Nokia Pushes to Regain U.S. Sales in Spite of Apple and Google - New York Times
Nokia Pushes to Regain U.S. Sales in Spite of Apple and Google
Eva Persson for The New York Times
Nokia is the world’s largest maker of cellphone handsets.
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By MARK LANDLER
Published: December 10, 2007
ESPOO, Finland — When Google announced plans in October to revolutionize the software of cellular phones, few were more eager to hear the details than the industry veterans at Nokia. They still are.
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“We’ve seen an announcement,” Nokia’s chief executive, Olli-Pekka Kallasvuo, said with more than a hint of sarcasm. “Conceptually, we could have made that announcement a long time ago.”
For a decade, Mr. Kallasvuo said in an interview here, Nokia has had its own army of software developers, writing applications for the next generation of mobile telephone services.
In the United States, at least, it has little to show for it. Although it is the largest handset maker in the world — with 39 percent of the global market of 1.1 billion phones — Nokia has languished in the American market, hurt by its refusal to adapt its strategy to the market’s idiosyncrasies.
Carriers criticized it for pushing its own technology and design. Nokia does not dispute that.
“We felt we could teach the U.S. market how we do business elsewhere, and frankly, that failed,” Mr. Kallasvuo said. “Now we just want to act, based on the needs and requirements of the market.”
As it sets out to regain its footing in the United States, Apple and Google are going after Nokia’s franchise. But in doing so, they are shaking up the wireless industry in a way that may open up the one market that has flummoxed Nokia.
Apple, with its innovative iPhone, is changing the business relationship between the handset maker and the carrier. “Apple has managed to get operators to pay a bounty for new customers signed up — that is a sea change,” said John Tysoe, an analyst with the Mobile World, a research firm in London.
Google plans to create software that will turn cellphones into the principal portal to a mobile Web. Android, Google’s open-source platform for software, aims to transform the cellphone into a pocket computer in which any number of software applications could be added to a phone just as software is added to a PC.
Nokia views Apple as the first credible entrant into its market in years, Mr. Kallasvuo said. As for Google, he said he would wait for more details before deciding whether it is a threat or an opportunity. It did not go unnoticed that Google did not ask Nokia to join its Open Handset Alliance, a 34-company group that includes Motorola, Samsung and HTC.
“It’s very clear that Apple, Google and other players are bringing in a lot of new directions,” said Mr. Kallasvuo, 54, on a rare day working at Nokia’s waterfront headquarters in a suburb of Helsinki. “Convergence is a nice, dandy word, but it means industries colliding.”
For Nokia, the cellphone’s growing role as the indispensable device in a wireless, Web-connected world ought to be a boon. It already sells half of the world’s so-called smartphones — Web-enabled devices like the iPhone, Research in Motion’s BlackBerry and Nokia’s N95.
But Nokia has an uncharacteristically weak position in the United States. It was a leader there but lost ground after failing to match popular products like Motorola’s Razr phone. Its market share, 28 percent five years ago, is now barely 10 percent.
“There’s no doubt competition is intensifying,” said Carolina Milanesi, a wireless analyst in London for Gartner, the research firm. “Nokia is responding more aggressively than any other vendor to the challenge.”
The company, which once made tires and television sets, is plunging into an array of new businesses, like music downloading and navigation. The goal is to pack its phones with multimedia services. Already, its ubiquitous camera phones make it the world’s top seller of digital cameras.
In October, Nokia paid $8.1 billion for a digital mapping and navigation software company, Navteq. It wants to use Navteq’s maps for a range of location-based services — enabling users to find a shop or a restaurant in a strange city, for example, or to bring friends together.
“Mobile phones have two qualities that PC’s don’t have,” Mr. Kallasvuo said. “They’re always with you, and they tell other people where you are.”
That might alarm people who cling to old-fashioned notions of privacy. But it is a boon for advertisers who can aim messages at increasingly specific markets. Privacy is also less of a concern for devoted users of social networking Web sites, like Facebook and MySpace. Nokia views these people, most of whom are young, as its future.
“More young people are accessing things like Facebook via their mobiles because the sites are often blocked at work,” said Mark Selby, Nokia’s vice president for multimedia services.
In its first major challenge to Apple, Nokia has announced a deal with the Universal Music Group to offer a year of unlimited free downloads of songs on its high-end phones. It will give subscribers access to Universal’s vast catalog, which ranges from Elton John to Kanye West. Nokia said little about how much it would charge or which phones would offer the service, known as “Comes With Music.”
While Nokia boasts that it has one of the word’s best-known consumer brands — in Asia, it ranks No. 1, ahead of Coca-Cola — it has put its Internet-based services under a new name, Ovi, the Finnish word for door.
