The Apple of Nokia's eye
The trouble with being number one in any industry is that you have nowhere to move but down. Few companies know this better than Nokia (NOK), the Finnish telecommunications giant that has dominated cell phones for so long that in some parts of the globe the brand itself has become synonymous with the device.
Nokia has long excelled at making beautiful phones, but in today’s competitive smartphone market, beauty is just a start. The devices that make consumers salivate are the ones that have great software, offer the most games and social networking features, get great service, and come attached to fast networks. Oh, and they have to be cheap.
One company has shaped this new competitive environment, and it’s not Nokia—nor was it even a telecommunications company until 2007 when it debuted the iPhone.
Apple (AAPL) is eating Nokia’s lunch.
With the iPhone, Apple created a consumer lust for smartphones by showing us we could browse the web from our palms and enjoy it. It launched a device so perfect in form that it has become the gold standard by which all other devices are measured. And it moved the global hub of telecommunications innovation from Asia, where form factors had previously trumped all else, to Silicon Valley, where software makers now race each other to come up with the coolest applications.
None of this has been good for Nokia, which had already lost substantial ground in the North American cell phone market (see “Nokia’s North America Problem”). Their struggle for market dominance in the age of the iPhone has been less about nailing an innovation strategy than playing a hardcore game of block and tackle. Enter the latest move: on October 22, Nokia filed suit against Apple in a Delaware federal court claiming infringement on 10 patents it holds on the integration of several technologies at the heart of Apple’s iPhone.
As my colleague Philip Elmer-deWitt points out, you can’t blame Nokia for having its nose out of joint. Apple, according to Nokia, has gotten a free ride since the iPhone launched—a very fast ride. Apple commands 22% of the smartphone market in the US, according to IDC. Globally, it holds 12% of the market, more than doubling its share from last year.
Meanwhile, despite its best efforts, Nokia has steadily lost ground. It holds 40% of the market, down from 43% last year, according to IDC. And in the competitive North American market, Nokia is barely holding its own with just 3%.
Recognizing that the North American market is more crucial than ever, Nokia has spent the last couple years retooling its strategy. It installed its chief financial officer in the U.S. It opened new offices in Atlanta to be close to AT&T Mobility (AT&T) and in Parsippany, N.J., to be near Verizon Wireless (VZ). And it put several hundred product developers in its San Diego design center to work in collaboration with AT&T and Verizon Wireless on some new products.
The efforts have begun to yield dividends as North American carriers have started to support a slew of new cell phones—and even a couple of smartphones—but progress is slow going. “We’ve not been good at delivering promises in the past,” Niklas Savander, who heads up Nokia’s services division, told me recently, in describing Nokia’s relationships with the carriers. “It’s a trust thing and it doesn’t go away easily.”
Savander said he's also stepping up the company’s efforts with its Ovi store by making strategic acquisitions, mostly as a way to hire new software development talent. In September, Nokia bought social networking company Plum Ventures and traveling startup Dopplr.
So far, these changes have not been enough to jumpstart Nokia’s smartphone growth. On October 15, the company reported a third-quarter loss of $836 million as sales fell 20% from a year earlier (in North America, sales dropped 25%). And as the Christmas season approaches, bringing a gaggle of gadgets for Santa to deliver, Nokia has a paltry smartphone offeri. It’s easy to understand why the telecommunications giant, explaining that it has sunk $60 billion into the research and development that has helped enable the devices to take off, might at least want Apple to share the wealth.
In 10 years Apple will dominate the phone market – look at how short it took Apple to take this HUGE portion of the market – we forget that we are ONLY on version 3 of the iphone! That's right only third version – can you imagine what the version 7 or 8 will look like??? Just look at the early ipods and look at what they do and look like now… time to buy more AAPL stock…
Nokia has to come back as a smart tool company,not a toy company as the Apple iphone is. It should become a fixture of your hand, arm and brain. Not a"BRANDED" company that is colored of fruits. Nokia needs three good phones not 50 different phones,and reissued every six or less months and thrown away. Take it away from industrial designer companies and give it to the comprehensive design thinkers. Come on " Nokia " Do it ! Remember the days when things lasted for awhile and they had some weight to its understanding of what the tool is to do.
