The CEO of the world's No. 1 cell-phone maker discusses dealmaking, a partnership with Microsoft, and the pace of change at Nokia
Nokia is the global cell-phone leader, with sales of 329 million units in 2009. Yet when it comes to feature-packed smartphones in some markets, including the U.S., analysts say Nokia (NOK) is under threat from rivals Apple (AAPL), Research In Motion (RIMM), and Google (GOOG). Case in point: Nokia's "Comes With Music" service, which adds music to the purchase price of a handset, was introduced in 2007 just as Apple's music-playing iPhone was gaining momentum. "Comes With Music" has failed to attract large numbers of users, according to Music Ally, a U.K.-based digital music research firm, even as iPhone demand has surged. Nokia Chief Executive Olli-Pekka Kallasvuo spoke with Bloomberg BusinessWeek's Arik Hesseldahl on Mar. 16 about Nokia's plans for the U.S. market, its acquisition strategy, and an alliance with Microsoft (MSFT) to create mobile applications for businesses. He also addresses efforts to make Symbian, the operating system acquired by Nokia in 2008, more attractive to software developers. What do you think of Nokia's prospects in the U.S. in 2010? We have taken several steps to enhance and boost our position in the U.S. And that adds to the dynamics. One that hasn't gotten much attention is our cooperation with Microsoft in order to introduce and co-create enterprise applications on top of our Symbian operating system. This is a pretty big effort to become prominent in the enterprise segment. What do you expect to deliver as a result of the cooperation with Microsoft this year? It's more like 2011. We are starting to see certain benefits already. But it's really about 2011. We are not talking about only porting existing business applications and services on top of a mobile platform, but we are talking about co-creating as well. The analyst Michael Gartenberg was recently quoted as saying, "Nokia failed to lead a changed market and has been forced into reacting to competitors instead of driving its own vision of the future." Is it a fair criticism? If I think about the way we have led, for example in the area of turn-by-turn navigation, but I could expand that to cover building content, software, and services on top of the mobile device, and in that way moving up the stack, we have been more proactive here than anybody. I think 2010 will turn out to be an extremely important year, when I believe we will be able to take to the marketplace some of the services concepts and content delivery mechanisms that we have invested in during 2008 and 2009. So, yes, we have to move even faster. We have to transform the company even faster. That's fair. But in fact I think we have shown quite a lot of progress here. Are you likely to create a phone using the Snapdragon chip from Qualcomm (QCOM) anytime soon? I cannot comment on that one. All I can say is that Qualcomm definitely is a potential partner going forward. The companies did fight a long time in court, and now we see them as a potential partner. You've been acquisitive in recent years. Will you stand pat for now? We will continue to acquire some when we need new skills and capabilities in certain markets. But I would say the major building blocks are in place. What will happen with Palm (PALM)? Overall if you look at the mobile devices industry, and the size and complexity of it, in the past it has been difficult for a smaller company to have a sustainable position … and the amounts you need to invest are big. In addition to innovation and quality, you need scale. Is Nokia interested in acquiring Palm? I cannot speculate. How is "Comes With Music" working out? It's fair to say it had a slow start in 2008. It has been gaining speed and traction, and now we have made that global. We just launched it in Russia, and the response has been extremely good. It's quite important to understand the local element. Making "Comes With Music" happen in Russia means you have to have the local content. This is especially true in India. It takes a lot of time and effort to go country by country to get access to that content. In India, for example, we spoke to 130 rights holders to get an adequate amount of music on board, and there are not many companies I think that can make that kind of effort. Symbian has a reputation of being difficult to develop for, which in turn makes it less attractive to developers. Have you tried to address that? What we have done is build a development framework on top of Symbian which allows you to develop on many platforms at the same time. … This has gotten a lot of traction.