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Thursday, May 27, 2004

Can Nokia Get The Wow Back? via Bweek

Nokia the Uncool. Who could have imagined it would come to this? Yet something has suddenly gone awry for the Finnish mobile giant. After a blowout fourth quarter, when Nokia sold a record 55 million handsets, it looked to be on track for another solid year in 2004. Then came Apr. 6. That's when Nokia shocked investors by disclosing that instead of 3% to 7% revenue growth in the first quarter, its top line would shrink by 2%. Although unit sales had soared 19% year-on-year, they lagged bigger growth for the industry as a whole, meaning Nokia lost five points of market share -- dropping below 30% for the first time since 2001.To turn profits around, it's making cooler phones, cutting prices, and moving into new businesses Does this signal the end of Nokia's remarkable reign atop the mobile world? Not so fast. With its unequaled brand recognition and distribution channels, analysts say, Nokia will be able to maintain market share above 30% for the foreseeable future. Unparalleled purchasing power and manufacturing prowess still let it churn out phones more efficiently than even rock-bottom Asian makers. And the company's huge resources, including a $13.6 billion cash horde and $4.4 billion in annual research and development spending, keep Nokia far from the brink. Analysts figure its revenues will be flat to down this year, at about $35 billion. But by 2006 they should rebound to $41 billion as handset sales top 225 million units. "This is not the fall of Nokia," says Bengt Nordström, CEO of Stockholm mobile consultancy Northstream.Still, there are troubling signs that Nokia is off its game. Failing to jump sooner into clamshell phones, which could make up nearly 40% of the industry's sales this year, was a major oversight. At the least, it suggests the Finns may have lost their renowned feel for consumer taste. What's more, despite a recent push, Nokia still has only about 13% market share in phones using the CDMA standard, which account for one-fifth of the total market. Even Nokia's brand -- sixth in the world last year according to consultancy Interbrand Corp. (OMC ) -- is showing signs of slipping in consumer surveys.Counting Nokia out would be a big mistake. But the Finns need buzz again -- and that's the hardest thing of all to recapture.

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