Nokia: Trending upwards

Over the last year and half, Nokia Scrip price has yo-yo'ed from $ 40 to $ 8 given the slump in the market and demand, its own performance in the smartphone market and its decision to change tacks from device orientedness to internet services focussed approach. Yesterday Nokia declared its 1Q, 2009 results and though a drop in numbers was in line of expectations, a 90% drop in profits was beyond expectations. This was Nokia's worst quarterly profit in more than a decade. Profits declined to 122 million euros (US$160.7 million), from 1.2 billion euros (US$1.6 billion) a year earlier. Sales fell 27 percent. Nokia sold 93 million phones in the first quarter, 3 million more than analysts had anticipated, the ASP of the phones fell sharply to $85 from $93 in the fourth quarter. Nokia's Devices & Services unit saw net sales decline 33 percent year-on-year to 6.2 billion euros (US$8.2 billion). Nokia remains the largest mobile-device maker in the world with a market share of 37 percent in this year's first quarter. However, that's down from 39 percent in the year-ago period. Nokia expects industry sales to continue to decline this year, estimating a 10 percent overall slide from 2008. Nokia's sales were mostly based out of the Asia Pacific, followed by Europe and then Americas.

However, these bleak numbers seem to have come with silver lining as far as Nokia is concerned and while this is the worst quarter for Nokia on record, it does look like they have bottomed out and the only way from here is upwards.

While Nokia has taken a beating in Smartphone space in US and North America over the last year and half, it now looks like they are finally ready to take the Operator centric route to consumers. With AT&T putting their weights behind the E 71, May 2009 onwards, Nokia will finally be able to get the operator toehold, which is a critical success factor in North American markets. Read Report

Considering that in Q1, 2009, Nokia's North American numbers actually grew by 30% and was the only Nokia region to register growth, the AT&T tie up on E 71 can be a big winner.

There seems to be traction on the Economy Smartphone 5800 Xpress Music, with 2.6 million units already shipped. The phone is popular in China, India and other developing countries given its price and feature attractiveness.

Olli Pekka, CEO of Nokia Oyj has indicated that the fall in numbers could also be attributed to channel de-stocking. To be quoting OPK, "Regarding the health of the overall mobile-device market, the inventory already in the sales channels decreased substantially during Q1 due to extensive destocking by operators and distributors. This adversely impacted our sales volumes in the quarter," Kallasvuo said. "However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter."

Amongst other strong signs of recovery is the fact that it has retained its 37% market share, and has in fact gained in strength in China and India, whereby Motorola and Sony Ericsson are flopping out. Nokia's impressive offensive at the low end will make sure that market shares are stable and increasing for sometime.

With N97 Nokia looks to get back at the technology leaders platform, a mantle it has lost to Apple and RIM in the recent times.

Nokia expects industry mobile-device volumes in the second quarter to be at about the same level or up slightly. The company also expects its market share in the second quarter to increase.
The news that sparked a Wall Street rally on Nokia's stock was the company's prediction that the decline in the first two quarters this year would be worse than in the second half of the year. What's more, the company is targeting an increase in market share for the year.

The two aspects, which are slight out of sync in Nokia at this time are its Netbooks foray and The flight @ Ovi, which will need to be accessed independently. The indicators at this point of time may not favour Nokia, but it certainly looks like Future Bright for Nokia.

Examining the case for Nokia Netbooks

Lap Top makers Lenovo, Dell, and Acer have announced their ventures into the smart phone space. I had covered a few of these in earlier blogs.
http://technologyandtelecom.blogspot.com/2009/02/smartphone-debut-dells-mephone.html
http://technologyandtelecom.blogspot.com/2009/02/lenovo-promising-smart-phone-debut.html
http://technologyandtelecom.blogspot.com/2009/02/toshiba-timeline-iphone-in-its-sights.html

Now, the king in the mobile space, Nokia takes the battle to the enemy camp by announcing its foray into netbooks. Olli-Pekka Kallasuvuo mentioned in a recent interview that Nokia was “actively looking” at the laptop market as the cellphone and mobile PC markets get closer and closer to convergence (read article http://www.reuters.com/article/technologyNews/idUSTRE51O6Z320090226). This had created the immediate buzz that it was expected to create around the technology geeks and followers around the world.However, this is more than i-fight-you-at- your-home-while-you-fight-me-at-my-home motive out here (meaning Nokia fights the lap top makers with its entry in that segment, even while Lap top makers try to prey on smartphone space). For starters, Nokia was already the largest computer maker in 2008, if the smartphone population are allowed to be counted in as computers.

An interesting line of thought that has featured in Nokia Conversations (Nokia's informal PR window to the world) is about how "mobile lifestyle" is fusing with "mobile computing" even as internet apps change the mobile phone from a medium of communication to projectors of our selves in the cloud. (Suggest the article as a compulsary read). Essentially, there are three major take outs from the article
1. Mobile devices will have to evolve to more creative usages in networking people.
2. The Cloud will be a platform where people would needto project themselves as a means of communication with others
3. Hence the need for a netbook device!

