Nokia Takes Aim at Apple

Nokia (NOK) has seemed determined recently to remind the world that it, not a certain Cupertino (Calif.) rival, is the world's dominant handset maker. In the space of four days, the Finnish company, which accounts for 37% of global mobile-phone sales, announced plans for a netbook computer, unveiled a new bargain-priced touchscreen handset, and a high-end "Internet Tablet." Nokia also rejiggered its top management, elevating an executive in charge of user friendliness to the executive board. Finally, the company announced an ambitious effort to offer money-transfer services to the billions of handset owners in emerging markets who don't have bank accounts.

All but the last announcement seemed aimed squarely at Apple (AAPL), whose phenomenally successful iPhone has thrown Nokia off-balance. Although the Apple accounts for less than 2% of the overall handset market, its iPhone has stolen share from Nokia in smartphones, the market's sweet spot. Sales of high-end gadgets with computer-like capabilities grew 27% in the second quarter, according to market watcher Gartner (IT). That comes as the overall market for mobile handsets fell 6% over the same period. Gartner says Apple's share of the smartphone market soared to 13% from 3% in the second quarter of 2009 from a year earlier, while Nokia's slipped to 45% from 47%. (Nokia counters that it recently has regained share.) Apple declined to comment for this article.

Nokia Chief Executive Officer Olli-Pekka Kallasvuo denies Apple is driving the company's strategy. Rather, he says, Nokia is aiming at totally new markets as the mobile-handset business shifts from hardware to a greater focus on such services as games, music, and navigation. "It's not simply fighting against your competitors like Apple, it's claiming new ground. It's claiming no-man's land," Kallasvuo told BusinessWeek on Aug. 27.

Still, the unprecedented flurry of announcements signaled that Nokia is going on the offensive after a long period when Apple seemed to dominate industry buzz. More major announcements are expected on Sept. 2-3, Nokia execs say, during the annual Nokia World extravaganza for analysts, press, and business partners in Stuttgart. "We are on the attack," says Nokia Executive Vice-President Anssi Vanjoki, who oversees global sales. "We had a more peaceful moment, and now we are really aggressive."

Booklet 3G Preempts Apple's Tablet One example is Nokia's so-called Booklet 3G netbook, which the company announced on Aug. 24. The mini laptop, which will feature 12 hours of battery life and the ability to connect to broadband mobile networks, is partly an answer to PC makers such as Acer and Dell (DELL), which are eyeing the mobile market. But Nokia's Booklet, which will use the Microsoft Windows operating system and Intel chips, similarly preempts Apple's rumored release of a tablet netbook by several months.

By launching the Booklet 3G six months or so before Apple's expected offering, Nokia has a chance to exploit its connections with telecom operators and redefine the market. "When Apple announces its first version, Nokia could announce a second version," says N. Venkat Venkatraman, a professor at Boston University who follows the technology industry.

Nokia still must convince skeptics that the Booklet can set itself apart in the already crowded netbook field, much less dazzle users in comparison with Apple's forthcoming product. "It's a very interesting introduction, but there are a lot of big questions," says Bob O'Donnell, a vice-president at market watcher IDC. Nokia plans to unveil more details about the Booklet, including the price, in Stuttgart on Sept. 2.

Both Nokia and Apple are ranked among the world's most admired companies. Still, many analysts doubt Nokia can compete with Apple in the markets that its U.S. rival chooses to attack. Charlie Wolf, a senior analyst at Needham & Co., says Nokia's Ovi services portal is not nearly as popular in major markets as Apple's iTunes. "Nokia is not a software company. Apple is a software company, and what distinguishes the iPhone and the iPod touch is their software," Needham says. "I think Nokia is just on the losing side."

bargain-priced smartphoneNokia, which has a history of bouncing back from setbacks, recognizes that it needs to be more like Apple by designing easy-to-use products, not ones merely stuffed with the latest technology. In response, the Finnish company said on Aug. 27 that it will appoint Alberto Torres, a 44-year-old former McKinsey & Co. principal, to the management board as head of a new solutions unit. CEO Kallasvuo said Torres' mission is to make Nokia devices work more seamlessly with software and services. "The user experience is No. 1 in the marketplace," Kallasvuo said — though he chafed at the suggestion that Apple represents the gold standard. "The gold standard has to be beyond that," he added.

Another riposte to Apple is the 5230 touchscreen handset, announced on Aug. 25. The device offers an array of smartphone features for the bargain price of $210 before operator subsidies. The handset will include GPS navigation, 33 hours of music playback, and the ability to access Internet services such as Facebook. It will ship in the fourth quarter of 2009.

nokia's global advantageThe 5230 is aimed partly at emerging markets where middle-class users can't afford iPhones or where Apple simply isn't present. Nokia, still king in countries like India and regions like Africa, plans to exploit that dominance. Yet another initiative, announced on Aug. 26, aims to offer basic banking services to mobile-phone users. According to Nokia, 4 billion people have mobile phones, while only 1.6 billion have bank accounts. Mobile money-transfer services already are available in countries such as Kenya, where they have been a huge success.

Nokia, with its global distribution, may be the only company capable of spreading such services around the world. "If you want to do something like this you need a company that has the market share Nokia has and the presence Nokia has in emerging markets—and also a brand that consumers trust," says Carolina Milanesi, an analyst at market watcher Gartner.

Nokia also is positioning itself as something of the anti-Apple in its approach to software developers. In contrast with its American rival, which maintains tight control over the software in its products, Nokia has begun to encourage users and developers to fool around with its operating systems. "When one person or one entity controls all the elements, it limits innovation," says Executive Vice-PresidentVanjoki, in a jab at Apple. "History shows that competitors who behave this way never make it to the big leagues in terms of how many people are using their products globally."