Nokia’s battle to stay world’s number one

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Think Finland – think business – and you may well come up with the name Nokia. From humble beginnings Nokia has risen to dominate the world market for mobile phones.

When Fredrik Idestam set up business on the banks of the river Nokia in Southern Finland, the telephone had not yet been invented.

It was 1865 and the firm started by making items such as toilet paper and rubber boots. It expanded into other businesses, before deciding to concentrate on electronics in the 1980s.

Nokia launched its first mobile phone, the Talkman, in 1984.

The machine was large and heavy by today’s standards but the company was sure one day everyone would want one.

That prediction proved correct.

Nokia sold more than 200 million phones in 2004, and last month reported fourth-quarter, pre-tax profits of 1.46bn euros (£1bn; $1.9bn), compared with 1.73bn euros in 2003. That topped forecasts for a fall in profits to 1.3bn euros.

Nokia has always been a forward looking company, says David Wood, of Symbian Technology.

At one point, Nokia controlled 37% of the global mobile handset market. Profits and the share price swelled as a result.

Yet new competitors – especially those from Asia – started stealing some of its market share. The rivals were making phones with features and styles that Nokia could not match – and at better prices.

Investors were disturbed, and Nokia’s share price – which had risen to heady levels in the technology boom – collapsed. The share price continued its slide in 2004. Nokia’s communications director, Kari Tutti, admits it was a difficult year.

One problem was that Nokia was slow to catch onto the popularity of folding phones – known as ‘clam shells’.

“They do need to have clam shells in the market to really compete with Far Eastern manufacturers like Samsung and Sony Ericsson,” says Hugh Morgan, of Mobile Choice magazine.

But Nokia says it has moved to fill that gap. The extremely rapid growth in business for Nokia in the past few years has been a result of many people buying mobile phones for the first time.

And there are still millions of people in Africa, India, China and elsewhere who long for their first phone, which Nokia wants to sell to them.

However, in other countries such as Britain, 90% of people have already got a mobile – so to grow its business Nokia must persuade them to replace their kit with something more sophisticated. But to many customers, hi-tech phones – such as those offering advanced third generation technology – appear expensive and complicated.

They have not caught on as the industry had hoped, and some firms have gone bust as a result. Sensitive to rising costs, Nokia, like so many firms nowadays, is manufacturing in China, where wages are far lower than in Finland.

A look through Nokia’s books shows good things and bad. Its sales continue to grow at an astonishing pace, yet the profit it makes on each of its phones is down dramatically. With almost a third of the global mobile market, it is still way ahead of its rivals – though the competition is intense.

Nokia is doing all it can to please customers and investors, yet its shares have sunk like a stone. Perhaps it just goes to show that in business, strange things happen – like a rubber boot maker becoming mobile phone company number one.

 

 

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Mobile audio enters new dimension

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As mobile phones move closer to being a ubiquitous, all-in-one media player, audio is becoming ever more important. But how good can that sound be from such a small device?

The sound of a buzzing bee jumps from left to right before disappearing around the back of my head.

The surround sound demo is unremarkable when heard on a multi-speaker home cinema system but startling when emerging from a small mobile phone.

British firm Sonaptic is one of a number of companies to have developed 3D audio technology that emerges from stereo speakers.

Firms AM3D and SRS both offer stereo-widening technology for mobile phones.

But Sonaptic’s managing director David Monteith says his firm is the only company to offer positional 3D audio on a mobile.

“There are quite a few basic technologies out there, making the sound seem a bit bigger, headphones a bit nicer. No-one has really tried before to make proper 3D positional audio – where an individual channel can be moved around.”

Sonaptic has been working with Japanese mobile network NTT DoCoMo to set standards for 3D audio on mobile phones.

In the last few months handsets from NEC, Fujitsu and Mitsubishi have been released on to the Japanese marker which have chips produced by Yamaha and Rohm with Sonaptic’s technology.

“The technology has been around on PCs and games consoles for some time but what we are doing is making it more efficient so it can go on a small consumer device like a mobile phone,” said Mr Monteith.

The technology works through applying the science of psychoacoustics and grew out of medical research done by the company’s research director Dr Alastair Sibbald.

“We are basically trying to fool your ears into thinking sound is coming from areas it actually isn’t. Your brain uses certain bits of information which we are effectively synthesising on a mobile phone handset.”

The structure of the ear works as a 3D encoder for sound – helping the brain understand from where sound is emanating.

Sonaptic’s audio processing algorithms mimic that 3D encoding, giving the impression that sound is coming from the left, right, and behind a listener when in fact it is coming from a single source.

Mr Montieth says: “If the sound is off to one side it will get to one ear before the other – if it is on the right it has to bend around your head to get to your left ear. The shape of your ear causes differences in sound from one ear to the other. We are synthesising those differences.”

Sonaptic hopes the technology will have a big impact in the growing market of mobile gaming and music downloading.

“Handhelds often have limitations – screens will be small by definition. If you want to get impact from media you are running – either a movie, a game or watching TV – if you want it to be more immersive then our technology can help.”

A fishing game is the first title to use the technology, creating a 3D sound field while the gamer plays. Driving games and shoot ’em ups using the technology are in development.

The technology can also be used for music – giving songs a much more expansive and immersive feel. Sonaptic offers its technology on a chip or in software and is about to release a new version which significantly improves the efficiency of the audio processing.

