The smartphone market, once the domain of Nokia (news, site) and its Symbian series mobile operating system, has been radically rattled with the game-changing iPhone and Android. While Nokia has consistently stuck with its Symbian OS and the upcoming MeeGo, there has been speculation that the Finnish company might be considering a switch, particularly since its new CEO Stephen Elop took the top job in late 2010. Now, with a leaked memo supposedly from Elop, it does seem that Nokia might just make the jump.
A Changing Market Landscape
Nokia has held the top spot in terms of smartphone sales and smartphone market share, along with RIM's Blackberry. However, with the introduction of the Apple iPhone in 2007 and Google's Android operating system in 2009, the game rapidly started to change. Previously market leaders, Symbian and Blackberry smartphone operating systems have seen a steady decline in market share and sales, until these were finally overtaken by Android and iPhone in late 2010.
A Canalys study recently cited Android as being the world's leading smartphone platform, with a 32.9% sales share in Q4 of 2010, compared with Nokia's 30.6%, Apple's 16.0% and RIM's 14.4% in the same period. Other analytics will point toward a decline in Nokia's market share, in favor of "other" smartphone systems rising, which we suppose means "Android."
A Change of Strategy
At a media conference call in January, Elop hinted that Nokia might be looking into a change in strategy, given the current market trends. "[T]here are multiple ecosystem patterns that need to be considered," he said. And this was quoted by CCS Insight analyst Geoff Blaber to mean that Nokia might be considering a change in platforms or operating systems in the near future.
While this was thought of as purely speculative, a recently leaked memo (confirmed by Nokia insiders to have been from Elop) alluded to the "burning platform" scenario, in which a man standing on a burning platform will jump into the freezing ocean waters. The memo then expounded that Nokia is in a situation in which it is losing ground in the mobile phone market to various competitors. The iPhone and Android are eating into Nokia's enterprise, business and consumer clientele in the high-end and midrange markets. Meanwhile, inexpensive Chinese-made phones are gaining ground in the low-end market.
Nokia has yet to release a high-end MeeGo (the successor to Symbian) gadget, and will likely have a one-per-year product cycle. Meanwhile, Symbian is "proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements," according to Elop. As for the low-end market, Chinese OEMs are cranking devices quickly and cheaply.
Elop says that it's no longer a battle of platforms, but rather a war of ecosystems, which not only includes hardware and software, but "developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things." He further said that Nokia will have to decide on whether to build, catalyze or join an ecosystem.
Seeing how both the consumer and enterprise markets have embraced devices such as smartphones and tablets from its competitors, Nokia is at a crossroads, and will need to make a decision soon. Elop says the company will make an announcement by February 11, which will entail a huge effort to transform the company. Until then, many industry observers will wait for the other shoe to drop.