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Nokia to shift focus from handsets sales to services

Nokia to shift focus from handsets sales to services
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First Published: Wed, Aug 19 2009. 10 04 PM IST

 New focus: Nokia president and CEO Olli-Pekka Kallasvuo. Manvender Vashist / PTI
New focus: Nokia president and CEO Olli-Pekka Kallasvuo. Manvender Vashist / PTI
Updated: Wed, Aug 19 2009. 10 04 PM IST
New Delhi: The world’s largest mobile phone maker, Nokia Corp., is increasing its focus on selling services rather than only handsets, to tackle mounting competition from Research in Motion Ltd’s (RIM) BlackBerry and Apple Inc.’s iPhone.
New focus: Nokia president and CEO Olli-Pekka Kallasvuo. Manvender Vashist / PTI
This would include a so-called push email service that would compete with similar services provided on BlackBerry and iPhone handsets.
Nokia aims to have 80 million active users for its services by the end of this year and ratchet it up to 300 million by 2011.
Olli-Pekka Kallasvuo, president and chief executive officer of Nokia, said his firm would concentrate primarily on messaging, media and entertainment services that includes email, music and gaming.
The firm is betting heavily on its mail and messaging services and has launched three mailing services. For enterprise users, Nokia has a mail for exchange service that synchronizes Microsoft Exchange inbox, calendar and contacts with compatible Nokia devices.
For individual consumers, Nokia offers a push email service, giving a user access to a maximum of 16 accounts in one inbox, and Ovi mail, which is “primarily for first-time email users”, Kallasvuo said.
Push email is used to describe email systems that provide an always-on capability, in which new email is instantly and actively transferred to the phone as it arrives.
This service, called Nokia messaging, will soon become commercially available in India. The company also offers navigation services based on a global positioning system in nine cities and is looking to expand it to 25 cities in the next 12 months.
Nokia also has a service for Indian farmers called Nokia Life Tools, which gives farmers access to relevant information including weather reports and language translations. “When we carried out the test of this project in Maharashtra, we saw that farmers spent around Rs30 on getting relevant information. Life Tools gives this to them at Rs2,” said D. Shivakumar, managing director, Nokia India.
“We have been known as a mobile phone company but in fact our industry is changing,” Kallasvuo said. “We are leaders in one industry and we are going to become leaders in the new industry,” he added, referring to a changing telecom industry where voice-based communication is becoming a smaller part of the overall mobile communications pie.
According to research firm Gartner Inc., worldwide mobile phone sales decreased 6.1% to 286.1 million units in the second quarter of this calendar year over the same quarter last year.
However, smart-phone sales surpassed 40 million units, up 27% from the same period last year, representing the fastest growing segment of the mobile-devices market. Any mobile telephone that combines voice services with email, Internet access, etc., is called a smart phone.
Nokia clocked 105.4 million in handset sales in the three months to June, showing a fall of 2.7% to as much as 36.8% in various markets. India is the second largest market for Nokia in net sales as well as revenues.
“The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors,” said Carolina Milanesi, research director at Gartner.
The Wall Street Journal reported on 20 July that Apple and RIM accounted for only 3% of all cellphones sold in the world last year but 35% of operating profits.
The disparity will become starker this year as Nokia and RIM are expected to hold 5% of the market in unit terms but 58% of total operating profits. The two companies’ outsize share of profits underlines the shift in the wireless industry toward feature-rich devices accenting easy-to-use software and away from an emphasis on hardware. “Not just new technologies, we are looking at solutions that we can offer,” Kallasvuo said. “Hardware alone will not be the defining factor for the handsets in the future.”
In the smart-phone segment, Nokia held a market share of 45% with 18.4 million sales in the second quarter of 2009. RIM and Apple had an 18.7% and 13.3% market share, respectively, for the same period, according to the Gartner study.
Meanwhile, Nokia’s factory in India has in three years become the firm’s largest manufacturing facility, with at least half of the handsets being exported to 59 countries, Kallasvuo said.
The factory, located at Sriperumbudur near Chennai, started with 550 people in January 2006 and now employs 8,000 people. The factory has shipped more than 200 million handsets by October 2008.
The handset maker has so far invested $285 million (Rs1,388 crore) in the factory, going above a commitment of investing $150 million in four years, which was made at the time of opening the factory.
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First Published: Wed, Aug 19 2009. 10 04 PM IST