The article very beautifully explains the device story behind the need to graduate from Mobile Computing to Cloud enabled netbooks. So Nokia's device strategy follows the convergence story as it unravels and transitions from a N 97/ iPhone to netbook!Interesting times, as industries converge and new paradigms emerge. However the question that pops up is, whether Nokia is doing things one too many? Its 2007 - 2008 strategy has revolved around services and even after a while, Ovi is not exactly "there" in terms of consumers, services, applications and stickiness. The opportunities for Nokia's software services would surely outweigh the cost of building a commodity consumer electronics device.

The first reaction to this one is Nokia shouldn't be looking at the netbook space. They've got enough on their plates at the moment, the new devices need attention and promotion, it will confuse the marketing message, there's very little profit in commodity devices...

On the other hand the Netbook can be seen as a natural device extension of the Ovi platform which links up from the consumers to the crowd.

My take on this is Nokia should be looking at its services eco system foremost. Netbooks will seriously not be an differentiator in the age of content and the internet. Investements in the netbook may not be both time, investment and attention consuming for very little returns.

Challenges and Opportunities: Ovi Application store

Ovi is Nokia's door (Literally in Finnish) to the high end internet and convergence enabled consumers. Over a year and a half, Nokia has been building its Ovi brand. On 16th February, 2009, Nokia announced Ovi Application store, a virtual store front where developers can develop applications and consumers can easily download them. N 97 will be the first device to sport the Ovi Aps store when it goes to sale in June 2009! The Store will be available on its S40 and S 60 platform devices. Nokia intends to pep up the offering by tracking downloads and suggesting applications to users, which may be of their interest.

A few days back, i had covered the Online application stores story in one of my posts: http://technologyandtelecom.blogspot.com/2009/02/online-application-stores-fad-or.html

Apple and Google are "there", Nokia, RIM, Palm will get there soon. Microsoft is also designing something on these lines.

Challenges and Opportunities

While Ovi Apps Store (OAS) has the advantage of a captive base of Nokia's consumers, which it can choose to exploit well, there are some formidable challenges that OAS faces.

The first challenge obviously is a "me too" positioning important from a perspective of "being available" to its consumers. Having the store was not really a innovation novelty as much as having a store to offer 3rd party applications. iPhone and Google have established themselves fairly well in the application space and the next three entries will be (RIM, Nokia, Pearl) will only fragment the market to feed their consumers!

The happening place in terms of application and their developments is really the North American market and Nokia doesnot have a good representation out there. This is slightly stiffling as Android and iPhone are getting ahead in the same context.

Nokia can tap into the base of developers in Europe and South East Asia. However, the market for applications and downloading is not so great in South Asia. Thus, cutting edge applications can have longer acceptance periods.

One significant advantage that Nokia brings to the table is the robustness and stability of its Symbian platform.

There is a lot of work that is happening on Android and Microsoft platforms. While Microsoft is distinctly seen as "pro enterprise", Android is seen as "pro consumer". Apple is .. "apple". Symbian has not generated as much interest in terms of work lately as a Android or a iPhone has.

Nokia already has a the largest community of developers (3.5 million). So there will not be any dearth of Ideas!

However, with low acceptance of applications in Nokia dominated markets, the same application developers may get higher returns in the Android, Microsoft or iPhone stores.

End Note

The first 6 months after launch is going to be important for Ovi. This is because, there will be a lot of applications, which will be source copied from the Apple store and Android store. The developers will expect a quick buck. Making a fast buck will depend on the ability of Ovi and the consumer acceptance of the Symbian store. That may shape the developer perception of the Ovi store!

Microsoft, Google and Ovi:The error list!

Less than 2 days back, i had blogged about the fallibilities of the super corportaions: Microsoft and Google. http://technologyandtelecom.blogspot.com/2009/02/even-invincible-and-infallible.html. Interestingly enough Nokia's foray into online services and application, Ovi has fallen into the list of goofers! This happened when a recent server crash lost all unsynched data on Ovi. This unsynched data is dated from January 23rd 2009 to Febrauary 9th, 2009. This means any data uploaded by the consumer from 23rd Janaury 2009 onwards would not have been saved.

Ovi is Nokia's foray into internet services through the Nokia devices. Apart From Nokia's Ovi, Apple's Mobileme and Microsoft's My Phone service (to debut) use the cloud to store data uploaded by the customer! While the number of affected users is limited, because of Ovi's small userbase, it is worth questioning what would happen if for some reason a Facebook would have such a failure.

The conclusion here for the user is: Dont trust the cloud for everything. It is also wise to have a back up local hard disk for your data.

Another question that pops up: should the cloud be rated for efficiency and trustworthiness of data systems, security and speed. Probably yes!