November 20, 2001
Nokia's New Handset Draws Attention
For Powerful Software Packed Inside
By DAVID PRINGLE
Staff Reporter of THE WALL STREET JOURNAL
BARCELONA, Spain -- Nokia Corp., the world's
biggest maker of mobile phones, is trying to position
itself as a powerhouse in software.
The Finnish giant unveiled here Monday a new
mobile-phone handset, called the 7650, with a large
color screen and built-in digital camera, but many
people in the industry were looking beyond the
flashy new hardware to the software inside the
gizmo. As handsets become miniature computers --
able to access the Internet, play games and even run
video clips -- the software that runs all these new
features is taking center stage.
The 7650, to be launched in Europe in the second quarter of next year at a retail price of 550 euros
($483), is a showcase for Nokia's multimedia messaging software, which can send pictures, sounds and
text to other handsets or Web sites.
Nokia said last week that it will license out this multimedia messaging system and other handset
software to rival phone makers. If it is successful, the company may be able to use its handset software
as a springboard to sell other products just as Microsoft Corp. has exploited the dominance of its
Windows software in the personal-computer market.
Jorma Ollila, chairman and chief executive officer of Nokia, said 60% of the Espoo, Finland, firm's
research and development engineers are working on software.
Though Nokia doesn't disclose revenue from licensing of handset
software, analysts believe that business is still very small. But some
analysts estimate that Nokia obtains 300 million euros of revenue a year
by selling server software, dubbed the m-platform, to help
mobile-phone concerns manage messaging services.
Adnaan Ahmad, a London-based analyst with Merrill Lynch, says
Nokia's move to license its handset software to other phone makers will boost sales of the m-platform
and help it sell more games, ringtones and other software from its Club Nokia wireless Internet portal.
In competition with other messaging software suppliers, such as Logica PLC and CMG PLC, Nokia is
revamping the m-platform so that it can handle messages incorporating pictures, music and video. That
is where the new handsets come in. At first glance, the 7650 is dominated by its color screen, but a
keypad slides out from the back of the phone to show a digital camera. The screen acts as a
viewfinder, allowing the user to frame a picture that can be sent to other users with a phone running the
same software. The handset runs Nokia's multimedia messaging software on top of the EPOC
operating system from Symbian Ltd., the London-based consortium in which Nokia has a minority
stake.
Nokia hopes the m-platform eventually will be used by mobile-phone operators to provide a host of
wireless services, such as location finding or electronic payments.
Per Lindberg, a London-based analyst with Dresdner Kleinwort Wasserstein, believes that the major
mobile-phone operators -- Nokia's primary customers -- have forced the company to license its
handset software to rivals so that they can piece together their own services using standard components
from many different technology suppliers. In the handset software market, Nokia faces competition
from specialist software suppliers such as Openwave Systems Inc. and Microsoft. Several major
mobile-phone operators, such as Telecom Italia SpA's Telecom Italia Mobile, have said they regard
Club Nokia as competing with their own wireless portals.
But Mr. Ollila argued that Nokia still has a technological edge on its rivals and that it has successfully
allayed operators' concerns about Club Nokia. The Finnish company has offered to share revenues
from the service with operators, and Mr. Ollila maintains that the operators will continue to "own the
customer."
In any case, Nokia is pouring huge sums into software development that few rivals, with the exception
of Microsoft, will be able to match. For example, analysts at Credit Suisse First Boston estimate that
Nokia has committed 1,000 staff and $200 million per year to developing new messaging systems. By
contrast, Logica's Mobile Networks division spent GBP 28.3 million on research and development in
the year ended June 30.
Although Nokia was late with GPRS handsets, Chris Gent, chief executive officer of Vodafone Group
PLC, said last week the Finnish company is likely to be one of only three phone makers to have third
generation handsets, capable of downloading data at high speeds, available in time for the giant
operator's U.K. launch of 3G services next October.
Even so Nokia may still find that powerful operators, such as Vodafone, drive an increasingly hard
bargain with their suppliers as they come under pressure to justify their huge investments in 3G. "The
real question is: How is the value going to be distributed?" says Mr. Ahmad at Merrill Lynch. |
