eWEEK at 30: Glory Days of Nokia, Motorola, BlackBerry Ended With iPhone

 
 
By Michelle Maisto  |  Posted 2014-01-25
 
 
 

eWEEK at 30: Glory Days of Nokia, Motorola, BlackBerry Ended With iPhone


The history of mobile phones is the story of a single lesson repeated: Don't get comfortable.

Or, put more bluntly, as it often is, you have to be willing to kill your favorite child.

To have any chance of staying on top, you have to walk away from the thing you labored to create and that has brought you tremendous success, or accept that the peak you've reached will mark the start of your descent.

"Companies are insulated, isolated. They don't want to rock the boat and screw up their revenue streams," Jack Gold, principal analyst with J. Gold Associates, told eWEEK. "But better you eat your own children than somebody else."

Roger Kay, founder of Endpoint Technologies, instantly made the same point when asked about the early success stories of the mobile phone industry.

"Killing your own children is part of succeeding in business, but very few CEOs have had the courage to do it," said Kay, naming former Intel CEO Andy Grove as a rare example. "You have to throw away a sure thing to take a bet on an unknown."

This is a lesson that Nokia, BlackBerry and Motorola should have learned during the days when they vied among themselves as leaders of the mobile phone market. Now their years at the top are a fading memory.

Before things went wrong for that trio of mobile phone makers, though, they went very, very right.

Birth of the Mobile Phone

The earliest days of the mobile phone industry looked something like this:

In 1974, a Motorola engineer made the first-ever mobile phone call. (Naturally, he called his chief rival, the person racing him to such technology, to say that he'd won.)

In 1979, the Finnish industrial concern Nokia expanded beyond its rubber and forestry businesses and teamed up with Finnish TV maker Salora to create a radio-telephone company. Then, in 1981, it launched Nordic Mobile Telephone (NMT), a precursor to GSM that was the first fully automatic cellular network and the first to allow international roaming. Suddenly, there was the possibility that everyone could call everyone.

Nine years after Motorola's first call, it launched the first commercially available mobile phone. The DynaTAC 8000X was thicker than a brick, could store 30 numbers, provided 30 minutes of talk time and cost nearly $4,000. But when Michael Douglas, as Gordon Gekko, used it on a beach to make a sunrise call in the 1987 film Wall Street, it was the epitome of high-tech and big-money excesses.

Nokia followed, in 1987, with the Mobira Cityman 900, the first handheld mobile phone for NMT networks. In a brochure for the Cityman, a Gekko-like character, airily ignoring a doting date, held a cocktail in one hand and a Cityman in the other while Nokia explained, "Everything is in your hands now. Connections. Time. The freedom to move."

For hundreds of millions of people, communication was about to change entirely.

Mobile Phones for the Masses

Motorola refined and slimmed down its design and in 1989 introduced the MicroTAC 9800X, the smallest and lightest phone on the market and the first flip phone, or clamshell, as the market dubbed it.

eWEEK at 30: Glory Days of Nokia, Motoroa, BlackBerry Ended With iPhone


The 9800X had a mouthpiece flap that folded over its keypad when the phone wasn't in use and a prominent antenna that the user pulled out before making a call.

For the next nine years, Motorola put out increasingly smaller and more affordable MicroTAC, and later StarTAC, phones. In late-'90s films, Hollywood leading men Nicolas Cage and Michael Douglas (perhaps hoping for a subconscious link to Gekko?) each used StarTAC phones in films.

Motorola units were the most popular phones of the early 1990s. In 1994, Motorola had a 60 percent share of the U.S. mobile phone market and worldwide it sold 12 million phones to Nokia's 9 million. But as the decade moved on, Nokia pushed ahead.

While Motorola worked on its clamshells, Nokia refined its candy bar phones (which were more Snickers than Hershey bars) with the 1011—the first mass-produced GSM phone—and, in 1994, the smaller, thinner 2100 series, which came in a number of colors and was the first mobile handset for many, many people.

Nokia has said its target was to sell 400,000 units of the 2100 series; instead, it sold 20 million.

"They recognized early on the value of combining voice and SMS … and they were right at ground zero of the GSM revolution," Charles King, principal analyst at Pund-IT, told eWEEK. "That provided them the market position but also the technical position to dominate."

Nokia was "the Apple of its day," added Gold. "They came out with small, reasonably priced devices that performed well … and it didn't hurt that they were in Europe, where things took off before they did in the States."

In 1996, Nokia wowed the world with the 9000 Communicator, a candy bar-style phone with a small exterior display and a hinge that opened the phone lengthwise to reveal a display as long as the phone and, opposite it, a giant QWERTY keyboard.

