Nokia’s services get critical thumbs-down

Analysts do not expect Nokia to catch up with Apple any time soon

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The Finnish mobile phone giant Nokia’s services strategy is still regarded as weak.
      In the opinion of many industry experts, the Ovi services platform that was launched less than two years ago has been a real disappointment.
      The new online content and applications outlet Nokia Store, introduced two weeks ago, also acted up already on its first few days in operation.
     
The Nokia phones’ handiness in utilising various services available is also seen as a major problem.
      “As far as services go, Nokia lags years behind Apple. I do not believe Nokia can run down Apple’s lead in short term”, says Richard Windsor, technology specialist at Nomura Securities.
     
In Windsor’s view, Nokia should develop a better user interface for its handsets and make use of its production machinery, which is the most cost-effective in the entire branch.
      “If Nokia were able to supply for half the price as good a user experience with its phones as Apple does with its iPhone, it could seriously challenge Apple also on the services side. For the present Nokia is far from this goal.”
      Market and research consulting firm Strategy Analytics analyst Neil Mawston considers Nokia’s weak market share in the United States its biggest problem.
      “The world’s most important mobile phone market is in the United States, and Nokia is paying a hefty price for its difficulties there. The U.S. market largely decides who will make it in the digital services industry”, Mawston argues.
     
As Mawston sees things, it is largely thanks to Apple that the United States can now be considered the most important mobile phone market area.
      “The iPhone created a huge demand for touchscreen handsets and new services. Nokia and other manufacturers are now feverishly trying to keep up with Apple.”
      According to Strategy Analytics, Nokia’s market share in the United States was only eight per cent in Q1/2009.
      This compares rather unfavourably with the wider world picture: on a global scale Nokia’s market share during the first quarter was 37 per cent, the consultancy calculates.
     
Nokia’s aim is to earn EUR two billion or more through its services net sales in 2011.
      In January-March this year the company accumulated a mere EUR 150 million from the services it provides.
      “People do not fully understand the services Nokia provides, because they have not been effectively marketed. A good example is the Comes With Music downloads initiative, which packs a punch for what it costs. In Great Britain the consumers are perplexed with the service and do not understand its value. It’ll take time before Nokia reaches Apple’s level”, says CCS Insight analyst Paolo Pescatore.
     
The interviewed analysts agree on the fact that Nokia will surely improve its services in the future.
      In their view it is a difficult task to transform a handset manufacturer into a services provider as well.
      The problems that have been encountered clearly reflect this.
      “The change is a learning process for Nokia”, Mawston says.
      It looks like Nokia has not learned the lesson just yet.
      Windsor suspects that the application store has been designed by someone other than Nokia itself.
      “This hints that Nokia itself still does not know how to provide consumer services”, Windsor concludes.


Previously in HS International Edition:
  Nokia to open its content and application store this spring (17.2.2009)

Links:
  Ovi by Nokia

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