It seems that my hunch on Nokia losing in the Mobile Handsets business is now validated based on the article published in www.telecomtv.com titled ” Nokia “not prepared” for smartphone onslaught; could sell its handset business“.
Highlights from the Article:
1. Apple’s iPhone division’s operating profits for Q3 2009 is estimated at $1.6B (based on quarterly earnings release data)
2. Nokia’s handset division’s operating profits for Q3 2009 is $1.1B based on the quarterly earnings release
Quoted from the article:
” Nokia’s director of strategy, Anssi Vanjoki, admits that the Finnish company was ill-prepared for the sustained and undeniably successful attack on its commanding position by the likes of Apple, Google and RIM and “does not rule out” the sale of its handset business at some time in the future. Martyn Warwick reports.
In an interview published this morning in the German magazine Wirtschaftwoche, Mr. Vanjoki, who is also Nokia’s head of marketing, admits too that his company needs to work harder to improve its mobile Internet products if it is to to stay in contention with the likes of Apple, Google and Research in Motion – the manufacturer of the increasingly popular Blackberry PDAs.”
Takeaways from the article:
1. Nokia’s march to the deadpool just seems to be accelerating over time as it remains uncompetitive with the onslaught of Apple and Google who are using their Silicon valley style Product Innovation capability to cut the oxygen supply to Nokia.
2. Apple’s profitability is based on the sale of only 5.2M handsets while Nokia sold 113.5M handsets out of the total market of 308.9M handsets sold in Q3 2009. The argument that I always made that selling large volumes of low end mass market feature phones and losing sight of the highly profitable high end market may be the sole reason why Nokia will fail as a company. Moore’s law applies to the mobile devices market as well and what is high end today will become low end in 1-2 years and when that happens the already uncompetitive Nokia will not have a market to play in.
3. Product companies need to focus on innovation and providing product delight to customers so that they don’t face the same fate of Nokia. If a large Goliath like Nokia can fail simply because they took their eye off the ball and started dabbling in fashion, gaming and areas that were not important to customers and started delivering poor user experience (btw, user experience is what made Nokia a great company a decade ago) then small companies with poor product offerings have a much shorter lifespan.
Indian product companies do not focus on delighting customers and keep offering sub-standard products to the market (Internet and Media companies included). The only reason they continue to do business is because our market is very large and due to the socio-economic background customers are not exposed to great products YET. Our markets have opened up nicely and we can now get the same products available internationally. It is only a matter of time until our people will start getting spoiled by great products and start demanding great products and services.
A nice example of this phenomenon can be observed in the Home Appliance business. LG and Samsung now dominate the home appliance business in India. Almost all the Indian companies in this space have been systemically eliminated and the few left standing like Videocon are struggling to remain competitive in this business and are diversifying into other businesses (DTH etc) where they can compete more effectively.
All Indian technology startups should focus on building great products that delight customers and can be benchmarked against the best in the world. If not, it is a matter of time until some silicon valley company will look at India as a part of their global expansion strategy and obliterate Indian companies that deliver poor quality.
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