Holding on for dear life, Nokia attempts to re-enter the handset market

TakeAway: Like 66% of companies out there, Nokia suffered from the first mover disadvantage.  Then throw some complacency on top of that and you will have the current day Nokia – losing market share by the minute and watching its stock price tumble. 

Now Nokia it is trying to crawl back.  Blaming customer focus, carrier demands, etc. for its dwindling success, Nokia is hoping that a suite of killer apps and new distribution channels will renew its position as a credible competitor in the handset market.

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Excerpted from NYTimes, “Can Nokia Recapture Its Glory Days?” By Nelson D. Schwartz, December 13, 2009

If there’s anywhere left in the world where it’s still impolite to flash a BlackBerry or an iPhone, it’s Nokia’s annual analyst meeting.

But earlier this month, as executives talked up the company’s plans for 2010, the optimistic message from the stage was belied by the behavior of the audience. In the back of the room, one money manager after another distractedly toyed with a competing device … one analyst announced to the room, “I don’t think anyone in this room is expecting an improvement in earnings next year” …

Although Nokia still commands 37% of the world’s handset market, it’s facing bruising competition in the lucrative high end of the industry, where the iPhone and BlackBerry have grabbed the cool factor in smartphones that can surf the Web and handle e-mail …

Nokia’s problems are especially acute in North America, where its hold on smartphones equals 3.9%, compared with 51% for Blackberry and 29.5% for iPhone … 

“We made wrong decisions in the American market,” says Nokia’s EVP for devices. For example, Nokia was slow to make the change to so-called clamshell phones, sticking with “monoblock” models even as consumers abandoned them.

And while Nokia first offered touch-screen technology in 2004 — three years before the debut of the iPhone — Apple’s models quickly made Nokia’s competing products look stodgy. Most of Nokia’s touch-screen phones can’t quickly transform their screen with the jab of a finger, which is among the factors that make the iPhone seem so much more slick.

Until recently … the company didn’t want to produce phones specifically tailored for American consumer tastes, and it resisted demands from the major carriers to come up with phones based around their brands and individual specifications …

Nokia has also been hobbled by its traditional weakness in phones employing C.D.M.A., the wireless technology offered by Sprint and Verizon Wireless that’s used by about 50% of American consumers … Nokia focuses instead on G.S.M. phones for AT&T and T-Mobile. However, AT&T’s exclusive deal with Apple has hurt Nokia in the high-end smartphone market …

Nokia is finally responding — its lithe, BlackBerry-like E72 appeared in the United States on Tuesday — but it is facing looming threats in other segments.

Google is offering Android, a rival to Nokia’s own operating system, which has been picked up by competitors like HTC, Motorola and Dell, while Asian manufacturers are turning up the heat with low-priced handsets in emerging economies where Nokia has long enjoyed outsize market share … 

“The market believes this is a management team that can’t and won’t execute,” …

Despite the pessimism outside, Mr. Kallasvuo insists spirits are still high inside the company …

Indeed, for all the new competition in smartphones, Nokia remains the dominant player in conventional handsets, selling roughly 15 phones a second worldwide …

And while market share might be minuscule in North America, the company commands a whopping 62.3% of the market in the Middle East and Africa, as well as 48.5% in Eastern Europe and 41.8% in Asia …

What’s more, Nokia has been written off before.  Citing past crises in 1998 (the advent of smaller phones), 2001 (the bursting of the tech bubble) and 2004 (the sudden popularity of flip phones) … “we’ve always had points where technology hit a plateau and had to be reconfigured.”

So why didn’t Nokia move more quickly to counter Apple and Research in Motion in smartphones? “We didn’t execute; we were aiming at too geeky a community,” he says. “Apple is made for the common man. It’s more for Joe Six-Pack than techno-geeks. But we understand Joe Six-Pack too” …

Nokia executives say new offerings like the N900, which is as much a mobile computer as it is a phone, or the N97 Mini, which combines touch-screen technology with a qwerty keyboard, will win back buzz from Apple and BlackBerry while appealing to the company’s 1.1 billion customers …

Another crucial development in 2010 will be a bigger push for North American market share, as Nokia works more closely with carriers and brings out more smartphones … Nokia executives are promising a smartphone for next year that will update the company’s aging Symbian operating system, combining the touch-screen coolness of the iPhone with a BlackBerry-like e-mail solution …

And though Nokia’s flagship outlets in the United States may be folding, the Finnish giant is still trying to compete directly with Apple online, opening Ovi in May to compete with Apple’s hugely successful Apps Store …

Edit by TJS

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Full Article
http://www.nytimes.com/2009/12/13/business/13nokia.html?_r=1&scp=2&sq=nokia&st=cse

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