Competition from the Apple iPhone has gotten most of the blame for Nokia's struggle in the past few years to maintain relevance and market share in smartphones. But the Android operating system backed by Google has emerged as a greater long term threat—and perhaps opportunity—for Nokia.
Figures released Jan. 31 by market researcher Canalys show that in the fourth quarter of 2010, phones built on Android outsold those using Nokia's Symbian operating system for the first time ever, grabbing almost 33 percent of the market, up from 8.7 percent a year earlier. Nokia, at No. 2, commanded 31 percent share, down from more than 44 percent in the last quarter of 2009. Apple's share edged down slightly, to 16 percent, in a market that nearly doubled overall, to 101.2 million units, according to Canalys.
News of Android's smartphone triumph came on top of a release the same day from researcher Strategy Analytics charting the rise of Google's operating system in tablet computers. In the fourth quarter of 2010 the Apple iPad remained the clear No. 1, with more than 75 percent market share, but devices built on Android surged to nearly 22 percent of the market, up from 2.3 percent in the quarter before.
Android, which is based on open-source software, has attracted big name handset makers (including Motorola, Samsung, and HTC) and has racked up thousands of developers and downloadable apps. Some of Android's appeal is due to its low cost and openness, but it also offers a rich set of tools and capabilities that permit low-prices devices rivaling the iPhone.
Meanwhile, Nokia continues to decline in smartphones. On Jan. 27, the same day the Finnish giant reported its fourth-quarter and 2010 results, Strategy Analytics issued a study estimating that Nokia's smartphone market share fell to 30 percent in the fourth quarter, down from 39 percent a year earlier. At the same time, Nokia's average selling price for smartphones fell 17 percent, reflecting price pressure and a shift to mid-tier devices, Strategy Analytics said. "Nokia is still the world's largest smartphone manufacturer, selling 100 million units in 2010, but it urgently needs to deliver an enhanced...portfolio of touchscreen models to strike back," said research analyst Neil Mawston in the report.
Nokia's Jan. 27 earnings release, which showed a 4 percent rise in 2010 revenues but declining profits and margins, prompted a sharp sell-off in its shares and raised anew questions about the company's strategy. A growing chorus of analysts wonder whether Nokia may be forced to swallow its pride and incorporate Android into its product roadmap.
In a client briefing issued Jan. 31, brokerage Nomura noted that 2011 could be a record year for smartphones, especially as the market shifts to mid-tier and low-end models for markets such as China. The tipping point, according to Nomura, will be Android phones priced at $150 or below. "Nokia does have smartphones at this price point, but the user experience remains so disappointing that we are not confident it will be able to participate in this market against Android," Nomura says.
The answer could come soon. Nokia has scheduled a strategy briefing day for Feb. 11 at which it could announce support for a new software environment. CEO Stephen Elop said during the company's Jan. 27 earnings call that Nokia needed to "build, catalyze, and/or join a competitive ecosystem," which some analysts took as a sign of the company's willingness to consider alternatives to its homegrown software. Nokia won't likely abandon Symbian or the advanced MeeGo platform it's jointly developing with Intel. But if Android keeps gaining market momentum, Elop may decide it's wiser to join 'em than fight 'em.
The Finns aren't gloating types, but they must be taking a certain amount of delight from Nokia's third-quarter comeback. The world's largest mobile phone maker on Oct. 21 reported revenues of €10.3 billion ($14.4 billion), up 5 percent from the same quarter in 2009 and higher than the €9.99 billion average estimate among analysts surveyed by Bloomberg. More importantly, net income of €529 million ($740 million) was nearly three times consensus. In last year's third quarter, Nokia (NOK) lost €559 million.
Driving the turnaround was a huge jump in smartphone sales, which hit 26.5 million units in the quarter, up 61 percent from a year earlier and 10 percent from the second quarter. All told, the category of products that Nokia calls "converged mobile devices" contributed €3.61 billion to the top line, while sales of nearly 84 million conventional handsets in the quarter brought in just €3.56 billion. That makes this the third consecutive quarter in which smartphone revenues outpaced those from simpler, higher-volume phones.
Other metrics also showed positive movement. Operating margins for Nokia's dominant Devices and Services unit, which accounts for 70 percent of total revenues, climbed one point from a year earlier, to 10.5 percent. And the company's closely watched average selling price (ASP) crept up to €65, from €61 in the previous quarter and €64 a year earlier. This was due to the higher relative volume of pricier smartphones in the mix, though the ASP of those devices continues to sag—down a worrisome 28 percent during the past year, suggesting Nokia may have been forced to discount in order to move merchandise.
