82 GlobeAsia September 2013

Technology

Why Nokia must again reinvent itself to stay relevant

penetration of Windows Phone and consequently Nokia is due in no small part to the abysmal offerings on its joke of an app store.

Nokia’s CEO Steven Elop (a former Microsoft Executive) is clearly a fan of the Windows Phone OS. Elop even announced an exclusive monogamous relationship with Microsoft as early as 2011. It is, however time to re-evaluate that relationship.

Google’s Android operating system is unequivocally the leader in mobile operating systems and Nokia has a hard time explaining its lack of apps to potential buyers. At the most recent Nokia launch for the Lumia 1020, Elop made a great deal of Hipstamatic and Swapchat (alternatives to the popular Instagram and Snapchat apps on Android,) but this merely served to highlight the lack of official Instagram and Snapchat apps for the Windows Phone ecosystem.

 Lemons into lemonadeNokia’s relationship with Microsoft could work in its favor if it plays its cards right. The fact is that when Nokia first pledged itself to Microsoft, it appeared that Microsoft was holding all the cards. Many expected the Windows

okia has released the Lumia 1020 to much acclaim worldwide. The handset features an astonishingly

advanced camera capable of producing 41 megapixel images.

Comparable to a professional SLR, the Lumia 1020 is considered by many to be the last hope for Nokia. The company has seen its star fade from absolute domination in 2008 to utter devastation today.

Lately Nokia has been digging its nails into the proverbial edge of a cliff desperate to hold on to some semblance of its former glory. With its latest product, Nokia is attempting to carve out a niche for itself among those who use their smartphones principally as cameras.

Many analysts question whether the company has what it takes to rein-vent itself or whether the Lumia 1020 will be its final gasp.

 Nokia faces a sea of challenges Nokia has typically excelled in the mid- to low-range smartphone market but the changing landscape could seriously hurt its prospects. While Nokia’s Asha and low-end Lumia models have done reasonably well so far, the soon-to-be-

released MotoX will likely hit Nokia hard.

Google has publicly announced that it intends to spend over $500 million dollars on marketing the MotoX. Early reviews indicate that the MotoX is not an exceptional phone, but its ad budget and $199 starting price will definitely give Nokia a run for its money.

Complicating matters further, Apple is also expected to enter this space soon. The rumored budget iPhone or iPhone 5C as it’s expected to be called would make buying a Nokia handset an unattractive option even for budget conscious consumers.

As blogger Mike Mandala of The Motley Fool network points out, if the iPhone 5C cannibalizes even 5% of Nokia’s market, and the MotoX another 5%, Nokia faces a loss of revenue that amounts to almost $2 billion. A very significant amount Nokia can scarcely afford to lose while it already battles for relevance.

Nokia’s other challenge is its rocky relationship with Microsoft. With the exception of a few stragglers, Nokia’s handset line is heavily dominated by phones running the rather unpopular Windows Phone OS. The low

September 2013 GlobeAsia 83

by Jason Fernandes

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Phone ecosystem to function like its PC business, with Microsoft eating the lion’s share of profits on the OS while handset makers eke out very thin margins.

The fact is however, Microsoft’s PC dominance is due to the abundance of PC manufacturers that all rely on Microsoft for their operating system. In the smartphone space, things are very different.

Shortly after 2011 a curious thing

happened. Microsoft’s suitors for its mobile OS each slowly gave up on the Microsoft ecosystem. One by one almost every manufacturer slowly pulled out, leaving Nokia to represent almost 80% of the Windows Phone market today. If ever there’s been a shift of power in the corporate world that happened as quickly and absolutely as it has in the Microsoft/Nokia relationship, I am unaware of it.

At 80% of the Windows Phone

market, Nokia holds enormous sway over Microsoft, much more so than any manufacturer of Android phones has on Google for example. What Nokia chooses to do with its clout is anyone’s guess but they would do well to evaluate the ways in which Microsoft could help, in distribution, marketing or any other sphere and then pressure Microsoft to take action. At the very least Nokia should demand Microsoft make a significant investment in its

84 GlobeAsia September 2013

Technology

App store, perhaps by offering greater incentives and resources to developers.

