Fixing Nokia

Reproduced from a Forbes article by Lionel Laurent:http://www.forbes.com/2009/07/27/nokia-mobile-motorola-intelligent-technology-nokia_print.html

No one at Nokia is sleeping easily these days.

While reporting a second-quarter sales drop of 25% and a profit dive of 66% earlier this month, the mobile phone giant admitted that it had to "develop new skill sets." And how.

Despite its weak quarter, the Finnish company is still at the top of the sales charts, moving 100 million units on a quarterly basis. Industry watchers are worried that it is starting to look a lot like Motorola in the mid-1990s--a mighty incumbent losing its edge to rival upstarts. There's concern that Nokia is a hardware whiz living in a world increasingly dominated by software; and despite its forays into online services and application stores, it needs a big refresh to catch up.

So, what should Nokia do?

Improving its user interface for handsets would be a good start. Nokia's Symbian operating system is still widely used, but the "S60" interface is showing its age. Gartner Research analyst Carolina Milanesi says that while Apple's rival iPhone interface is very smooth and "horizontal," requiring only one or two steps from the start menu to perform a function, S60 takes the user "deeper and deeper" into a Web of choices and processes. The problem is exacerbated by Nokia's attempts to shoehorn S60 into new touch-screen phones, whereas Apple's system used touch-screen technology from the beginning.

A better interface would also help Nokia close the gap between its online services, which offer everything from applications to music, and its technology-rich handsets. For instance, Nokia's high-end handset, N97, has a more powerful camera, better map navigation and wider multimedia capabilities than the latest iPhone. But N97's less sophisticated interface limits the user's ability or desire to connect with Nokia's services, giving Apple a clear advantage.
DnB Nor analyst Fredrik Thoresen says the gap makes it nearly impossible for users to access Nokia's online services. "It's a hassle. I've never done it," he says.

It's surprising that Nokia has fallen behind, given that it first announced its foray into online services back in 2007 with an app store it would call Ovi. Indeed, the company appeared ahead of the game in controlling the end-to-end chain from hardware to software. But integrating these services has proven difficult, partly due to resistance from network operators--fearful that Nokia is stealing their thunder--and also because Nokia's user base is so broad that even something as simple as a one-stop online shop threatens to become an unwieldy behemoth.

But if Nokia can keep hammering away at Ovi, which launched in May, giving it mass-market appeal with an improved and easy-to-use handset interface, all the company would need to add is a killer touch-screen design. Oppenheim analyst Nicolas von Stackelberg thinks Nokia should use capacitive touch technology, a la iPhone, which responds more accurately to the finger's electrical conductivity.

In terms of Nokia phones' display screens, MKM Partners analyst Tero Kuittinen says the ideal size is 3.5-inches, which would make playing games and browsing the Internet a lot easier. He also believes Nokia should release more touch phones at $200 and below, like the music-oriented 5800 and upcoming 5530, to gobble up users in low-end emerging markets before Apple and BlackBerry maker Research In Motion get there.

"The game of migrating new features into cheapie phones is the one that turned Nokia into a behemoth in 1997 to 2007," says Kuittinen. "That is the game that must be the core of the comeback plan in 2010 and beyond."

And a comeback is exactly what Nokia should be planning. For the past two years, the company has rested on its laurels in the face of Apple's success. By admitting it has new skill sets to learn, perhaps Nokia is ready to fix its problems, catch up to Apple and maybe even surpass it in the software and design arenas.

Let's hope Nokia can silence, once and for all, its comparisons to Motorola.

Profiling the slide at Nokia (Part III)

Dan Carter’s blog says it all. http://www.worldofnokia.co.uk/2009/07/nokia-loosing-its-grip/

The blog illustrates how Nokia looses the big game from a consumer perspective, with the most vociferous fans now slowing conceeding to the fact that Nokia’s smartphone challenge is outplayed and outsmarted by other worthy competitors.

To quote Dan,” Through thick and thin I have been promoting Nokia, Blogging about Nokia, Talking about Nokia and Buying Nokia!. However more and more recently my eyes are being opened to the rest of the Smartphone world and it is clear to me there are other phones out there that will do the job I need them to do, and maybe in some cases better?.”