Still, there was enough good news in the quarterly report to drive Nokia's shares up 6.3 percent in Helsinki trading, though the rise wasn't matched later in New York, where shares rose 3.3 percent by late afternoon. It also helped that Nokia forecast flat to higher margins in the fourth quarter and raised its forecast for overall industry growth to "more than 10% in 2010," compared with an earlier estimate calling for a rise of "approximately" 10 percent.
Unfortunately, that's pretty much where the positive points run out. Nokia conceded in its earnings statement that it expects to "slightly" lose market share this year compared to last in both volume and revenue terms. To help keep costs in line, the company announced plans to lay off 1,800 people from corporate functions, R&D;, and at Symbian, a Nokia-owned, London-based software firm that develops the operating system used in Nokia smartphones. It will also streamline operations by merging the development of the Symbian 3 and Symbian 4 operating systems.
Fixing Symbian is key to addressing Nokia's slipping market share. Simply put, the King of Handsets is having a tough time delivering products that excite buyers the way Apple (AAPL) iPhones and models running the Google (GOOG)-backed Android operating system seem to. Reviewers and bloggers tend to pin the blame on the Symbian software, which though powerful and robust, is faulted for being less intuitive to use.
That point was made starkly clear when researcher Strategy Analytics released its third-quarter smartphone market share estimates later on Oct. 21. In a market that grew overall to 77 million units, up 78 percent from a year earlier, Nokia's sales grew at less than the rate of the market, up 61.6 percent, while Apple's grew 90.5 percent and the "other" category, which includes a lot of Android sellers such as Samsung, HTC, and Sony Ericsson, soared 117%.
To be sure, Nokia still has 34.4 percent market share to No. 2 Apple's 18.3 percent, but that's a historic low for Nokia—and Apple is closing the gap. At the same time, a crowded market is getting even more competitive: BlackBerry-maker Research in Motion (RIMM) slipped to No. 3 in the third quarter, according to Strategy Analytics, with unit sales up 45.9 percent, but retains its strong footing in corporate accounts, while giant Microsoft (MSFT) is trying one more to time to barge into the handset market with its new Windows Phone 7 software.
All these challenges raise the stakes for Nokia's new CEO, Stephen Elop, who joined the company five weeks ago from Microsoft. He's got a lot of work to do, especially addressing Nokia's tiny market share and near irrelevance in the U.S. Having a decent set of quarterly numbers under his belt and a nice pop in the stock could help smooth the transition.
The way consumers use television is changing rapidly, with 70 percent of viewers now streaming, downloading, or watching recorded broadcasts on a weekly basis and half accessing on-demand TV or videos via the Internet at least once a week.
Those are among the findings in a new study released Aug. 25 by the ConsumerLab research group at Swedish telecom equipment maker Ericsson (ERIC). Conducted in seven countries (China, Germany, Spain, Sweden, Taiwan, the U.K., and the U.S.) with a sample representing 300 million people, the survey is part of Ericsson's ongoing efforts to understand how consumers behave and what they think of telecommunications and media.
The study findings confirm that patterns of media consumption are undergoing a major transformation, thanks especially to the Internet, mobile networks, and the emergence of digital devices such as the Apple (AAPL) iPad tablet.
To be sure, some 93 percent of respondents still watch conventional scheduled TV broadcasts at least once a week. But a growing number are demanding the ability to consume TV content when and where they want it—at a later date, via time-shifting digital video recorders (DVRs) or on-demand services, and on devices other than traditional TVs, such as mobile phones or laptops. In what's likely good news for gizmos such as the iPad, 37 percent of respondents said they would be interested in using a tablet in conjunction with their TVs.
"Consumption is fragmented and complex," said Anders Erlandsson, Senior Advisor at Ericsson ConsumerLab, in a press release about the survey findings. "There are few established consumption patterns, and it's a trial-and-error market with lots of curiosity around it."
The study identified some anomalies between consumer spending and usage patterns. For instance, respondents shell out an average of €38 ($48) per month for TV services—broadcast (cable, satellite, DSL), pay-per-view, and on-demand. Broadcast accounts for 60 percent of their total outlay, while on-demand is just 37 percent.
Yet of the 25 hours per week, on average, that consumers spend watching TV, only 43 percent is on broadcast or premium services, while 55 percent is time-shifted or on-demand TV. Ericsson argues that this gap in "wallet share" between what customers pay for and how they use TV augurs a shift in future spending patterns that service providers must anticipate and exploit. "It is clear that consumers are not paying for what they use the most," the company said in its press release.
What are the opportunities highlighted in the survey? Ericsson found that more than 50 percent of respondents would like to connect their PCs to their TVs to watch online video—from sources such as YouTube (GOOG) and others—or to view photos or browse the Web on a larger screen, more comfortably, and with groups of people. Yet making such connections today can be frustratingly complex.
