Is Nokia Toast?

By  |  Monday, July 6, 2009 at 2:43 pm

Nokia N97Gizmodo’s Matt Buchanan has posted a review of Nokia’s iPhone-like N97, with the provocative headline “Nokia N97 Review: Nokia is Doomed.” At first blush, it sounds like he can’t really mean that he thinks Nokia could be headed for extinction. Comic exaggeration, right? But the more I thought about it, the more I came to the conclusion that the headline’s a perfectly reasonable one. I’m not predicting Nokia’s death myself, but neither do I take it as a given that the company has a long future in the smartphone business.

Matt’s conclusion on the N97 is that it’s a respectable piece of hardware but that its Symbian S60 Fifth Edition operating system and Ovi Store application repository don’t have what it takes to compete with their counterparts on the iPhone. Judging from the time I’ve spent with an N97, he’s right. Cell phones in 2009 are really software/service combos that happen to have hardware wrapped around them, but Nokia is still racing to catch with the modern era–as represented not only by the iPhone but also Google’s Android and Palm’s Pre phone and WebOS software.

(A bunch of other major phone companies, such as HTC, LG, Motorola, and Samsung are hopping aboard the Android bandwagon, but Nokia is denying rumors that it has any plans to build an Android phone.)

Nokia may be the biggest phone company the world has ever known, but we’re just entering the age in which smartphones will largely replace both PCs and phones as we’ve known them. It’s as big a technological sea change as we’ve ever seen. And when those sea changes happen, being an incumbent means very little.

Actually, history shows that incumbency usually puts you at a disadvantage. Mainframe companies didn’t dominate the minicomputer biz. Minicomputer companies not only didn’t dominate microcomputers, but mostly collapsed, period. The major developers of DOS applications ran into deep trouble when Windows came along; the major developers of Windows applications don’t rule the software platform known as the World Wide Web. And so far, the most important player in smartphones is Apple, a company that’s only made phones for a couple of years.

Apple isn’t one of the spunky startups that usually slaughter humongous corporations when the world of tech goes through one of its periodic reinventions. It’s more than thirty-three years old; not only has it seen a heck of a lot of history, but it was once written off as moribund. It’s a little as if minicomputer pioneer Digital hadn’t just founded the search-engine business with AltaVista, but had managed to turn AltaVista into today’s Google.

Strangely enough, the fact that Apple long ago lost the war for personal-computer dominance to Microsoft put it in a much better position to make the leap to smartphones than if the Mac had somehow conquered the PC market. An Apple that controlled the PC industry would have been too large and too invested in existing products and business models to come up with the iPod; an Apple that never launched the iPod and iTunes might never have decided to enter the phone business at all, let alone changed it forever.

Of course, the fact that the rest of the industry is scrambling to get to where the iPhone was a year ago doesn’t guarantee a rosy future for Apple, any more than the original 1984 Mac’s innovations meant anything for the company’s prospects in the 1990s. Nor does the rough condition of Symbian and Ovi today mean that Nokia isn’t working on truly impressive versions even now, or that it won’t dump them for something different and better.

Anyone who thinks he or she knows for sure who will dominate smartphones in, say, 2014 is either a whole lot smarter or a whole lot dumber than I am. But right now, it’s easier to sketch out scenarios in which Apple maintains its lead than it is to figure out one in which Nokia crushes it. And a future that involves Nokia pulling out of the smartphone industry is no more wacky an idea than the idea of IBM pulling out of the PC business once seemed…


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16 Comments For This Post

  1. AJ Says:

    Excellent post, Harry! Nokia better get their act together.

  2. Simon Says:

    The modern Apple is one that has learnt from its previous mistakes- and lost none of the hunger that marks out an exciting startup.
    You’re right that nobody can say who’ll be out front in five years but the only smartphone OS so compelling that you can take the phone out of it and still sell millions- hard to imagine it won’t be still relevant in 2014. I just hope that by then the competition is serious.

  3. Simon Says:

    Oh yeah and i’m sorry for Nokia. Their dumbphone user experience was so far ahead of the competition. Shame they couldn’t carry it over. But it sounds like they’re miles from ever getting it together.

