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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (44055)	7/3/2001 12:29:09 AM
From: gdichaz	Respond to of 54805

Mike: My comment on your comments on my comments on CC's comments. Yes. But with one exception. As the person who once used the slogan "Qualcomm and Nokia - together the world !" (years ago BTW), I would suggest that Nokia has blown its opportunity for that and is now on the long slippery slope down. Nokia's choice, and sadly so. On that, I consider CC's answer perceptive. Best. Cha2

To: Mike Buckley who wrote (44055)	7/3/2001 1:35:05 AM
From: Thomas Mercer-Hursh	Respond to of 54805

how Joe Sixpack would make use of 3G services. Maybe it's to play advanced games. I really dunno. And, the real point is that while initial adoptions are likely to be in terms of advanced forms of existing services or new, but rather marginal applications, the main stream of adoptions are likely to come from application domains that are only dimly imagined at this point. Jokes aside ... not that they ever are completely ... the issue with double dash is not that he is some kind of retrogressive Luddite, it's that a cell phone has yet to present to him a compelling value proposition. For mere voice calls, I understand this since it is highly marginal for me as well, although I am currently erring on the side of actually having one which is only turned on when I use it and that doesn't happen most months. In the same sense, I have never had a compelling interest in a laptop or, more recently, a PDA. For a year or two I have had an interest in a PDA sized device with a usable keyboard ... since I doubt that I and a pen interface will get along well together ... for taking notes at extended wine tasting events so that I don't have to transcribe everything from chicken scratches. I have a clear sense of the possible benefit, which one often doesn't with new applications, but have yet to find a device which really fulfills the purpose.

To: Mike Buckley who wrote (44055)	7/3/2001 9:35:37 AM
From: gdichaz	Read Replies (1) \| Respond to of 54805

Mike: Chuckle. Need to "modify" my comment on Nokia in light of Qualcomm / Nokia license agreement just announced. Now the only question is, is it too late for Nokia? Probably not in an overall sense, but that Nokia faces strong and tough competition in all flavors of CDMA from Asia, specifically including mainland China as well as Korea and Japan, in handsets (which will lower Nokia's margins) seems highly probable. At least Nokia can honestly "go commercial" in CDMA infrastructure, whether UMTS or otherwise. The fears of a "court challenge" to Qualcomm's owning CDMA lock stock and barrel are now gone. Good news all around IMO. Evidence that Qualcomm's gorilla status in CDMA, and the future of mobile wireless / internet (intranet), is set. Best. Chaz PS And following up on CC's comment about how suppliers will gain, this is good news for Texas Instruments also.

To: Mike Buckley who wrote (44055)	7/8/2001 12:15:56 PM
From: Eric L	Respond to of 54805

