Nokia: Calling America with a New Smartphone

Popular in much of the world, the Finnish handset maker goes after American consumers with an ultrathin smartphone
What do soccer club Manchester United, singer Robbie Williams, and Finnish handset maker Nokia (NOK) have in common? They're all hugely popular in most of the world, but have only a handful of fervent followers in the U.S. Now Nokia, with 37% of the global mobile-phone market, is making a new push to boost its meager 8% share in the U.S.

In May, AT&T (T), the largest wireless carrier in the U.S., plans to start selling Nokia's e71x, the thinnest smartphone with a Qwerty keyboard in America. The phone looks similar to Research in Motion's (RIMM) BlackBerry but is a sleeker 0.39 inches thick. It also has a music player, video camera, and GPS capabilities. By offering an eye-catching phone for an expected $100 at retail, Nokia may have its best chance in years to compete in the U.S. smartphone market against RIM and Apple (AAPL), whose hot-selling iPhone starts at twice the price. "We are starting to gain momentum," says Mark Louison, president of Nokia's North American operations.

AT&T, T-Mobile USA, and Verizon Wireless have carried a handful of Nokia's cheap and midtier devices. But to get Nokia's highest-end phones, American customers had to buy them directly from the company via its Web site or Nokia stores. That meant consumers couldn't get the subsidies carriers often offer and would have to pay as much as $600.


One cool phone can only do so much for Nokia, of course. The company has long harbored some ambivalence about the American market because of the heavy control wireless carriers exert and because wireless technology has not been as advanced as in Europe. Some experts believe Nokia let its U.S. share slide in part because it could reap higher returns in places like China, though Nokia executives say they haven't deliberately neglected the U.S.

To regain market share, Nokia will have to follow up the e71x with comparably promising phones. In particular, the company, which built its global dominance with stylish, durable phones built for wireless networks prevalent in Europe, needs to develop more phones with the CDMA wireless technology used by Verizon Wireless and Sprint Nextel (S).

Louison points out that Nokia recently placed its third CDMA phone with Verizon. The company is collaborating with carriers two years in advance of a phone's release, customizing looks, software, and radios. While Nokia typically launches phones elsewhere and then brings them to America, Louison says that could change this year. "You'll see products that we'll start introducing in this market first," he says.

The U.S. business is growing more important. Apple users, concentrated in the States, have become the early adopters in downloading software to cell phones. Eventually, software applications tied to particular devices could become the deciding factor when buyers choose a smartphone, says analyst Charles Wolf of Needham & Co. Nokia has to figure out how to encourage developers to write as many new cool apps for its phones as they do for the iPhone.

The Finnish company needs to win over consumers, too. Unlike mobile-phone users in most of the world, Americans don't think of Nokia as the cool, go-to company for advanced cell phones. John Jackson, vice-president at consultant CCS Insight, says Nokia will need great products and better marketing to change that attitude. Without it, he says, "you should not hold your breath for an extended Nokia presence in this market."

BY Olga Kharif and Jack Ewing

Kharif is a senior writer for in Portland, Ore. Ewing is BusinessWeek's European regional editor.

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