This month Fortune cover shows an iPhone and referring to launch of Verizon iPhone as “get ready for the dream phone”. People familiar with the case speculate Verizon will launch iPhone in early 2011. Lots of US mobile phone users were praying for this news for years. As the largest US mobile operator; by number of subscriber, Verizon was always preferred choice for consumers as the ‘more reliable” service provider. Its CDMA based 2G network, better coverage and call quality in general in the first part of this decade made it preferred choice for voice users.
For the past couple of years, smartphones start to challenge data network capacity. While early 2000 was the hype of wireless data networks deployment, there was no real data traffic until couple of years ago. Operator’s huge investment on mobile data upgrade was sitting idle for years before iPhone shows the art of smartphone development to other vendors and flooding the market with its clones. ATT launch of iPhone in 2007 was smooth until the huge amount of data traffic starts to cripple its network in dense markets, including New York and San Francisco. ATT executives claims the dream of a better iPhone experience on Verizon network will shattered as soon as operator stats to sell and distribute iPhone across its networks. Although Driod and other Andriod based phones were very popular, their popularity and traffic load would not be even close to after iPhone launch. This points to another question; if Verizon starts to sell iPhone, does Andriod based phones continue to growth (at least in the US)? Lots of Verizon geeky data users were forced to buy Android phones because they didn’t have other choices. By introducing iPhone, Verizon introduces a real competitor for its Andriod phones.
It happened much sooner than I thought. “Nokia Corp. said it was replacing embattled Chief Executive Olli-Pekka Kallasvuo with Microsoft Corp.’s Stephen Elop, as the world’s largest handset maker seeks to reverse steep declines in earnings and market share that have decimated its share price”. After four years of constant struggle and lack of a clear strategy toward future products and particularly high-end mobile phones (smartphones) Mr Kallasvuo kicked out of the door. It was a well know fact that Nokia is heading south, but the speed of it was really surprising for everyone. Many analysts feel that Nokia was caught flat-footed by the iPhone’s success and blame its weakness in smartphones for shaving about 70% off of Nokia’s market value; or more than $90 billion, over the past three years. Basically, Nokia morphed into a “giant dwarf”; a huge player but not a huge force to shape the industry; a follower and not a leader. And it was not all about market share; the overall management of the company was a shenanigan! Former employees describe the structure of the company as a confusing matrix organization, akin to the “Soviet Union.” While Nokia was ahead on hot trends in the tech industry such as internet services and 3-D, lengthy approval processes and a lack of leadership inside of Nokia bogged down these innovations. One former employee added that Nokia, given its size, was never eager to invest in innovations that didn’t have a high volume potential across many of Nokia’s markets. Even the timing of the announcement is awkward and shows a little bit of rush and chaos within the organization. Next week, the company holds its annual “Nokia World” conference in London, where Mr. Kallasvuo was expected to articulate a new strategy to regain its footing in the industry and to present a new smartphone, the N8. The switch at the top of the company will likely draw attention away from those issues. But how this change is going to affect Nokia as a company? First of all Mr Elop is not Finish; he is not even European. “Nokia is definitely a Finnish company. It was born from Finnish culture,” says Juhani Risku, 53, a former Nokia executive, who also wrote a book about the company. He is Canadian at least and not American, so he can be a little bit less brutal. But in any case, this is going to be a dramatic cultural shift for Nokia. Northern American management style is definitely more aggressive and non-European. Secondly, the momentum is already shifted toward Apple, Google and HTC as the leaders of smartphone market. And finally he comes from Microsoft; well they have their own struggles in mobile market for the past couple of years. It will be tough to change it in short term. How Mr Elop is going to tackle these issues and change the direction of the company are questions that will be answered in the next couple of months, if not years.
Olli-Pekka Kallasvuo took over the world’s largest mobile phone manufacturer in the summer of 2006. Six months later Steve Jobs unveiled the iPhone, and it has been downhill ever since. Nokia’s shares have tumbled by nearly two-thirds. Its profit margins have withered from 15% to 7%. And the firm has all but imploded in America, despite Mr Kallasvuo’s pledge to conquer the region. Since 2005, experts in mobile industry started to predict a very gloomy future for the dying giant. While they stick to their legacy phones and are happy with major penetration in the developing countries; read it as high volume low margin domains, other competitors started to target higher margin products including smatphones. Developing countries will be all using smartphones within the next five years anyway.
Although people think Nokia’s most obvious problem is being squeezed out of the smartphone market, its biggest mistake was lack of vision for much higher margin products that come with them; applications! Smartphones are not only lucrative in themselves; they are the gateway to the even juicier market for services and “apps”. Apple’s iPhone and Google’s Android range compete on “cool”. BlackBerry is synonymous with business. But what does Nokia stand for? As usual Nokia still chases the pack. Mr Kallasvuo argues that the forthcoming N8—an all-singing-and-dancing handset that is due to hit the stores in October after several delays—will “mark the beginning of our renewal”; I guess this the fifth or sixth time they are waiting for such a product in the past five years. But previews suggest that the phone is more about catching up than setting the pace. Nokia’s ads tout its “revolutionary” touch-screen technology, built-in camera and GPS. Yet such baubles are already commonplace. It is time for Nokia board to wake up and consider a new direction. GM was once dominating car industry, but lack of innovation forced them to bankruptcy. Nokia should learn its lessons; things are changed!
It is sad to see Nokia is closing its flagship store on London’s Regent street after suffering slow sales and poor footfall; just after 2 years! While the fortunes of the Apple Store opposite are buoyant, with the Mac-maker frequently touting it as the most profitable store in its arsenal, Nokia’s Regent Street shop failed to generate enough interest. During same time and at same location, it is the product and user experience which dictate success of a company. Nokia should understand it was not Apple store which attract people; products in the store were the main reason customers were going to Apple store.
Couple of months ago I wrote about why Nokia is loosing the battle in smartphone war! The latest news that iPhone share of smartphone market is up to 17 percent is another affirmative sign of gradual decline for Nokia. While global mobile phone handsets were almost the same as for the same quarter in 2008, smartphone sales were up by 13 per cent to 41 million for the three months ending September 30. This means you can not count on out of date, old fashion voice centric phones forever to generate revenue. Also, you can not wait for Apple or other companies to come out with a concept (iPhone, iTune, etc) and just copy that! You should have some innovation yourself to be successful!