Leadership troubles

Nokia has set the all-round benchmark for handset companies over so many years that to question its strategy could be classed as heresy. But that's what an increasing number of market analysts are doing as the company stumbles to implement a smartphone product strategy, and looks set to lose market share in its own backyard of Western Europe.

While smartphones make up a small percentage of Nokia's overall revenue and product numbers, Nokia's continued inability to develop a real competitor to Apple's all-conquering iPhone is becoming more than a minor embarrassment. Nokia's latest attempt, with the announcement of the N97 (unofficially labelled as an iPhone-killer), has failed to enthuse the majority of those who saw and tested the device, The effort is furhter hampered by not being scheduled for a commercial launch until mid-next year.

A Credit Suisse report poured further worries over Nokia's attempts to combat Apple by stating the Finnish company's applications strategy was far more fragmented than Apple's. "In addition, while the long-awaited 5800 XpressMusic is a decent entry into the touch screen arena, we believe that it will be unable to compete with the likes of Apple's 3G iPhone, and we would look to see further touchscreen announcements by Nokia," said a CS analyst.

The CS report also forecast that, with the competitive pressure from RIM, HTC and Apple increasing in the smartphone segment, Nokia's current share of the sector, which has declined to 38 per cent in Q3 2008, would remain vulnerable during the first half of 2009--and that Nokia's smartphone margins would drop from around 20 per cent this year to 15 per cent in 2009.

While the picture for Nokia might look troubled, other handset vendors, such as Motorola and Sony Ericsson, have deeper problems to resolve, and with less resources.

However, Nokia is certainly under the cosh, and 2009 will be a critical year for this market leader to prove its credentials, and the cellular industry will watch with keen interest its every move. - Paul