Nokia has gone this route before, with little success. Club Nokia, a previous effort to sell games and ring tones directly to consumers, foundered after cellular operators in Europe refused to accommodate it. And the early signs for Ovi were not auspicious, with few operators signing up.
Recently, though, Vodafone, one of the world’s largest cellular operators, agreed to offer Ovi. In return, Nokia will split a percentage of the service revenue it makes with Vodafone; it will also manufacture a number of handsets exclusively for the operator. Analysts said the arrangement seemed tilted in Vodafone’s favor. But that may be an acceptable price for Nokia to pay, given its desire to elbow into the market for Internet-related services, which it predicts will be worth $145 billion globally by 2010.
“They’re trying to make operators understand that they’re not against them,” Ms. Milanesi of Gartner said.
There are other signs that the industry is moving in Nokia’s direction. In the United States, operators have historically played a gatekeeper role, deciding which phones their subscribers can use for what rate and then steering them toward services controlled by the operator. But Verizon Wireless recently said that it would give customers more choice in terms of phones and services — provided they use its transmission technology, CDMA, or code division multiple access.
For Verizon, Nokia has subcontracted the production of a CDMA phone to an undisclosed Asian manufacturer — a rare step for a company that prides itself on making its own products. Nokia is also working with AT&T and Sprint to design phones.
Mr. Kallasvuo, a lawyer, once ran Nokia’s North American operations. He is a regular visitor, and spends a lot of time talking to carriers.
And for the last six months, that has meant hearing a lot about the iPhone. Nokia’s executives describe their own reactions to it in flat, unemotional terms that would seem scripted, if the speakers were not Nordic.
“The user interface was what one would expect from Apple,” said Kai Oistamo, the executive vice president for mobile phones.
Apple has shipped 1.4 million iPhones since June, less than half as many shipped than Nokia’s high-end phone, the N95. Yet Mr. Oistamo concedes that success is more than a simple numbers game. “If you don’t strive to be cool, to be on the edge,” he said, “you run the risk of becoming irrelevant.”
For now, though, Nokia is counting on its broad portfolio of products, rather than a single iPhone-killer, to fend off the competition. “We’re not a one-product, two-product company,” Mr. Kallasvuo said.
Eva Persson for The New York Times
Nokia is the world’s largest maker of cellphone handsets.
Sign In to E-Mail or Save This
Reprints
Share
Del.icio.us
Digg
Newsvine
Permalink
By MARK LANDLER
Published: December 10, 2007
ESPOO, Finland — When Google announced plans in October to revolutionize the software of cellular phones, few were more eager to hear the details than the industry veterans at Nokia. They still are.
Skip to next paragraph
Related
Blogrunner: Reactions From Around the Web
“We’ve seen an announcement,” Nokia’s chief executive, Olli-Pekka Kallasvuo, said with more than a hint of sarcasm. “Conceptually, we could have made that announcement a long time ago.”
For a decade, Mr. Kallasvuo said in an interview here, Nokia has had its own army of software developers, writing applications for the next generation of mobile telephone services.
In the United States, at least, it has little to show for it. Although it is the largest handset maker in the world — with 39 percent of the global market of 1.1 billion phones — Nokia has languished in the American market, hurt by its refusal to adapt its strategy to the market’s idiosyncrasies.
Carriers criticized it for pushing its own technology and design. Nokia does not dispute that.
“We felt we could teach the U.S. market how we do business elsewhere, and frankly, that failed,” Mr. Kallasvuo said. “Now we just want to act, based on the needs and requirements of the market.”
As it sets out to regain its footing in the United States, Apple and Google are going after Nokia’s franchise. But in doing so, they are shaking up the wireless industry in a way that may open up the one market that has flummoxed Nokia.
Apple, with its innovative iPhone, is changing the business relationship between the handset maker and the carrier. “Apple has managed to get operators to pay a bounty for new customers signed up — that is a sea change,” said John Tysoe, an analyst with the Mobile World, a research firm in London.
Google plans to create software that will turn cellphones into the principal portal to a mobile Web. Android, Google’s open-source platform for software, aims to transform the cellphone into a pocket computer in which any number of software applications could be added to a phone just as software is added to a PC.
Nokia views Apple as the first credible entrant into its market in years, Mr. Kallasvuo said. As for Google, he said he would wait for more details before deciding whether it is a threat or an opportunity. It did not go unnoticed that Google did not ask Nokia to join its Open Handset Alliance, a 34-company group that includes Motorola, Samsung and HTC.
