re: Nokia's Attempted Move Into CDMA
>> Nokia's CDMA Handset Challenges
By Peggy Albright
Monday, January 22, 2001
Wireless Week
Late last year, Nokia held its Nokia Capital Market Days in London. The handset manufacturer annually hosts the meeting to give the investment community an opportunity to discuss the company's business with top management.
But this time, the company added one more presentation to the usual fare, this one to explain Nokia's CDMA handset business. "There's been so much written and so much covered on Nokia and CDMA that we felt we had to start to be a little more public on what's going on," says Larry Paulson, vice president of CDMA for Nokia Mobile Phones, who delivered the presentation.
Nokia, in fact, has a lot going on with CDMA, although it has not yet made a big mark in that part of the industry. The manufacturer, despite its stature as the top handset supplier with worldwide brand identity, was late to enter the CDMA market. Nokia believes it has roughly 8 percent of the CDMA handset business worldwide. Audiovox, Kyocera and Samsung are the top CDMA suppliers globally.
"What we've been doing is quietly building an arsenal to go about attacking this business," Paulson says. The goal is to reach the "upper teens" in market share in 2001.
Paulson told analysts at the London event that Nokia is well on its way to turning its current CDMA position around. Over the past year, it went back to the drawing board to redesign the technologies used in its CDMA handsets. It has bolstered its investments in CDMA research and development worldwide. It also opened three CDMA product support centers. The anticipated CDMA business will be served by three new multiprotocol factories that Nokia validated for operation in 2000.
The activities reflect an urgent need. Before long, as networks around the world evolve to third-generation technologies, all services will be based on CDMA. Nokia must boost its CDMA position or risk diminishing its overall stature.
The company admits it undertook the first task - redesigning its CDMA technologies - because it didn't have a full enough understanding of CDMA to build the market share it wants with its earlier product lines. The company developed its own chips and software without purchasing any products from CDMA powerhouse Qualcomm. Although it is a cdmaOne and cdma2000 licensee, Nokia has resisted licensing wideband-CDMA from Qualcomm. Most industry observers affirm that it will have to do so eventually, particularly since a patent challenge that Nokia submitted to the European Patent Office a couple of years ago was recently rejected.
Nokia's lack of CDMA readiness showed in its initial products. While the company says it has sold CDMA handsets to more than 40 operators worldwide, many products, for example, suffered inadequate power levels and signal strength.
To address operational problems, the company conducted a three-pronged effort in 2000 to ensure its equipment would perform as well or better than popular, competitive CDMA phones. It completely redesigned the baseband, RF components and software used in its CDMA products. Then it compared the operation of the redesigned units against the competitors' handsets that service operators believe to be the best-performing products on the market.
Nokia then conducted drive tests to compare its new technologies against the reference units. It placed about 500,000 calls on a variety of networks to evaluate call maintenance, call termination and call origination performance. Satisfied that it was able to produce a "best of class" product from these three perspectives, it began putting its new products on the market. The 5185i has been shipping since last quarter. The 6185i is expected to ship in volumes this quarter.
Nokia took its second objective, bolstering the company's R&D, to several countries. The company vastly expanded the CDMA R & D facility that opened in San Diego in 1999 and brought in additional engineers. It also expanded the R&D facility it operates in Seoul, South Korea. And it opened a new R&D center in Vancouver, British Columbia, to focus on data initiatives.
In what Nokia describes as an example of its manufacturing flexibility, the company last year also formed a partnership with Telson in South Korea. It will draw on Telson's experience to help deliver Nokia-designed cellular and PCS products to the Korean market in the first quarter of this year. Additionally, it will use Telson as an R&D arm in developing CDMA 1XRTT devices for the Korean market.
With these company initiatives in place, Nokia is gearing up to release numerous new CDMA handset designs in the Americas this year. Already looking ahead, it is focusing all of its current energy on developing cdma2000 1XRTT units for 2002.
Despite the all-out effort to recoup lost time and opportunity and despite Nokia's favorable market position overall, events subsequent to the December analyst conference suggest it may face additional struggles.
While Nokia says the 5185i model has one of the lowest return rates ever achieved by phones introduced to the market, Verizon Wireless this month reported continuing problems with short messaging service functions on the 5185i. Nokia shipped 1.9 million of the handsets in the fourth quarter last year, most of them to Verizon.
While Verizon said Nokia was "making every effort" to resolve the 5185i problem quickly, Verizon spokesman Jim Gerace says: "Right now it is not operating properly on our network. We are selling the Kyocera phone for people who want short messaging." He added the company will not purchase the nearly ready-to-ship 6185i from Nokia if the SMS problem is not resolved.
Nokia spokeswoman Cherie Gary described the problem as a software glitch that impairs mobile-originated SMS functions only. "The technical issue has as much to do with phone software as challenges related to network optimization," she says. "We anticipate the new mobile-originated SMS enabled software version for the 5185i will be accepted this month and it would be the same solution for the 6185i."
At least one analyst who attended the London event says the 5185i functions fine for voice services. Brian Modoff of Deutsche Bank Alex. Brown says he believes Nokia's CDMA handset glitches are fixable and not necessarily Nokia's greatest challenge.
The CDMA handset market is more competitive and has stronger second-tier players than the other segments that Nokia currently dominates, Modoff says. Handset form factor is another issue. The 5185i, in particular, is an older design that does not have the style of some of Nokia's newer TDMA or GSM models, or that of the slick CDMA handsets that other vendors are producing.
Keep an eye on Nokia in 2001 to see what they come out with in CDMA handset designs. <<
- Eric - |
