Cutting Room: Nokia’s catch-22


Finnish manufacturer restates global lead in terms of handsets shipped, but continues to have ground to make up in premium smartphone market, and loses quartet of influential executives to boot

It says something of the pressure it feels in the market when Nokia, the world number one, is inclined to defend its position (click here).

The fact such a statement was made just as its three highest-profile executives (Jorma Ollila, Olli Pekka-Kallusvuo and Annsi Vanjoki) were confirmed to be departing, along with the country manager (Mark Loughran) of arguably its most important European market undermined its claim of a return to form somewhat (click here).

It cannot have been planned like that.

Nokia’s argument is that it is “the most global company” among handset manufacturers and that, as such, it is serving a broader audience than its rivals.

It is required to spread itself more thinly, the argument goes – or, to manufacture many more device models than rival firms.

One can, therefore, explain away in its defence a liability perhaps to lose something when it comes to creating the definitive product.

As Apple has done for this recent industry cycle. And which, in turn, other manufacturing firms have followed more successfully.

One can suppose that is the longer explanation of its defensive position.

And it just about holds up so long as Nokia’s badge continues to appear on more than a third of total global handset shipments, and on more than 40 per cent of the smartphones in the market.

But there are other ways to cut it.

Firstly, what exactly constitutes a smartphone? If it is a portable and programmable device that allows some computer-like cleverness, then, sure, Nokia’s smartphone share is impressive.

But Nokia is counting every Symbian-powered handset in its range as a smartphone, and very few compare in end-users’ minds with the new breed of handsets from Apple, RIM, HTC and Samsung.

Because the Symbian OS does not have the usability or business functionality of Apple’s iOS, RIM’s BlackBerry OS or Google’s Android.

Nokia claims its new Symbian^3 platform – on the latest C6, C7, E7 and N8 devices – makes the transition for its mainstream platform “from legacy to leading edge”.

Taken with its MeeGo system, developed with Intel, this is the crux of Nokia’s claim of a return after too long with old software.

Perhaps. But – and this is a measure that must be considered in terms of detail leaked by bloggers ahead of announcements this month – the industry and consumer interest in its devices on the Mobile News and What Mobile websites this month was considerably less than in the new HTC Desire HD, for instance.

Nokia’s brand power has been adulterated by a series of misfiring high-end handsets, which have coincided with very iconic devices from rivals, and likely also because of its omnipresence in every market segment in every country market on the planet.

There is little brand premium in putting 30 million budget units into emerging markets, even if a new audience is grateful to be connected.

And does Apple or RIM look at Nokia, and think it is the touchstone?

No, because they have expanding businesses. Nokia’s claim about total handset shipments is rather like Everything Everywhere’s claim about UK customer numbers: market-leading, yes, but not where it matters most.

O2 is more profitable in the UK still and, in fact, retains the leading subscriber brand anyway.

Apple murdered Nokia at last count for profitability (£2.1 billion on revenue of £6.3 billion in the second quarter, compared with Nokia’s £190 million on revenue of £6.5 billion).

Nokia’s profits slumped 78 per cent, Apple’s increased 75 per cent.

Its figures might be discounted on the grounds they include Mac and iTunes sales, among other contributors, but the space between mobiles and computers is blurred.

Nokia is producing netbooks itself, and it is the one, anyway, reinventing itself as a software and services company.

Which makes the urgency to get right its Symbian^3 and MeeGo systems pressing.
Nokia has stalled for two years at least. If one considers Loughran’s reign as UK general manager since 2007 (click here), what has changed?

Loughran never held the industry profile of certain former UK manufacturer heads, which does not necessarily mean much. But he had a chance to change things.

The major distributor review in 2008 saw little different, and Nokia continued to fight grey trade with questionable success.

At the same time, Loughran was limited by the tools available to him.

The failure of the Brightpoint contract, which was at the time the one new entitlement issued in the review, told the whole story.

Brightpoint is a specialist in the UK, adept at selling into business channels and vertical markets. It is universally respected by its peers – in part, because it does not tend to come up against them.

It lost its Nokia contract because it failed to hit targets, and it failed to hit targets because demand was not there in crucial business segments for Nokia fare.

Its channels just preferred BlackBerry and HTC. Nokia has to convince the market it makes better phones at the higher-end.