed the article, but I didn’t agree with it because it an assessment of a global business from a local view point. At the end of the day though that is the authors right. And sitting here I am able to reply and suppot that right from a handheld computer that my company helped bring into being.

Mark

Finnsense

Nokia has a history of missing the boat. It missed clam shells and it got beaten handsomely by the thin Razr from Motorola. It still ended up with 40% market share.

The above commenters are right to point out that the US market is Nokia’s weakest. So the iphone obsession doesn’t damage it there much because it’s not that strong. Plus, we’re entering hard times, so Apple is going to have to cut prices. At least here in Finland (no I don’t work for Nokia) the iphone is much more expensive than even the N95 and N82.

All this said I do wonder why Apple, a newcomer to the mobile phone market, can make a decent mobile OS while Nokia can’t. Symbian’s okay of course but there’s no reason for Apple to have stolen a march given the resources Nokia has.

Stacey Higginbotham

I think the handset market has room for more niches now than a few years ago. In a market with such variety and so many vendors, Nokia’s ability to have 38 percent market share is good, but losing share and seeing the average cost of its handset go down means it can’t be complacent. It obviously competes today, but lagging on touch was a serious issue. Its actions regarding VoIP that OM has talked about seem to signal a disconnect from end users as well.

I actually don’t have, nor want an iPhone, but I will admit I have a bias toward developed markets. That being said, if Nokia doesn’t want to cut prices like its competition is, I think it needs to focus on the high-end, because that’s where people buy based on features and a brand rather than price. Developing markets as a rule are more price sensitive.

Syamant

Some observations you might want to consider

1. Does the main hypothesis of your article apply to the American market or its valid for the Global Market. Not everyone is enamoured by the touch metaphor or the smartphone approach. Does Nokia’s share in the US have a bearing on the analysis.

2. A question I have is this, Can one be a one trick act aka iPhone and dominate all segments ?

3. Have the others got their act together ie Samsumg, LG, HTC etc on a global scale. Yes they get a lot of coverage in the media but does coverage translate to conversion and service.

4. Objectively speaking, is the current Nokia line incapable of competing with the products on a segment wise basis ?

5. How do the emerging markets view various incumbents and also specifically do they have distribution and service networks in place to compete ?

Your views would be appreciated. Regards.

Rita El Khoury

Once again, a VERY poor analysis of the Nokia situation, coming from a USA-based iPhone-blinded person. YES Nokia lost marketshare this quarter, but that’s all due to the fact that they didn’t release anything substantial this quarter. N78 is just your average handset (although one would argue that it can do A LOT), N96 was out very late in the quarter. Only the E66 and E71 made it this quarter, and we all know how Eseries sales are much lower than Nseries.

Anyhow, Nokia knew this beforehand, because they are focusing on the next quarter. They have a hell of few months ahead with the N96, N79 and N85 making it to the markets, and the 5800 xpressmusic also released in some countries, with Comes With Music.

But what you need to know is that Nokia is in a transition phase. They aquired Trolltech, they aquired Symbian and Open Sourced it, they have also been working for a year on their own new music, maps, files, sharing and games services. They are trying to put everything together now, and at the same time they are moving from S60 3rd Edition to S60 5th Edition (that’s the “touch screen” interface you want). This sort of blank period always happens when you quit a certain phase and enter another. It’s understandable, it’s predictable, it’s temporary.

And on a side-note, Nokia has blown up all the cards with the 5800 XpressMusic pricing. “Others cut prices? Well, so do we, watch us!”.

And before saying something in the lines of Nokia handsets don’t do music or whizzy apps or whatever, try S60. E71 or N82 for example. Putting aside the touchscreen (which Nokia had since the 7700 and 7710, mind you, very ahead-of-their-time handsets), S60 can offer anything you’d want to do on a mobile phone. You can also MMS, copy/paste, use A2DP, connect your device on TV-Out, assign any song as a ringtone and even view flash on the browser! O’really!

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