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The meaning of Nokia’s poor results

As a mobile phone user I’m sure I’m a bit of an oddball.  I regularly carry two devices – an iPhone and a Nokia N95 – and have a small collection of handsets that I’ve used at one point or another over the years.  I carry the iPhone because it’s hands down the best mobile application and internet browsing platform available in the Canadian market, and the N95 because it’s unlocked, it tethers, and takes great photographs.  Oh, and they both make phone calls.

Nokia’s announcement yesterday that profits had fallen 90% in the previous quarter should have been no surprise.  The writing has been on the wall for some time as RIM and Apple have aggressively taken market share from the dominant mobile phone provider.

The problem is simply this.  Markets move in cycles.  The amazing Carl Zeiss optics and 5 megapixel resolution of the Nokia N Series are at the peak of a cycle that began a decade ago – the addition of cameras to phones. iPhone is a device optimized for a new cycle – application usage and content consumption on the internet.  RIM has created a device optimized for mobile text communications – email in particular.

And what of Nokia?

Nokia has been faithfully sending me its new devices for review for several years now.  I’ve variously written about the N90, N70, N73, N95, N93 and others. Currently awaiting review are an N96 (N95 with a big screen), N85 (N95 with a small screen), N79 (N95 without the slider) and XpressMusic 5800 (touchscreen device).  While all are beautiful industrial design, they are variations on a theme.  Of the four, I carried the XpressMusic 5800 the longest, because it was novel.  The N95 is still the device I carry day to day (not a review device, by the way – I fell in love with the review device and shelled out $600 of my own money to own one).

Nokia has two grand problems:

  1. Nokia is now just one of many phone manufacturers that include a camera on their device, but it doesn’t own the position in the customers mind of being the must have camera phone. Moreover, because of advances in camera technology, consumers aren’t buying phones based on the cameras anymore (as they were a scant 5 years ago).  They buy based on other criteria.  Nokia’s platform hasn’t evolved substantially in some time.
  2. Nokia is not the manufacturer of an iconic device today.  The N95 had the potential to be iconic – an early 3G device with some novel applications like QiK and a stupendous camera – but that was over three years ago.  They could have ship an N95 “Media”, N95 “Music”, thus reinforcing the iconic design and brand of the N95.   The choice to brand NSeries rather than line extensions from a single iconic device was a mistake.

The impact of these mistakes really can’t be underestimated.  When Apple ships a new iPod, or RIM a new Blackberry, the world awaits with breathless anticipation.  Legions rush out and upgrade (and yes, I’ve bought two iPhones and three Blackberries in the last five years).  In contrast, when a new NSeries device comes out, with its muted branding, and incremental improvements, it doesn’t say “upgrade” to the masses.  It doesn’t scream “I am the follow on device to your N95, Saunders – buy me!”. 

Personally, I will continue to carry around the N95. It’s great technology, I was able to buy it unlocked, which means I can travel with it and avoid the horrendous roaming charges that I’d pay on my iPhone or Blackberry, and it takes photos better than any other phone on the market.  

Yesterday’s financial numbers, however, would tend to confirm that people like me are a minority.

{ 2 comments… add one }

  • Ruben Olsen April 25, 2009, 11:21 am

    I agree with your two points.

    So should Nokia do as the rest of the pack – just become another iPhone wanna be?

    I think the only chance Nokia have to be resurrected is not becoming a another iPhone wanna be.

    If the follow up on their Morph concept – with a corresponding hardware unit – then we are talking!

    For a longer explanation, take a look at http://www.open-voip.com/blogs/blog1/2009/04/25/b

  • Alec April 26, 2009, 6:22 am

    Ruben – I'm not suggesting that Nokia clone the iPhone. Apple has too much of a head start on them, frankly. There's a lot of good design in iPhone, however, and it continues to evolve. iPhone OS 3.0 is imminent, with a lot of features that many people, including developers like my company, are looking forward to.

    What I'm suggesting is that it's time for Nokia to do some reinvention, including reinventing business processes that are taking too long for them to bring innovation to market. For example, I own a Nokia GPS puck that's four years old. Long before Apple and RIM started playing with maps on phones, Nokia was there. They should have owned that market. What happened?

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