Nokia strikes back against 'smart' rivals - 6th September 2009

Faced with increased competition from up-and-coming rivals, Finnish telecom giant Nokia plans to launch a slew of new products this year but analysts say it faces a tough battle to hold on to its position as the world's number one mobile phone manufacturer.

To fight back against Apple's iPhone and RIM's Blackberry, Nokia announced plans to launch three new smartphones with touch screens, a portable notebook PC, and will tie up with Microsoft to use its popular Office software on its handsets.

Industry observers criticised the Finnish giant for its aging product lineup and for not bringing smartphones to market quickly enough to take on their up-and-coming rivals.

Analysts interviewed by AFP agreed that Nokia had not yet found a product to challenge the iPhone as most new Nokia devices use an outdated operating system to drive their phones.

"It is going to be 2011 before they have the right software to make a really competitive product," Richard Windsor, a London-based technology analyst for Nomura Securities, told AFP.

Its latest smartphone, the N97, has achieved modest sales so far compared to the iPhone.

Technology consultancy Gartner estimates Nokia has sold just 500,000 of them worldwide since its launch in June. Apple's new third-generation iPhone sold one million units in its first weekend on sale.

Nokia needs its new models to be a success -- smartphones, handsets with high-speed internet access, are the fastest growing segment in the mobile phone market and their higher price tags mean they carry higher profit margins than cheaper, more basic models.

The Finnish giant's share of this lucrative segment has ebbed away in recent months. In the second quarter of 2009, it sold 45 percent of all 40 million smartphones sold worldwide.

That compares to 47.4 percent of 32 million handsets at the same time last year, according to Gartner data.

"The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors," wrote Gartner analyst Carolina Milanesi in a research note to clients.

In addition to its partnership with Microsoft, Nokia will also use Linux software and work with social networking site Facebook to develop new services.

"They have realised that for certain things it makes sense to partner," Ben Wood, research director at CCS Insight, told AFP.

Apple also beat Nokia in drawing in additional revenue from the sale of online applications: ringtones, videos, games and other Internet gadgets.

Its App'Store went online in July 2008 while Nokia's Ovi store launched in May this year.

"Nokia cannot create one killer product to beat Apple or Google. Nokia has to create an experience or a solution that is so compelling that a consumer says 'I like the whole proposition'," said Wood.

Nokia's chief executive Olli-Pekka Kallasvuo told reporters on Wednesday that these add-on services were "critical to our future" and that his company wanted to make smartphones more affordable to a wider range of people.

But that will be a hard sell in the current economic climate.

The global financial crisis has weakened demand for mobile phone sales after six years of uninterrupted growth.

Nokia, which has 1.1 billion customers worldwide, posted a 66-percent drop in net profit in the second quarter of 2009 and a nearly 25-percent decline in revenues on a 12-month basis.

In a bid to restore the company to profitability, a cost-cutting programme was launched in January aimed at reducing Nokia's workforce by some 4,000.


Nokia Corporation is a Finnish multinational communications corporation, focused on wired and wireless telecommunications, with 112,262 employees in 120 countries, sales in more than 150 countries and global annual revenue of 51.058 billion euros as of 2007. It is the world's largest manufacturer of mobile telephones: its global device market share was about 40% in Q4 of 2007. Nokia produces mobile phones for every major market segment and protocol, including GSM, CDMA, and W-CDMA (UMTS). Nokia's subsidiary Nokia Siemens Networks produces telecommunications network equipments, solutions and services.

Nokia's corporate headquarters are located in Espoo, a city neighbouring Finland's capital Helsinki. It has sites for research and development, manufacturing and sales in many continents throughout the world. Nokia employed 21,453 people in R&D in 2006. Nokia Research Center, founded in 1986, is Nokia's industrial research unit of about 800 researchers, engineers and scientists. It has sites in seven countries: Finland, Denmark, Germany, China, Japan, United Kingdom and United States. Production facilities are located at Espoo, Oulu and Salo, Finland; Manaus, Brazil; Beijing, Dongguan and Suzhou, China; Fleet, England; Bochum (closing planned for mid-2008),Germany; Komárom, Hungary; Chennai, India; Reynosa, Mexico; Cluj-Napoca, Romania and Masan, South Korea. Nokia's Design Department remains in Salo, Finland.

Nokia plays a very large role in the economy of Finland: it is by far the largest Finnish company, accounting for about a third of the market capitalization of the Helsinki Stock Exchange (OMX Helsinki) as of 2007; a unique situation for an industrialized country.[9] It is an important employer in Finland and several small companies have grown into large ones as Nokia's subcontractors. Nokia increased Finland's GDP by more than 1.5% in 1999 alone. In 2004 Nokia's share of the Finland's GDP was 3.5% and accounted for almost a quarter of Finland's exports in 2003. In 2006, Nokia generated revenue that for the first time exceeded the state budget of Finland.

Finns have ranked Nokia many times as the best Finnish brand and employer. Nokia is listed as the 5th most valuable global brand in BusinessWeek's Best Global Brands list of 2007 (1st non-US company), the 20th most admirable company worldwide in Fortune's World's Most Admired Companies list of 2007 (1st in network communications, 4th non-US company), and is the world's 119th largest company in Fortune Global 500 list of 2007, up from 131 of the previous year. (Credit: Wikipedia).


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