re: King Nokia (NOK) - I Highly Recommend ... ... this book, ("The Nokia Revolution"), to anyone interested in modern day business strategy, to gorilla gamers, to any Nokia investor, anyone considering NOK as an investment, anyone invested in or intending to invest in wireless, any Qualcommer who views Nokia as the evil enemy (know thy enemy as thyself), or anyone who thinks that the 20,000 employees of Nokia engaged in R&D simply design colored faceplates, or think that the "Nokia look and feel" refers simply to the form factor and cosmetic look of Nokia mobile phones. This exceptionally well researched and written book purports to deliver "the first comprehensive strategic* study of Nokia".* It delivers on it's promise. The book chronicles strategy making at Nokia in depth, how its executives think, and how and when it listens to its customers. Gorilla Gamers will enjoy the discussion of "Technology-Adoption Life Cycles", in the "Downstream Innovation" chapter, and the discussion of Geoffrey Moore's ideas that originated in classic technology-adoption frameworks. The author notes that Nokia's marketeer's studied these idea's (contained in "Crossing the Chasm" and "Inside the Tornado") diligently. He also notes that "Moore's frameworks for marketing strategies fit Nokia's efforts at market-making strategies, which were founded on taking advantage of discontinuities in emerging technology markets. ... In Nokia's marketing strategies the chasm framework has enabled the company to tailor appropriate responses to the early adopter [upstream innovation] and the late-adopter markets [downstream innovation]". The book discusses "strategic inflection points" in some detail in the chapter titled "Strategic Market Making" - which essentially are the transition points between generations of technology, and "in the medium term Nokia's paradigm has consisted of corporate and business strategies and strategic architecture. Since the 1980's this architecture has evolved in four phases articulating the central corporate challenges": * First generation: analog cellular (early 1980's) * Second generation: digital networks (late 1980's to early 1990's). * Third generation: data and voice communications, i.e., convergence of IP/cellular (late 1990's to early 2000's). * Fourth generation: wireless/wireline broadband transparency (2010 and beyond). Skimming ahead (or is it behind - I started in the middle) the book also discusses Nokia's study of and application of "the Network Effect" This is not a read in one sitting book. It is packed with the results of prodigious research into the mobile communications industry, and includes a wealth of charts (some requiring a magnifier), stats and well documented corporate and geopolitical and economic history. It is a book one reads with a marker, a tin of page points (had to rush reorder from Levengers), a fine point pen and some sticky notes at hand. When I have finished, it will join Moore's 4 titles, Christensen's, Morris & Ferguson's, Thomas Peter's "In search of Excellence", Mary Walton's "The Deming Management Method", r. William C. Y. Lee's "Essentials of Wireless Communications", and a few others, in easy reach on my desktop bookshelf. It will stay there, irregardless of how long I hold Nokia, although I will hold Nokia as long as they are King, or until it becomes clear that Nokia's strategic intent articulated by Jorma Ollila in 1999 will not be fulfilled: "Nokia's strategic intent is to take a leading, brand recognized role in creating the Mobile Information Society by combining mobility and the Internet, and stimulating the creation of new services." The Nokia Revolution: The Story of an Extraordinary Company That Transformed an Industry Author: Dan Steinbock List Price: $27.95 Amazon Price: $22.36 Hardcover - 352 pages 1st edition (May 31, 2001) - ISBN: 081440636X amazon.com Table of Contents Preface & Introduction Part I: The Diversification Strategy 1. The Origins of Nokia 2. Kairamo's Vision of a European Technology Concern 3. The Crash of the Investment Economy: Nokia's Years of Turmoil Part II: The Global Focus Strategy 4. Restructuring: The Focus Strategy 5. Strategic Intent 6. Global Focus 7. Strategic Market Making Part III: Toward the Mobile Information Society 8. Nokia's R&D: Focusing and Globalization 9. Upstream Innovation 10. Downstream Innovation 11. Nokia's Secret Code Appendix: A Note on the Finnish Sources *About the Author:* Dan Steinbock (New York City and Helsinki) is an affiliate researcher at the Columbia Business School and is a member of Columbia Universities Institute for Tele-Information ((CITI) and a visiting virtual professor at the Helsinki School of Economics and Business Administration. In the early 1990's Steinbock's researched focused on digital convergence . He has served as a strategy consultant for TIM and Sonera. Excerpts from Selected Reviews: The book provides insights that are invaluable to managers coping with change as well as to anyone seeking to participate in the wireless future. - Tom Wheeler, President & CEO of CTIA - What emerges from the author's thorough corporate history and thoughtful analysis of Nokia's strategies, is a profile of a company that has unknowingly created many of the modern business approaches that companies today strive for. Agility, innovation, alignment, first mover advantage -- Nokia used them all to successfully create market niches and ultimately become a global leader in one of the hottest technology trends in recent years -- wireless. There is nothing on the shelves that competes with the author's comprehensive and in-depth approach. This book became a business classic the minute it hit the shelves! While the author, a "visiting virtual professor" at the Helsinki School of Economics as well as a researcher at the Columbia Business School, is clearly enamored with the company, he never slips into mindless praise, letting Nokia's record speak for itself. (June 29) Forecast: The dot-coms are going up in smoke, but we still have our Nokias. Amid New Economy eulogies, readers interested in mobile communications and corporate strategy will be glad to find a high-tech success story they can still believe in. *Disclosure:* I was invested in Nokia from 1995 till late 1998 and enjoyed a sensational return, particularly since I doubled my position immediately following Nokia's crippling Q3 1996 earnings warning resulting from a logistics blunder. I started investing in Nokia again in November 2000. Currently I hold equal quantity of shares in Qualcomm and Nokia so my Nokia position is one third that of my position in Qualcomm. My average cost for Nokia shares is $24.25. The majority of shares were purchased with proceeds from the reduction of my Qualcomm position earlier this year at $88. The reduction of my Qualcomm position was a portfolio balancing matter, and not dissatisfaction with Qualcomm which is, IMO, a premier long term hold. I will be increasing my Nokia position by 50% if my limit buy hits over the next few weeks. *Nokia Project Hunt Status:* Overdue as usual, but well in progress. One more new Nokia book to read after this one. Lots of editing and trimming back to do, and some financials analyses, for which I will seek some help because I am a 1.) who relies on others to drill on valuation. It is sort of like the inevitable Nokia/Qualcomm license agreement was. It will be done when it is done. Merlin: If you have gotten this far in this post I wanted to say that I owe you a response to your post #44055. When I respond I will be referencing some comments made by this author in this book. Best, - Eric -

