Back in December of 2008 we posted our conclusions on why Nokia would yet again fail to gain any traction in the smartphone market. (See Five Reasons why the new Nokia N97 doesn’t matter.) Since then the mobile Internet has continued to be dominated by Apple, Google Android, and Research in Motion.Â Recently we added Motorola to our list of winners in this space because their Android-based strategy appears very solid to us.Â Palm continues to be in the group but a high valuation coupled with concerns we have on long-term operating margin push it lower on our priority list.
The meta issue for Nokia seems to be the fact that they see the world through their own lens of “leadership” and believe they are actually ahead of companies like Apple and Research in Motion.Â Obviously this isn’t a good place to start if you plan on improving.Â Nokia measures things like their total number of different phones and their rank as a global brand.Â So they can succeed on their terms and fail on ours at the same time.Â Â Recently it came to light that the Nokia “Comes With Music” promotion has garnered just over 100,000 users after nine months in the market.Â Given the vast resources Nokia can wield their abject failures in new markets are simply stunning.
We’ve commented here before that Nokia management has been hostile to us in the past if we simply mentioned products like the iPhone or Blackberry during discussions.Â Based on the uselessness of this “exchanges” we haven’t had a briefing from them in the past 12 months or so but we haven’t felt that we were missing anything based on the publicly available information.
This month Nokia is launching their “Booklet 3G” in Best Buy stores in the US.Â It’s a good quality small laptop what falls into the “netbook” category but will run Windows 7.Â It will compare favorably to similar models offered by Asus, Dell, HP, Samsung, MSI, and others.Â Nokia is offering it both with and without a 2-year data contract with AT&T.Â At the time of this writing it seems that the price with the data plan will be $299 and the best guess on a price for the system without a data contract is $599.
Nothing about the Booklet or the current plan is going to change anything in the market.Â (The same can be said of Dell deciding to enter the smartphone market.)Â Nokia will have a product in the category and can add it to their “unrivaled breadth of devices” slide and draw another “so what” from the user and investment community.
The central problem with Nokia is that they have not aligned themselves to any significant segment of the smartphone market.Â We hinted at this in our review of the N97 which noted that the devices “was neither sexy nor business like” which means it has modest appeal to many but great appeal to few.Â Nokia has been abysmal in the consumer and entertainment space versus a device like the iPhone and similarly unable to come close to matching Research in Motion with business features and enterprise appeal.
We haven’t seen any evidence that this identity crisis is going to resolve itself soon.Â At the same time Android promises to fill another gap for consumers and carriers looking for a robust but more open and customizable device.Â Motorola, HTC and many application developers are focused on Android as a platform alternative to the proprietary iPhone.Â This is yet another segment of the smartphone market that Nokia has not seized.
We have no axe to grind on Nokia and although we haven’t performed a full Intrinsic Value analysis on the company their valuation probably already reflects a good measure of despair for them.Â At the same time we wonder if and when this giant might wake up and be felt in the mobile Internet / smart phone segment.Â Is Nokia really going to leave it all for Apple, Research in Motion, Google and a host of Android suppliers?
[Disclosure: Neither the author nor Research 2.0 has any investment position in Nokia at the time of this writing.]