Analyst perspectives on key wireless industry topics including mobile devices, network infrastructure, mobile operators, mobile content, and short range wireless connectivity.

Could Nokia Stumble?
Author: Jake Saunders, Vice President of ABI Research Asia-Pacific
Thu, 26 Apr 2007 05:38:53 EDT

  On the 19th April 2007 Nokia posted its results. While Nokia’s operating margins are coming under pressure from the increased competition, Nokia’s market-share seems to be going from strength to strength. Through ABI Research’s own analysis, Nokia now has a market share of 35.8%, as of 1Q-2007, 1.1% more than just one year ago. Nokia has been keen to garner as much market-share as possible as it helps to protect operating margin in the mid to long term. However, Motorola’s dramatic turn of events in 1Q 2007 (a -4.5% reduction in market-share, see previous blog) underscores the fickle nature of the mobile handset market-place. Nokia does have substantial cash reserves to be able to ramp up R&D and handset production to overcome weaknesses in its handset line-up, but could Nokia stumble?


  1. The answer is “yes” and Nokia’s senior management knows it. It was only 2 years ago that Nokia failed to detect the raising interest in clamshell designs by the mass market, which left the door open for Samsung (especially) and Motorola to gain sizeable chunks of market share. Nokia was able to roll out a half dozen or so clamshell design handsets which then helped to stem the loss of sales in that sector.


  1. Nokia is also conscious that, while many of their existing end users do place significant value on user interface familiarity when they come to buy their next phone, there can also be a number of customers that become jaded and bored with “Nokia-styled” handsets. The N-series is not just about catering to an emerging segment of end-users, mobile messaging and entertainment prosumers, but also about re-invigorating the Nokia branded handset.


  1. The Nokia-Siemens joint venture will have a number of synergies and assets to draw upon but the fledgling telecoms infrastructure JV is striving for momentum at a time when the wireless infrastructure is showing signs of a slowdown in the infrastructure segment (wireless in particular). There are a number of business culture and operational differences between Nokia and Siemens. If clients (i.e. mobile operators) perceive that the rate of innovation or product liability has decreased, Ericsson, or others, could well be the net benefactors of any internal disputes between the Nokia and Siemens factions.


  1. Linux phones are another possible potential threat to Nokia, which relies heavily on Symbian. While most mobile phone users are unlikely to want to tinker with their phones, existing vendors or joint ventures could come along that contribute different functional elements for the mobile device and the applications that sit on a Linux kernel based phone, which could allow for an “IBM PC clone type mobile phone” to be introduced into the market. The mobile phone as commodity hardware. The value could shift away from the hardware device and emphasize more the software/applications installed on it.


The above is just some initial speculations; some of them are more serious than others. There are likely to be additional threats to Nokia’s market pre-eminence which I have not covered. So despite Nokia’s recent success, I doubt there were any late night parties in Nokia HQ on the 19th.  

Based and developed from a CNBC commentary.

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