Nokia and the Long Term Strategy – It's NOT all gloom and doom. Awesome things coming soon.

It’s not all gloom and doom as “analysts” and certain blogs would have us believe.

Today, 22nd July 2010, Nokia reported Q2 earnings. Despite the fierce competition from all fronts, and without their best fighters on the front line, their smartphone market share still went up to 41%. Some other numbers are less flattering, and understandably so given the lack of new flagship. Many of your industry ‘analysts’ will concentrate on this and will spell yet again gloom, doom and death of Nokia.

• “Nokia aren’t competing at the high end”
• “Nokia fail to understand the smartphone market”
• “Nokia are playing catchup to superior handset makers Apple, and the host of Android manufacturers”.
• “Nokia’s Ovi store is lagging behind App Store”
• “Nokia hasn’t got good, slim touch screen phone”
• “It’s all about Android”
• “Nokia missed the boat and should make an Android device”
• “Nokia should have bought Palm and made WebOS devices”
• “Nokia are making little progress”
• “Nokia’s market share is collapsing”
• “Nokia’s losing market share to Apple and Android”
• Insert own negative Nokia comment.

Nokia still sold equal amounts of phones to RIM, Apple and HTC combined. But being that it’s Nokia, that’s of course a failure, especially if we compare operating margins and profits against Apple. (But then again, Apple is selling one extremely premium device, amongst it’s premium and arguably overpriced devices. Apple’s operating margin is higher than all of their competitors)

Operating margins were low, profits (though still in hundreds of millions) were down. Average price of handsets was down to 61EUR. Nokia handsets aren’t necessarily bad – on the contrary, they’re well priced for the features they hold. But this means lower profit margins on these cheaper, value for money handsets.

Note: for still at least a month there will be no high end handset to raise the average.

Nothing new in this post but worth reiterating as analysts and certain blogs seem oblivious to Nokia’s very open strategy (especially cringe worthy to hear now, suggestions of moving to Android).

The LONG TERM strategy

Thinking ahead - reap what you sow.

Since the N95, Nokia has been in an intermediate transition stage. Phones in between (to me) felt like they were just there to keep some attention on Nokia. N85, N96, N97. Unfortunately, they didn’t turn out to ultimately be positive attention.

In one sense, Nokia’s given iPhone and its competitors an easy ride. S60 wasn’t ready for touch screen. Nokia slapped a touch screen on and voila, S60 5th edition, with its annoyances to boot. Even better for competitors, Nokia gave their S60 5th Edition flagship gloriously underpowered hardware that makes it even harder to use it. Try S60 5th/S^1 on the Samsung i8910 – capacitive screen, faster hardware – it makes S60 5th slightly more palatable (even more so with certain cooked firmwares as default sammy one is missing quite a few features).

Nokia gave us a hint that they do have a very decent game plan with the N900 and MAEMO 5. Nokia were extremely quick to point out that this remarkable handset (which was everything we were waiting for on the power side) was only step 4 of 5 at Nokia World. Software was great, power and potential was amazing. Why dampen down the excitement with this killer honesty?

Step 5 is MeeGo, Nokia’s new open source and and Modern OS for mobile computers. And Nokia aren’t doing this alone; MeeGo is equally the child of the Intel, with a significant amount of partners lined up to make MeeGo devices. Qt which makes app development much easier also gives that cross platform advantage that means the same app will run on any Qt compatible device, whether that be your S^3 N8/C7/X7/E7, S^4 “E9”, or MeeGo N9/Tablet/Car infotainment etc. To those wanting apps, apps, apps, they’ll come. We’ve seen the N900 and N8 play those “iPhone Grade” games with ease. As a content producer/developer, would you restrict yourself from increasing your audience and revenue? As to distribution, MeeGo/Qt apps will be available through the Universal App Up Store from Intel or Nokia’s Ovi Store, the 3rd most popular behind App Store and Getjar.

Nokia World 2010 – ‘sleeping giant’ sets alarm for September 2010 to do some ass kicking.

Nokia’s LONG TERM strategy, transitioning to high end with quality user experience on touch optimized handsets starts coming to fruition this September (14th and 15th) at Nokia World 2010. The N8 may already be released around then, along with announcements of the rumoured super slim, 4″ screen N8 QWERTY (E7? RM-626) and the long awaited MeeGo Phone (N9?) which we all have high hopes on.

[vimeo=http://vimeo.com/12127305]

Remember our interview with Alberto Torres, Nokia EVP; MeeGo Computers.

• MeeGo phone will push the boudaries of processing power
• MeeGo phone will be a very high end product
• MeeGo is an opportunity to create something well beyond what others are doing
• MeeGo phone is step 5 of 5 and intended for mass market
• MeeGo phone will be something everyone wants to own
• MeeGo phone will try to satisfy all needs into one plate
• MeeGo phone will be capacitive, more stylish and more beautiful with simpler UI that average users will find as equally compelling as tech leaders.
• MeeGo has potential to be something deeper than typical smartphone
• Nokia N8 will be Nokia’s flagship in a few months
• All future flagships will be built on MeeGo
• MeeGo phone will be on Nseries (not rumoured Sseries)
• MeeGo will have higher experience level than Symbian
• Symbian^3 and MeeGo will have certain minimum base level specification to ensure apps created on one device works in another.
• N8 is first step in reclaiming momentum at high end.
• MeeGo is the next step.