To: Mike Buckley who wrote (44055)	7/8/2001 5:48:52 PM
From: Eric L	Read Replies (2) \| Respond to of 54805

--Mike, re: Christensen & Listening << I thought he spelled it out his usage of proprietary "closed" nice and concisely. ... You've presumably seen my thinking that he never used the word, "closed," much less try to explain it. I think that's something H&Q conjured up. >> At about the same time you were posting this, I was composing this post: ... but since I was chiding you for commenting on the Christensen audio before listening to it I need to chide myself (publicly) for listening - but not listening well - before commenting on it myself. Typically, my first listen to any business or investing audio is a preview, and I generally half listen while doing other things. I set aside time to do a more thorough and focused listen if the preview sparked my interest, which this one did. In this case I skimmed the PDF (summarry/comments/interpretation), and did my first listen right after Judith and Voop posted the links. I then printed out the PDF, and read it thoroughly. When you and I first engaged I assumed that what was in the summary was more or less what Christensen said. When I listened the second time with the PDF in hand, I discovered that the Hambrecht comments embellished and interpreted what Christensen said. We will never know whether he reviewed their summery or if they worked from his presentation notes, or just commented and interpreted on their own. [Let that be a lesson to us all - sometimes we do not listen well - what we think we heard is not what we heard, and sometimes when dealing with the written word we selectively focus on certain elements and miss the overall gist]. Either way placing "closed" in parentheses between proprietary and architecture or business model was warranted in my judgment. The reason for this is that to many people proprietary connotes closed, while to many others proprietary architecture or business models can be either open or closed. It is always important to distinguish for this reason. Moore's usage is a lift, from the industry, from the chroniclers (like Morris & Ferguson), and although its common parlance in tech, its not in overall investing circles. All this of course of tantamount importance to us Gorilla Gamers. Worst of all, proprietary closed and proprietary open are not black and white, and although Moore treats committee architecture as the opposite of proprietary architecture, that's not always black and white either, and the evolution of cdma2000 standards in 3GPP2 is a case in point. Skimming back through "Innovators Dilemma" which I view as an important complement to the "Gorilla Game", I think I've been able to determine that Clayton deals with business models more than architecture and doesn't use Open or Closed to distinguish between proprietary architecture or business models ... at least I don't think he does. Regardless, I have enjoyed the discussions that have resulted as a result of the Christensen posting. Eric--

To: Mike Buckley who wrote (44055)	7/8/2001 5:51:02 PM
From: Eric L	Read Replies (1) \| Respond to of 54805

