Nokia on the verge of a major comeback

Robert C. Johnston.

 

This was published online at Sydney Morning Herald smh.com.au (Technology News, ‘Nokia on the verge of a major comeback’, Opinion), on November 18th, 2011.

NOKIA has done it tough the past few years.

Once synonymous with innovation, quality, and market dominance, Nokia’s stock price has slid steadily (from $US40) since late 2007, around the time Apple’s iPhone first entered the market. It has lost heavy ground in terms of market share to both Apple iOS and Google’s Android platform.

Nokia’s staple Symbian operating system, renowned for its user-unfriendliness and frustrating quirks, was hastily adapted for new Nokia touch screen phones but failed miserably to keep apace with competing operating systems specifically designed to make full use of recent innovations in touch screen technology.

One thing that helped keep Nokia’s battered banner flying was its reputation as a leader in incorporating quality camera lenses in its smartphones. But even the flagship N8 with its outstanding 12 megapixel camera, released late-2010 and intended as Nokia’s big fight back, was again let down by the severely outclassed Symbian user interface.

On top of that, Nokia has had a history of neglecting its phone software and its Ovi app store was more fiddly and not as reliable as those of competitors. With the likes of the iPhone 4, Samsung Galaxy S, and HTC Desire around, the N8 just could not penetrate the market – Nokias were just too slow and too unintuitive.

Stephen Elop, chief executive officer of Nokia, hopes Windows Phone can save the ailing handset maker. Photo: Bloomberg

Stephen Elop, chief executive officer of Nokia, hopes Windows Phone can save the ailing handset maker. Photo: Bloomberg

Then, in February 2011, Nokia’s new CEO Stephen Elop, formerly of Microsoft, announced that Nokia had signed a deal worth billions with Microsoft that would see a shift away from Symbian into a new era of Nokia phones running the Windows Phone 7 (WP7) platform. Analysts and investors reacted and Nokia’s stock price instantly fell 11 per cent.

Many observers hissed that this deal would be the end of Nokia. Symbian loyalists felt betrayed. Apple and Android fanboys gloated that uncool Microsoft could not possibly compete in the rapidly progressive, highly glossy smartphone race.

Others could not understand why Nokia had suddenly abandoned MeeGo, a Linux-based operating system designed in conjunction with Intel which had up till then been seen by many as a promising Nokia alternative to Symbian.

Further restructuring, outsourcing and job losses over the coming months again besieged the already shattered company and appeared to validate the naysayers’ points.

Months went by and apart from some confusing leaks there was no sign of any Nokia Windows Phones. In June 2011 Nokia inexplicably announced a MeeGo phone, the N9, but, while being an elegant and simple design, it was received with mixed reactions by observers who labelled it a “dead” platform – Nokia had stated it was concentrating on WP7 and it was believed that there would be few updates or apps available in future for the MeeGo N9.

Nokia’s stock value, affected also by the European debt crisis, dwindled to $US4.82, its lowest point since the late 1990s.

It appeared the company was doomed.

I, however, disagreed. I thought it was premature to write off Nokia. It was, by my observations, the best time to invest in the company.

Here are several reasons why I believe Nokia could be on the verge of a major comeback over the next couple of years.

While analysts and investors reacted negatively to the Microsoft deal, I believe it was the best move available. The deal is worth billions to both Nokia and Microsoft, and the investment is so great for Microsoft that it has to make it work. The WP7 platform, despite its potential, has not yet been able to claim significant market share since its initial release in October 2010, perhaps due to a half-hearted marketing effort by Microsoft and early partners such as HTC. But Microsoft now sees its enormous partnership with Nokia as its ticket into the smartphone race. This is also make or break for Nokia, its very survival literally depends on the success of this partnership. Both companies know the stakes.

Many observers thought Nokia should have gone the Android path, but I think WP7 is a good choice – it’s different. iPhone and Android phones have already saturated the market. As Microsoft’s Steve Balmer put it, the entry of Microsoft’s WP7 into the smartphone ecosystem would mean it was now a three horse race.

I should point out that I have owned a Nokia Symbian phone for over the past 4 years. I myself had actually vowed to never again buy another Nokia because of the frustrations I have noted. But then I had a look at Nokia’s direction since the Microsoft deal. I have not owned an iPhone, Android phone, or WP7 phone, and so am quite unbiased either way. I also happily cross-pollinate my Apple iPod and iTunes with my Windows PC (cue the fanboy shudders).

