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Nokia fights to retain smartphone dominance

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Idc,
Market Share,
Windows Mobile,
Gartner

Marguerite Reardon CNET News

Published: 13 Mar 2009 15:52 GMT

...to do really cool things on their phone. Apple's successful App Store, which allows application developers to create applications for the iPhone, has been wildly popular, spurring an entire industry devoted to creating iPhone applications.

Every smartphone maker in the industry is following Apple's lead by introducing their own version of an App Store. Nokia announced its application storefront in Barcelona in February at Mobile World Congress 2009.

Embracing open source
More importantly, Nokia seems to have recognised that the open-source community will be able to develop the software platform much more rapidly. Last year, it bought the remaining shares of Symbian and contributed the software and its Series 60 software to the Symbian Foundation, which is making the software available to the open-source community.

Yet Ken Delaney, vice president of mobile computer at Gartner, argues that Nokia needs to go one step further and revamp its entire user interface.

"The user interface is a problem for them," he said. "It's a big mess. You go to the second screen and can't find what you're looking for. And I think that will impact the overall usability of the phone and its Ovi services."

The company hasn't announced any grand plans for revising its user interface, but it Kai Oistamo, executive vice president of devices for Nokia, said in a recent interview that the company is working on making the phones much easier to operate, including making applications easier to access.

"The key to success is making devices that are easy to use," he said. "That has a lot to do with the user interface and also making it easy to activate things like email. Complexity is increasing on the devices and we have to keep them simple to use."

Cracking the US market
The other major hurdle Nokia faces is the fact that it barely competes in the smartphone market in the US. This is a big problem, bearing in mind North America, and the US in particular, is the largest market for smartphones in the world, according to IDC analyst Ryan Reith.

Nokia has talked about getting more aggressive in the US market for two years. It opened a development facility in California, and it has been manufacturing phones specifically for the North American market. Nokia currently offers many unlocked versions of its high-end phones, such as the N95 or the recently launched Nokia 5800 XpressMusic, in the US. But the problem is that none of these phones is offered by any of the four big US mobile operators, which means they are unsubsidised.

For US consumers, it's hard to justify buying a $400 (£280) Nokia phone when they can get the iPhone, a BlackBerry, or Google's G1 phone for $200 or less with a two-year contract from a carrier. And experts predict that carriers will soon be subsidising smartphones even further to entice consumers to spend more on those expensive monthly data services.

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"I expected a year ago that we'd see some carrier sponsored Nokia phones here in the US," Reith said. "They've announced North American versions of phones, but they aren't really moving through the channel. The only way that will happen is if they are subsidised by the operators here."

Nokia has been rumoured to be working with Verizon to develop a device for its 4G network, which is set to launch commercially in 2010. But even before that, Oistamo of Nokia promises that some of its high-end phones will be carried by US operators this year.

Even without the US market, Reith of IDC believes Nokia can still maintain a market-share position in the 30 percent to 40 percent range by selling devices throughout the world. But the US represents an untapped market that has massive growth potential for the company. What could be more threatening to Nokia is the emergence of competitors, such as RIM, Apple and other phone makers using Android or Windows Mobile, in Europe and Asia, says Gartner's Delaney.

RIM has already made significant headway in Europe, nearly doubling its market share in Western Europe. And Apple has made some inroads in parts of Asia.

"If RIM continues to increase market share in Europe and Apple increases market share in parts of Asia, that could be a problem for Nokia," he said. "But realistically, maintaining 60 percent market share in a market with so many competitors is unsustainable."

Indeed, Nokia may have slipped slightly from its lofty perch, but the company is not down and out. And as long as it can improve its software, defend its position throughout the world and even gain share in the US, it should be in good shape, regardless of what RIM or Apple or Google throw at it.

Credit: Nokia fights to hold on to smartphone dominance from CNET News