Nokia: it's no longer about selling phones. Really?

You know that something is up when someone at Nokia, the largest phone maker (by units), is saying that “it’s no longer about selling phones” (in a conversation with Bloomberg, via NYT). This phrase was used as Nokia is trying to fight Apple in the App space. The end-game is to emphasize what Nokia smartphones are capable of. It’s a recognition that the value is in the software.


Of course, Nokia is right to ramp up the Apps offering on its platform, but in my opinion, the above statement is plain wrong: it is about selling phones.

Just like the game console market, market-share and profitability are the two most important factor that drives App developers. And for both of those, Apple has largely proven that earning a top spot in its app store is like “striking gold”, at least for a short while. This is because the Apple installed base of device (iPhone, iPod Touch, iPad) is one of the less fragmented out there. Apps written for the lowest common-denominator “just work”.

To fight Apple back, Nokia needs to have apps, and to have apps, it needs to have cool phones on which (lots) of people want to use apps. Many observers will be quick to point out the *huge* Symbian market share and so on… but honestly, I think that Symbian is not even in the fight anymore. iOS andAndroid are leading the game, and while Meego might have a chance in the future, its installed-based is tiny.

To increase Meego’s market share, Nokia needs to sell more smartphones than ever. And to sell more smartphones, Nokia needs attractive designs and a great user experience. This is a situation that is really hard to break out of, because the money (and the political power) inside Nokia is probably in the hands of those who generate more revenues, and that the (cheap) feature-phones.

Some say that Nokia should simply switch to Android. This might be an interesting experiment, but how would Nokia then compete with the likes of HTC (or Samsung), who are currently dominating the design and production of Android phones? Nokia currently has the choice between taking a huge risk (with Meego) and be in charge of its fate, or jumping to Android and be commoditized to death.

In the end, this is going to be a test of leadership for Nokia. Its management will have to pull off a “Manhattan project” if Nokia wants to get back in a big way. If it doesn’t doit soon, I’m afraid that the “halo effect” that the brand is enjoying in developed market will eventually fade off. In the ruthless world of consumer electronics, you’re only as good as your last smartphone.

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