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Thu 14 Oct 2010 04:22 PM

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Getting smarter

High-profile departures and troubling profits have left question marks over one of the world’s biggest brands. How will Nokia recover its crown?

Getting smarter
Nokia is poised to flood the high-end market with options for every consumer.
Getting smarter
Kai Öistämö, Nokia’s executive vice president for corporate development has a tough job on his hands, given that his remit is to make the firm the most competitive in the marketplace over the next three years.

High-profile departures and troubling profits have left question marks over one of the world’s biggest brands. How will Nokia recover its crown?

Everything about the Nokia World event spells ‘big’. As if to emphasise the point, Anssi Vanjoki, the Finnish company’s mobile solutions supremo, yells “It’s big,” as he demonstrates the latest E7 model to an overexcited crowd of tech executives. Behind him is a Dubai-in-its-heyday-sized television screen, which flickers with pictures showing Nokia’s many devices being handled by people from the US to Bangladesh.

The firm’s trademark mantra — ‘Connecting People’ — is repeated so frequently that it feels seared into your cortex. In fact, given that the company has sold 1.3bn phones to the world, there’s a disconcerting feeling that this is Nokia’s planet, and I’m just visiting. Yes, this is Nokia World — a two-day event in London’s Docklands packed with telecoms industry luminaries dressed like Steve Jobs, bands, breakout sessions, and one slightly bewildered Dubai-based journalist with a woefully malfunctioning BlackBerry.

However, this is also a rather peculiar Nokia World, which perhaps explains why the wattage has been turned up even further. A week before the event begins, CEO Oli Pekka Kallasvuo, in charge since 2006, quits his post. Just two days before his booming speech on the first day, Vanjoki also announces that he’s calling it a day. So just what is going on at the world’s biggest mobile phone manufacturer?

Of course, unless you’ve been locked in a sauna for the past five years, you’ll at least have some idea of the answer. Once holding 40 percent of the global market share for mobile phones, Nokia has had a tough recession. The firm cut 3,000 staff last year, which led to a fourth-quarter jump in results; however, it also posted a profit warning in July, and saw its global market share slide down to 33 percent. At this point, readers would be justified in pointing out that any company that sells fully a third of the world’s mobile phones is hardly in dire straits. But the fact is that Nokia seems to have been losing the battle on the ‘smartphone’ front — that is, the all-singing, all-dancing hi-tech segment, which also happens to be by far the most lucrative. The firm may well be selling 40 percent of the world’s smartphones, but it isn’t making 40 percent of the profits from that sector.

“Where we are going to perform better in the future is in the higher-end smartphone solutions space, where I think the portfolio we have just launched gives us much better competitiveness than we have had for a while,” says Kai Öistämö, Nokia’s executive vice president for corporate development, and one of the few board-level executives left to speak to the press at the Nokia World event. “Also, the overall dynamic, we are feeling ourselves much more confident and competent on all our offerings. Not only the very exciting portfolio we launched today, but also the progress we are making on the services side, on the mobile phones side, the C3 touch and type, very exciting things. We’re seeing a lot of positive things moving forward, and it’s good to see growth back in the overall industry as well.”

By his own admission, Öistämö has a tough job on his hands, particularly given that his remit is to make the company the most competitive in the marketplace over the next three years. But his cause will be helped by the advent of new CEO Stephen Elop, a Canadian from Microsoft, who is set to bring in the software expertise the Finnish firm is so desperately craving. Under Kallasvuo, Nokia had felt its influence wane as the combined strength of Apple, Research In Motion’s BlackBerry and Google’s Android platform started to take its toll on the former giant’s figures. Vanjoki has even compared users trying out Android on smartphones to Finnish boys “peeing in their pants” for warmth during the cold winter months (i.e. a short-term answer to a long-term problem). While it’s good to see senior executives refrain from corporate-speak, the executive also pointed out that Nokia’s operating system of choice, Symbian, couldn’t compete with Apple’s iOS or Android when it came to touchscreen smartphones.

And since Nokia World, the departures have continued. Ari Jaaksi, the vice-president in charge of the firm’s MeeGo — an operating system that was launched in conjunction with Intel in February this year — announced his resignation this month, before the system’s first device had even been delivered. But Öistämö, speaking just before Elop took over towards the end of September, seems pretty confident that the Canadian is the right person to step into Kallasvuo’s shoes.

“One of the things is that, given his background, he is probably going to be instrumental in accelerating the change that we are going through from a hardware manufacturer to a solutions software company,” Öistämö says. “I think he has quite a bit to contribute. Knowing him also as a person, I think he’s going to be a great fit for our company.”

