Analysts: Nokia has wasted 3 years trying to come up with challenger to iPhone
Poor quality of Nokia software is source of astonishment for market analysts
In spite of tenacious efforts, the Finnish mobile phone giant Nokia has not succeeded in reining in its competitors’ lead in the higher-value smartphones.
According to an estimate by the global research and consulting firm Strategy Analytics, Nokia lost eight billion US dollars (EUR 5.7 billion) in last year’s net sales because the company’s success in touch-screen smartphones still remained weak.
The estimate draws on the notion that Nokia’s share of the touch-screen handset market should be the same as its share of the mobile phone market in general.
According to Strategy Analytics, Nokia’s share of the legal mobile phone market was 38 per cent last year. Its share of the touch-screen device market, however, was less than half of this.
One important reason for Nokia’s poor success in the most expensive smartphones is the American market.
According to Strategy Analytics analyst Neil Mawston, in the higher-value smartphone segment the U.S. market is the most important in the world.
If the world’s largest mobile phone manufacturer is very weak in the world’s most important market area then that can only be called a strategic error, is the way in which Mawston summarises matters.
Nokia first presented its iPhone lookalikes at a London press conference in August 2007.
Despite the promises, a serious challenger to the Apple product made by Nokia has still not been seen on the market.
According to investment bank Nomura’s technology expert Richard Windsor, Nokia has wasted three years in developing its iPhone challenger.
“Had the N97 been able to compete with the iPhone, Nokia’s Devices and Services unit’s business profit percentage would be more than 15”, charges Windsor.
Research firm CCS Insight's analyst Ben Wood is of the opinion that Nokia is not prepared to alter the design processes of its mobile phones to the same extent that the iPhone has changed the market.
“It is unforgiveable that Nokia has lost three years in developing a competitor to the iPhone. Nokia is unable to even imagine how large of an internal change if would take to be able to develop a device such as the iPhone”, Wood says.
The primary reason for Nokia’s inability to come up with a competitor to the iPhone is on the software side, analysts reckon.
Without a thoroughgoing software shake-up, Nokia will unlikely be able to challenge Apple toe-to-toe.
The higher-value smartphones are important, because with them the manufactures’ margins per handset are the highest, conspicuously more than with the large-volume phones, where Nokia enjoys high market penetration.
Earlier this week Nokia launched its new N8 handset, which utilises the revamped Symbian 3 operating system.
The smartphone will enter the market in the autumn. With the new operating system the Nokia Symbian phones will also be equipped with a new user interface.
“Nokia lays too much emphasis on developing software for the cheaper handsets. The renewal of a user interface should have been started with the higher-value smartphones”, Windsor asserts.
In Wood’s view, the N8 is a step in the right direction, however.
In his opinion it is the first building block in strengthening Nokia’s position in the high-end smartphone market.
In December, the Nokia management gave an assurance in an investor meeting that the new Symbian 3 and Symbian 4 operating systems would improve the company’s competitiveness significantly.
“The Nokia directors have put their jobs on the line when giving such brave promises with regard to the future. They are not dumb, and they did not do it light-heartedly. More than likely they will deliver on their promises”, Wood says.
In the meantime, Apple practically rules the roost in the high-end smartphone market, making substantial profits.
“The only way for Nokia to strengthen its profitability is to improve its Symbian software. Earlier this year certain software issues forced Nokia to cut the prices of its smartphones in order for the company to hang on to its market share”, Windsor says.
Notwithstanding its software issues, Nokia remains clearly the largest manufacturer of handsets in the world.
The company's great strength lies in a very broad product assortment that attracts consumers in all market areas.
Nevertheless, Nokia has demonstrably lost its position as the pathfinder in the business to the American rivals at Apple.
Apple recognised one salient point before the engineers and managers in Espoo: a mobile phone can be used for a great deal more than just talking.
A second significant reason for the fading of Nokia's earlier halo is to be found in the United States, where the media has taken up the iPhone and spread the word effectively to other corners of the world, in the view of Strategy Analytics' Neil Mawston.
The media often takes a blindly uncritical view of all Apple's doings, such that the positive attention paid to the company's products is in no way proportionate to the weight of the products themselves.
A good example is Apple's iPad tablet, the commercial success of which is still a large question-mark. This has nevertheless not prevented journalists over the Atlantic from writing profusely and ecstatically about the newcomer.
By comparison, Nokia's market position in the U.S. has been growing weaker for years, and the company does not present a strong profile to the consumers.
Nokia President and CEO Olli-Pekka Kallasvuo declared in the summer of 2006 that he would not rest until the company's position in the North American market had improved materially.
According to Strategy Analytics, in the summer of 2006, Nokia enjoyed a 13% share of the North American market. This is now down to 7%.
Previously in HS International Edition:
Nokia Q1/2010 results improved, but share price hammered 14% in Helsinki (23.4.2010)
Nokia result comfortably exceeds analysts´ forecasts; stock soars 13% in early trading (28.1.2010)