Nokia: Don't bet the house on content

At times you can feel sorry for Nokia. The company is damned when it dares to plan for the future, and it’s damned if it doesn’t.

But that illustrates the depth of its dilemma. Today, Nokia is phenomenally successful in one business – handsets – which generates £27bn ($54bn) a year, with a margin of between 15 to 20 per cent.

However, Nokia relies on a small number of powerful customers as its route to market. This isn’t a problem for every business. If you sell fighter aircraft, you know who your handful of customers are, and can schmooze them directly. If you sell bangles from a market stall, you can choose which market you sell from. Nokia doesn’t have the luxury of either: its channel is its market.

And “getting from here to there” is the problem.

At great expense last week, Nokia began to imagine itself as a very different kind of company: a vertically integrated services business. Mobile users would flock to the company’s new portal, Ovi, for games, music, information and “social” interaction. You might call this a “post-operator” world, but it’s also a “post-Nokia” world, as it presumes that both data and devices are commoditised. It’s a Plan B.

However, the strategy takes today’s complex mobile data eco-system and promises to torch it. Today, there’s room for a Real Networks selling games or ringtones, for example, or an AQA providing an answers service. Nokia’s Ovi portal effectively declares war on all these smaller service providers. That can be considered bad manners (or a business necessity) – but it isn’t fatal to Nokia’s plans. It’s the biggest, would-be service companies who are the most threatened.
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Widget-fiddling at Nokia

When one looks at the prime assets of the Nokia of five years ago, it’s alarming to see how many have been discarded. At the turn of the decade, the Finnish giant boasted a formidable reputation for reliability, security and ease of use. Now it’s thrown all three out of the window, with security being the last to go.

The diminishing reliability of these devices isn’t unique to Nokia, and it may be a consequence of having so many products, in so many markets, all at once. But engineers deep in Nokia we’ve spoken with describe how they grew weary at being conditioned only to fix a proportion of bugs. It offends an engineer’s pride to release a flawed product, but this became a way of life. There was simply too much to do.

As for usability, the company which pioneered an interface that helped popularize the digital mobile phone – NaviKey™ – now falls far behind much of the competition. With feature phones, Nokia’s interface has failed to evolve with the tactile and graceful interface of Sony Ericsson, for example.

At the high end, the story is far worse. The S60 UI initially provided Nokia with a clever bridge to the future, but it looks pedantic and cumbersome besides Motorola’s MotoRizr 8, let alone Apple’s iPhone. Nokia answers the perennial S60 user’s question, “Why so many clicks?” by adding extra hardware buttons, such as the slow and inflexible “Multimedia” key. S60 is incredibly poorly written in parts, but Samsung has demonstrated that it doesn’t have to be sluggish, by using its own chip to speed up its first European S60 phone. Yet Nokia has ensured most of its smartphone users have a substandard experience, by starving the devices of sufficient memory or fast enough processors.

It doesn’t augur well that the company’s skill at exploiting the emerging markets owes little to its recent R&D work: it’s succeeded with low cost models in China by dusting off older, more reliable, and easier-to-use technologies. In other words, it’s living off past glories, rather than looking to the future.

In fact, Nokia now appears to quite relish the complexity of its devices. Quite bizarrely, a company which had no need for an inferiority complex appears to have acquired one.
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What sealed Palm's software fate?

So, PalmOS ends up in the hands of an Japanese mobile browser company that almost no one has ever heard of. It’s a sad sign that expectations for PalmOS software have been so low, for so long, that PalmSource stock leapt 70 per cent on the news.

The origins of this decline have been well documented here at El Reg, we’ll only recap the key mistakes before raising a spectre that haunts this tale of Silicon Valley history: a spectre called Apple. 

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Nokia enters the data dispenser biz

Every bar has a condom dispenser. Why doesn’t every store have a data dispenser? Because you don’t want to shag a computer, of course. But this is an idea that remains largely unexplored.

At 3GSM last week, Nokia tiptoed into a market that one day might be enormous: the “proximity server”. If you’ve attended a tech conference in recent years you might even have used one without giving it a second thought. San Francisco pioneer WideRay has been in the business for five years: it beams the schedule to attendees on demand via Infra Red or Bluetooth. Inside the server is a cellular SIM, which updates itself from the network. But it could beam anything: ring tones today, MP3 files tomorrow. With an increasing number of punters having Bluetooth phones, the market potential increases daily. When we looked at the idea almost two years ago, it seemed proximity servers could have deep consequences, such as the potential to transform product branding, or at least make the retail experience less daunting for shop-o-phobics.
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Nokia cuts hit smart phone, multimedia R&D

Nokia is reining in R&D, with the axe falling hardest on its 3,000-strong multimedia division founded a year ago. The exact number of staff affected isn’t known, but a press release issued on Tuesday from Nokia Multimedia says the cuts are intended to reduce R&D expenditure to 9 to 10 per cent of net sales by the end of next year. That’s roughly the level it was in 2001. According to Nokia’s most recent annual report, consolidated R&D rose from 9.6 per cent of net sales in 2001 to 12.8 per cent in 2003.
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