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Nokia In The United States

Posted on Friday, Mar 19th 2010

According to a recent IDC report, Nokia (NYSE:NOK) is the world’s biggest converged mobile phone maker with about 38% share in Q4 2009. However, it has a poor presence in the U.S. market, which is dominated by RIM and Apple.

Outside the United States, Nokia sells its phones directly to the consumer without any relationship with carriers. For a long time, it applied the same strategy to the carrier-dominated U.S. market — instead of a two-year contract with a carrier, it sells unlocked phones directly to the consumer. This strategy would have a chance of working in the United States if Nokia’s phones were innovative. But in a market where trendsetting phones such as iPhones and BlackBerries are available at highly subsidized prices, Nokia’s international strategy was not a good approach.

So, last year, Nokia teamed up with AT&T to sell its feature-rich phone e71x for $100. But it is not just about the price — Nokia has to work on its products and image, too. It has to bombard the market with innovative products and applications to keep up with the intense competition in the United States.

In the fourth quarter, Nokia reported a 7% decline in its sales in North America to just 3.8 million units. In the last quarter, RIM’s Blackberry sales were about 6.5 million in North America, iPhone sales were about 3.1 million in the United States, and Nexus One has sold a total of 0.135 million phones in the 74 days since its launch.

Nokia’s total mobile device shipments in the quarter were up 12% to 126.9 million. Latin America sales declined 7% and Europe declined slightly while Greater China, the Middle East & Africa, and Asia-Pacific showed strong growth. Revenue from the Mobile Device segment grew 0.5% to €8.2 billion ($11.15 billion).

Total revenue in the fourth quarter was €12 billion ($16.32 billion), down 5%, and in the fiscal year 2009 it was €41 billion ($55.79 billion), down 19.2%. Nokia swung back to operating profit of €1.1 billion ($1.5 billion) after a loss of €426 million ($579.44 million) last quarter. Operating profit last year was €492 million ($669.22 million). Nokia ended the quarter with €8.9 billion ($12.16 billion) in cash. Q3 coverage is available here.

At the recent Mobile World Congress in Barcelona, Nokia announced a joint venture with Intel that is called MeeGo. It merges Nokia’s Maemo and Intel’s Moblin to create a Linux platform that works on smartphones, netbooks, and tablets. The company also announced a 3G netbook powered by Intel’s Atom processor.

Nokia recently made Skype available on its phones, which will make international calling much cheaper. However, Skype also has a deal with Verizon, and taking Nokia by surprise, it decided not to include the application in the American version of the Ovi store.

Last year, Nokia bought a minority stake in mobile financial services supplier Obopay. It recently teamed up with an Indian bank to launch an m-commerce platform in India. This is another killer app that could serve as a differentiator in Nokia’s strategy. My interview with the CEO of Obopay is here.

For the first quarter, Nokia expects its Mobile Devices sales to be €6.5 billion to €7.0 billion. It expects industry mobile device volumes to be up 10% in 2010 and targets to increase its share slightly in 2010. The stock is currently trading around $15.5, close to its 52-week high and with a market cap of about $57.5 billion.

Chart for Nokia Corp. (NOK)

Nokia cannot afford not to focus on just the U.S. market, or on just any single market, for that matter. It is not only the U.S. market that is competitive — in Asia, HTC, Samsung, and LG are constantly jockeying for market share.

When the Palm Pre made its debut, I suggested that Nokia acquire Palm to strengthen its portfolio as well as its presence in the U.S. market. Palm hasn’t been doing well lately, falling prey to intense competition. Yesterday Palm reported that it shipped 960,000 smartphones but sold only 408,000 units compared to 783,000 shipped and 573,000 sold last quarter. In a recent interview with BusinessWeek, Nokia’s CEO, Olli-Pekka Kallasvuo, said that Palm would need scale to survive. On the other hand, Nokia could use Palm’s strong brand positioning in the United States, its much talked about Web OS and its strong development team, led by Jon Rubenstein.

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The E71x was an interesting experiment. If Nokia would have teamed up with AT&T for some proper marketing and promotion, the E71x might have sold more units.

As an owner of an E71 (Euro) I’m a huge fan of the device and people are woo-ed when I show it to them.

The Nokia selling approach was given a bit of credence lately with Google’s method of selling the Nexus One. Like NOK, GOOG allowed folks to buy directly from them…so this made this concept a little less foreign to US phone buyers.

To me, Nokia buying Palm would not serve Espoo in any fashion. Sure the Palm devices are ‘cool’ and would bring some pizzaz to the Nokia brand, I don’t see enough synergy here. Perhaps the engineers that Palm acquired from Apple could serve some benefit to OPK and friends, but I believe most of them would bail before working at Nokia. To these guys, Nokia is like the Microsoft of the mobile world and their contributions wouldn’t be as valued.

Jason Harris Monday, March 29, 2010 at 4:01 PM PT

Nokia’s N900 is a very good smartphone. Maybe not yet as slick as iPhones, Androids or even modern Palm products.
But, Nokia is using the N900 as a development platform which will bring their Linux-based, mobile operating systems – and the hardware that runs them – into the 21st Century.
By releasing the smartphone as an open platform Nokia is getting developers to play with both the hardware as well as the software and help create future advanced products.
Nokia is still the world’s leader in manufacturing simple, inexpensive cell phones and feature handsets – and is working hard to bring that same expertise to their smartphones.

Gary Krakow Tuesday, March 30, 2010 at 10:55 AM PT