Upwardly mobile
FINANCIAL TIMES [OF LONDON]
SATURDAY JANUARY 30 1999
Think of Nokia as a software company. Of course, it also happens to be manufacturing one of the fastest-growing consumer items ever, which it does very well. Last year, it churned out 41m mobile phones, doubling production volumes, yet inventories barely budged. But Nokia is exciting because of its vision of what mobile phones could become - devices at the heart of innumerable tasks, be it surfing the internet, paying credit card bills, programming a video recorder and maybe the occasional phone call. Compared with the software heart these devices will have, mere manufacturing will eventually be low in the value chain. Nokia is not only involved in developing the operating system for this new product, but will also be designing many of the software applications for the system, such as internet browsers.
Nokia's other weapon is its brand. Mobile phones have now so penetrated the mass-market that design is becoming increasingly important. Here, Nokia - the first to bring out bright multi-coloured handsets - has an edge. Nokia has had a remarkable year, cracking the US market for digital phones with smarter marketing than rivals.
The issue is how sustainable this is. Nokia wants to damp down expectations that operating margins - already at 19 per cent - can keep sailing up. Pricing may be less favourable this year. Rivals should not rejoice too soon. The company seems as intent on abolishing the product cycle as new-age economists are on abolishing the business cycle. Nokia plans a host of new phones this year, as well as a constant upgrading of old ones. This is not a company to bet against.
|