So moving on, I have played with each of these three phone platforms in detail and have certain impressions. I must say I am intrigued by Windows Phone 7?s unique style compared to the other two.

Nokia's new Lumia 800 smartphone

Nokia’s new Lumia 800 smartphone

WP7 is an elegant platform. I was drawn instantly to its Metro interface. Now don’t get me wrong, it really is a matter of personal preference – but I really like the way that the tiles seem alive and animated, constantly updating with incoming alerts and social network updates. I also like the way the pictures album flicks over like a little digital photo frame. I appreciate being able to see everything I want to see – updates, calendar, photo albums, all on the one screen without one blocking the other. iPhone and Android, by contrast, tend to have a wallpaper picture partly obscured by icons or text, or other useful information not readily displayed on the homescreen without entering an app or sliding down a notification panel.

Apple’s iPhone is undoubtedly an excellent phone, the smoothness of its user interface is unmatched. Yet Apple is maligned for being exceptionally restrictive with what users can and cannot do. This of course is not a problem for many users but iPhone is just not for everyone.

And despite Android’s great ability to customise, its great openness is also one of its major flaws: less quality control means less neatness. Perhaps updates will improve this but I think in general its interface is quite clunky. It comes across as quite a boyish, rough sort of operating system, if that makes sense.

WP7 seems to meet both half way. It seems very easy to use. Especially since its Windows Phone 7.5 “Mango” update, its interface is smooth – comparable to iPhone’s and slightly less restrictive. And while it may not be as customisable as Android, it is also less clunky and jerky. I believe Nokia Windows Phones, with this elegant feel, would probably appeal well to female and male users alike, if only they knew about it.

This comes to another reason why Nokia might make a comeback. It has been advertising its Nokia N9 (the MeeGo one) very heavily, and I believe that when the Nokia Windows Phones begin hitting major markets Microsoft and Nokia will go all out with marketing and advertising.

Just a couple of weeks ago, at the Nokia World conference in London on October 26 2011, Nokia finally announced its first Windows Phones: the Lumia 800 and 710. The new flagship Lumia 800, boasting a beautiful polycarbonate unibody design, an 8 megapixel still camera, 720pHD video, and features such as free voice-guided navigation and downloadable music playlists, was received well and will be released in selected European and Asian countries over the coming days and weeks.

Australia – and more importantly the United States – will follow in early 2012.

One concern I have is that by the time these phones are released in many countries, particularly the US, other competing phones may be released which severely challenge the specs of these first Nokia Windows Phones. 8 megapixel camera phones are also pretty standard these days, and many, such as the Samsung Galaxy S II and the iPhone 4s, already record video at 1080p full HD. By the time Nokia’s phones hit the US market, perhaps other companies will have phones available with higher quality, higher resolution cameras. The rumoured Samsung Galaxy S III, successor to the popular S II, is expected to arrive early next year with monster specs. Many phones also already come with 1GB of RAM and dual-core processors – hardware currently unaccepted in the current Mango iteration of WP7.

And who knows what the iPhone 5 will bring. Being Steve Jobs’s last project, it will no doubt be a significant unveiling. Will we see stereoscopic cameras? Solar cells behind the screen or incorporated into the body? Some rumours even suggest it will be bendable.

The Siri voice activated personal assistant on the new iPhone 4s has also been a marketing success for Apple, and there is no question that it is the most sophisticated voice controlled application on any mobile device so far. Its ability to understand conversational speech is quite amazing. But while Windows Phone users may not necessarily be able to enjoy sassy Siri-like responses to off-topic questions such as “Siri, will you marry me?”, WP7.5 has its own Speech application which performs essentially the same functions (sending dictated SMS, voice activated dialling, web searches, weather reports etc.), and performs them well. Moreover, this intelligent voice interaction will continually improve (while hopefully not becoming Skynet).

With regard to the new Nokias, I would have tried to ensure that the Lumia 800 was released with hardware that truly stood out from the rest on the market. A 10 megapixel camera sensor, for example, would have been a stand-out selling point.

