Further glimpses at Nokia Corp.’s strategy for addressing the CDMA market that has largely eluded its global grasp came to light recently as several phones surfaced, rebranded for the Finnish handset giant.
Web-based reports revealed last week the existence of a CDMA2000 1x EV-DO handset made by SK Teletech, now a subsidiary of Pantech, branded as a Nokia 6305i slider phone and apparently destined for Verizon Wireless, though neither Nokia nor Verizon has announced it. Twice this month the Federal Communications Commission announced approval of other CDMA handsets, both clamshell-style models made by Pantech and rebranded for Nokia as the Nokia 6215i and the 6315i.
These efforts come as Nokia’s joint venture with Sanyo Corp. to produce CDMA handsets, announced in February, is ramping up but still shy of tangible products.
Analysts say that Nokia’s efforts are critical to maintaining its presence in CDMA markets, particularly in the United States and in emerging markets such as India, as it does so effectively in the GSM world. While Nokia has a well-established presence in both technologies in India to maintain, it is playing catch-up with arch rival Motorola Inc. in the United States, which according to Nokia executives is a market whose importance far outweighs its actual size.
Nokia declined to provide details on its use of original design manufacturers or its CDMA direction, other than to reiterate their rather opaque stance that the company-known for making its own phones-“will use ODM manufacturers for certain products where business reasons make it a logical course of action.”
Observers, however, simply point to Nokia’s past attempts to work around Qualcomm Inc. patents on its CDMA handset business, first by developing its own CDMA chips with limited success, then by forming the JV with Sanyo. Because that JV is not expected to bare tangible fruit for as long as a year or two, the apparent deals with Pantech and its SK Teletech subsidiary probably represent an interim strategy. (Nokia and SK Teletech reportedly inked a deal in March 2005 to produce the EV-DO handset, prior to SK’s purchase by Pantech in May 2005.)
In the bigger picture, Nokia’s arrangements with Pantech will also allow it to swiftly move its client software and content delivery platforms into the EV-DO world as high-speed, CDMA-based networks are built out in the United States and elsewhere around the world. Companies such as Motorola and Qualcomm also are pursuing a strategy of marrying their existing brand recognition to multimedia capabilities embedded deep in the mobile phone, ultimately intended to create brand-extending “experiences” for end users.
“Nokia has an ecosystem extending from developers to end-user services and a level of brand recognition and end-user affinity and it wants opportunities to add value beyond hardware,” said John Jackson, senior analyst with the Yankee Group.
According to Taha Rangwala, senior analyst with Pyramid Research, the deals with Pantech and SK Teletech provide entry-level and mid-tier CDMA phones, leveraging those ODMs’ CDMA capabilities. The Sanyo JV should provide a high-end CDMA portfolio for the U.S. and for Japan, where the market tends to favor local vendors. In all three cases, these ODMs will benefit greatly from producing handsets for the world’s leading handset brand.
“This is a pure CDMA play from Nokia’s perspective,” Rangwala said. “They won’t see tremendous volume from CDMA handsets, nor is it likely to gain market share in CDMA.”
Clearly, however, Nokia cannot afford to ignore CDMA, especially as it represents a major portion of the North American market where network upgrades will finally support the rich, multimedia features that Nokia’s customers such as Verizon Wireless are banking on for future revenue growth.
“Nokia doesn’t have an EV-DO story,” said Jackson. Thus, it is imperative to maintain its presence across all CDMA market segments, especially the multimedia end, and has been compelled for competitive reasons to have a short-term (Pantech) and long-term (Sanyo JV) strategy. “Nokia would like to bring its broader investments in client software and content delivery platforms into the CDMA space,” Jackson concluded. “There’s no longer much value in remaining a simple hardware vendor.”