Much hope rests on MeeGo phone to be all it has promised to be, all it has expected to be and more. We’ve seen MeeGo on the netbook which has received positive reviews. We’ve seen MeeGo on the tablet, which looks extremely impressive. Finally, MeeGo on phones got a brief preview, and Eldar Murtazin says himself that Nokia’s own version of the UI will look much better than what we’ve seen on the Aava Mobile (and N900 with MeeGo).

N8 and future Symbian Devices

But a lot rests also with the remarkable multimedia machine, the N8 which has tantalized us since April and the almost DSLR rivalling camera. To outsiders of Nokia, that’s the only gun Nokia’s got in their holster (not realising the basement full of weapons being prepped in secret). There is a team of all stars in training. You know their names, you’ve seen one in leaked shots. Without them, Nokia has remained profitable and held ground with the substitutes (S^1 and S603rd and S40 handsets). What more when they come out on the pitch?

But all but one are Symbian devices…Symbian?

Symbian-Foundation really is just that for Nokia, a foundation of their core smartphone experience. As much as everyone else but Nokia would like Symbian to die (it’s the most used smartphone OS, why wouldn’t you want it to die if you were the competitor?) it’s here to stay and why not? Symbian will get better as it receives updates to the user experience to make it in line with today’s expectations.

Maturity of Symbian is a strength not a weakness – it’s highly advanced in terms of features and just needs a facelift in the UI to make the final user experience pleasant, thus ensuring people can use the plethora of features it’s had for many years that some are only recently praising as wonderful and new.

We’ve seen these usability issues addressed in Symbian^3. For the most of it, it will be good enough for the majority of its intended users. Symbian^4 is the real visual refit as we move to Qt/Orbit based UI from the traditional AVKON.

It’s pretty obvious but OPK confirmed more S^3 handsets coming soon in today’s Q2 report

In smartphones, we continue to renew our portfolio. We believe that the Nokia N8, the first of our Symbian^3 devices, will have a user experience superior to that of any smartphone Nokia has created. The Nokia N8 will be followed soon thereafter by further Symbian^3 smartphones that we are confident will give the platform broader appeal and reach, and kick-start Nokia’s fightback at the higher end of the market

Awesome things are on the horizon.

It takes time to turn around a big ship, and Nokia being the number 1 phone manufacturer is the biggest of them all.

Rest assured, Nokia are aware of the increasing competition and aren’t taking things lightly. Services are improving. Awesome handsets are coming. Hopefully, with a touch of marketing flair to do these products justice (perhaps not to the extent of a Reality Distortion Field, though whether Nokia and everyone needs one to even all the marketing confusion is another post altogether).

Here’s a fantastic comment by JFH in the previous post that pretty much mirrors the sentiment of this post:

I know very well that Nokia realised, even before the N97, they were caught off guard by the emergence of touchscreen phones as a status symbol. They were caught off guard when they were building services. At the worst possible time for them.

Since then they have managed to make Ovi maps in a gem of an asset, the Ovi store the 3rd most popular online store, and they expect to have 300 Million ovi services users.

They refocused on hardware & OS, and in my mind built a stellar device with the N900. Now that S^3 is here, S^4 is coming, MeeGo is coming, NFC, Pentaband, all that stuff is coming, with Qt, the way is up from the moment they announce all of this at Nokia World. I expect them to make a splash.

They have basically stayed profitable in the WORST time they have ever had, and they have made the right choices, technologically, strategically, and morally. They have gone through a storm, have continued to focus on long term investments instead of panicking, picking up Android and running with it.

They have 10 Billion is cash. The majority of patents in LTE. They build the largest LTE roll out to date at 7 Billion dollars. None of their new batch of devices is out yet, not even the N8. With an N8, N9, E7, X7, C7 coming out, their entire all star line up is absent, while the rest is digging their grave with the CPU MHZ wars.

Nokia is profitable, as opposed to what we see from Sammy of SE usually, because they have lower costs. Lower production costs, higher volumes, etc. They will not and should not give this away. What they should do is retain the cost advantage without skimping on performance.

THAT is the reason they wont pick up android. It turns them into Asus, or Dell, box pushers that compete on price on similar hardware & software: STUPID. And it is the smart way to go. I completely believe S^3/S^4 will give us equally snappy performance as competitors, but with lesser specs. Those specs are irrelevant, its experience that counts. And Nokia is betting it can deliver the same experience through cheaper chips, because Symbian is simply better at it.

For going all out, for getting perception turn positive again, for getting the spotlight back on Espoo, what better way to do this than lead the way in moving from smartphones to mobile computers. Did you see what just happened with FCam. Think you can do that on iOS?

So we have Nokia, Intel, & Linux foundation working on MeeGo. We already have seen a preview that looks already as shiny or better than the stuff that is out there now. BUT: Its a full real OS. Not iOS, not “look im a java VM” Android, but a real operating system. One that could run open office, or gimp, or what have you. The N9 will be a leap forward. Its the reason no one has seen it yet.

I know it has been said before, but wait and see.JFH

So….

Before you lose all hope in Nokia, just remember what’s coming at Nokia World 2010. Awesome things coming soon.

Tags: Nokia, Nokia World, Rant

Category: Nokia, Rant