Nokia - Targets America

Corporate America A Key Nokia TargetWednesday March 16, 7:00 pm ET Reinhardt Krause
Mobile phone maker Nokia, based in Finland, has its eye on corporate America.
The No. 1 maker of mobile phones reaps only 12% of its revenue from the U.S., mostly sales to consumers.
In 2005, Nokia (NYSE:NOK - News) plans to roll out some 40 phones and devices geared to U.S. consumers.
Longer range, it's aiming to increase sales to big U.S. companies. To do that, it'll need strong distribution ties with service providers.
Nokia sells most of its U.S phones through Cingular and T-Mobile USA. It hopes to do more with Verizon Wireless and Sprint (NYSE:FON - News).
Nokia has opened a new corporate office in Westchester, N.Y., close to Wall Street, a big wireless market.
Richard Simonson, Nokia's chief financial officer, recently spoke with IBD about Nokia's U.S. goals.
IBD: When will more Nokia products debut first in the U.S. rather than in other countries?
Simonson: We don't have the same market voice in the U.S. that we have in Europe, Asia and Latin America. We're taking steps to address that. Nokia has been able to ride the GSM (network) standard to introduce global products. The U.S. didn't fit easily into that model, because it had multiple standards (GSM and CDMA) and, frankly, the U.S. has been quite a bit behind in mobility.
(Nokia made) perfectly rational decisions to introduce products globally that maximized time to market, global market share, profit and cash flow.
Still, there's a bit of a legacy to catch up in the U.S. with GSM products. (Analysts sometimes ask) why we aren't building specific phones for the U.S. to be leading edge that come out at the same time (as in Europe). That's what we're starting to do in a better way.
You can look at the new 3G phone, the (model) 6680, for instance. It's got video-sharing, two cameras, etc. The 6682 is the U.S. variant (and came out at the same time). That's just one example.
There are clear differences in the U.S. market that are going to require us to launch specific U.S. products. We're trying to work closer with Verizon and Sprint (CDMA carriers), as well as Cingular and T-Mobile (GSM carriers).
IBD: Will those products involve corporate and other enterprise customers?
Simonson: The U.S. market is probably going to be a disproportionate driver of what products are successful on the enterprise side. We recognize that. Our enterprise solutions group is looking at U.S. companies. They're often ahead in mobility. They're thinking about things like end-to-end security. The enterprise solutions group is very U.S.-centric. That's why it's based here (in Westchester).
IBD: While Nokia is a big supplier of GSM phones, how's it doing in CDMA vs. five years ago?
Simonson: We really upped our investment in CDMA products and research and development. That started us on a path of going from 4% market share, to 8%, to around 12%-15%. That was the result of us saying we've just got to get more serious about it (CDMA) and put resources there. But it's a clear fact we're underrepresented in mid- and high-end products. We're not on the cutting edge on CDMA. We need to address that. We'll be pragmatic about how we do it.
IBD: Do wireless service providers now have more leverage over phone suppliers like Nokia and Motorola?
Simonson: The operators have significant say, particularly in the U.S. market, which is dominated on the distribution side by operator channels. There are other markets like that, so we're familiar with this.
IBD: Some analysts say the branding power of phone suppliers is fading. A few carriers are rolling out phones under their own label.
Simonson: We have embraced co-branding and customization. That's a big change for Nokia. Operators say co-branding and customization are in their interest. Our dialogue with some of them (Verizon and Sprint) has improved. We had a bit of butting heads with some operators a year ago. We weren't embracing co-branding.
IBD: What's involved in customizing phones for wireless providers?
Simonson: We just introduced the 6101 phone, a clamshell model. We did a 6102 variant of that for China Mobile (NYSE:CHL - News). It's their phone; nobody else has it. The layout of the keypad, the layout of the screen, the colors and graphics. It's got the China Mobile name on it.
There's software customization, too. When you fire up the phone, you get the China Mobile welcome screen and navigation tools. There will be other 6100 variants for other operators.
IBD: About half of Nokia's new U.S. models are clamshell types. But Nokia was late realizing that many consumers prefer clamshell models. How could that happen to a market-savvy firm like Nokia?
Simonson: We just missed it. The signs were there. We were hearing it. But we weren't acting on it. We were ignoring it for some reason or were in denial for some reason. We went through that internally, with no punches pulled. We diagnosed why we let it happen. The great thing about Nokia is we're a pragmatic learning organization.