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NOKIA as we all know (not sure about a common man in Northern America !!) is the world’s undisputed leader in Mobile Devices Technologies especially with greater dominance in Europe, Asia and Latin America markets.
But NOt a King In America !! Why??
To put more light on this conundrum, let’s analyze the growth of the mobile devices industry and the contribution of the industry leader over the last four years 2006-2009. This has been a significant phase for the big changes in mobile devices industry (advent and growth of smartphones, with new players entering with smart devices and hurting the incumbents’ sales..yes… smartly enough).
(Note: I have approximated Q4’2009 data from the previous industry and Nokia’s sales data, as Nokia has still not released its Q4’09 results)
The above graph depicts the consistent market share for Nokia worldwide but there is a dip in market share in 2009 coupled with the industry de-growth in late 2008 and early 2009 due to the recession slowing the growth prospects of mobile devices industry.
There are more causes of this dip in performance from the world leader. Let’s see where it has lost its market share, though there is no prize for guessing but let us confirm it…
It’s crystal clear from the above depicting NOKIA’s dominance everywhere accept North America. The contribution to the sales in North America has been decreasing dramatically for Nokia from the year 2002 with a whopping 35% market share (leader) to 2009 with a below par 8%.
What has been the main reasons in such a developed market like North America where Nokia is not a King?
Why isn’t it able to leverage from its earned brand equity all over the world here in American Markets. Is it the product portfolio or the operator partnerships or the go-to-market sales strategy or the right attitude or not understanding the North American consumers ?
Issue 1: Birth of Smartphones and Apple iPhone …
The smartphone growth driven by Blackberries and the Palms of the world in mid 2000s was suddenly accelerated with the Apple’s first step into mobile phone industry with iPhone, leveraging from its iPod success. This certainly made it difficult for Nokia, as Apple with its good core hardware design, a mind-blowing touch screen interface coupled with the applications and the app store revolutionized the smartphone market. Smartphone was now smarter and available for the local consumer(apart from Blackberries which had more of enterprise users) creating a breathtaking user experience. Nokia had no answer to the iPhone’s success which slowly was competing with it’s high end product offerings and captured the growing smartphones category along with the incumbent Blackberry.
If we look at a snapshot of Year-on-Year growth of smartphones market-share globally, the situation is evident: Nokia losing worldwide market share in smartphones category from 51% down to 40%. We all know this is the most must have category in any product portfolio with a 15% year on year industry growth. Also, dominance in this category will dictate who will be the global leader in mobile industry in coming years as the advanced wireless networks (HSPA+, WiMAX, LTE) are designed for such data hungry devices.
Issue 2: Product Mix:
Continuing with the discussion on Smartphones. Though Nokia is at 46% in global share of its Symbian OS and 40% in global share of its smartphones handset sales, the Symbian OS is equipped with far more clunky user interface and lacks the power of applications which the iPhone ecosystem has in store for the users. Nokia should come up with new smartphone devices available to enterprise as well as normal consumers. The likes of Nokia E71x, N97 and N900 should enhance the Nokia’s product portfolio in North America.
Almost two of the top three operators in USA runs on CDMA technology (Verizon Wireless & Sprint-Nextel). Nokia never had a focus on CDMA handsets in its portfolio especially in North America. CDMA based handsets comprises to only 14% of the entire Nokia’s mobile handset sales. So this explains its focus on the inclusion of CDMA driven handsets in its portfolio.
Issue 3: Mobile Operator Partnerships & Go-to-Market Sales Strategy
I believe this is the key to Nokia gaining market share in North America. “Subsidy” to the end users has been the primary factor in driving any handset sales here and mobile subscribers are habituated to it… But, almost 70% of Nokia’s worldwide sales is based on a “direct buy” go-to-market strategy. If a subscriber needs a handset he pays around $100-$300 for a multimedia phone or even $400 to $500 for a smartphone(high-end) and in many of the bigger Asian markets like India & China, Nokia sales are direct without any subsidy to the subscribers.