Was a loyal nokia customer until they started trying to make their customers stupid. once they started rebranding 8210s as 50,000USD Vertus it was pretty obvious they had lost the plot, meanwhile Blackberry and Apple were there with open arms enabling their clients instead of just trying to milk them.
Re: the Nokia suit
The Nokia patents in question are part of the GSM standard. As such, Nokia is supposed to license them on a Fair, Reasonable and Non-Discriminatory basis. That means charging everyone essentially the same royalty. It appears that, instead, in their negotiations with Apple, Nokia tried to charge Apple a lot more per handset than it does other manufacturers and get free licenses for some Apple patents, allegedly patents that Apple does not license at all.
Apple has counter-sued, alleging that Nokia has violated Apple patents that are NOT part of any standard and not subject to FRAND licensing.
Toguy, if your wife isn't missing her iPhone then she probably shouldn't have had one to begin with. For those of us who use them even to just a fraction of their capacity, suddenly being without it would be like losing an arm.
I sent my newly iPhone owning sister an email that I expected an immediate response to. She didn't write back for two days. When I asked her what was up (over the phone), she said "Oh, I didn't check my email." She has an iPhone and can go days without checking her email? I check it every time the alert goes off. My sister, like your wife, can live without iPhones or any other smartphone.
Just because your wife doesn't miss it doesn't mean it's only hype. I, for one, abhor hype. I need my iPhone and and I use it for its intended purposes.
There's a real epidemic of people surmising the world based solely on their own feeble experience.
iPhone is very fragile. My wife drop it once and the screen was crushed. It's going to cost over $350 CDN to fix it. No Warranty! Less than a year old. Rogers, carrier in Toronto Canada, told her she still has to pay the contract. Left bad taste. She went back to just regular phone and not missing anything. The smartphone hype might just be hype only.
Can't you just see the CDMA carriers gnashing theit teeth here? LOL, the only complaints abou the iPhone anywhere are carriers being unable to market them.Apple was very smart in only choosing GSM carriers. Verizon in the US for example often touts they would love the iPhone on their network but Apple knows in order for Verizon customers to use them, they'd have to purchase two, one to talk and the other to web surf simultaneously. Who in business or even personally would want that in a smartphone? Go Apple keep on keeping on!
Apple just sold 60,000 iPhones the first week of availability in Korea. That's in a market with only 400,000 smartphones total.
I have to agree with Wavelett right now, he's hit it right on the money. At the moment, Apple is making huge strides in America with their iphone. The other companies have to even scratch the surface with their technology. In America.
Outside of America is a different story. It is said that Singapore and Korea are years ahead of America in the mobile industry. Quite crazy when you think about it. trifilliate
Well, I do not really know what this guy from Finland is talking about. I work for a consultancy that does business all over Europe and I see iPhones absolutely everywhere. In business meetings I see iPhones and Blackberries, but not a single Nokia device. I do lecture IT at a German university. All my students have iPhones or Android phones, not a single Nokia device. All Nokia phones are available anywhere and delivery times for the 3GS are still quite lengthy.
While there is no clear-cut definition for "smartphone", several of the phones Nokia is counting as smartphone sales do barely qualify, the almost brand new N97 is slower and less user-friendly than the original iPhone from 2007… Instead of spreading FUD, maybe they should make better phones and drop that clunky monstrosity called S60. Nokia's average selling price dropped below 60 EUR, while Apple's is north of 600 USD. You can't be a luxury provider and a rummage table at the same time. If Nokia is serious about smartphones, then they should establish a separate brand with a first class identity and create an OS that is worthy enough (Maemo seems to have some potential).
I must add that if one of the criteria is as you put it: "Oh, and they have to be cheap", then Apple's iPhone simply doesn't meet it. Nokia on the other hand is the king of cheap durable phones outside of the major smartphone category.
Smartphones do NOT need to be cheap as they're purpose is to provide computing power and versatility.
I also struggle to accept that Nokia has spent $60 billion in R&D for their devices – would you like to help out with a source?