“It’s very clear that Apple, Google and other players are bringing in a lot of new directions,” said Mr. Kallasvuo, 54, on a rare day working at Nokia’s waterfront headquarters in a suburb of Helsinki. “Convergence is a nice, dandy word, but it means industries colliding.”
For Nokia, the cellphone’s growing role as the indispensable device in a wireless, Web-connected world ought to be a boon. It already sells half of the world’s so-called smartphones — Web-enabled devices like the iPhone, Research in Motion’s BlackBerry and Nokia’s N95.
But Nokia has an uncharacteristically weak position in the United States. It was a leader there but lost ground after failing to match popular products like Motorola’s Razr phone. Its market share, 28 percent five years ago, is now barely 10 percent.
“There’s no doubt competition is intensifying,” said Carolina Milanesi, a wireless analyst in London for Gartner, the research firm. “Nokia is responding more aggressively than any other vendor to the challenge.”
The company, which once made tires and television sets, is plunging into an array of new businesses, like music downloading and navigation. The goal is to pack its phones with multimedia services. Already, its ubiquitous camera phones make it the world’s top seller of digital cameras.
In October, Nokia paid $8.1 billion for a digital mapping and navigation software company, Navteq. It wants to use Navteq’s maps for a range of location-based services — enabling users to find a shop or a restaurant in a strange city, for example, or to bring friends together.
“Mobile phones have two qualities that PC’s don’t have,” Mr. Kallasvuo said. “They’re always with you, and they tell other people where you are.”
That might alarm people who cling to old-fashioned notions of privacy. But it is a boon for advertisers who can aim messages at increasingly specific markets. Privacy is also less of a concern for devoted users of social networking Web sites, like Facebook and MySpace. Nokia views these people, most of whom are young, as its future.
“More young people are accessing things like Facebook via their mobiles because the sites are often blocked at work,” said Mark Selby, Nokia’s vice president for multimedia services.
In its first major challenge to Apple, Nokia has announced a deal with the Universal Music Group to offer a year of unlimited free downloads of songs on its high-end phones. It will give subscribers access to Universal’s vast catalog, which ranges from Elton John to Kanye West. Nokia said little about how much it would charge or which phones would offer the service, known as “Comes With Music.”
While Nokia boasts that it has one of the word’s best-known consumer brands — in Asia, it ranks No. 1, ahead of Coca-Cola — it has put its Internet-based services under a new name, Ovi, the Finnish word for door.
Nokia has gone this route before, with little success. Club Nokia, a previous effort to sell games and ring tones directly to consumers, foundered after cellular operators in Europe refused to accommodate it. And the early signs for Ovi were not auspicious, with few operators signing up.
Recently, though, Vodafone, one of the world’s largest cellular operators, agreed to offer Ovi. In return, Nokia will split a percentage of the service revenue it makes with Vodafone; it will also manufacture a number of handsets exclusively for the operator. Analysts said the arrangement seemed tilted in Vodafone’s favor. But that may be an acceptable price for Nokia to pay, given its desire to elbow into the market for Internet-related services, which it predicts will be worth $145 billion globally by 2010.
“They’re trying to make operators understand that they’re not against them,” Ms. Milanesi of Gartner said.
There are other signs that the industry is moving in Nokia’s direction. In the United States, operators have historically played a gatekeeper role, deciding which phones their subscribers can use for what rate and then steering them toward services controlled by the operator. But Verizon Wireless recently said that it would give customers more choice in terms of phones and services — provided they use its transmission technology, CDMA, or code division multiple access.
For Verizon, Nokia has subcontracted the production of a CDMA phone to an undisclosed Asian manufacturer — a rare step for a company that prides itself on making its own products. Nokia is also working with AT&T and Sprint to design phones.
Mr. Kallasvuo, a lawyer, once ran Nokia’s North American operations. He is a regular visitor, and spends a lot of time talking to carriers.
And for the last six months, that has meant hearing a lot about the iPhone. Nokia’s executives describe their own reactions to it in flat, unemotional terms that would seem scripted, if the speakers were not Nordic.
“The user interface was what one would expect from Apple,” said Kai Oistamo, the executive vice president for mobile phones.
Apple has shipped 1.4 million iPhones since June, less than half as many shipped than Nokia’s high-end phone, the N95. Yet Mr. Oistamo concedes that success is more than a simple numbers game. “If you don’t strive to be cool, to be on the edge,” he said, “you run the risk of becoming irrelevant.”
For now, though, Nokia is counting on its broad portfolio of products, rather than a single iPhone-killer, to fend off the competition. “We’re not a one-product, two-product company,” Mr. Kallasvuo said.
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