Nokia's North American Problem

Over the past decade, Nokia’s U.S. market share suffered because it was selling candy bar phones when flip phones were more popular. But today, Nokia’s facing different concerns, as it competes against new entrants, such as Apple (NSDQ: AAPL), Google (NSDQ: GOOG) and RIM (NSDQ: RIMM). CNet reports that Nokia’s current problems consist of having an outdated software and user experience and a lack of any significant partnerships with U.S. carriers that are willing to subsidize the cost of their phones. To be sure, Nokia (NYSE: NOK) is the largest handset maker in the world, so it can’t be ruled out, but it seems that today’s innovations in mobile are coming out of North America, which is drawing on its rich expertise in software and internet services. Here’s a look at what Nokia is struggling with and what it is doing to correct things…

The problems: Ken Delaney, vp of mobile at Gartner, told CNet that Nokia’s user interface is “a big mess. You go to the second screen and can’t find what you’re looking for. I think that will impact the overall usability of the phone and its Ovi services.” And, although, some of Nokia’s higher end phones are available here, they are offered at full price because Nokia has partnered with few carriers for subsidies. From the consumer’s perspective that means comparing a $400 Nokia phone with an iPhone, a BlackBerry, or Google’s G1 phone for $200 or less with a two-year contract. The result is that Nokia’s smartphone market share continues to drop, slipping from 49.4 percent in 2007 to 43.7 percent in 2008, according to Gartner.

Moving in the right direction: Nokia has started to make improvements on both fronts. It recently purchased Symbian, and plans to make the operating system open source to encourage third-party developers to make it better. As far as the user interface, Kai Oistamo, Nokia’s EVP of devices, told CNet: “The key to success is making devices that are easy to use. That has a lot to do with the user interface and also making it easy to activate things like e-mail. Complexity is increasing on the devices and we have to keep them simple to use.” Nokia has also opened a development facility in California, and has started manufacturing phones targeted at the North American market. At Mobile World Congress, Nokia bragged about how few clicks it read and send emails. In terms of carrier partnerships, Nokia is rumored to be working with Verizon Wireless (NYSE: VZ) to develop a device for its 4G network, and although that seems far out at this point, Oistamo promises some high-end phones will be carried by U.S. operators this year.

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