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Bang and Whimper

by Mark W. Hibben
8/23/2010

Nokia and RIM in the Mobile Internet Wars

Earlier this year, as I described the impending War for Mobile Internet Supremacy, I dismissed Research in Motion and Nokia by virtue of their uncompetitive operating systems.  Their continuing market share decline for the latest quarter has largely borne out my expectations, but I admit to having second thoughts in the case of Nokia.  Nokia at least appears ready to put up a good fight, whereas RIM is going gentle into that good night.  RIM’s latest offering, the Torch 9800 with Blackberry OS 6 appears to have had a disappointing opening weekend, with sales estimated to have been only about 150 k and is already discounted to US $99.99 on Amazon.com.  Meanwhile Nokia is fighting back on multiple fronts including IP litigation, collaboration with Intel in hardware and software, OS development, mobile web browsing, and new more competitive products such as the Nokia N8, due at the end of September. 

The Torch Goes Down in Flames

From the moment that the first iPhone was introduced, the tech pundits declared that the lack of a physical keyboard was a disadvantage and that iPhone could never replace Blackberry or other phones that had physical keyboards for “serious” text messaging.  This belief prevailed for years and apparently motivated Microsoft to include a slide out keyboard on the Kin, which was intended to appeal to youthful text messagers. 

The ignominious demise of the Kin and the lukewarm reception of the Torch should begin to make clear that consumers don’t really care that much about physical keyboards.  Touch screens work fine for texting, and physical keyboards only add bulk and weight. Beyond the attachment to keyboards, Blackberry revealed in the Torch its fundamental problem, and the reason for my dismissal of RIM as a real competitor in the WMIS: the Blackbery OS.  To be sure, Blackberry OS 6 is an improvement, and provides reasonable touch gesture recognition such as swipe and pinch, but it all seems too little too late.  The screen resolution and size (480 x 360, 3.2 inch) make the Torch unsatisfying as a media player and undermines the web browsing experience as well.  The Torch achieves rough parity with the first iPhone in terms of user interface, but that’s not nearly good enough to attract new users, and may not even be enough to retain its major corporate customers.  With iOS 4, Apple took direct aim at Blackberry’s corporate dominance through Microsoft Exchange integration and enhanced security.  If Blackberry OS 6 is the best that RIM can do, it will only continue to bleed market share.

Nokia’s Fateful OS Choice

As of Q2 2010, Symbian OS, Nokia’s smartphone operating system, still held the largest market share at 41.2%, but this was down significantly from Q2 2009 at 51.0%.  That Nokia has understood the challenge posed by iPhone OS and Android has been apparent by their actions in the operating system sphere.  In June 2008, Nokia took over Symbian and converted it into the non-profit Symbian Foundation.  Symbian OS has become a completely free and open source OS.  In retrospect, this appears ill-advised.  The competing mobile operating systems, Windows 7, iOS 4, and Android are all developed and maintained as commercial ventures by professional, for-profit, software companies.  To be sure, open source operating systems have been influential in Apple and Google’s case, but both effectively took over their open source progenitors and made the systems their own.  Nokia has essentially gone in the opposite direction, and it remains to be seen whether the latest product of the Symbian Foundation, Symbian 3, can really hold its own against its commercial rivals.  Symbian 3 appears to achieve rough user interface parity with iOS 4, while offering the multi-tasking that has been present in Symbian for some time.  Symbian 3 will appear in the forthcoming Nokia N8.

As if to underscore its insecurity about Symbian, Nokia announced a joint venture with Intel in February of 2010, to combine the companies’ respective mobile operating development projects, Maemo and Moblin, into the Meego open source project.  Meego is also being undertaken by another non-profit, this time the Linux Foundation.  By June of this year Meego had tech pundits declaring that Symbian was dead and that the N8 would be the last device that would run it.  This was almost immediately contradicted by Anssi Vanjoki, head of Nokia Mobile Solutions, on July 2 in the official Nokia blog.  He stated that future Nokia phones might run a Symbian 4.  He also tried to delineate the roles for Meego and Symbian: Meego would be primarily for mobile computing, while Symbian would be for smart phones.  Clearly there’s a lot of overlap, and my impression is that Meego is an attempt to hedge the bet that Nokia made when it created the Symbian Foundation, but putting Meego in the hands of the Linux Foundation was not the way to do that. 