Some have said that it would be wise for Nokia to tread carefully because Microsoft could pull the rug out from under Nokia if they decide to conclude their experiment with Windows Phone. Nokia is so heavily dependent on Windows Phone at this point that such a decision would mean almost certain doom for the company.

Analysts have suggested that due to certain licensing deals, Microsoft might actually make more money through the sale of Android phones than its own Windows Phones. Microsoft is expected to make $3.4 billion on Android devices this year and that number will only increase as more Android phones enter the market.

Is there any motivation then for Microsoft to concentrate on its own mobile operating system? I believe the answer is yes. With mobile devices massively outselling PCs, a tech company today lives and dies on its mobile offerings.

Microsoft in particular has invested heavily in its cross-device ecosystem, integrating its PC, gaming, mobile and online offerings so thoroughly that the success of each is inextricably linked to the success of the ecosystem as a whole. Microsoft has much too much at stake to let Windows Phone die and this could work to Nokia’s advantage if it is able to exploit the situation.

Another factor that would likely work in Nokia’s favor is the slow implosion of BlackBerry. BlackBerry’s shares have taken a beating over the last several weeks because its latest offerings, while decent, have failed to make the kind of sales figures that investors were hoping for. The company continues to hemorrhage subscribers and a recent report indicated that a deal to take BlackBerry private could be imminent.

What does this have to do with Nokia? Well uncertainty is not good for any company and BlackBerry is no different. If Nokia plays its cards right, it could make Windows Phone (and by extension Nokia) a very real third option after iOS and Android. In fact Elop explicitly stated as much during the launch of the new Lumia 1020.

Many BlackBerry users could be open to jumping ship but this would only be if Nokia is able to convince Microsoft to invest more heavily in the Windows Phone developer program and improve its app market.

As it stands however, Nokia is ill-equipped to take advantage of the BlackBerry exodus because these users are unlikely to move from one dismal app ecosystem to another similarly challenged one. Nokia (or more specifically Microsoft) does have a small window in which to act however, and if the two companies are able to significantly increase the number of apps in the Windows Phone marketplace, they might be able to benefit from BlackBerry’s recent stumblings.

 Reinvention is intrinsic to Nokia’s identityFew people may be aware that Nokia initially began as a paper and pulp producer, moving on to several different industries over its multi-decade history. At one time or the other Nokia has produced everything from footwear and car/bicycle tires, to computers, televisions and even chemicals. This is of course all prior to their move into telecommunications and finally mobile phones. Reinvention

Nokia has taken note of the fact that a vast number of smartphone users heavily utilize their phones for taking pictures.

is something this Finnish company has proven to be fairly good at.

This brings us full circle back to the Nokia Lumia 1020. Nokia has taken note of the fact that a vast number of smartphone users heavily utilize their phones for taking pictures. Nokia has chosen to focus on just this market with the new Lumia’s completely unprecedented camera.

Tales of blurry cell phone pictures taken in low light are legion as more and more people take pictures almost exclusively on their cell phones. The Lumia 1020 camera features such a high resolution that it provides a virtually lossless 6X zoom, a feature certain to delight shutterbugs.

If Nokia can reinvent itself with the Lumia 1020 as the brand that photo enthusiasts choose when buying a smartphone, it could survive and even thrive by carving out such a niche. Whether Nokia is able to resurrect itself remains to be seen, but the answer also depends heavily on whether it is able to leverage its clout and convince Microsoft to take the app store a little more seriously.

The Lumia 1020 and Nokia’s attempt to corner the camera phone niche could mark a turning point for the company if it is able to use that momentum to slowly bring things around. It’s too early to count Nokia out. For a company that started off in the paper and pulp industry, the lyrics of the Grateful Dead tune Truckin’ seem especially appropriate: “What a long, strange trip it’s been.”

  Jason Fernandes is a tech commentator

and the founder of SmartKlock.