Earlier this year, Nokia also admitted that while global demand for mobile phones would increase by 10 percent in 2010, the firm’s own growth would remain flat. However, the official is pretty bullish about this year’s prospects.

“It [the flat projected growth this year] is part of a function on the portfolio. If you look at the whole, the improvements in our portfolio are back-end loaded, if you like,” Öistämö points out. “They’re biased towards the second half, where we are seeing significant improvement. It takes time to get it through the local market, into local stores. So I think it’s a function of that, and at the same time, keeping the share and growing growth in the marketplace, is not a bad starting point.”

But there can be little doubt that the portfolio additions of which Öistämö speaks are pretty impressive. With analysts insisting that Nokia has not delivered a truly hit high-end device since the N95, the four products being launched this year are probably the most eagerly awaited in Nokia’s history, and certainly those on which the manufacturer’s hopes rest. While most firms might tend to launch one device at a time, the Finnish company is seeking to make use of its hi-tech Symbian 3 operating system to try and wrest market share away from its competitors by flooding the high-end market with options for every consumer.

First up is the N8, which is backed up by a 12 megapixel camera with Carl Zeiss optics, high-definition video, and an impressive 3.5-inch colour touchscreen. Elsewhere, Nokia also unveiled the C6 and C7 models, as well as the E7, which is designed specifically for business users. The E7 features a four-inch screen and a full QWERTY pull out keyboard. It comes preloaded with Microsoft Mail for Exchange as a productivity tool, and allows users to both view and edit a series of Microsoft applications such as Powerpoint. Altogether, Nokia thinks it can sell 50m of these phones around the world, and as you read this, the N8 may well have finally made it to a vendor near you.

Given that Nokia already offloads 260,000 smartphones a day to global customers, such a target may not actually be too hard to reach, particularly given the firm’s global reach. But Öistämö is wary of discussing any further targets for the firm in terms of market share.

“No, we have not gone back and said here’s the goalpost. We have a goal of increasing both the value and volume of market share,” he explains. “The difficulty with having a goalpost is once you reach it, what is the next thing? It’s better to have short-term and longer terms goals which we renew as we go.”

But Nokia has other advantages other than the swanky new phones and operating system it is showering on its clientele. The firm’s sheer size and tentacular reach into all regions of the globe — as well as offerings to fit most users’ wallets — make it pretty much unique in comparison to its competitors, most of whom focus on a specific segment. While that is essentially a positive, there is also a clear concern that Nokia’s spread over so many verticals has left it open to competition in areas like the smartphone segment.

“One of the competitive advantages of Nokia is that we are the most local global company in the world — not just in the mobile space, but everywhere,” Öistämö says. “Obviously we have expertise in distribution, hardware and design and we can take the same thing into the digital world, where the content is local — music is not the same in the Middle East as it is in the UK, for example. Being able to be the most local company in the new world where physical and digital world are merging — that’s something we try to do. I think our approach and strategy and targets are different from anybody else in our space.”

That point about the merging of the physical and the virtual worlds seems to spell out a lot of what Nokia is trying to do over the next few years. As the mobile landscape changes, interest is moving from hardware to solutions, seamless access to content, and access to applications wherever the user may be at any one time.

“I think there’s very exciting path where mobility overall as a context — it’s very important for all of us as individuals to use contextual information like your location to be able to tailor make what kind of information is being shown to you,” Öistämö adds. “What do you want to show of yourself to other people, in social terms? So it’s not just the navigation, it’s a lot more than that, in terms of the moving mobile environment.”

Further down the line, Öistämö admits that it is hard to predict how exactly the industry will develop. “It’s easy to see how this could really seamlessly emerged — so I could see who you are on Twitter, and who is connected to you. So as people actually walk by physically, you could see who they are in the virtual world, or I could see, for example when I’m going to London, what sort of recommendations passers by have on specific areas of town,” the Nokia executive says. “Many science fiction novels have been written about this, and it’s not that far out. These kind of things will happen definitely over the next 10 years, but I would like to say more like over the next five years.”

However, visions to the future must be relegated to the backburner as the company focuses right now on its bottom line. It’s fair to say that while 2010 may have been one of the uneasiest in Nokia’s storied history, especially given the frenzy of media speculation about the high-level departures, it has no plans to yield up its position as the world leader in the mobile phone segment. And while that sector has been important in the past, it’s set for even greater relevance in the future particularly if — as some analysts are predicting — the number of people using mobile devices to access the internet overtakes those using PCs in the not-too-distant future.

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