Another key finding: 40 percent of respondents say that "immediate access" to chosen content is very important to them, suggesting a shift from owning videos to accessing programming on demand.
Most importantly, Ericsson says that service providers must devise ways to align consumer spending and usage. Thanks to the "everything should be free" Internet mindset and a growing shift to TV consumption on PCs, traditional service providers risk seeing the value of their offerings diminished. Yet, "if done right," Ericsson argues, "consumers will reallocate their TV spending to new alternatives."
By most measures, the world's largest maker of mobile phones delivered disappointing second-quarter results on July 22. Revenues grew less than 1 percent from the same quarter a year earlier, to €10 billion ($12.89 billion), and profits plummeted 40 percent, to €227 million ($292.5 million), below consensus analyst estimates of €285 million.
Nokia held onto 33 percent of the mobile phone market, but the average selling price for the 111.1 million phones it shipped in the quarter fell to €61 ($78.60) from €64 ($82.46) a year earlier. That helped pull down its operating margins on handsets and services to 9.5 percent, from 11.6 percent a year earlier.
Was there any good news? You have to dig down a bit to find it, but Nokia reported a few bright spots. The market for smartphones—higher-priced devices that typically support e-mail, multimedia, wireless browsing, and downloadable apps—is where Nokia's shortcomings vs. rivals Apple and Research In Motion has been most evident. But in the second quarter, the Finnish company sold 24 million such devices, up 42 percent from a year earlier, according to market researcher Strategy Analytics. The overall smartphone market grew at about the same rate, so Nokia held its share from a year ago, at 40.3 percent, and actually grew share slightly from 38.8 percent in the first quarter of this year.
This seems an astonishing idea, given the rise of the Apple iPhone and continued high visibility for RIM's BlackBerry devices. What accounts for Nokia's relatively strong showing (RIM had 18.8 percent of the market in the second quarter and Apple had 14.1 percent, both slightly down from the first quarter, according to Strategy Analytics) is Nokia's vast powers of global distribution and a preponderance of lower-end models in its lineup that appeal to aspirational buyers in emerging markets.
The result, of course, is that Nokia smartphones sell for a lot less, on average, than those from rivals. Average prices in the second quarter fell to €143 ($184) from €181 ($233) a year earlier. By comparison, Apple's smartphones generate $635 each in hardware and services revenues—which helps give Apple far better margins. Still, it's arguable that selling nearly 4.4 million more devices than your next two rivals combined gives Nokia a certain pride of place.
Israeli startup Time To Know is out to revolutionize education by offering schools a new digital teaching platform and interactive curriculum. The company's ambitious goal: to radically change the way teachers and students interact.
Founded in 2004 and located in a cheerfully painted former girls college in Jaffa, Time To Know has raised $60 million in funding spearheaded by Shmuel Meitar, a co-founder of customer care and billing software giant Amdocs (DOX). The company has won contracts with schools in Israel, the state of Texas, and New York City, and counts 350 employees around the world.
The flaws in today's "chalk and talk" educational system, which has remained pretty much unchanged for the last century, are widely recognized. But attempts to fix it by bolting on computers and connectivity have so far had only limited success—partly due to a lack of relevant educational content and software tools, says Dovi Weiss, Time To Know's Chief Pedagogical Officer and a co-founder of the company. "What is needed is a holistic approach," he says.
Enter Time To Know's Web-based software, which forms the basis for a suite of tools ranging from course planning and classroom management to group collaboration and student assessment. At the core is a collection of interactive curriculum in math and language arts (reading, writing and comprehension), as well as English as a second or foreign language. Thanks to its real-time nature, Time To Know gives teachers immediate feedback on which students in the classroom are succeeding or falling behind. "What we are building is a partnership between teachers and technology," says Weiss.
Ariel Brailovsky beat thousands of consumers to win a dream vacation package in Spain by doing nothing more than tweeting and completing a few tasks on Facebook. The contest was...
In the race to stay competitive in the emerging digital economy, Nordic nations continue to rule the roost. The U.S. has gained ground, and Asian countries are on the rise....
In a sign that European tech IPOs are warming up, French startup Carmat, a pioneering designer of an entirely artificial human heart, is planning a €15 million initial public offering...
Among the global economic upheavals of the past two decades, here's one worth cheering about: the worldwide spread of entrepreneuriship. Anyone who doubts that should have headed to Monaco...
LVMH Moet Hennessy Louis Vuitton has zero tolerance for companies that manufacture and sell fake goods. The Paris-based luxury group works with law-enforcement authorities to shut down counterfeiting operations in...
Nationalism is rearing its head in cyberspace. A proposal is gaining ground in France to build a federation of interconnected local computing clouds—funded in part by the government—to protect the...
Story Tools