  4. John Baxter Says:

    I can’t tell from the underlying stories on Reuters (I used the link in the article) and the Guardian whether Nokia denied any future use of Android, or denied plans to release an Adnroid phone in September.

    Perhaps there’s an actual quote from Nokia out there, but I haven’t found it, and the news regurgitators have put their own spin on things.

  5. sfmitch Says:

    I have a hard time convincing myself that anyone other than Android or iPhone OS ‘win’ the smartphone war.

    I see Nokia / Symbian losing smartphone market share at an increasing pace.

    Microsoft is in deep trouble if it is indeed a year and a half (or so) away from an update to Windows mobile (6.5 isn’t anything to get excited about)

    I just can’t see WebOS gain enough market share to ‘get over the hump’ to gain critical mass.

    Since Apple won’t license its’ OS that leaves Android in a really great position to become the dominant smartphone platform. I see Apple continuing to do very well but I can’t see it being THE dominant smartphone platform.

    It should be very interesting to watch the battle unfold over the next few years.

  6. Jussi Says:

    Nokia basically can’t jump the Android bandwagon even if it would want to. Why not? Well, let’s see. If Nokia would announce Android phone, it would mean 1) Symbian acquisition was a blatant mistake and a lot of money was wasted on it (hundreds of millions of dollars and many manyears of wasted development work) 2) Navteq acquisition was a blatant mistake (Android is built around Google Maps, so jumping the Android bandwagon would render Navteq obsolete) – 8 billion dollars was wasted to acquire Navteq that is making constant losses (last quarter, 50 million dollar lost reported) 3) Ovi / internet business strategy was a blatant mistake (Android is integrated into Google’s services and Google Android Market mobile market place) – hundreds of millions of dollars and several years of development work on Ovi would be lost 4) Nokia would become a bare hardware maker again competing heavily against dozens of other competent Android hardware makers (like Samsung, HTC, Sony-Ericsson, Motorola, Panasonic etc.).

  7. Jussi Says:

    So, is Nokia dead? For all practical reasons, yes.

  8. joecab Says:

    Your observation about how Apple’s past “beleaguered”* status helped them to where they’re at today is right on the money.

    I still don’t get why Nokia is necessarily dead. There are still a heck of a lot of people that don’t want or need smartphones.

    * Remember when it was practically impossible to read a news story avout Apple that didn’t involve that word?

  9. Jussi Says:

    Why is it dead? Because it can not compete in the smartphone segment. At the moment the only growth is happening in the smartphone segment, sales of regular “bulk” phones is not growing any more – peak has been reached and competition is fierce in that segment. Did you know that in China alone over 20% of the mobile market is “owned” by pirate phone manufacturers – small shops that sell copies of nokia phones (with brand names like “Nokla” etc. that resemble Nokia – do a google search for “Nokla”)? These small, 10 person “factories” can produce basic bulk phones in China nowadays and because there are tens of thousands of these 10 men “factories”, together they have over 20% market share! Can you imagine? So, basically you can not get profits by selling bulk phones any more.

  10. John Doe Says:

    While iPhone is a nice device with a fresh UI (not good UI, just fresh) it has yet to prove that it can control fragmentation while users’ demand for new features puts pressure on them to diverge their hardware. They can’t pretend to invent MMS and Cut/Copy/Paste next year as well.

    Android on the other hand is a curious story. It has the Linux geeks on his side because it is … Linux. It has the idiots with it because it is … Google. The UI is ugly like hell and the only way HTC was able to create something cool on top of it was by breaking the platform compatibility. The hardware is ugly, the software is ugly and the companies using it are ugly, small and (some of them) dying (SE, Motorola).

    Symbian on the other hand seems to be the ugly duckling. It is blamed for everything and anything by any idiot that has a blog or can write a comment to one. Why? Some say that it is old. True. Some say that it is ugly. Not true, Symbian’s inner design is very elegant. The UI is old (as in proven, reliable) and different (as in driven by function and not by form) but I for one prefer it.

