Nokia Expands Business Portfolio

At first glance, it seems that Nokia, the largest manufacturer of mobile devices, is always lurking in the bushes. At the end of last month, the company announced its withdrawal from the Japanese market due to a lack of demand, only for the Finnish company to announce a major breakthrough into two new markets five days later: maps and email services on mobile phones.

Prepared by: Vanja Figenwald

Both of these moves, although directly unrelated, indicate a new direction in which Nokia is heading – they no longer intend to rely solely on growth in the mobile device sector, but plan to expand their portfolio to include services available on them. This line of thinking is not difficult to understand; in fact, it is a very logical reasoning. The market for devices themselves, which for so long was a booming sector with no end in sight, is slowly drying up, as evidenced by the fact that in many wealthy countries, the number of subscriptions exceeds the number of physical mobile units. Strong growth in mobile phone sales is increasingly a feature of emerging markets, while wealthy markets have clearly become saturated. Margins are therefore shrinking, and one option would be to try to increase their already lion’s share of 40% of the global mobile device market, but it seems more lucrative to tap into a new source of services on them.

Nokia is not a newcomer in the field of mobile services, but previous ventures have not been particularly successful. A few years ago, they launched Club Nokia, an online store with various content for mobile phones, which provoked discontent among operators threatened by this move. Given that Nokia largely depends on their goodwill, the venture failed miserably. However, this was not the end of their ambitions of that type, as last summer they launched Ovi, an attempt to create a global one-stop shop for mobile services, similar to those of Yahoo and Google in the internet space. Ovi, which translates from Finnish, aims to be much more – a center that integrates mobile services between phones and personal computers. For example, photos taken with their phones equipped with positioning technology, such as the N97, can automatically be tagged with coordinates and uploaded to Ovi, where they appear on a map that can be shared with friends.

Colleagues in the industry were initially not overly enthusiastic about this innovation, but Nokia has managed to achieve stable progress over the past year. They spent over $10 billion on acquiring companies with the necessary technologies for this service, enabling services such as a music store and synchronization of phone numbers between computers and mobile phones. What is somewhat surprising is Nokia’s success with operators, Vodafone and T-Mobile, who decided to support Ovi alongside their own services. Of course, they will also take a share of the revenue from advertising, e-commerce, and subscriptions to premium services. This time, Nokia succeeded due to the reduced interest of operators after the failure to launch their own similar portals.

With last week’s launch of two new services, named Maps on Ovi and Mail on Ovi, Nokia has managed to realize all key services, but the harder part is yet to come – smooth, unified functioning of the same. Only when they succeed in this, some analysts believe, will Nokia attract a larger number of users at the expense of the competition. In addition, Nokia must convince users to join and spread the word, which they have hardly done at all so far. Advertising for Ovi will begin next year, but it will not be easy to create a brand strong enough to compete with the ‘fortresses’ of Apple and Google’s mobile software. On the other hand, Nokia has a significant advantage stemming from their unrivaled strength in the device sector, specifically 470 million units sold this year, which translates into further numbers meaning they only need a fraction of that to achieve significant results. They are also aided by the lack of internet access in developing countries where mobile phones could gain popularity when it comes to internet access. Considering Nokia’s extremely resilient history, a company that first produced paper products, then moved on to rubber, cables, and electronics before entering the mobile phone market, there is no doubt about their instinct for survival in new market conditions.