Dan adds, “The problem I seem to have is with the Symbian OS not evolving enough compared to other manufacturers. Apart from some transitions and Feature Pack updates the OS looks the same today as it did 3 years back with the N95.”

The last when Nokia was able to make waves with its smartphone was the N 95. However, there after, N 78, N 79, N 82, N 85, N 86, N 96 and now the N 97 havent really given audience the kicks they were worth! Another user Ashutosh Timary comments, “You can almost predict what nokia is going to churn out next and not only that, even without playing with the new device, you can almost feel the experience.”

HTC Hero with a new Android OS and ‘Sence’ system, is a very sexy looking OS with a great piece of hardware packaged in one phone. The Hero has a large touch screen, HSDPA, 5 Megapixel camera, 3.5mm headset jack and looks like a real multimedia phone.

Another prime case is that of iPhone 3GS which has been selling out all around the world despite being very over priced for the specification. The N97 beats the 3GS in pretty much every area apart from usability of the screen and the OS.

Does Nokia have any more smartphone winners in its portfolio? No probably.. All current Nokia devices seem recycled.

Nokia are starting to become boring with their same devices repackaged and using the same OS over and over again, especially when other manufacturers are doing such a good job at getting things right.
Ref: http://ronnie05.wordpress.com/2009/07/22/nokia-ii/;http://ronnie05.wordpress.com/2009/07/22/nokia-i/

Profiling the slide at Nokia (Part II)

Nokia’s Age of Denial

While touch-screens had always been around, it was the iPhone in June, 2007 that had caught everyone’s imagination with its form, function, features and applications. Till then, Nokia’s N and E Series devices were the ultimate in technology. In Q2,2007, Nokia launched the iconic N 95, a do-it-all smart-phone that captured the imagination of the world. Nokia missed the trend, as it was basking in the glory of N 95! Nokia regarded the Haptile feed as a fad which would mellow down. That was not to be and Nokia realized it the harder way.

August 2008: Nokia launched an offensive against the iPhone 3G by announcing the successor to N 95, the N 96! By then, Nokia had taken note of iPhone’s initial success in US. However iPhone without operator subsidies outside the American shores was a doubtful starter (as proven in the case of India, where the iPhone could not live up to its hype because the carriers (Airtel and Vodafone) did not subsidize it). Positioning the N 96, which was only a few additions to N-95 against iPhone 3G was only a subterfuge. Nokia was trying to play the game on its own terms where as iPhone appeal to the consumers was becoming painfully evident.

July 2009: This was the first time that Nokia played Apple on a level game. The N 97 which was Nokia’s haptile flagship device fared badly against the Palm Pre and the iPhone 3GS. Nokia’s smartphone portfolio was getting depleted and except the E 71 and its other versions, there was a serious lack of a smartphone from the Nokia stable! The fight between N 97 and iPhone was already dubbed as the fight between device and software. Apple with its sexy and neat looks, brilliant browser and UI and Apps store turned the game on the N97. Even Palm Pre with its WebOS was cooler than the N97!

What lies ahead

Nokia will now have to re-think its smartphone strategy in order to stay in the game.
Product design: Most of the Nokia phones look and feel like some other Nokia phone. E71 was a success, they augmented it to E 63, E 72.

A new OS that would make UI and browsing experience pleasurable. There is a space to learn from Apple, Android and even the Palm!

Need to look at open sourcing solutions. While they had the first Apps market (Forum Nokia), they lost the plot mid way and allowed Apple to get away with the Apps Market. Failure to differentiate on Apps and Services was a big mistake on hindsight.

Need to be more collaborative rather than closed in its approach. Nokia’s stiff approach to working with the other partners in the eco-system has cost then dear in the Developed markets.
Mobile Internet may well be the next in devices. Enabling a superior browsing experience is key to greater user acceptability. That is again something that Apple and Palm have perfected.

http://www.thestreet.com/story/10545980/1/tech-rumor-of-the-day-nokia- needs-palm.html

Profiling the slide at Nokia (Part I)

Nokia’s slide in the smartphone segment has been well documented and the latest results from Nokia do not inspire confidence about a quick revival. Nokia’s slide draws a sharp contrast from Apple and its Apps store. Here’s profiling Nokia’s smartphone story.