“It’s important we only use 10 or 15% of the processor otherwise you won’t be able to play a game on the handset,” explained Mr Montieth.

The company is now looking to the US and European markets, where it has been working with network Vodafone.

“We have focused first on Japan because it has a very advanced mobile phone market. We knew Japan would be the first place to have the handsets that could use our technology. There should be handsets out in the UK in the next six months.”

 

Mobiles ‘not media players yet’

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Mobiles are not yet ready to be all-singing, all-dancing multimedia devices which will replace portable media players, say two reports.

Despite moves to bring music download services to mobiles, people do not want to trade multimedia services with size and battery life, said Jupiter.

A separate study by Gartner has also said real-time TV broadcasts to mobiles is “unlikely” in Europe until 2007.

Technical issues and standards must be resolved first, said the report.

Batteries already have to cope with other services that operators offer, like video playback, video messaging, megapixel cameras and games amongst others.

Bringing music download services based on the success of computer-based download services will put more demands on battery life.

Fifty percent of Europeans said the size of a mobile was the most important factor when it came to choosing their phone, but more power demands tend to mean larger handsets.

“Mobile phone music services must not be positioned to compete with the PC music experience as the handsets are not yet ready,” said Thomas Husson, mobile analyst at Jupiter research. “Mobile music services should be new and different, and enable operators to differentiate their brands and support third generation network launches.”

Other problems facing mobile music include limited storage on phones, compared to portable players which can hold up to 40GB of music. The mobile industry is keen to get into music downloading, after the success of Apple’s iTunes, Napster and other net music download services. With phones getting smarter and more powerful, there are also demands to be able to watch TV on the move.

In the US, services like TiVo To Go let people transfer pre-recorded TV content onto their phones. But, the Gartner report on mobile TV broadcasting in Europe suggests direct broadcasting will have to wait.

Currently, TV-like services, where clips are downloaded, are offered by several European operators, like Italy’s TIM and 3. Mobile TV will have to overcome several barriers before it is widely taken up though, said the report. Various standards and ways of getting TV signals to mobiles are being worked on globally.

In Europe, trials in Berlin and Helsinki are making use of terrestrial TV masts to broadcast compressed signals to handsets with extra receivers. A service from the Norwegian Broadcasting Corporation lets people watch TV programmes on their mobiles 24 hours a day. The service uses 3GP technology, one of the standards for mobile TV.

But at the end of 2004, the European Telecommunications Institute (Etsi) formally adopted Digital Video Broadcasting Handheld (DVB-H) as the mobile TV broadcasting standard for Europe.

Operators will be working on the standard as a way to bring real-time broadcasts to mobiles, as well as trying to overcome several other barriers. The cost and infrastructure needs to set up the services will need to be addressed. Handsets also need to be able to work with the DVB-H standard.

TV services will have to live up to the expectations of the digital TV generation too, which expects good quality images at low prices, according to analysts.

People are also likely to be put off watching TV on such small screens, said Gartner.

Digital video recorders, like Europe’s Sky+ box, and video-on-demand services mean people have much more control over what TV they watch. As a result, people may see broadcasting straight to mobiles as taking away that control.

More powerful smartphones like the XDA II, Nokia 6600, SonyEricsson P900 and the Orange E200, offering web access, text and multimedia messaging, e-mail, calendar and gaming are becoming increasingly common.

A report by analysts InStat/MDR has predicted that smartphone shipments will grow by 44% over the next five years. It says that smartphones will make up 117 million out of 833 million handsets shipped globally by 2009.

 

Consumers confused by new phones

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Few British consumers are considering upgrading to third generation (3G) services, reveals a survey. Only 4% of those questioned said they were considering swapping their existing mobile for a new 3G handset.

The research is bad news for phone firms who are stepping up competition for 3G converts as they finish building networks to support the new services.

The consumers questioned said that the bewildering number of features on 3G handsets was putting them off.

Competition to get people moving on to 3G networks will escalate in the next 12 months as almost all of the UK’s operators have now launched their new networks.

The 3 network launched in 2003, consumer services from Vodafone and Orange followed in 2004 and O2 unveiled its network in early January. Only the UK’s T-Mobile has yet to launch.

But the survey shows that consumers may resist swapping their existing phone for a 3G one because of widespread confusion about the bewildering number of ways to pay for phones and the vast array of features most have onboard.

“The concern is that if they do not make it simple and less frightening for consumers it may impact the growth of 3G,” said John Hughes, co-founder of Netonomy which commissioned the survey.

The survey’s findings contradict bullish predictions from Swedish-Japanese moble phone maker Sony Ericsson. It expects the number of 3G handsets, capable of live video calls, sold in 2005 to double from 2004 to around 10% of all phones sold, the firm said on Tuesday. “3G will… become increasingly important as the year progresses,” Sony Ericsson Chief Executive Miles Flinet said in a statement.

The survey found that 71% of those questioned thought that mobile services were getting more complicated. Most of those who responded to the survey, 59%, said they thought that 3G phones would be even more complicated to configure and pay for.

Mr Hughes said that technological advances that should make life easier for consumers seemed to be making things more complex. He said many operators did a bad job of guiding customers through the many options available to them.

Without good guidance consumers could find themselves trying to sign up for services not supported by their current handset or even signing up for the same service twice.

Mr Hughes said operators had to work hard to help consumers navigate through the complexities. “In the long run the only sustainable relationship a business has is its relationship with customers,” he said.