Hoping to Dial Into Cell Phones' Future
Friday, July 22, 2005
ESPOO, Finland -- Nokia Corp., the world's largest producer of mobile telephones, could make good use of a time machine. For Nokia, seeing the future is a life-and-death matter.
Few industries change faster than the cell phone business, as Nokia was reminded several years ago when it missed the "clamshell" wave. Nokia was already the world's leading producer of cell phone handsets when clamshell phones, which open and close like their namesake, became the rage in Asia and the United States. But those phones, many of which had color screens, were made by Motorola Inc., Samsung Corp. and other Nokia competitors. Nokia initially had no comparable models.
Nokia's share of the world market fell by several percentage points, to about 30 percent. Motorola, Sony Ericsson Mobile Communications AB, and Samsung and LG Group of Korea all prospered at Nokia's expense. Suddenly last year, one of the world's most successful high-tech companies was looking vulnerable.
Had Nokia bet on the wrong future?
The answer will not be known until -- well, until the future. Nokia executives express cautious optimism after what looks like a modest turnaround since the end of last year. Second-quarter results reported Thursday showed strong sales but also narrowed profit margins and guarded prospects for the rest of 2005.
Nokia shares fell more than 10 percent on the New York and Helsinki exchanges Thursday. Over the previous year, the stock had risen nearly 40 percent.
Nokia is the biggest company in Finland, representing about 3.5 percent of gross domestic product and nearly 25 percent of all exports. At Nokia there is a clear and openly stated company position on what the near-term future holds.
This (in case you missed it) is the year of music -- the cell phone as a sort of iPod, capable of downloading, saving and playing thousands of songs. 2006 will be the year of television on your mobile telephone. 2007 will be the year for games on the phone and the capability to play them against other phone users. 2008 will be the year of "my connected life," when the years-old dream of cell phones that are Internet terminals will finally become a widespread reality.
Well, that's what Thomas Jonsson, director of communications for Nokia Networks, said in a recent interview in Nokia's glass, wood and steel headquarters building here. Only the 2008 entry is problematic: The others are already here or just around the corner. The phone as camera -- that was 2004's theme -- is well established, though big technical improvements are still being made. Nokia's success with phones that take and send pictures has mitigated the damage done by its slow start with clamshell phones.
"Mobile TV, music, imaging applications [still and motion photography] and games -- those are the horses we are betting on now," said Hannu Nieminen, Nokia's vice president for user experience.
Nokia's first conceptual breakthrough, according to Tero Ojanpera, 38, the company's chief strategy officer and a member of the group executive board that runs the company, was to realize that people all over the world were ready to take their telephones with them. Now, he said, the company anticipates that much more than talking on the phone is about to go mobile. For Nokia, Ojanpera said, the biggest challenge is "continuing to capture the behavioral changes of how people live."
To try to see over the horizon, Nokia supports a team of futurologists called Insight and Foresight. Run by Patrik Sallner, it produces a "Nokia World Map" that charts trends that could affect Nokia all over the world. Nokia years ago outgrew Finland. It has adopted English as its official company language and has extensive research and development operations in China, India, the United States and other countries.
Sallner would not share his map with a reporter; it is a proprietary secret. But he did talk about some of the notions his team has come up with -- for example, the undershirt made from special materials that could convert body heat into electricity to power your mobile device.
Sallner foresaw a day when customers treat mobile devices the way they think of watches today -- so we will have a device for days off when we're wearing jeans, a device for work, a device for evenings out on the town, etc. "We want it to be like, 'How many pairs of pants do you need?' " he said. If people started to think of Nokia devices in this way, "that would make the market much bigger." Nokia is introducing 40 new models this year, 10 of them third-generation "3G" smart phones that can conduct video conferences and transmit substantial quantities of data.
Before too long, Ojanpera said, users should be able to access data on their office computer network or home PC with their phones. New software technology may make it possible to "packetize" voice messages, or reduce them to packages of digits that can then be transmitted across the Internet, the way all data is moved on the Net now. This would make mobile phones, in effect, an extension of Internet-based telephony.
Is that what's coming? Maybe, Ojanpera replied, using careful language that befits an oracle on whose analyses a lot of money may be riding. "This is one of the main directions where the world is going. But is not the only direction. There will be different variations of this future."