"The Communicator fit into a jacket pocket and it felt like a lump of future pulsating against your heart," Finnish writer Tero Kuittinen fittingly wrote in a 2013 BGR article about bringing a Communicator into a New York bar, in 1996, when "literally everyone else … had analog Motorola StarTAC phones that did not even offer SMS support."

Kuittinen added, "Like all Finns that year, I was drunk on an unearned sense of superiority—and three glasses of Absolut on the rocks I drank right after the taxi pulled in from JFK."

In 1998, Nokia sold 39 million phones to Motorola's 34 million, and in 1999 it nearly doubled its lead, selling 77 million phones to Motorola's 48 million.

Between 1999 and 2002, Nokia launched its first phone capable of accessing the Web, its first with a built-in camera, its first with video capture, its first 3G-capable phone and (with the Communicator 9210, in 2000) its first to run the Symbian mobile operating system, making it Nokia's first smartphone.

eWEEK at 30: Glory Days of Nokia, Motorola, BlackBerry Ended With iPhone


The very first smartphone, though that word wasn't used at the time, was the IBM Simon. It was introduced at the Comdex tradeshow in 1992, before the world was ready for it. Simon went on sale in 1994 for $900, and over six months, just 50,000 units were sold.

Gartner's market share figures for 2001 are a near-reflection of today's ranking. There were two dominant players, the first (Nokia back then, now Samsung) with more than double the market share of the second (Motorola, now Apple) and nearly a third of the entire market. There was also a third-place player (Siemens, now Lenovo) trailing far behind with single-digit market share.  

But in 2004, Motorola pushed forward again with the introduction of the Razr V3, an "ultraslim," quad-band "video phone" made from "aircraft-grade aluminum."

"I remember the moment that I first saw the Razr," Ken Hyers, a senior analyst with Strategy Analytics, told eWEEK.

"I was working as an analyst in Boston, and I got a call saying to go to MIT and see something that would 'blow my mind.' They made me sign an NDA and they showed me some phones, and then they made me sign a separate NDA and they pulled this device out, and it was the Razr. And I was like, 'Oh my God. That is amazing! You're going to sell a million of these!'"

Hyers laughed. "Of course, they sold a few more than that. They really did get their moment in the sun."

The Razr became a high-end style statement for consumers and a money-maker for Motorola, which made several hundred dollars off of each $500 phone.

Over four years, Motorola sold 130 million Razrs. But by 2007—the year the iPhone debuted—a Razr could be had for $30 with a two-year contract. By that time Motorola, having ridden the Razr's coattails for too long, was in a shambles.

"Motorola invented cell phones. The problem was that they didn't keep up with the marketplace and they let Nokia bypass them," said Gold. "Motorola went after the higher end of the market, and they didn't see the mass market coming—at least not fast enough to keep up. Nokia out-innovated them."

Nokia's portfolio had become vast. As early as 2003, it had introduced the 6600, a smartphone that ran the Symbian OS and featured an XHTML Web browser, email, a VGA camera, a multimedia card expansion slot, a RealOne music player, Bluetooth and an infrared port. The same year, it put out the 1100, something of a less-expensive take on the 2100 for developing markets and of which Nokia ultimately sold more than 200 million units.

The Symbian OS was a significant development past "dumb" feature phones, and "they made Nokia king," said Kay.

"Nokia's fall can be dated to the arrival of the iPhone," Kay added. "Apple killed Nokia right away, but Nokia didn't know it was dead for a couple of years."

Innovating Alongside the Consumer Market

"What's the surest sign that a product has become a pop-culture phenomenon? When it becomes generic," George Stephanopoulos wrote in the 2005 Time 100—a list of the year's most influential ideas and people. He categorized the BlackBerry mobile phone, the brainchild of Mike Lazaridis and Jim Balsillie, alongside Kleenex, Jell-O and Xerox.

eWEEK at 30: Glory Days of Nokia, Motorola, BlackBerry Ended With iPhone


BlackBerry's impact was so considerable that it actually introduced two words into the lexicon. The second, Crackberry, suggested how addictive it was to suddenly have information "literally at your fingertips," wrote Stephanopoulos, pondering whether the device was "more a curse or a blessing."

"Suddenly, businesses were able to communicate with their employees no matter where they were," said Gold. "It allowed you to stay in touch with your users around the clock, which of course has good sides and bad sides. But until then you had to go to something, you had to sit down at a PC. People were taking their phones to bed with them—the BlackBerry changed the working world."

In 1999, as Nokia was overtaking Motorola in the feature phone space, Canadian company Research In Motion (RIM) introduced the BlackBerry 850, a sort of two-way pager with a small display, a QWERTY keyboard, a wireless data connection and the ability to synchronize with a corporate email system.

