Understanding Nokia's Motivation for .MOBI
For a long time, Nokia's extraordinary success in handsets was based upon superb logistics, top quality design, and a first class user friendly software. In 2004, Nokia's handsets strategy stumbled for the first time. Fortunately, it had started over the past six years moving from handsets to software. It is now realizing that it needs to move out of software into services, and the mTLD ".MOBI" is central to this shift.
In mobile handsets, Nokia's position has become more and more untenable in 2004. At the top of the range, and bucking the trend with somewhat out of fashion phones, Nokia ended up thinking its brand was the fashion, and did not realize the market was moving from branding to fashion: it lost its touch when it totally missed the clamshell bonanza. In the low end, new entrants, mainly for the Far East, and especially from China, are also challenging its dominant position. In the mid market, service operators are more and more successful in imposing co-branding, ie: tailoring of mobile phones under their brands, which Nokia had refused for years. Finally, the transition to 3G means that Nokia is at a disadvantage against its main competitors, as Japan and South Korea operators and manufacturers have a two year lead on the rest of the world. As a result, Nokia has been losing a 10% market share and margins are plummeting below the golden limit of 20%. It has lost 80% of its market value since 2000 and is now surpassed by Samsung as the most valued IT company. It will probably not achieve its stated strategic goal of 40% market share as it slides quickly back below 30%. Basically, it is now systematically one step behind its competitors in terms of product offering, design and speed to deliver to markets.
Fortunately, Nokia decided in 2001 to progressively move from handsets to software, as margins in the former were plummeting, whilst staying high in the latter. Fortunately also, software has always been a stronghold of Nokia, as it was developed as the cornerstone of its handsets strategy: because of its ease of use, its proprietary Real-Time-Operating Software has been for years the best. What has been new over the past year is the push by Nokia to move first into operating systems in joint venture with others, by taking control of Symbian, and then in application software focused on business. With a 50% market share of smartphones, Symbian is the leader, but it is competing head on with Windows Mobile for Smartphone by Microsoft and Brew from Qualcomm. Hence Nokia's push into application software for business and now games.
Unfortunately, a major threat is now appearing: Java by Sun, the software "Cannibal". Considered initially as a software platform which allowed applications to travel over the Internet and run on all operating software, it has been progressively integrated in all other operating software. It is now present in over 250 million mobile phones and runs 500 million smart phone cards. Because of its small memory requirements compared to other competing systems, a 1 to 20 ratio, it is now viewed as replacing over the next 10 years all other operating software. In other terms, exit Symbian, Microsoft Mobile and Brew, all cannibalized by Java. Furthermore, because it was initially conceived to run applications, not operating systems, it is even better placed to cannibalize the service application software world: right now it is considered as the potential standard software for the development of the coming applications for the G3 mobile platform and of the next software bonanza: "ambient computing", ie service applications which download and erase as one moves.
In such an unstable environment, Nokia has no other choice than to leave software and move into services. So do the others. Hence the importance and the significance in the mTLD of the joint venture between Nokia, Microsoft and Sun, which is tantamount to a worldwide monopoly of all mobile operating systems and key service application software providers, providing them with a lock and an edge on the services available through mobile access and on mobile service operators. In return, this provides the mobile industry a key hold on mobile clients and an edge over fixed line operators.
This very unusual combination can only give a measure of the urgency and desperation of their promoters. Details of the arrangements between these 3 companies are not publicly available, which in this context is not acceptable: by controlling the operating software, whether Java based or not, these three companies control the access to the entire mobile platform of all the third party service application providers. This raises serious anti trust issues, as well as requires serious protection for the Community which includes a well balanced and tight controlled governance for the mTLD. Apart from general statements promising a transparent and open architecture, Nokia has refused to give full access to its system architecture which is the only way to understand whether this promise is real or based on thin air.
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