IDC: What Stephen Elop should do with Nokia in the U.S. market

Ramon LLamas IDCBack in 2000, I had my very first Nokia phone. It was a Nokia 5160. It had a black and white screen. It did not have a camera. It came with a stock grey faceplate that could be changed with a red one or a blue one. I played "Snakes" non-stop (my first exposure to mobile gaming applications probably started there too). It was cool. It was the phone to have among my friends. I still have it.

More than a decade ago, when the mobile phone market was just getting started in the United States, Nokia was the leading mobile phone vendor in the United States. Shortly afterwards, Nokia was also one of the leading smartphone vendors in the United States with its 3600 series and N-Gage devices. My friend had a 3630 that took pictures and ran on something called "Symbian." I secretly coveted it, and it was the one I planned on getting next.

Since then, Nokia has lost its luster in the United States, falling behind LG, Motorola, and Samsung in the overall mobile phone market, and Apple and Research In Motion in the smartphone market. Consider the following figures for Nokia in the United States for 2004 and 2009:

  2004 2009
Mobile Phone Market Share 19.5% 7%
Mobile Phone Ranking 2 5
Smartphone Market Share 21.8% 2.5%
Smartphone Ranking 2 8

Nokia's decline can be traced to its decisions not to participate in key developments in the market. 2005 was undoubtedly the year of the clamshell form factor, but you would have been hard pressed to find one from Nokia. Touchscreen-enabled devices were notably absent too in 2007. Its first quick messaging device did not come to market until 2009 with the Twist 7705 at Verizon Wireless. As for smartphones, Nokia launched its popular Nseries and Eseries devices elsewhere in the world, only to have them appear in the United States months later, usually through open channels.  Only one model, the N75, specifically targeted the United States in 2006, but by then, smartphone users, particularly consumers, were warming to BlackBerry and Palm devices. Today, most users would name Android, Apple, or BlackBerry as their next smartphone. Nokia and Symbian would infrequently be mentioned. Today, most of Nokia's devices can be found among prepaid services. Its smartphones still trail behind the market leaders, but the company has quietly grown its presence through open channels such as BestBuy and its own website.

Enter Stephen Elop

Now that Stephen Elop has officially taken over as the CEO of Nokia, there has been a lot of speculation over what he is going to do first. There are plenty of choices, from smartphones and operating systems to emerging market opportunities and mature market challenges. Already, Nokia is the leader in these categories in many other countries. But in the numbers and history mentioned above, the United States is a very different market in which to compete for Nokia. Elop and Nokia have their work cut out for them. Here's what I'd like to see happen:

Partner with a carrier and launch a premier smartphone in the United States. Success in the United States mobile phone market is directly tied to partnering with a carrier. The success of Apple at AT&T, and Motorola and HTC at Verizon Wireless has paid off in spades for all companies involved. In each instance, both the carrier and handset vendor were credited in each other's success, and in the process gained mindshare in the United States smartphone market as the leading examples of a successful partnership.

Launching a premier smartphone in the United States bucks the trend of previous Nokia smartphone releases. But Apple, Motorola, and HTC have recognized that the United States appetite for smartphones is always waiting to be fed, and a good hotbed to experiment before launching into other markets. iPhone 4 troubles were exposed in the United States (as well as several other countries), but it was a good launchpad to have that experience before a broader launch.

Put marketing dollars behind it. Most consumers are unaware that Nokia offers smartphones in the United States, nor what those smartphones are capable of doing. A massive marketing campaign that clearly highlights the capabilities of Nokia's smartphones and its carrier availability would go a long way in lifting Nokia's brand image in the United States. Look at how quickly HTC, a lesser known player in the United States smartphone market, raised awareness with its marketing campaign a year ago, and continues to generate interest.

Carve out a niche for Symbian and MeeGo. This is the biggest challenge for Nokia in an already crowded market. Android and Apple are widely accepted as consumer-oriented operating systems, and BlackBerry and Windows Mobile trace their histories to the enterprise. Moreover, BlackBerry is winning over consumers and the new Windows Phone 7 is aimed squarely at consumers. The good news is that there is still plenty of space to be had. The question is how Symbian and MeeGo do it better than anyone else.

Go down market with smartphones quickly. Smartphones are quickly becoming democratized in the market, no longer the sole domain of enterprise users and early adopters. There is low-hanging fruit to be had by bringing smartphones aimed squarely at the first-time user, and the lower price point can help drive volumes forward. Still, down market should not be equated with cheap.

Nokia can afford to get out of the Japanese market, as it did in 2008. But the United States is an important market for Nokia to compete in. Elop will need time to fully understand Nokia's position in the United States, come up with a strategy, and execute.

Good luck, Mr. Elop.

We'll be watching.

Ramon Llamas is a senior research analyst with IDC's Mobile Devices Technology and Trends team. In his role, Llamas tracks the quarterly results of the leading and emerging mobile device vendors, and uses the data to forecast the short-term and long-term direction of the mobile device market, and how it affects handset vendors, carriers and customers. He recently released his worldwide mobile phone and smartphone 2010 - 2014 forecasts, as well as a worldwide forecast of the mobile phone touchscreen market. In addition to being featured in FierceWireless, Llamas has been featured on Bloomberg Radio, National Public Radio, and quoted in Investor's Business Daily, the New York Times, and the Wall Street Journal. Llamas can be reached at [email protected].

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