Nokia Faces Concerns About A Potential GPRS Monster
wirelessweek.com
By Margo McCall
September 3, 2001
Wireless Week
So much is riding on GPRS that even a tiny glitch can take on the contours of an evil, smirking villain with pointed fangs. That fact became evident last week when a control channel issue involving a Nokia GPRS phone prompted concern that the launch of 2.5G technology wouldn't go as planned. At the same time, shares of the world's biggest phone manufacturer sank to new yearly lows–trading below those of Motorola, the second-biggest phone producer–amid concern that Nokia's market share is slipping.
Concern about Nokia is great because of the volumes of GPRS handsets the Finnish manufacturer is expected to deliver. The jitters developing over whether Nokia will produce large numbers of handsets on schedule underscores just how big a role GPRS is expected to play in revitalizing the moribund handset sector next year and maintaining wireless carriers' momentum in signing up new customers.
The technical issue, which was resolved fairly quickly, centered around the fact that Nokia's current specification for the GPRS packet control channel won't be available on a network until next year. Consequently, although the phone can be tested in the lab, it can't be tested on a network, says Nokia spokesman Keith Nowak, who notes that such challenges with new technologies are typical.
Fears that Nokia wouldn't deliver GPRS handsets on schedule apparently are unfounded. Nokia has devised a solution using the existing control channel. The Third Generation Partnership Project also reportedly approved another solution.
"They seem to be back on track to deliver," says Gartner Dataquest analyst Bryan Prohm. "The quicker they can get them out there, the better it is for them and the better it is for everybody."
Still, the problem caused ripples of concern among the analyst community, which, like the rest of the world, is eagerly awaiting the arrival of Nokia's GPRS handsets. Motorola and Ericsson introduced their GPRS handsets in Europe months ago, but Nokia isn't expected to have its new models ready until later this quarter. In Europe, Nokia's 8310 is scheduled for release this quarter and the Bluetooth-enabled 6310 the following quarter. The 8390 is expected to hit the United States by year's end, with large volumes being sold by the first quarter of next year, Nowak says.
While other handset makers reportedly dropped prices to lower inventory, Nokia CEO Jorma Ollila told analysts in July that his company refuses to play that game. However, SoundView analyst Matt Hoffman believes the company is now slashing prices on its TDMA equipment after losing market share at Cingular Wireless to "a newly resurgent Ericsson," whose 1228di is very price competitive.
With Ericsson and Motorola both trying to steam ahead to gain market share, the pressure is on Nokia, which has introduced few new phones this summer. The company last week did unveil the 3395, an entry-level WAP GSM phone for the American market. Hoffman notes in a research report that Nokia must begin cutting prices on products in September in order to meet the highest expectations for growth this quarter.
Indeed, according to Gartner Dataquest's latest survey, Nokia's market share is slipping at the hands of Motorola and Ericsson. While Nokia's share dipped from 35.3 percent to 34.8 percent between the first and second quarters, Motorola's rose from 13.2 percent to 14.8 percent and Ericsson's from 6.8 percent to 8.3 percent. Nokia's Ollila has set his sights on selling 40 percent of all phones worldwide.
Ericsson, which last week formalized a joint venture with Sony Corp., regained its position as the third-largest global handset maker, a title German manufacturer Siemens AG snatched from it in the first quarter. Still, in the second quarter Siemens saw its share rise from 6.9 percent to 7.9 percent. Korea's Samsung experienced a share surge from 6.3 percent to 6.9 percent. Japanese manufacturers Panasonic and NEC Corp., which recently teamed up, both saw their market share decline in the quarter.
Gartner's estimation that total global handset sales plunged 8.4 percent to about 90 million–the first-ever year-over-year quarterly decline–lends credence to the need for GPRS to jolt the industry out of its doldrums. Some consumers reportedly are waiting for the arrival of 2.5G to upgrade their phones.
Gartner expects 450 million wireless phones will be sold this year, up slightly from 405 million last year. A report from IDC, meanwhile, forecasts that 412 million will be sold.
So while GPRS won't cause a surge in handset sales this year, it should account for some growth next year. Thus, the worry that small software glitches could turn into a monster-sized problem. |