--Mike, re: NOK & Christensen << I think you left out the most important part of Christensen's comments about Nokia. You wrote: "worries about Nokia" ... Nokia "makes all the money and their vendors get hammered" That was a preview to entice the board to listen ... <g> << You seemingly forgot to explain that the reason he worries about Nokia is because "Nokia is about at the point that they begin overshooting the functionality that people can actually utilize in those handsets." He explains that as Nokia becomes more entrenched in that phase, it's Nokias suppliers that make the money, not Nokia.>> I've clipped a transcript from S100 below paraphrasing what Christensen said. I'm not sure what your thoughts were when Christensen was asked the question about Qualcomm & Nokia, and he ducked the Qualcomm side and responded about Nokia but my reaction was that he knows a little, but not a lot, about Chasm Groups client Nokia, and he force fit them into his favorite (maybe only) thesis "when new technologies cause great firms to fail". The tipoff to my thinking that he does not know that much about Nokia is in fact his statement that "Nokia is about at the point that they begin overshooting the functionality that people can actually utilize in those handsets." Nokia increasingly thinks of itself as a software company, and its expertise and key differentiator lies in making tiny and powerful data appliances eminently useable, and consequently not only appealing but a must have, for every category of user. their 3G reference models (that they will back down to 2.5G) reflect this. My read on Nokia is that (along with Qualcomm and perhaps TI who are in related but entirely different business - the potential beneficiaries he refers to) they amongst their peers are best positioned to transition into the next generation. They made the transition into the last generation better than their peers, and should be able to do so in this one. This is not to say that Nokia can not fail, however. They have several vulnerabilities, but this is true of every gorilla and king we hold to some extent when they migrate technology generations, and especially when they do so in the face of exceptional economic uncertainty of the ilk of what we face today in telecom (wired or wireless). I previously referenced a rather objective book by Dan Steinbock called "The Nokia Revolution", and talked about his (Nokia's) concept of strategic inflection points. Hopefully Nokia's understanding of this concept will help them weather through. Hopefully Qualcomm can deal with this as well. At the conclusion of the book Steinbock devotes 3 pages to what he calls "The Drivers of Nokia's Strategic Failure". First he summarizes 6 key drivers of Nokia's success (Nokia's secret code) and says "to understand the driver's Nokia's strategic failure, the strategist must simply reverse the drivers of its current strategic success. The company would then suffer in [those] general circumstances". Sobering. I guess one could say that past performance is no guarantee of future success. Here is the promised paraphrase of what Christensen said in regarding Nokia at 25 minutes: I worry about the future of Nokia, in the sense that when the product, ... I go back to this thing I just gave about when the product is not good enough, the architecture is inter dependant, the way you compete it is to make better products and being an integrated provider is a big advantage. And then as it becomes more than good enough, an industry standard architecture emerges. Nokia, with it's products has been in the first camp on the left hand side and the architecture of it's products is inter dependant, and during that era the people that make the product itself that the customer uses, they are the ones that make all of the money and their suppliers get hammered. So when General Motors was the dominant integrated maker of cars, which was in that era, they were the ones that made all the money and the suppliers get hammered and IBM made all the money and their suppliers got hammered and the same thing is true of Xerox, RCA and others. But then when the product becomes more than good enough and you develop this modular industry standard architecture, then the company that makes in the stage of the value added, where you used to make the money, which is designing and assembling the product that the customer uses, it becomes very difficult to make money. And a good way to visualize that is if you were an engineer at Compaq and your boss told you to go and design a better computer than Dell, how would you do it? You would put a faster microprocessor, higher capacity disk drive and anything you can do, the competition can do instantly because if the industry is integrated around the industry standards it just becomes that all of the functionality resides in the subsystems and not in the assembled product. And I think that Nokia is about at the point where they begin overshooting the functionality that people can actually utilize in those handsets. And what you will see happen is that the handset itself will become more and more economically and technologically the equivalent of a desktop computer. And the ability to make money in that value system will migrate back to the companies that used to not be able to make money like Agilent, because they will then begin to provide subsystems to the cell phone makers which themselves are somewhat equivalent to the Intel inside. So I would have a bias that the ability to make money in that world is going to migrate away from Nokia in the future. << ... all this why Nokia participates in the overall design of the product with trusted long term partners like the one they moved in beside in Fort Worth, and based on the open standards that they help drive which bear their footprint, and then they take a step further adding some proprietary hooks that make their product difficult to clone in its entirety, and differentiates them, All this while becoming more and more intimately connected to what they see as their real customer - the end user - while the commodity manufacturers focus on the carrier, which Nokia most certainly does not neglect, services exceptionally well, and shares the feedback from their end user customer to their carrier customer. Its a complex strategic business model, with some risk attendant, but so far, so good. They face a crisis right now because they have spent massive amounts of R&D money on 3GSM WCDMA, and there is a real possibility that the technology could be ready before the market is ready, not only for lack of IP experience and lack of 3G business models, but also because of the economic climate. Many of our favorite primates and royalty face this dilemma, including our favorite wireless primate. - Eric -