David Wolf

Nokia's Restructuring: Nobody Loves A Value-Chain Hog

Mr. Zheng,

Thank you for your comment. You are obviously quite passionate about this.

To begin, I'd like to point out that whatever the faults of my line of argument, you are mistaken in your assumptions about who I am.

You said:

"I know what is the origin of your so silly reviews, it is all because your narrow eyeshot. You just use a Verizion 1 mega camera Samsung phone and one ipod. You never go outside US to say how European, Chinese, India, Japaness are living. That's your problem. Remember twice, cellular industry's Vatican is not US."

If you had taken the time to learn a little bit about me before launching a personal attack (which, you should know, detracts seriously from your credibility), or indeed if you had even read the article carefully, you would see that I actually live in Beijing and have lived here for twelve years. I actively use two iPods, a Motorola ROKR E6, regularly try the handsets of other manufacturers, and I've spent more time in Japan than the United States in the past three years. So I actually agree with you on one point - the heart of the cellular industry lies outside the US, and indeed Asia leads the world.

I am not an Apple zealot. I love and use their computers and their iPods, but I see the iPhone as a niche product and not a threat to the core industry. If you had read some of my previous posts on the subject, you will find I am extremely skeptical about the iPhone's near-term prospects in Asia generally and China specifically.

Since Nokia is the subject of our discussion here, let us return to it:

When I speak of design, I am not referring to technical specs. Outside of Nokia, people use the term "design" to describe the overall shape, form, and fit of a device. I don't think there is any question that Samsung, LG, and Motorola are far ahead of Nokia in delivering devices that are appealing to the senses, and therefore appeal to the growing number of users who see their handsets increasingly as a fashion accessory, not a computer. A recent survey I saw noted that after price, the most important attribute of a handset is how it looks. Now, you and I, being more technical, may not fall into that category, but we are most assuredly the exception, not the rule.

When I refer to mobile entertainment, this includes primarily handsets designed for music and video playback. These are an important category, because in Asia we like to use our mobile phones as entertainment devices. Nokia may well have 20 devices that can play music, but the numbers out of independent research houses like SinoMR make it clear that the sheer number of devices does not mean leadership in the segment. Sony-Ericcson still leads that pack with only a handful of devices, and 70% of Motorola handsets sold in China are either music enabled or optimized. Nokia's problem in entertainment is the experience, and part of the reason you will probably see them migrate off of Symbian in the next 18 months to the "cute" Linux-Java platform is that they have stretched Symbian just about as far as it can go in this area. Since you asked for a list, Motorola has the ROKR Z6, E6, E2, E780x, E680x, SLVR L6g, and MING that all play games. Is the list as long as Nokia? No. But sometimes a wider choice is a substitute for a quality experience. That's a merchandising tactic that is as old as retail.

As to mobile gaming, the category is languishing generally in China, a very small and specialized niche. I expect to see some major announcements from Nokia on games in China in the second half of this year, but they are still recovering from their N-Gage faux pas globally. Me, I've got six games on my ROKR E6 that I play occasionally to regularly, but as I said, I am not representative of the broader population in this regard.

As to Nokia's performance in the US market, Nokia's loyalists may believe the company's weak showing there is because of Qualcomm, but the reality is Nokia's original and continuing failures in the US can be attributed directly to product decisions made at Nokia.

My evidence about Apple's leadership in design and user experience, I think you may have been confused. I was referring to their leadership in design and user experience generally. I'm not ready to judge the iPhone until I - and a few million other people - have had a chance to use it. You also continue to confuse "features" with "design" and "user experience. That's okay - Nokia has, too. The rest of the industry and the vast majority of users, on the other hand, do not. Apple's leadership in design and experience in the computer and consumer electronics industries is a matter of record, and if you want to compare Apple and Nokia on innovations, we can do that separately. I think you might be surprised at the results.

As far as "leverage" is concerned, frankly that's all Nokia has, and as a company it is starting to understand that sheer volume is not going to be enough if it wishes to continue as a healthy business. This is why it is undertaking its foray into services, software, and the like in first place. After all, it's much easier to launch into a "blue ocean" strategy than it is to fix core problems.

Look at the market performance in New York overnight, and you will see that investors are as unconvinced as I am that Nokia is doing the right thing.

And to your final question: I'd bet on NOK, SNE, MOT, and Samsung for music phones against the iPhone any day. That may change, but for now, that's where my money is.

Thanks again for your comment.