COVER STORY HANDSETS
Not all vendors seek to imitate Nokia’s
move, though. Speaking at an Ericsson press
event in September, Miles Flint—seeing out
his last days as Sony Ericsson CEO before he
steps down on November 1st this year—suggested
his firm has no interest in aping Nokia’s
shift into services.
Flint was keen to stress that the company’s
focus was on working with the
operator community as a community and
not, as he put it, “making things difficult”
by introducing potentially competitive
services. “We’re all about making phones,
we won’t be separating software and services
revenues.”
On Nokia’s Ovi move he added: “Five years
ago, our survival depended on our relationship
with the operators, and this is still the
case. But there is some realignment going on
in the market, which is making some operators
cautious.”
At least some carriers, though, seem prepared
to countenance such a strategy from
their suppliers. Jens Schulte-Bockum is global
director of terminals for the Vodafone Group.
He is emphatic in his assertion that operators
remain the strongest point of contact with
the end user, but he is relaxed about the Ovi
development. “We have already announced
a marked move away from an operator-controlled
walled garden into very explicitly
supporting open mobile internet experiences
and working with a multitude of partners:
internet players like Myspace, Google Maps,
eBay and Youtube,” he says.
“We’re not necessarily hostile as a matter of
principle to the idea that vendors like Nokia
implement relevant services on handsets and
make a contribution to this openness and this
emerging space themselves,” he continues,
adding: “We’re discussing that with Nokia. I
can’t go into a lot of detail but the end game
that we’re working towards is one that I would
describe as mutual openness and peaceful
co-existence.”
At 3UK, director of product management
Fergal Walker, is similarly unfazed. “There’s
space for everybody,” he says. “Anything that
encourages people to use these kind of services
is good for the industry.”
Club Nokia was widely perceived as an
aggressive move. But Ovi, argues Carolina
Milanesi, is actually a defensive play. Vendor
margins are under pressure from bargaindriving
operators, which are also turning
to own-branded handsets—a move into the
vendor’s territory, she says. “It’s the operator
putting pressure on the vendor and the vendors
looking for a different way to deal with their
issues. And one way to look for other revenues
is to enter the services space,” she says.
Nokia’s lead, naturally, is reflected in
the portfolios of handsets offered to the
market by the carrier community. “We’re
Sony Ericsson and Nokia dominant,” says
3UK’s Walker, adding that the absence of
Samsung from his portfolio does not reflect
the global rankings, but that the dwindling
of Motorola stocks in the 3 warehouses
certainly does.
Second placed Motorola—the firm from
which Nokia stole top spot in 1998—has been
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Vendor margins are under pressure from
bargain-driving operators, which are also
turning to own-branded handsets—a
move into the vendor’s territory
having a bad time. While it’s still a leading
player in its domestic market of the US, the
firm has, for some time now, looked directionless.
On quarter by quarter sales the vendor
looks set to lose the second place to South
Korea’s Samsung imminently.
“Motorola’s portfolio is very weak in
WCDMA,” says Milanesi, “which is really
penalising them in Western Europe. Things
are not going to change until the third quarter
of 2008.”
If Motorola does slip to third, it then has
Sony Ericsson to think about. Although the
gap between third and fourth places is significant,
Sony Ericsson has publicly stated its
intention to seize the bronze medal.
During his tenure, Miles Flint has steered
the firm in the direction of profit rather than
market share. But as he prepares to pass on
the baton, says Carolina Milanesi, a shift
in strategy could be in the offing. “They’re
talking about market share again. It will
be interesting to see how much they want
to do that and whether profitability will be
compromised a little.”
Balance between volume and margin is key
in the handset space. Motorola’s problems have
been in part attributed to the lunge for market
share made by the firm through the GSM Association’s
Emerging Market Handsets project, both
rounds of which saw Motorola win the right to
provide the ultra-low cost terminals. This cost
the firm focus in the high-end arena.
To be successful across the board, vendors
need popular models selling at the top end to
make up for the margin squeeze inherent in
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