Hi Jessi, producing the iPhone doesn't make Apple a telecommunications company. That makes it a device manufacturer. Telecommunications company typically refers to the AT&Ts, Zain, MTNs, etc. of this world.
LOL, of course someone from Finland is taking unsubstantiated shots at Apple's iPhone!
The iPhone flopped so badly, that there are already over 1M users on China Unicom's network. They had been brought in thru the grey market. And, another 1M are using China Mobile's network. The problem is pricing. If grey market phones can be bought, full featured for less than the official offering thru China Unicom, then which one are you going to buy? The Chinese aren't stupid.
As for India, Russia and Japan, the same issue of pricing is affecting India and Russia. Of course, the same problem of high prices affect Nokia smartphones, so I can hardly understand Mr Helsinki's gloating. As for Japan, there have been a couple well-publicized articles that the iPhone has not been a success, but there also have been a number of articles, less well-publicized that indicate the iPhone is a success. It certainly has mindshare.
And, if the iPhone's success is "lukewarm" in Europe, I think every company would wish for the same. Didn't you know that the iPhone has over 40% smartphone share in France? That's awfully close to Finland's border.
The iPhone may be a success in America, where people don't know better. But did you notice this (even some American media reported this): iPhone flopped miserably in China, 10 sold during the first weekend in Beijing.
iPhone flopped in India, Russia and Japan as well. Lukewarm success in Europe. iPhone will remain a marginal local player in North America.
Shravan from Toronto, Canada:
I agree with your definitions. But Jessi did not use it correctly.
My original comment was only partially posted. I included the quote: read second to last paragraph:
".. stepping up the company's efforts with it's Ovi store.."
Nokia is definitly very good in making keypad-based handset. Even the under 100$ models have good keypad and easy-to-access menu. It is this UI that wins Nokia from Motorola, SonyEricsson & others.
However, the new trend is touch screen. No wonder that Apple was able to quickly adapt mouse-based UI of its OS to touch-based UI and made good iPhone product.
I think this is why Nokia is using Linux-based Maemo for new N900. Reusing Linux mouse-based GUI can be a faster way to achieve better touch-based UI rather than enhancing its S60 software.
Spot on Hary – not sure if it is being 'biased' – but clearly the author did not bother to read where Nokia's losses came from (NSN JV) or how their handset sales are going (better than expected). This is an interesting battle as it is essentially one of technology (Nokia) vs. Design (Apple).
Donna from Coquitlam, Canada
Jessi has the used the correct version. It's stands for "it is" in this case where as "its" is a neutral possessive and should be used when an object is referred to as belonging to another object.
Masters in Journalism from The University of California at Berkeley.. and still can't spell?
its or it's?
sounds like Nokia's trying to bring in some easy cash, which they heavily need since NO ONE BUYS THEIR PHONES ANYMORE!!!
This article is very good news for Nokia. It definitely looks like Apple is getting worried about stealing patented technology.
Or maybe since that technology is not a fruit-like logo, it can be stolen and copied as anyone sees fit. A typical don't use my IP, but yours is free for everyone. Typical Apple thinking?
What Nokia wants is more money then it gets currently from Apple. This is a negotiating ploy that will end with Apple filing countersuits and the two agreeing to share some IP.
Well, apple would definitely sue Nokia if they used a multitouch feature in their phone. Woolworth's logo which looked surprisingly similar to Apple's is still up and they don't have plans to take it down, and seriously I don't think it is a problem to me.
I think Nokia has dropped in sales because of lots of consumers are getting smarter. THey are awaiting the new models. I think Nokia will get the better portion of it this fall. google sniper
i dare you to use apples use of multitouch and not get into a legal battle with them. Why is this any different?
apple took action for a logo that they felt looked to similar to their logo. something that has no technological benefit. only used to keep the herd from getting lost.
people that do not care, lust what is dangled in front of their face. marketing is corner stone of the company.
a point on the sales matter, i would suspect less sales of phones from nokia in the US. I do not know that the N series was ever sold from ATT or TMobile.
its obviously not lack of function from the device that keeps people from buying them.
