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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 174.54

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Nov 13 3:59 PM EST

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To: Ramsey Su who started this subject	9/1/2000 6:50:44 PM
From: carranza2	Read Replies (2) of 196633

Tero: Why Doesn't My Phone Have That? By Tero Kuittinen Special to TheStreet.com 9/1/00 5:42 PM ET Nokia (NOK:NYSE ADR - news - boards) has unveiled its vitally important new low-end model: the 3310. It is the keystone of a new strategy aimed at leveraging Nokia's economies of scale to the hilt. News from the product launch started leaking on Thursday from Swedish sources -- and Nokia's share price started responding a day before the official launch of the phone. A new product does not often result in major moves in the share price of the manufacturer -- this week's action reflects how much the market is paying attention to Nokia's product lineup after the recent profit warning. The 3310 is the replacement for the top-selling low-end phone in the world, the 3210. It is designed to leverage Nokia's 30% market share in the mobile-phone business in two different ways. The first strategic move is to boost the feature selection of a cheapie phone above the level of most current midrange models, while keeping the price low with the help of a massive production run. The second tactic is to bind Nokia users into unique networks of special features that are initially available for only Nokia handsets. Nokia is currently the only company that can create a credible network effect via new features, since a 25% to 30% market share is more or less the minimum you need to create a new network among mobile-phone users. Substantially improved features should increase the pressure on low-end rivals; but they also put Nokia into a very tight spot concerning its own midrange model sales. Redefining the Low-End Market The 3310 is the first low-end global system for mobile communications phones to incorporate voice-activated dialing. The stand-by time with the standard battery tops 10 days; a solid number for a 133-gram model. The new features associated with text messaging represent the real core of this new product launch. The design of the 3310 evokes the look of the high-end 8200 model -- the upper keypad has been wrapped around the display in a curve and a thin metallic stripe offsets the display. The aim here is to create a "halo" effect. Borrowing high-end features like latest keypad design and voice dialing is expected to add luster to what is essentially a cheap, high-volume mass-market handset. The danger associated with the halo effect is that in making the low-end model too appealing you risk cannibalizing the sales of more pricey models. With a special battery, the 3310 weighs barely more than 100 grams -- moving dangerously close to the high-end territory. The 3310 more or less achieves its immediate goal -- increasing the design and feature gap between Nokia's low-end models and the competition. The 3310 could be a midrange model from some other brand -- but it is being positioned as a cheap volume item by Nokia. By raising the bar in the low end, Nokia is now setting itself up for a very demanding task with its upcoming product launches. Nokia needs to come up with compelling reasons for a price premium for its midrange models and the high-end luxury range. This may be one reason the 3310 does not incorporate wireless application protocol, or WAP. Persistent rumors about a Nokia MP3 phone are another possible way to redefine a premium niche. Color-display models are now anticipated to debut before next summer -- together with general packet radio service, or GPRS, features enabling faster Net access for WAP phones. The 3310 may be the new benchmark for the low-end market this Christmas. The new low-end concept is to incorporate most of the features of the early 1999 high-end phones, while leaving the premium models of 2000 the challenge of coming up with a completely new portfolio of features. Building Communities Most of the early attention paid to the 3310 has concentrated on its messaging and customization features. The new chat option hooks the owners of 3310 into a mobile instant-messaging network. The length of the longest possible text message has been tripled, allowing three 160-letter messages to be automatically bundled into one miniature email. Now people can send longer messages, send them to several people simultaneously and follow the chat of several contributors simultaneously. This sort of "community-building" chat has been a big hit in Europe and Asia as a separate, operator-run service -- now it's being incorporated into the phone itself. The chat messages can be sent to older handsets as well -- this is a crucial feature of how Nokia approaches network creation. New key features are often compatible with older phones and are introduced to a wide range of models, which maximizes the pool of consumers that are sucked into the nascent networks. Picture messaging has now been introduced to Nokia phones across the board -- from the workhorse 3210 to the luxurious 8890. The incentive for buying a picture-messaging phone increases with every new customer that already has access to this feature. The chat function will most likely repeat this pattern and pop up in all key Nokia models of next winter. This leaves Nokia's competitors in an uncomfortable situation. They can either introduce models that support Nokia's picture messaging -- and thus reinforce Nokia's position as the builder of new standards -- or they can opt not to follow suit and risk alienating new buyers who want to be part of the picture messaging or chat with their friends. Just how much impact these new networks have on purchasing decisions is not clear. But we should get some idea of the influence on consumers during the next 12 months -- that is when Nokia's definition of picture messaging should reach critical mass among teenagers in leading GSM markets. The chat function introduced with the 3310 is designed to dovetail with the existing explosion of text-messaging traffic and should complement the picture-messaging network already created via half a dozen Nokia models.

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