Nokia needs one smartphone operating system it has complete control over rather than two smartphone operating systems it has limited control over.  Meego especially appears to be a typical Linux sandbox, with lots of enthusiasm and little cohesion. Meego has handset, netbook and In-Vehicle Infotainment projects all running simultaneously.  Nokia hasn’t announced any Meego products.

Nokia’s Other Fronts in the WMIS

If it seems that Nokia’s OS efforts have been scattershot, the same could be said for Nokia’s efforts to defend its smartphone market share in general.  In June 2009, a collaboration between Nokia and Intel was announced that would involve jointly developed chip-set architectures, licensing of some Nokia mobile phone IP, and what would become Meego.  Given Intel’s obvious interest in the handset business, this was a logical collaboration, and Nokia stands to benefit from Moorestown processor technology, when it arrives.  In March 2010, Nokia bought the privately held mobile browsing company Novarra.  Novarra’s technology allows web pages to be reformatted for mobile web browsing.  In May 2010, Nokia launched a new set of patent infringement suits against Apple over GSM and UMTS patents to supplement the patent suits it had already launched back in October 2009.  Apple has, of course, countersued.  Finally, Nokia Siemens Networks, the wireless infrastructure joint venture, recently bought Motorola’s wireless network infrastructure business for US $1.2B and inked a US $7B deal with LightSquared to build a national “4G” wireless network that will serve 92% of the US population.   Both Nokia and Siemens reportedly have been looking to exit the venture, but the company could prove to be advantageous in the WMIS if Nokia’s handset business can survive long enough to profit from Nokia’s intimate knowledge of the new 4G network to come. 

The decline in market share, the shotgun approach to fighting the WMIS and some disruptive corporate re-organizations have lead to the perception that the current CEO (since 2006), Olli-Pekka Kallasvuo might be on the way out.  At the July 22 Earnings Conference Call, Kallasvuo staked the company’s financial future on the success of the N8, so I would guess he has at least until the end of the next quarter. 

In size, Nokia looks to be comparable to the other major combatants in the WMIS, but net income shows how disadvantaged Nokia has already become.

Company Latest Quarter Quarterly Revenue Quarterly Net Income
Microsoft Fiscal Q4 $16.0 B $4.5 B
Apple Fiscal Q3 $15.7 B $3.25 B
Google Fiscal Q2 $6.82 B $1.84 B
Nokia Fiscal Q2 $12.7 B $0.37 B

 

It All Comes Down to the N8

By the numbers, the N8 looks like a good smartphone.  It’s about the same size as the iP4, but a little thicker at 0.51 inch vs. the iP4’s 0.37 inch.  The case is anodized aluminum available in a variety of colors besides black and silver (if you like that bright anodized color look).  It has a nice 16:9 3.5 inch active matrix organic LED (AMOLED) display with a reasonable 640 x 360 pixels and a capacitive touch screen.   It’s a 6 band GSM/WCDMA phone capable of 10.2 Mbps download (if you can find a network that’ll support it), unlocked and capable of running on AT&T’s or T-Mobile’s GSM networks.  The camera is a 12 Mpixel monster with Zeiss optics and 720p HD video recording capability, plus it provides HDMI 720p output so you can hook it up directly to an HD TV.  The N8 also provides GPS, Bluetooth 3.0, removable micro SD memory, and even FM radio reception.  Battery life is reasonable if not exceptional at 720 minutes talk on GSM and 6 hours playback of HD video over HDMI.

The usability and appeal of Symbian 3 remain to be seen, but Nokia advertises that it has a full web browser that even supports Flash Lite.  Nokia has tried hard to fill the applications gap with the Ovi Store, but there’s not nearly the developer support that exists for Android and iOS, another area where being open source isn’t necessarily helpful. 

If the N8 is successful, Kallasvuo will get to keep his job a little longer and Nokia will live to fight another day in the WMIS.  I doubt this will change the ultimate outcome of the WMIS, which I still believe is between Microsoft, Google and Apple.  Nokia sealed its fate when it decided not to bring Symbian OS development into the company and retain complete control.  Neither Symbian nor Meego will save Nokia from the consequences of that decision.

  • 1.
    Torch in Flames
  • 2.
    Fateful Choice
  • 3.
    OS Insecurity
  • 4.
    Other Fronts
  • 5.
    Down to the N8
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