Q&A With Nokia's CFO

Rick Simonson discusses the Finnish company's challenges in the U.S. market and outlook for the future, especially for multimedia phones

In a telephone interview with BusinessWeek's European Regional Editor Jack Ewing, Nokia's Chief Financial Officer Rick Simonson talked about the company's U.S. woes, the potential for multimedia phones, and what lies ahead.

Market share was down a little bit. Does that concern you at all?

A little bit. Obviously you'd always prefer to be going up, but a little bit of volatility quarter on quarter isn't something that is so foreign to us and we can work around that. It doesn't shake at all our confidence that we're going to continue our market-share gains overall in 2006, just like we improved in 2005. That's all on track (see BusinessWeek.com, 7/20/06, "So-So Season for Nokia").

Are you concerned about what happened in the U.S.?

Well, yes. I think [CEO] Olli-Pekka Kallasvuo spoke pretty forcefully on that. We have to be. It just means more focus, more resources, but continuing what we have already started last year. We had two excellent quarters, Q4 [2005] and Q1 this year. But we had a little bit of slippage. One of the reasons was this cancellation of an order we think was a one-time event.

Most importantly, we still have to get a broader portfolio of products in there, the right products for the right operator. We have a need to improve our game [in the U.S.], but I think we have the organization aligned with that. The quality of the conversation we are having with our operator customers gives us encouragement as we look further out.

How about the enterprise business?

Right on track to do what we said. We are going to see the benefits of the broader product portfolio and ramp-up of those products in the second half. We said that we expect the [division] to turn from red ink to black ink as we go into 2007.

How is the E61 [e-mail device] doing?

It's doing well. Right now it's out in Europe and Asia Pacific markets. It's not up to full run rate in terms of volumes in the second quarter. It really just began shipping. The E62 is the North American variant of that. That's not out in the market yet. So we have that to look forward to in the second half.

You saw good growth in the N-series multimedia devices. What does that mean in terms of your overall strategy?

Oh yeah, they [the Multimedia group] had a great quarter. They've had two great quarters this year and just real good momentum. That speaks highly for mastering the complexity that we have talked about a lot. People are starting to see what we were talking about when we created this whole Nokia N-series sub-brand, and talking about multimedia-portable computers. The N80, N73, and N91 are really starting to deliver on that promise.

Is multimedia how you continue to grow in the more saturated markets?

Exactly, it's how we grow there because we're really showing the customer what can be done. How we can bundle different new multimedia features together in a way they can use. We're also opening up different avenues of distribution through these products…whether that's online or so-called big-box electronic retailers. If you look at multimedia in terms of size, €1.9 billion ($2.4 billion) in one quarter. That's a pretty sizable business. We've taken this from a startup division to an entity that's bigger than a lot of competitors worldwide.

What's the outlook?

I feel the quarter was a very solid quarter. We delivered on what we had said. We feel good about the overall market health. The second half has all the makings to continue the trends we've seen, with good steady growth in emerging markets, a good replacement market, and continuation of a nice push in these higher-end markets; for example, the N-series, E-series, and 3G over W-CDMA [a third-generation cellular network]. We're seeing traction there. We've mastered that complexity ahead of the competition in a more cost-efficient way, and we're being rewarded with better margins.

Before it's here, it's on the Bloomberg Terminal.