    Some idiots pick on Nokia. That they’ve made a wrong bet with Symbian and that they should go with Android. So what if Nokia does both? What if the mistake Nokia made was to bet on that Maemo thing they still develop for their internet tablets? Replacing Maemo with Android would be really easy if only one would have a reason to do that. But as said, Nokia has nothing to gain and Android nothing to offer.

    To conclude: the one doomed is Android, that’s why they tried to get associated with Nokia, they need a big name. Their current big names, Motorola and SE, might release an android phone but that would be among their final acts before selling the business to some Chinese dude. And Googe Maps needs Navteq. And Nokia’s Ovi takes Google’s clients away from the basic services such as mail, media sharing, maps, cloud storage.

  11. sfmitch Says:

    @John Doe

    So, Nokia has everyone just where they want them? Their plunging market share in the smartphone market doesn’t mean anything?

    Wake up and look at how things are, not how you want them to be.

  12. Daniel Says:

    @john Doe
    Don’t hate on Apple because they make a compelling product. What makes Apple a product for the rest of the consumers is the fact that one can easily use their product with very little training. The apps that are there are ones they will actually use. Apple never said that they invented anything, but they advertise that there product is compelling to use.

    Nokia window to put a compelling platform for consumers was closed the moment the iPhone 3G with a JDK for developers. Nokia had the time and the resources to do Symbian right, but was too slow. Now they are begining to see that are relagated to watching while others pass them up. By the time they get back up to speed it will be too late. Sorry to see this happen as I really had high hopes for Symbian OS.

  13. John Doe Says:

    @Daniel: I said already that iPhone is great, but it is not the ultimate phone and the end of the world is not coming yet just because iPhone exists. And WTF is an JDK if iPhone, do you know what you’re talking about?

    @sfmitch: Nokia’s market share can go up an down, it is not a monopoly. The other companies though have a lot more to lose and some of them barely exists anymore.

    One more thing to consider is math and statistics. iPhone is the apparent grower in the market but they are winning on a market that Nokia never owned, a market which in fact never existed. The phone is a success in US where you freaks used to call Motorola’s Razr a smart-phone. A entire new customer segment was added to the smartphone market and that of course changes the figures.

    But Nokia has the resources to transform in a clearly changing market. To say that Nokia is doomed is to oversimplify and to hyper-estimate the value of the opposition.

    Only one thing only can at this point “doom” Nokia and that is iPhone OS becoming available license free to any Chinese phone cloning shop. And as we know that will never happen.

  14. Observer Says:

    Nokia has made major level mistakes in very short period of time and wasted literally billions of dollars yet same top management is still on board. Ovi has probably been the biggest failure in mobile history. Service was launched globally, but even after a month it was launched it’s still not working and the content is pure crap. Just read users comments on S60 and you get a pretty good idea it’s not what they want. Apple came and changed the game with iPhone. Android brings Apple’s super usability to other makers touchscreen phones. Android is here now and it works.

    Nokia can keep on selling those cheap poor man’s cellphones to China and India, other major players will dominate the smartphone market soon.

  15. John Doe Says:

    Android brings s**t. I have an Android phone and trust me, it is not usable. I give all due credit to iPhone but I have nothing to give to Android. Even in a world without iPhone, Android still has nothing to offer. No innovation, no design, no wow factor in UI, no decent hardware … nothing. Boring from the sales package upward. Android was born dead and now Google is already replacing it with a new OS, in fact with yet another Linux distro. This time browser based, aiming at disrupting Pre’s pale attempt to claim an innovation niche.

    I don’t mind waiting for the smartphones war to be over, and I will buy the best phone for me on the market, from HTC or Nokia it does not matter as long as I am satisfied with it.

    I’m just sick and tired of lousy bloggers and dumb readers.

    @Observer: How cool must be to be you. So sharp and wise, able to see everything that Nokia’s management has yet still to grasp. To bad you don’t know what Ovi is …

  16. Jabberwocky Says:

    Nokia has a solid base of business customers for its smartphones outside of the U.S. The iPhone is much less of a threat to Nokia’s dominance in that market than are BlackBerry phones (how in the hell did RIM/BlackBerry never get a single mention in the article or any of the comments up ’til now?!). Just because it’s early attempts to compete with Apple don’t measure up doesn’t mean it won’t learn from those mistakes.

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