But 8 megapixels, backed up by quality lenses and good camera processing, is still nothing to be sneezed at. And Windows Phone Mango, due to the neatness of its code, seems to run very happily on 512MB and single-core. If Microsoft swiftly follows things up with the anticipated “Tango” update for Windows Phone, enabling larger RAM, multiple cores, and different screen resolutions (Bluetooth file transfers and mass storage mode would be nice, too), it would negate most advantages other platforms are perceived as having over Nokia’s Windows Phones.

The new Nokia phones already have the right look for success, but it is also crucial that Nokia very quickly follows the Lumia 800 up with new devices, in a competitive timeframe, that have hardware that can face up to anything else out there. It’s time to stop playing catch-up. But, not withstanding whatever Apple has up its sleeve, Nokia should be able to hold the line.

Importantly, at Nokia World, marketing managers spoke of the massive campaign to bring the new Nokia WP7 phones to the attention of consumers. It appears that Nokia’s marketing team aims to “call back its legions” – drawing on its past position of market power by going all out with, advertising, point of purchase impact and partner accessories.

A crucial aspect of convincing buyers will be to convince (and educate) the sellers. I have, for example, recently been advised by mobile store staff that the Windows Phone 7 would suit a business customer, and that they prefer and recommend iPhone or Android. Others are quite biased against WP7 because of the old issue-ridden Windows Mobile from years gone by. Clearly, these sellers do not yet realise that WP7 is targeted squarely at the mass-consumer market. With a massive advertising and retail education campaign Nokia’s Windows Phones will seek to change these outdated perceptions.

I believe that, once consumers become aware of them, Nokia WP7 phones will have significant mass market appeal and impact – particularly because of the elegant design already noted above. The Nokia industrial design in these phones is strikingly beautiful. Again, they are different.

A reason why the iPhone is not often seen as product placement in big budget movies is because “everyone has one” and they do not seem special. I did, however, notice that Nokia phones were featured in the recent Transformers 3 film. This type of investment is a good move, and the featuring in other films of market available Nokia WP7 phones can only add to awareness and appeal. Sony Ericsson, for example, made quite a big impact by featuring its phones in Casino Royale.

With regard to Nokia’s strategic leadership, CEO Stephen Elop has done the best he could under very difficult circumstances. He has obviously invested a lot of himself in Nokia’s restructure and planned comeback. A lot is riding on his decisions. While many chastise him for being Microsoft’s agent, I have been quietly confident that he has the right stuff. I had this sentiment reinforced after reading his Twitter update in which he quoted Sun Tzu’s necessity to believe in oneself, and his desire to execute well against the company strategy.

Nokia also has great patent strength. Apple and Samsung have been having a legal tug-of-war with each other over various patent breaches that have resulted in costly and time-consuming injunctions. Nokia holds thousands upon thousands of patents and has recently been payed a truckload from Apple because of it. This patent strength, and Nokia’s ability on the most part to avoid patent breaches, is a significant Nokia asset.

It should be noted that Nokia and Microsoft have been investing a lot of effort into ensuring that its app marketplace and accompanying software (such as Microsoft’s Zune) work well. Money has been poured into encouraging developers to fill the WP7 marketplace.

And Microsoft’s impending release of Windows 8, which should filter across all its devices – PCs, tablets, phones – should also make a big difference in creating a truly combined ecosystem rivalling Apple’s deep and successful integration between its various devices.

Windows phones aside, Nokia has just released an update for its MeeGo N9 and also announced at Nokia World its new “Asha” Symbian phones designed to target its emerging markets (another Nokia strength) such as in India and Africa. These moves will tend to dispel rumours that Nokia will not continue to support the two platforms, at least into the near future.

So it is possible that Nokia (with Microsoft help) may just have the right recipe for success after all. It just needs to get new and competitive phones to the US market as soon as possible – and market them well. It has just been announced that the successor to Nokia’s mammoth 12 megapixel N8 is coming in 2012. Well, it’s once thing to say something is coming; it’s another to actually deliver in time to make an impact in a rapidly moving market. But there are undoubtedly millions of loyalists ready to believe in Nokia again, and many more out there just ready for something different. If Microsoft continues to add new and innovative features to the platform, Nokia and its Windows Phones will be an excellent alternative to all the iPhones and Androids out there.

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