Paul Withers explains why Nokia’s future could all hinge on its high-profile deal with Microsoft to use its Windows Phone platform
The plight of failing handset manufacturing giant Nokia continues, and if the pace accelerates any more, the manufacturer could eventually find itself in a position it may never recover from. There have even been rumours of a potential sale in the past week.
Who would have thought this could ever be the case? Just a few years ago it was at the top of its game with the ground-breaking N95 handset. The device went on to sell close to seven million units globally. Customers loved it. It generated similar interest to that of the iPhone today. But what has it produced since that comes close to capturing the same feeling?
According to the industry personnel we spoke to on and off the record, very little.
It’s a prime example on how quickly this industry moves and changes.
Just last month research from Gartner revealed Nokia’s market share in Q1 slipped to 25.1 per cent – its lowest since 1997. Incidentally that was the year the N95 was launched.
Follows ups, the N96 and N97, did not live up to expectations arguably making the same mistakes as Motorola with
In the meantime, the Apple iPhone was launched in June 2007, and we all know how that has changed the handset landscape. All the major handset manufacturers realised what was happening and reacted quickly by launching similar products.
Samsung came to market with the Galaxy S and followed up this success with the recently released Galaxy S II, which has drawn many admirers.
HTC took about two years to establish itself as a respected brand and the release of the various Desire and Wildfire handsets, most recently followed by the Sensation, have only strengthened that position.
RIM has continued to dominate the business market with its BlackBerry smartphones and is now making inroads into the consumer market.
Sony Ericsson and Motorola can relate to Nokia’s problems in the past. But both upped their game by building a significantly improved portfolio of products. The Xperia range has single-handedly turned around the fortunes of Sony Ericsson, bringing the Swedish manufacturer into the black. Motorola now has an impressive range of innovative devices including the DEFY and the ‘game changing’ Motorola ATRIX.
LG is another that has struggled to keep pace, but its dual-core Optimus 2X handset and Optimus 3D device could begin to turn the tide.
One of the key differentiators is the operating system. Android and Apple’s iOS are the key drivers. Symbian, according to those we spoke with, has failed. And Nokia’s decision to move to Windows Mobile, at least for its smartphone range, has been welcomed. But no-one is taking any bets on it being a success, or whether it will actually turn things around. Its recent history brings scepticism.
There have been too many false starts with handsets. Sure, it is the global leader in terms of volume (see box, below) but for smartphone sales it is not even on the podium.
Nokia clearly has a place in the low-end bracket. The sales of its 1100 model total an astonishing 250 million units, and it was the best-selling device of last year. But it cost less than a tenner in some stores.
Emerging markets are seen as Nokia’s strength, but the likes Huawei and ZTE are posing a real threat to its market share here. Releasing top-end, high-spec – and most importantly reliable – devices, is essential.
Operators only speak of smartphone growth with handsets. O2 reported in May its smartphone sales doubled to 80 per cent in Q1, with data revenues also up 30 per cent year-on-year.
Vodafone announced in its Q1 results last month that 90 per cent of its contract sales were smartphones, compared to 70 per cent in the last quarter.
With the value of voice at rock-bottom, operators need to encourage customers to use additional services such as data on the device.
If the demand from consumers drops, so will the orders from retailers. If this happens, then the company is in very serious trouble.
The recent profit warnings from the company and rumours of staff unrest indicate things are not exactly rosy in the Finnish camp.
The resounding feeling is Nokia needs a new story. And fast. The fact people still talk about the N95, as we are now, speaks volumes. Perhaps its deal with Windows may bring it the wow factor it so desperately needs. Its future could depend on it.