Wednesday, August 03, 2005

Can a $800 Phone Reinvigorate Nokia?

The Wall Street Journal writes about Nokia's Chief of Design, Frank Nuovo, and the company's latest flagship handset, the 8800. During the late 90's, the LA-based Nuovo was credited with designing phones that made Nokia the global handset market share leader.

Over the past few years, his stature has taken a hit as Nokia has missed some key style trends and the company's market share has slipped.

A few years ago, the company sold 37 percent of all handsets world-wide. Motorola was second with 17 percent and Samsung third with 10 percent. As the article states, "Nokia was late tapping into the craze for clamshell phones in 2003 and 2004 -- a lapse that cost the company several percentage points of market share." According to Strategy Analytics, Nokia now holds "32 percent of the global market, with Motorola at 18 percent and Samsung at 13 percent.

Nuovo and Nokia are now resting their hopes on the sleek, stainless steel 8800, which costs $800 and took three years to design. The company is trying to counter Motorola's Razr V3, which has been a big success, "selling more than five million units world-wide since it came on the market last fall -- a huge number for a $500 phone."

Richard Windsor at Nomura believes the Nokia product line has shown improvement over the past year, but thinks "Nuovo still needs to rediscover his knack for producing premium handsets that can generate a lot of buzz and boost interest in the rest of Nokia's models." Remarked Windsor, "If they don't have an iconic product with which to reinvigorate the brand, it is not going to work."

The article mentions Nokia and Nuovo's past efforts developing high-end luxury phones, which cost up to $20,000. Gartner analyst Ben Wood commented that "They have been experimenting, but it's not clear that any of these experiments have paid off. Nokia's design team is under massive pressure."

In the end, the analysts seem sceptical that the 8800 will achieve Razr-like sales. "It is lovely, but it is not distinctive enough to be another Razr," said Windsor. UK-based analyst Kulbinder Garcha at Credit Suisse First Boston agrees and noting the hefty price added, "The phone is very well designed, but it remains at too high a price point."

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