Nokia's Growing Threat To Apple And Samsung

| About: Nokia Corporation (NOK)

Only a year or two ago, Apple (NASDAQ:AAPL) was undisputed king of the smartphone and tablet world. But in the way the technology world turns, the kings are easily dethroned and only one thing seems certain - no one company is fit to rule a single technology market indefinitely. We've seen it countless times throughout the history of modern technology as companies hit the jackpot with a great idea that becomes something monumental for a few years but just doesn't provide lasting success and dominance for the company. It probably has a lot to do with endlessly changing consumer tastes and the continual cycle of innovation and emulation that is played out on the intensely competitive field on which the all world's greatest technology companies are players. It's hard to invent entirely new products. It's a lot easier to take what's out there and make it better or tweak in ways that consumers will eventually favor over the original inventor's technology.

Samsung (OTC:SSNLF) has become a masterful improver and tweaker in today's smartphone market. Just as Japanese companies like Sony (NYSE:SNE) were doing in the 80s and 90s, the Korean behemoth has managed to take American inspiration, add Asian engineering expertise and perspiration and reap massive profits. Samsung also excels at figuring out exactly what consumers really want and giving them just that. It's a completely different mentality than say, Steve Jobs' eschewing of market research, famously saying that people don't know what they want until you show it to them.

Where does Nokia fit in?

Nokia (NYSE:NOK) seems to me to be positioned on the sidelines, waiting for its talents to gain recognition by the crowd. It's part innovator, part emulator; part Jobsian, part crowd-pleaser and all the while still possesses some serious design chops. CEO Stephen Elop isn't quite so bold as Jobs to say that the consumer's taste doesn't matter, but on the other hand he seems to be willing to take bigger design risks than Samsung. If consumers ever grow tired of Samsung's offerings (which isn't really an 'if' but a question of 'when'), Nokia is waiting to take the spotlight as the next trendsetter.

I'll provide a few examples to illustrate this point. It seems that consumers have spoken in regards to batteries and storage- and many of them, perhaps the majority, want what Apple doesn't offer - expandable storage and removable batteries. Samsung has gladly grabbed up potential iPhone customers who have eschewed Apple's lack of compromise in this regard. Nokia also has plenty of offerings with these capabilities, like the Lumia 520 and 720. But on the other hand, its flagship phone, the Lumia 920, takes its cue from the iPhone. So for those folks that, like Mr. Jobs did, find removable batteries and SD card slots unnecessary or to be a degradation of elegant design, there exists a Nokia phone to suit their tastes.

Nokia is also experimenting with innovative smartphone cameras, and is the current market leader on that front. The Lumia 920 was widely heralded by reviewers as having the best camera among smartphones thanks to its impressive performance in low-light conditions. While the Nokia also offers the PureView 808, a 41 megapixel cameraphone, it is rather bulky and runs on the Symbian operating system, so it doesn't have much mainstream appeal. But consumers have undoubtedly shown that they are replacing their point-and-shoot cameras with their phones, so much so that the major camera makers like Canon and Nikon have seen their sales impacted dramatically. A recent study by Assocham found that high end smartphones are preferred over digital cameras by 91% of customers. Nokia has taken notice and is going to great lengths to offer smartphones with the best imaging capabilities, with both cutting edge optical hardware and software. The latest entrant to the competition, providing the rumors are true, is the Nokia EOS 41 Megapixel smart-cameraphone, which has a physical shutter and optical zoom. This device could rival mid-level point-and-shoot cameras and appeal to a lot of photophile consumers who have yet to abandon their standalone camera devices. If it runs on Windows Phone and isn't too thick, it's potentially the biggest game-changer in smartphones since the introduction of screens measuring 4" and larger.

Nokia was also the first smartphone maker to offer out-of-the-box wireless charging capability as well as polycarbonate cases in bold colors. And it is the first to partner exclusively with Microsoft (NASDAQ:MSFT) on its WP platform (all other Microsoft WP partners also make Android phones). This was a very risky move that at first seemed like a blunder but may be finally starting to pay off. For example, Microsoft is heavily promoting Lumia phones on its Windows Phone landing site. And the WP web store lists all 6 Lumia phones first, followed by HTCs phones and a Huawei phone. Interestingly, no Samsung phones are listed there. This means Nokia can focus on research and development and let Microsoft take care of its advertising. It seems like a win-win situation for both partners: Microsoft gets exclusivity with a top-tier hardware maker, and Nokia gets its products promoted heavily by a software maker with a massive advertising budget. They can also work closely together to achieve a Zen-like confluence of hardware and software, something Apple excels at but is one of Androids greatest pitfalls. One prevailing complaint about Android is that it's too scattered and fragmented, with different phone brands applying their own user interfaces and offering the Android updates to users on their own schedule, which is sometimes much later than when Google first releases a new version. There is no unified "Android experience" like there is iOS. It seems that Microsoft and Nokia are learning from Apple that a technology product is ultimately experienced as the synergy of its two halves - the software side and the hardware side. Designing them as halves of a whole, rather than as independent entities, seems to result in a more compelling product.

Nokia's hardware contribution is partly responsible for Windows Phone more than tripling its market share year-over-year. The report last month noted that Nokia accounted for 79 percent of all Windows Phone sales. As Nokia's smartphone line grows and continues to offer the level of innovation and compelling design that it has been, then Windows Phone and Nokia will pose an ever increasing threat to Apple and Samsung.

Disclosure: I am long NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Tagged: , , , Communication Equipment, Finland
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here