LAS VEGAS-When Jorma Olilla, chairman and chief executive officer of Nokia Corp., bid farewell to the industry at CTIA Wireless 2006’s opening day keynote session on Wednesday, he asked the audience’s indulgence to reminisce about wireless’ coming of age during his 13-year tenure. Olilla leaves the firm in June for the non-executive chairmanship of Royal Dutch Shell plc, to be replaced by Olli-Pekka Kallasvuo, currently president and chief operating officer.
In terms of strategy and outlook, however, Olilla’s company is building on its forward momentum by busily executing its ambitious strategy to remain the world leader in mobile phone market share-about one-third of all phones sold globally bear the Nokia brand-and to overtake arch-rival Motorola Inc. in the United States.
In fact, Nokia sent ripples through the wireless industry just a week earlier when it raised its estimates for industrywide, global handset sales this year from 10-percent to 15-percent growth during last year, to about 915 million units. And mobile handsets are by far the largest of Nokia’s four major business units, which include network infrastructure, multimedia handsets and enterprise solutions.
“There will be a lot of very interesting stories coming out of Nokia in the next 12 months,” said Tim Eckersley, senior vice president for Nokia in North America, as he reviewed Nokia’s strategy for maintaining global dominance in handsets.
“Our expectation is that we will be No. 1 in the U.S., we’re just not saying when,” Eckersley said. “In the fourth quarter of 2005, we had 20-percent market share in North America, the No. 2 position.”
The company has played catch-up in the U.S., Eckersley acknowledged, due to its slowness to adopt the popular clamshell form factor and its historic weakness in its CDMA phone portfolio. The first challenge has been met and the second should be addressed when Nokia’s announcement of its intent to form a joint venture with Sanyo Electronics Co. Ltd. is realized this year, he said. Such a JV would become its own entity, the largest CDMA vendor in the world, measured by handset volume sales, according to Eckersley. Sanyo is strong in high-tier handsets and has a strong relationship with Sprint Nextel Corp., the second-largest CDMA carrier in the country.
Nokia’s strategy in the handset landscape for mature and emerging markets is one of value and volume, Eckersley said. It is combining functionality and design for the mature, replacement market in the U.S., Europe and Asia, focusing on making its manufacturing process nimble and responsive to shifts in the market. In emerging markets such as China, India and Latin America-where the so-called “next billion” mobile subscribers are thought to reside-Nokia is making an effort to finesse the manufacturing logistics of entry-level phones to maintain profit margins.
“The entry-level phone is not always the cheapest phone,” Olilla had told his audience last week at CTIA 2006, shedding light on Nokia’s well-known position that it would not enter the ultra-low cost handset space that Motorola is gambling on to overtake its rival. “The mobile phone is an aspirational device. Clearly, we do not take this lightly.”
According to Avi Greengart, senior analyst with Current Analysis, now that Nokia has begun shipping slim, silver clamshell-style phones in the U.S., with strong sales response, it runs up against rival Motorola’s product lineup that includes the much-sought Razr, which continues an unprecedented run of sales previously unseen in the wireless handset market. Nokia’s market share has slipped slightly in North America, according to Greengart’s recent report on the company, as Motorola, Samsung Electronics Co. Ltd. and LG Electronics Co. Ltd. have all but captured the mid-tier and high-end segments of the market.
The prospects in this competitive match-up draw a calm, determined look from Eckersley and parting rhetoric from Olilla, about the industry in general and Nokia in particular: “It would do us well to remember the power of simple services. New applications must work well, simply and at reasonable cost.”
