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Nokia Revises Symbian Strategy as Smartphone Sales Improve

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Nokia (s nok) today announced quarterly results that show improvements in how the company is doing in the highly competitive smartphone market, shipping 26.5 million such devices in the period, a 61 percent increase from the year-ago quarter, and a 10 percent improvement over the prior quarter. Even with such positive results, Nokia still faces a challenge in executing its Symbian strategy in a timely fashion, as its competitors are well positioned. Perhaps most disheartening for Nokia are signs of weakness in regional markets that Nokia has traditionally relied upon.

Nokia’s quarterly numbers are the first since Stephen Elop took over as Nokia’s new president and CEO in September, but the company’s results have nothing to do with Elop, given his short tenure. Even though Elop isn’t responsible for today’s numbers, he’s beginning to make an impact on the company’s future. In tandem with the company’s financial news, Elop is bringing change in the form of 1,800 job cuts associated with a repositioning of Nokia’s software strategy. Going forward, Nokia won’t refer to its smartphone platform as Symbian^3, Symbian^4, etc… Instead, it will simply be Symbian and will be upgraded on a rolling basis. Based on my experience with the Nokia N8, the company has room to roll out improvements; superior hardware is hampered by a mix of software and user interface issues.

Additionally, Nokia will put greater emphasis on its Qt development framework, declaring it now the sole platform to create apps for Symbian and MeeGo devices. That’s another strategy change, and while a positive one, a company that constantly changes strategy never executes a strategy. Here’s Rich Green, Nokia’s CTO, explaining the new stance on Qt:

Regardless of the platform focus, the increased sales growth in Nokia’s higher-end devices is helpful in multiple ways. The cost of creating a mobile app can easily surpass six figures, so developers are keen to watch which devices and platforms consumers are attracted to, and therefore, which of those smartphones are a potentially good target for their apps. A greater number of high-end device sales also raises the average selling price and profit margins for handsets. Nokia doesn’t enjoy the roughly $600 ASP that Apple does, but Nokia’s ASP did increase in the quarter to €65 (US $91) as compared to €61 in the prior quarter and €64 from the year ago period. You don’t need an accounting degree to understand that selling more devices at a higher price brings increases in revenue.

Even with such improvements, however, Nokia is realistic about the challenges it continues to face from devices running on rival platforms such as Apple’s iOS (s aapl) and Google’s Android (s goog) systems. From the investor release today:

Nokia now expects its mobile device volume market share to be slightly down in 2010, compared to 2009. Nokia earlier targeted its mobile device volume market share to be flat in 2010, compared to 2009. Nokia continues to expect its mobile device market share to be slightly lower in 2010, compared to 2009.

They say that admitting the problem is the first sign of recovery, and to be fair, Nokia has made similar statements about the overall market in the past. Despite smartphone sales rising, Nokia expect its global market share to be decreasing in 2010 because its competitors are exhibiting more growth. Apple, for example, recently announced quarterly iPhone sales of 14.1 million units, good for a 91 percent increase in year-over-year sales. Nokia’s own sales numbers show weakness in areas where it has traditionally been a strong player: device sales in the Middle East and Africa regions as well as in Asia-Pacific markets declined on both a quarterly and yearly basis.

The issue in these regions isn’t Apple; it’s Google’s Android army. India, a place where you could find consumers with a Nokia everywhere you turn, is starting to see an influx of low-cost Android devices from local handset makers. Google providing Android to these companies at no charge give them a chance to compete against Nokia while bringing smartphone features and apps to the masses. And India is just one example: Asian handset makers without a mobile platform and ecosystem of their own are more than happy to take the free Android system for low-end devices.

The overall results for Nokia should be seen as a positive, but with competitors exhibiting stronger smartphone sales growth, Nokia still has a long road ahead of it. With Elop now taking the wheel to drive change, it’s going to be an interesting ride.

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11 Responses to “Nokia Revises Symbian Strategy as Smartphone Sales Improve”

  1. I deal with a number of carriers and handset folks in India and SE Asia.
    Android is not significant for them in terms of how they are defining their strategy. They use whatever is the lowest cost product with no intent (I cant stress this enough) of climbing up the value chain.
    So we are not talking about apps, we are not talking about even mid-range devices, we are talking “race to the bottom”. They will use Android, or any other s/w they can use to combine with cheap Chinese hardware.
    The real revolution in India is bound to happen with 3G and MNP (mobile number portability) both around the corner. That will be at the high-end which is a 3-way tussle between Nokia, RIM & Samsung.
    Apple is asleep at the wheel in india.

  2. Making Qt the sole application framework isn’t so much a change of strategy as it is an elimination of the arcane. Using the old Symbian C++ to design and develop applications will not make them “future proof” like Qt. I think that is the right choice. They have been stressing Qt for a long time and now it is no longer recommended but required.

  3. Kevin, the decrease in India is not down to smartphone sales and has little if anything to do with Android. It’s related to the rise of cheaply manufactured dual SIM dumbphones by the likes of Micromax and other Chinese manufacturers. Nokia failed to leverage this market and fell behind until the release of their own handsets.

    Secondly, Apple’s rise is good YonY but it’s their quarterly peak. Annual growth rate over the last four quarters isn’t as good.

    Third the change in strategy will instantly reassure anyone – such as me – who has bought an S^3 device because of the modular approach to updates. The hardware, as we knew, is excellent and the clunky but functional UI will now only get better.

    This is a very good set of results and an excellent statement of intent from Nokia. The future looks very bright indeed.

    • All good points, Mark. The sales decline in India may not yet be attributed to Android, but Micromax (and others) are adopting Android for lost devices – that was my point.

      Yup, Apple had a killer quarter, which may not be sustainable, although I suspect next year will be more record iPhone sales, largely due to the anticipated end of the AT&T exclusive.

      Agree on the modular approach to updates for current and future Symbian device owners. Today was a good day overall for Nokia.

  4. I don’t think Nokia has a new stance on Qt at all. Developers knew all along that Symbian^3 was meant as a transitional OS that would support both AVKON and Qt, giving developers time to port their apps to Qt. But the big news is that Symbian will be upgraded on a rolling basis… and I think it was something Nokia really had to do to stay in the game with iOS and Android.

    26.5 million smartphones shipped in Q3 is impressive, especially since many consumers propably were holding off their purchases waiting for the new N8. If we expect a boost in sales after the release of the new Symbian^3 devices, I’d say 30-32 million smartphones is reasonable for Q4.

    • Definitely a good strategy for Nokia from a developer standpoint, Peter, and I agree that the smartphone sales numbers are a positive sign. Devices like the N8, C6/7 and E7 are sure to help the sales figures going forward as well, but I’ll be interested to see if Nokia’s sales rate is growing faster or slower than competitors.