By the time RIM added voice capabilities (though not a speaker—users had to wear a headset) to the device in 2002, people were already beginning to complain about "BlackBerry thumb"—the joint pain related to the workout that the BlackBerry's keyboard was giving to the overworked thumbs of the handset's more obsessive users.

The BlackBerry 6210, introduced in 2003, was the company's 10th device and its first with an integrated phone. It was a mobile phone with a Web browser, access to corporate email, SMS, BlackBerry Messenger and even access to corporate applications. It came in blue or black, and a few months later a slightly tweaked version for AT&T and T-Mobile, called the 7210, even featured a color display.

"Before the iPhone, BlackBerry was the device," said Gold. "You were nobody if you didn't have a BlackBerry."

By 2004, BlackBerry had more than a million subscribers, and by 2007, it had more than 10 million.

The iPhone Changes Everything

On Jan. 9, 2007, at MacWorld San Francisco, Steve Jobs introduced the iPhone, calling it "literally five years ahead of any other mobile phone." It featured Web browsing, email access, searching, maps and most importantly, a multi-touch display that made it possible to control the phone with a fingertip.

It was beautiful and simple and designed by designers for everyone. A tremendous number of people thought Apple had introduced the first phone with email access and an Internet connection, though what it had actually done was create a smartphone so unintimidating and accessible that suddenly the average person became alert to possibilities that really only "enterprise users" had been enjoying.

"With Nokia's Symbian phones, you needed a manual to get started. BlackBerry was the same way," said Strategy Analytics' Hyers. "They just weren't intuitive. They were designed by engineers."

The iPhone went on sale June 29 of that year, and by September Apple had sold a million of them, giving it a 3.4 percent share of the worldwide smartphone market. In another strategic move, ahead of the holiday shopping season, Apple lowered the iPhone's starting price from $599 to $399.

eWEEK at 30: Glory Days of Nokia, Motorola, BlackBerry Ended With iPhone


Nokia still dominated the market at that point—by 2005 it had already sold its billionth phone—with a 49 percent share. RIM, in second place, had 10 percent, and HTC had 4 percent.

By the time Apple introduced its second-generation iPhone in 2008, it had reached a deal with AT&T, which with a two-year service contract dropped the price to $199. This further helped Apple shoot past stagnant HTC in the rankings and claim 13 percent of the market. RIM, meanwhile, had grown its share to 16 percent and Nokia was down to 42 percent.

BlackBerry's high point was 2009. During the third quarter, it surged passed the one-fifth mark to grab a 20.7 percent share of the worldwide mobile OS market, as Apple's iOS rose to 17 percent. Google's Android was new on the scene and, thanks to Samsung and LG Electronics, it managed a 3.5 percent share.

By 2010, Apple was outselling BlackBerry, as iOS climbed to 16.7 percent, BlackBerry dropped to 14.8 percent and Android shot past them both, claiming a 25.5 percent share of the worldwide market. Nokia's Symbian still held first place, though it was down to 37 percent during the third quarter of 2010, from 45 percent a year earlier, and its decline was destined to continue precipitously

During 2013's third quarter, Samsung—its bet on Android having fully paid off—led the worldwide market with a 32 percent share, and Apple followed with 12 percent. Rounding out the market, BlackBerry managed a 2 percent share, while Symbian, abandoned by Nokia in 2011, dribbled down to 0.2 percent.

Google purchased an ailing Motorola in 2011 and has since declined to share the number of phones it has sold. It's rumored that the pair's first phone together, the Moto X, sold only 500,000 during the first quarter after its release.

Can Apple, Samsung Avoid the Pattern?

"Motorola got complacent, and they didn't innovate fast enough. It's the same story as BlackBerry. They were the first truly innovative device in the market, and they set the standard for years, but they were out-innovated. Nokia—and I don't mean to sound cruel—was fat, dumb and happy, and they didn't see the market shifting. Or if they did, they didn't respond quickly enough," said Gold. "Time is not anybody's friend in this market."

Apple and Samsung, the companies now with the most to lose, should be fully cognizant of the lessons the fate of their predecessors offer. Whether they break the natural cycle remains to be seen.

"Once you catch the attention of consumers, that's when you have to innovate," said Hyers. "Samsung has moved into the wearables market because they realized that if they stand still, they'll be eclipsed."

Samsung Chairman Lee Kun-hee, the man who led Samsung's takeover of the smartphone market and turned his father's company into a "$288 billion behemoth," The New York Times reported Dec. 14, 2013, had a message for his employees this year: "You must do better."

The article added, "At other companies, congratulations might have been in order."

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