Nokia’s Decline
Nokia announced a 66 percent yearly drop in Q2 profit while lowering its 2009 market share target for its cellphones. Originally, Nokia had expected market share to rise in 2009, presumably based on a successful launch of the N97 flagship device. However, outside of a core group of S60 diehards, the N97 has been universally panned in both reviews and user forums alike. And with nothing but rumors of an Atom-based Nokia Netbook on the immediate horizon.

Overall YOY sales for Nokia have fallen by 25% to 9.9 billion Euros in Q2. This is 7% higher than Q1, 2009.YOY Nokia shipped 103.2 million devices during Q2, 15% less than an year earlier, but 11% more than Q1,2009. The average selling price was also down from 74 Euros Q2 last year to 62 Euros currently. In Q1 2009, Nokia had recorded less than 100 million shipments for the first time in 2 years. Q2 2009 was slightly better in terms of volumes but the ASPs are southward bound still.

Inspite of aggressive job cuts and other measures such as moving out of non core activities, Nokia is now cutting down its profitability and market share outlook. It is now predicting its mobile phone operating profit margin will match the first half at 11.3% (less than the analysts prediction of 17.4%) and its market share will stay the same as last year (compared to original forecasts of a rise).The stock took a 15% plunge after the results were announced last week.

Analysis
The significant volumes from the lower end have helped maintain the market shares although it is pulling the ASPs down. However it is the smart-phone market where Nokia is taking a big hit in terms of both volumes and numbers. Thus, Nokia is finding harder to stay profitable because of increasing competition in the high end phone segment from the likes of Apple’s iPhone, Palm Pre, Toshiba’s TG01 against Nokia’s N 97 and 5800, which are key support to its margins. Nokia is suffering from low operating margins because it does not have really competitive products at the high end of the portfolio.

Analysts are dubbing this period as Nokia’s Motorola Moment. http://www.forbes.com/2009/07/17/nokia-apple-iphone-markets-equity-mobile.html?feed=rss_technology.

Once a giant of the handset industry, Motorola got stuck with its Razr handset model longer than it should have done, failing to catch on to other innovations that were taking place in handset making, before losing market share in China to Nokia and in the US to Apple.
Nokia seems to now be falling in the same trap. It was late to realizing the popularity of clam shell phones, late to touch screen and now late to the application store as pioneered by Apple’s iPhone, as well as high quality web browsing. The fact that remains is that Nokia has not been innovating and has only been a fast follower.

Services Company
2 years back, when Nokia had suggested a move into services based businesses, the Wall street had welcomed the efforts by a stock price spike. That was the right thing to do. However, Nokia has taken long to do what it set out to do. And its efforts have been largely diffused. Instead of getting one thing right, Nokia tried many and more different things. It launched into Nokia Music Service and Comes with Music, N-Gage Gaming and Ovi Services, Ovi Share (networking platform) and the latest being Symbian horizon (an apps store). Was Nokia doing too many things at the same time? With Nokia’s kind of ability, it could probably carry the gambit as well. The problem perhaps was Nokia trying a plethora of business models, without really doing anything really meaningful. It was a follower and not the original in most of these services. In effect, it was trying to compete, by its sheer size and presence, and not basis its technology leadership.

In many cases, the platforms existed at Nokia, long before competition had stepped in. N-Series phones were regarded as the ultimate edge in technology for a long time. Yet Nokia never regarded applications and software as a differentiating element unless Apple came along with the Apps Store. It was Apple who pioneered the iTunes and Nokia has been playing catch up with its Music store and Comes with Music.

The problem is complicated with Symbain OS. While Symbian is the most robust mobile OS and leads the smart-phone OS market share at 40%, Nokia probably needs to look at a second option to compete with the likes of Web OS (Palm), Android and Apple OS.