In North American markets this sales strategy won’t drive sales but only stronger partnerships with the tier one mobile operators will boost Nokia ‘s handset sales. Nokia has to be flexible on their price points in North American markets and develop relationships with these operators. The recent success of Nokia E71 series with AT&T is the biggest example for Nokia maintaining the 8% market share almost flat compared to 2008. Nokia should come up with a CDMA/EVDO based smartphone especially to tackle the Korean handset companies (Samsung & LG) who have also captured Nokia’s market share over these years and topped the market share charts in North America.
I can perfectly relate myself to this situation. I have always been a hardcore NOKIA fan. I always bought expensive Nokia N Series phones costing between INR15000 to INR250000 ($300 to $500) back in India but after coming to USA and bitten by the subsidy bug, it lured me into choosing iPhone 3G($100) offered via AT&T in lieu of buying an unlocked Nokia 5800 for $400 !!
Issue 4: Understanding American Consumers
Along with the subsidy game and touching consumers on price points, Nokia failed earlier in understanding the tastes of American consumers instead mass producing devices for the global market to save on production costs. The lack of flip phones, smartphones with QWERTY keyboard catching up with the “texting” trends and touch screens coupled with great social networking, navigation , utility applications creating a great ease and user experience.
Road to the Throne !!
Summing all this up, Nokia does have lots of issues on its plate but at the same time it does possess the technical as well as business capabilities, brand equity, capital to make amends. Already there has been a lots of improvements strategically from Nokia’s end.
Nokia is revamping its North American operations to collaborate more closely with the major American operators. AT&T this year will begin billing customers who use Nokia services branded as Ovi. Those customers will no longer receive a second bill from Nokia. And in Canada, the network leader, Rogers Communications, is making it easier to access Ovi Maps and N-Gage game services on two Nokia models.
There are huge plans to revitalize the Nokia’s Ovi App store and with the acquisition of Navteq GPS will help it leverage significantly. In a recent move by Nokia in offering a free turn-by-turn navigation tool for lifetime inbuilt in to its smartphone, it will revamp the location based services roadmap.It is available for 74 countries, in 46 languages, and with traffic information for about 10 countries and detailed maps for more than 180 countries to start with.
The another big step Nokia has taken a leap in is its R&D expenses. It has rose from 5% in 2007 to 12.5% in 2009 which should lay a strong roadmap for new product lines and diverse product portfolio. Nokia has worked on its product’s form factor, touchscreen capabilities, inclusion of latest social networking and utility apps, an intuitive mobile web experience and QWERTY keyboard capabilities with their Nokia N900 & Nokia N97 editions. Not sure whether any North American operators have announced their newer commitments with Nokia , but soon we should expect.
Nokia is also planning to make Symbian an open source platform enabling a future full of broader capabilities and a deeper reach in the North American markets .Thus, developers will have access to every single line of code, in other words, to an Open Source operating system, and we would be able to see many more APIs, and induction of more and more functionality to the programs.
To round up, It’s a long way to go for NOKIA in regaining the North American throne. It’s going to be challenging and worth watching. At the same time, all eyes are now stuck on the fiercest battle between smartphone OS’s in the war of smartphones:
Symbian Vs. Blackberry Vs. Apple OSX Vs. Android Vs. Palm OS Vs. Win Mobile.
- Neil Shah
References:
Nokia Quarterly and Annual Reports 2006/2007/2008/2009 Yankee Research: The Battle for Smartphone OS Supremacy
For an update on latest Q4’09 Release…
Nokia swings back to black, reports smartphone gains in Q4
January 28, 2010 — 10:47am ET | By Phil Goldstein
Nokia reported stronger-than-expected results for the fourth quarter with gains in both global and smartphone market share. The company regained some of the swagger it lost following a dismal third quarter.
And Wall Street rejoiced; Nokia’s stock was up almost 8 percent on the news to around $13.90 per share following the news.
The company reported a net profit of $1.33 billion in the quarter, a 65 percent jump from its $804 million in the year-ago period and a dramatic reversal from the $834 million loss the company posted in the third quarter. The Finnish firm scored net sales of $16.74 billion in the quarter, down 5 percent year-over-year but up 22 percent sequentially. Net sales in the firm’s devices and services business totaled $11.4 billion, up slightly year-over-year and up 18 percent from the third quarter.
