Nokia Tries to Undo Blunders in U.S.
BERLIN : Nokia, the world’s biggest maker of mobile phones, is an undisputed powerhouse in Europe, Asia and Latin America, where its market share regularly tops 30 percent.
But in the United States, despite two decades of trying, Nokia is struggling. The company, based in Finland, has seen its market share slip to 7 percent in June, down from 10 percent a year earlier and from a market-best 35 percent in March 2002.
Especially troubling is Nokia’s failure to make a dent in the U.S. smartphone market, the only segment of the mobile industry that is growing. Three years after Apple introduced the iPhone, Nokia has no touch-screen sales hit or phenomenon to compete with it as American consumers shop for Christmas.
Nokia is trying to recover from a decade-long set of mistakes that is forcing the company to play catch-up with Samsung, LG, Motorola, Research in Motion and Apple.
Among its biggest blunders in terms of U.S. sales, according to analysts and former Nokia executives, the company failed to design nearly all of its phones to meet the taste of American consumers. Instead, it mass produced devices shaped like candy bars for the global market to save on production costs.
It also designed its models to work on a European communications standard called GSM when about half the U.S. market — including the customers of Verizon Wireless and Sprint Nextel — uses CDMA.
“Nokia, at the height of its success, decided not to adapt its phones for the U.S. market; that was a mistake,” said Ari Hakkarainen, a Nokia business development executive from 1999 through 2007. “They are still trying to recover from this.”
An executive at a North American. network operator, who declined to be named because he was not authorized to speak publicly, said, “The attitude at Nokia was basically: ‘Here is a phone, do you want it?’ Nokia wouldn’t play by the rules here, and they have paid a price.”
But Nokia is trying to make amends. It has recently revamped its U.S. operations to collaborate more closely with the major U.S. operators — AT&T Mobility, Verizon, T-Mobile USA and Sprint Nextel — that control 96 percent of U.S. mobile sales, according to International Data Corp.
The strategy is beginning to produce results: AT&T will begin billing customers this year who use Nokia services branded as Ovi. Those customers will no longer receive a second bill from Nokia.
Rogers Communications, the leading Canadian operator, is making it easier to access Ovi Maps and N-Gage gaming services on two Nokia models.
Starting in mid-November, Nokia will sell a netbook, the Nokia Booklet 3G, which is a model for its new collaborative strategy. The $300 minilaptop will come with a $60 monthly contract at AT&T Mobility and will use Microsoft’s Windows 7 operating system.
“Nokia’s mobile device leadership, together with AT&T’s mobile broadband network leadership, Best Buy’s retail reach and Windows 7, is a very strong lineup,” Microsoft’s chief executive, Steve Ballmer, said last week, referring to the U.S. retailer where the netbook would be sold.
But some industry executives say Nokia faces an uphill battle to regain its lost stature. Times — and cellphones — were simpler when Nokia overtook Motorola to climb to the top of the U.S. market in 2000, and Apple, R.I.M. and Google were not in the mobile business.
“They claim they get it and understand the U.S. market,” said Ramon Llamas, a senior analyst at IDC in Framingham, Massachusetts. “It’s the story we have heard for the past couple of years. But the execution still is not there.”
The contrast between Nokia’s global dominance and its status in the United States, where a Nokia handset is almost as common as a Scandinavian restaurant, could not be more striking.
In Europe, Nokia supplies a third of the phones being sold in Germany and Britain by the market-leading network operators, T-Mobile and O2 U.K. In the United States, Nokia supplies just eight to AT&T Mobility and four each to Verizon Wireless and T-Mobile. It has none on offer at Sprint Nextel.
In all, just 14 of Nokia’s 121 phone models being sold around the world are available through U.S. operators. Eleven others are being sold through Nokia retail stores, its U.S. Web site and retailers like Best Buy, Dell and Amazon.
The thin operator lineup is a legacy of Nokia’s decision to mass-produce for a global market. In Europe, a competitive marketplace with more than 230 different operators, Nokia could always find one or more operators in every domestic market willing to sell its portfolio of phones.
But in the United States, operators can command design changes to promote and sell their own wireless services. They place their brand names on every model they sell and make sure their revenue-raising wireless services are prominently displayed and easy to use.
In March 2007, Nokia appointed an American, Mark Louison, as president of Nokia Inc., the company’s North American unit, and gave him a seat on Nokia’s global management board. Mr. Louison said in an interview that Nokia recognized its former strategy had not worked in North America and was now busy laying the groundwork for long-term success.
Under Mr. Louison, Nokia has set up liaison offices in Atlanta, Dallas, Seattle, and Parsippany, New Jersey, the headquarters of the major business units of the top American operators. Nokia also has an office in Toronto near Rogers Communications.
Nokia has struck deals over the past year with Qualcomm, the biggest maker of mobile phone chips for CDMA devices in the United States, as well as with Microsoft to design Windows Office Mobile software applications for some Nokia models that use the company’s Symbia operating system.
Nokia has based its global chief financial officer, Rick Simonson, at its U.S. headquarters in White Plains, New York, where 350 people work. Mr. Simonson will head Nokia’s nonsmartphone cellphone business. Also based there is Nokia’s global chief development officer, Mary McDowell, to increase input from the U.S. market.
“In the past, we had a one-size-fits-all mentality that worked well on a global basis but did not help us in this market,” Mr. Louison said. “That has changed now, and there is a recognition within the company that we have had to change our attitude about how we approach this market.”
The migration of wireless technology to higher-speed networks like LTE that are based on the GSM standard used by Nokia should also help the Finnish company sell phones.
The company’s decision to convert Symbian to an open-source software could also help spread its presence on smartphones.
“Nokia is about open systems, big markets, taking the products to the masses,” Mr. Louison said. “The smartphone business has grown very quickly and most of the solutions out there are closed systems.”
After Nokia said it would make Symbian open source, AT&T Mobility joined Symbian’s board of directors.
“Everything you see us doing is to build the broad set of capabilities to take us broader and deeper into the U.S. market,” Mr. Louison said.
Nokia faces a global economic slowdown that has put pressure on its sales and earnings. Last week, Nokia reported a third-quarter loss of $1.36 billion as sales fell by 20 percent globally — and 25 percent in North America — from the level a year earlier.
Besides initially failing to adapt its handsets for U.S. networks, Nokia did not anticipate changes in American consumer tastes, like the development of preferences for flip phones and touch screens, said Neil Mawston, an analyst in London with Strategy Analytics.
“Nokia was not in sync with American consumer tastes and got caught sleeping on two important changes,” Mawston said.
And for Symbian — as well as the Ovi services Nokia offers — to reach critical mass and start paying off, Nokia has to sell more phones to Americans. With its market share in single digits and North American unit sales still falling, that appears to be a tall order.
