Nokia's Fall Spurred by Rise of Android, iPhone

By Clint Boulton  |  Posted 2011-02-06

Nokia's Fall Spurred by Rise of Android, iPhone

Just a few short years ago, Nokia's Symbian platform was the reigning smartphone king with 50 percent smartphone market share.

One week ago, the company reported for that fourth quarter that its smartphone market share was 31 percent, 4 percent less than the year-ago period. Nokia's profit for the three months ended Dec. 31 was $1.02 billion, down 21 percent from a year earlier.

As a result, Reuters reported that Nokia CEO Stephen Elop, who took over last September, will fire several executives and revamp the company's strategy at the company's Capital Markets Day investor meeting Feb. 11.

"Nokia faces some significant challenges in our competitiveness and our execution," Elop said in the company's earnings statement. "In short, the industry changed, and now it's time for Nokia to change faster."

So, what has happened to Nokia? The quick answers are Google's open-source Android operating system and Apple's iPhone, as Symbian's slide has coincided with the rise of those superior, high-end smartphone platforms.

Android surpassed the struggling Nokia last quarter in smartphone shipments, 33.3 million to 31 million, according to mobile market researcher Canalys.

It's hard to believe that this has happened less than two years after Android's market share was almost nil. Verizon Wireless launched its Droid line in November 2009 and the platform has caught fire.

As a singular device on a singular, proprietary platform, the iPhone's growth is even more impressive. The iPhone is pinching Nokia, particularly in the United States, where it sold 16.2 million units in the last quarter and is racing Android in market share.

Industry analyst Jack Gold said one of Nokia's issues is that its impact has remained largely centered in Europe, while RIM, Apple and Android have carved large swaths of U.S. market share.

Gold called for Nokia to jettison its total reliance on Symbian, noting that business users, the core of the smartphone market, are abandoning the Symbian OS for Android, iPhone and BlackBerry.

Nokia Faces Stiff Challenges

While Android and Apple iOS have raised the bar for handsets with video chat, voice search, near field communications and other perks, innovation on Symbian has waned, leading Sony-Ericsson to move away from the platform. Indeed, Reuters noted that Elop is looking "for top people with good software expertise."

Gartner analyst Ken Dulaney said Nokia's slide is just another example of how smartphone platforms enjoy different eras. High-end smarphones have already seen the Palm era, the Blackberry era and now the iPhone era.

Nokia has been working off a keyboard-driven user interface that worked well a decade ago. But in a new era dominated by iPhone and Android devices, it's hard to migrate a keyboard OS to the touch-screen interface.

"But ultimately these companies and Nokia have difficulty because they are not ultimately software companies like Apple or Android," Dulaney said. "They just don't think like these companies do. And while they create fantastic hardware, the software is not developed to the level that the modern buyer expects."

So what is Nokia doing about it? The hot rumor from Feb. 4 was that Nokia will port Microsoft Windows 7 mobile software onto Nokia smartphones.

However, while this might give Nokia a greater presence in North America, it's unclear just how great that presence will be. The early word is WP7 is not selling well. A Nokia and Microsoft tie-up might yield two smartphone Titanics.

Analyst Gold said Nokia might consider creating a smartphone line on Android with a customized Nokia user interface, much like HTC does with Sense and Motorola does with Blur.

"This should allow you to get to market very quickly with a line of compelling smartphone devices that are competitive while giving current Nokia users a migration path with a familiar UI paradigm," Gold said.

There is still time. Nokia remains the world's top mobile phone seller, with 31 percent of the market as some 1.3 billion people worldwide use Nokia phones. The brand remains strong even if the push to modernize Symbian has been slow.

"They do have an opportunity due to their huge global presence," Dulaney added. "And in emerging markets they continue to do well. There is time for them to change. But Elop will have to take risks that might seem uncomfortable for Nokia at first."



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