In the quarter, Nokia shipped 126.9 million units, up 12 percent from the year-ago quarter and up 17 percent sequentially. Nokia’s global handset market share inched up to 39 percent, from 37 percent in the fourth quarter of 2008 and 38 percent from the third quarter, according to the company’s measurements. Nokia’s devices and services segment posted an operating margin of 14.9 percent, up from the 9.4 percent it recorded in the year-ago period.
Importantly, Nokia’s global smartphone market share shot up to 40 percent, charging back after it dropped to 35 percent in the third quarter. The company shipped 20.8 million smartphone units in the fourth quarter of 2009, up from 15.1 million in the fourth quarter of 2008 and 16.4 million units in the third quarter.
“We grew our market share in smartphones in the fourth quarter, driven by the successful launch of new touch and Qwerty models,” Nokia CEO Olli-Pekka Kallasvuo said in a statement. “Our performance in smartphones, combined with continuing success in the emerging markets, helped us increase sales in our devices and services unit, both quarter-on-quarter and year-on-year. Our solid results also owe a good deal to world class supply chain management and impressive sales execution.”
As for Nokia’s outlook on the overall global handset industry, the firm reiterated expectations of 10 percent growth this year over last year, though it said it expects its share of that market to remain flat.
Analysts were impressed with the company’s performance, particularly its smartphone gains.
“The fact that Nokia’s market share in the smartphone market grew to 40 percent from 35 percent is quite impressive and highly unexpected, especially given the increased level of competition from companies like LG, Samsung, Apple, Palm, RIM and HTC,” said Julien Blin of JBB Research. “That said, while Nokia is not out of the woods yet, Nokia’s strategy seems to be paying off; Nokia recently reorganized its U.S. operations to work more closely with the leading U.S. carriers, made key management changes, and is changing its strategy toward the U.S market as it now intends to make specific devices for U.S.”
As for Nokia Siemens Networks, the firm’s joint venture with Germany’s Siemens, the business saw a 16 percent decline in sales to $5.36 billion, from $6.4 billion in the year-ago period, due to increased competition from the likes of Ericsson and Chinese vendors Huawei and ZTE. However, Nokia Siemens broke a string of quarterly losses with its $25.3 million operating profit.
Read more: http://www.fiercewireless.com/story/nokia-swings-back-profit-smartphone-gains-q4/2010-01-28#ixzz0e9JSltNu
Nokia to halve next year’s smartphone portfolio
December 3, 2009 — 2:16pm ET | By Phil Goldstein
Nokia next year will cut the number of smartphones it releases roughly in half in order to better compete with the likes of Apple and Research In Motion. The company has introduced around 20 different smartphone models this year.
“We see … really fierce competition certainly in the high end, but we also see it in the mid to low end of smartphones increasing,” Jo Harlow, the head of Nokia’s smartphone unit, said in a webcast. “We will defend our position, but we believe we also have tools to play offense as well as defense.”
Indeed, Nokia has hinted at a reduction in the number of its forthcoming smartphone models; Nokia during the past several weeks has slashed close to 600 research-and-development jobs in locations across the globe, partly due to its plans to slim down its global handset portfolio in a bid to focus on fewer, flashier phones.
That Nokia is reworking its approach to smartphones comes as little surprise. In the third quarter, Nokia’s smartphone market share dropped from 41 percent a year ago to 35 percent. It is still the global leader in smartphones, but Apple and BlackBerry maker RIM have been making gains. Further, Nokia reshuffled its front office in the wake of its $834 million loss in the third quarter. The company appointed CFO Rick Simonson as the new head of the Mobile Phones unit within Nokia’s devices business. And Harlow moved from being senior vice president of global marketing for Nokia’s handsets to running the company’s Smartphones unit, the other unit in Nokia’s devices business.
Earlier this week, Nokia said it expects the overall handset market to grow by 10 percent next year, though its own share of the market will remain flat during that period. The world’s largest handset maker also reiterated its commitment to the Symbian platform as its main smartphone operating system (reserving Maemo for high-end devices), and said it will improve the user interface on Symbian.
For more:
- see this Reuters article
Read more: http://www.fiercewireless.com/story/nokia-slash-smartphone-portfolio-half/2009-12-03#ixzz0e9KGhyfN