I completely agree with Wavelett. Apple has been using patented technology that other phone manufacturers have been paying for. It is ridiculous to think that Apple should get a free ride. Oh yea, there's no app for that.
Contrary to American conventional wisdom, there are no Apple technology innovations behind iPhone. Apple was a smartphone latecomer who walked to the table laid by others and took the bits and pieces it liked. Nokia has used 50 million dollars in research, 40 companies duly pay their licences, but Apple won't. If Nokia does not sue, it will lose its patents.
I think it would be easier for thugs from Nokia to just walk into Cupertino and tell everyone to "stick 'em up" and just rob them on the spot. Nokia is really getting desperate for cash. I doubt if Nokia can afford to fight out a long court battle with Apple since Nokia is already bleeding cash.
"paltry, eat nokia's lunch, apple so perfect in form, nokia block and tackle and has its nose out of joint". this is journalism with an agenda. cnn tv news has an apple computer on the newsdesk and typically has two, of the five technology stories, about apple – even now there's a headline story about apple's new mouse (yawn). c'mon guys, a cnn story about apple is like fox news calling itself unbiased while it promotes republicans.
Well, all i can say is this is one more biased CNN article on Apple vs anyone.
I will start from the end of the article. Author says as Xmas approaches, Nokia has a paltry smartphone offering?
Is that really true?
Nokia is going to release smartphones in every category for all kinds of consumer market in this 4th quarter.
FYI: N900, N97mini, E72, 5230, X6 and 5530(released just recently in few markets with more to come). While all this are being release 5800 is still selling like a hot cake.
Next: The 3rd quarter loss was mainly due to Nokia-Siemens Networking division and not due to handset division if you compare Q2 to Q3. Did the author bother to specify that? That is not a fair but biased reporting.
Also all the sales figures are misleading and incomplete. Did she mention that those figures are year on year or Quarter over Quarter?
Regarding suit, well if all the leading 40 world companies are paying royalties, except Apple, then there must be some truth in that. The suit is not just out of jealousy or losing market share fear. There are reports that Nokia was in talks with Apple for over a year regarding this, and Apple did not agree, hence this suit. Nokia might have thought, enough is enough, Apple is using their horse to go the restaurant and eating Nokia's lunch.
It is pretty clear that CNN has heavy investment in Apple stocks, hence you can hardly see any negative article on Apple.
Why don't Nokia use some other features that Apple patented. That way they will be equal, Lets see who wins. Last I knew apple wanted to sue palm. So Is palm features not the same with apple? Or they are going to wait till they increase market share before suing?
What Apple brings to the table, however, is a new array of intellectual property of its own. And in order to compete with Apple, competitors like Nokia have to either (1) come up with new stuff themselves (tough to do considering Apple's head start), or (2) try to pry some of Apple's i.p. from its hand by techniques like going to court, then settling for a i.p. sharing agreement.
Only problem: Steve Jobs. Jobs will tie them up in a court battle for years, if they're not careful. And by the time the dust settles, Nokia will be history.
I don't envy Nokia. Or Sony. Or Palm. Or even Microsoft, for that matter.
Apple is well and truly in the catbird seat.
It is interesting to see what kind of tools Apple has on this if any. When you are a new comer to an industry all existing players will defend their position. Nokia is just the fastest to respond. Motorola, LG, SonyEricsson, Samsung not to mention Qualcomm etc can and will do exactly same for Apple.
Fact is that cellular phones are based on (mandatory) standards. If you are making a phone for GSM, WCDMA etc you will unavoidable infringe a lots of patents most owned by incumbent industry players. Apple knew this when they started the business.
Apple just sold 60,000 iPhones the first week of availability in Korea. That's in a market with only 400,000 smartphones total.
Huh??? Have you ever been to Korea? I was in Seoul 2 years ago and was amazed that everyone had some sort of 'more than just a telephone' device of all sizes, shapes and capabilities. (It's also the most Mac-hostile place I've been, but that's another story…) If Apple can beat Samsung, LG, etc, in their home turf, that's clearly a big deal. But 60k phones is a drop in the Korean smart phone bucket.