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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: 49thMIMOMander who wrote (13247)	7/2/2001 8:59:58 PM
From: S100	Read Replies (1) \| Respond to of 34857

oops, someone else all confused like Clay? Same song? I worry about Nokia? Nokia - Customer appeal By Alan Cane Published: June 27 2001 14:05GMT \| Last Updated: June 28 2001 18:23GMT If the world had ended on June 11 this year, Nokia's valediction would have intimated that it could walk on water. Alone among the major manufacturers the world's largest maker of mobile phone systems seemed to be bucking the downward trend. It was continuing to predict strong growth in the handset market. On June 12, however, the Finnish group issued a profits warning that shook the market, sending its share price down more than 20 per cent. As Commerzbank analysts noted: "Although investors were generally fully aware of the difficult market conditions in mobile telephony, Nokia was perceived to be largely immune due to better product mix and execution". It was, however, not. One question is whether Nokia's much admired business systems are sufficiently capable of detecting swift changes in the state of the market. The other is whether Nokia's current discomfort is a blip in a spectacular growth pattern, which has seen it top the European league of companies for delivering shareholder value over the past five years, or a symptom of a deeper malaise. Nokia's success in the handset business - it dominates the market with a 35 per cent share - is a consequence of efficient manufacturing, clever designs and sharp marketing which has made a Nokia phone the "must have" accessory for the style conscious - especially among the young. As one competitor put it slightly maliciously: "As a former manufacturer of rubber boots, Nokia knows what appeals to consumers: we know what appeals to engineers." Just over 10 years ago, the Finnish company, then and now the largest on the Helsinki stock exchange, was an untidy conglomerate including electronics, cable manufacture, machinery, rubber and a chemicals division. In 1991, it sold its data division to ICL of the UK. Since 1994 it has been concentrating on the mobile phone business with a single-minded intensity which has swept it far ahead of rivals such as Ericsson of Sweden, Motorola of the US and Siemens of Germany. The story of its rise to its present pre-eminence has the hallmarks of a business case study. Matti Alahuhta, a Nokia manager in the days when it was a sprawling assemblage of disparate businesses, used a sabbatical year at IMD, the Swiss business school, to develop a theory that small companies could dominate a high technology industry if a new technology changed the rules of the game and all the players were forced to start from scratch. Cellular radio telephony proved to be the technology: GSM, the European digital mobile radio standard, the vehicle for Nokia's dramatic growth. By 1998 it had surpassed Motorola of the US as a handset manufacturer. Last year, it achieved pretax profits of E5.9bn on sales of E30.4bn. GSM, the Global System for Mobile telephony, was sponsored by the European Union and has since become the de facto world standard for second generation (digital) mobile telephony. It provided Europe with the kind of economies of scale across frontiers that the US has long enjoyed and gave Nokia an advantage that has eluded, for example, Europe's personal computer manufacturers. Although the significance of Nokia's design skills has probably been overdone - the much derided handsets of its fellow Scandinavian, Ericsson, are not that bad - it was probably the first to understand the importance of individuality with personalised handset covers and ring tones. Coupled with heavy research spending which enabled it to be among the leaders with new technologies, however, Nokia has managed to convey an image of efficiency, innovation and trendiness which has proved eminently marketable. The question today, however, is whether Nokia can continue to lead the pack both in mobile telephony and in return to shareholders as the world moves towards third generation systems - the delivery of voice and data (text, still and moving images) to mobile handsets. The problem for Nokia, given Mr Alahuhta's analysis, is that the players in this new game are not starting from scratch. The basic technology CDMA (code division multiple access) has been extensively developed by a US company, Qualcomm. The European version, UMTS (universal mobile telephone system) is proving more complicated to develop than the technologists had appreciated. There are many more operators in the field, including the large Japanese electronics groups. While the company remains confident that it will be able to deliver handsets and infrastructure within the deadline for the start of UMTS services in Europe next year, its credibility has been shaken somewhat by its recent profits warning. On the other hand, the company has more than its share of Finnish resilience and may yet prove the doubters wrong. specials.ft.com