Nokia, the world's largest maker of mobile handsets, said Thursday that it plans to close two flagship stores in the U.S. as it refines its sales strategy and struggles to get a bigger foothold in the North American market.
Nokia also said it plans to close one of two stores in London. And it will look for a new location for its Sao Paolo store.
The U.S. Nokia stores that will be closed are in New York and Chicago. Nokia has 12 stores worldwide. It opened the first store in Moscow in 2005. Nokia said closing the stores is part of a new retail strategy that includes more cooperation with operators and other retailers.
Nokia's shift in strategy comes as the company indicates it plans to focus more on services and applications through its online Ovi store. Last month, the company said it plans to limit the number of devices it will launch as hardware has become less important to consumers and services and applications have become more important.
It's hardly a surprise that Nokia would shut down the U.S. stores as it refines its retail strategy, since this is one of the company's weakest markets. While Nokia still dominates the worldwide cell phone market with about 37 percent market share, the company's market share in the U.S. is only in the single digits. For years, the company has said that it plans to focus on the North American market, particularly the U.S. But little progress has been made.
Nokia executives say that the company is developing new products for the U.S. market and that it's working with wireless operators to get Nokia devices on those networks. This is important for Nokia since about 90 percent of all cell phones sold in the U.S. are sold through an operator. And most are subsidized. Nokia doesn't offer many products through carriers in the U.S., a fact that has hurt the company in the U.S. market.
But Nokia is making some progress. Earlier this year, it launched its E71x smartphone on AT&T's network. That said, other high-end devices, such as the N97, are still not offered by a U.S. operator.
Meanwhile, Nokia's competitors, namely Apple and Research In Motion, have taken advantage of forming relationships with carriers and their devices are offered with hefty subsidies. As a result, Apple and RIM have much higher market penetration than Nokia with respect to smartphones.
Apple, which makes the popular iPhone, has also been far more successful with its retail strategy than Nokia. The company now has 279 stores that it's opened in the past eight years since it opened the first Apple store in 2001. These stores have become a big revenue driver for the company, generating about $6.6 billion of the company's $29.9 billion in revenue in fiscal 2009.
Apple's flagship stores, or as the company calls them "significant stores," are especially designed to draw in visitors with eye-catching design and architecture. Some of the stores, such as the Fifth Avenue store in Manhattan, which sits below a glass cube across the street from the Plaza Hotel, have become tourist destinations. Worldwide some 170 million visitors entered an Apple store in fiscal 2009.
Apple plans to open between 40 and 50 new retail stores in 2010. More than half of these new stores are expected to be outside the U.S. Some of the countries where Apple will open new stores include the United Kingdom, Canada, Australia, Italy, Switzerland, Germany, France, and China.
Finally, some good news from Nokia.
On Wednesday, the world's largest maker of cell phones said it expects sales volumes of mobile handsets to increase 10 percent in 2010 from 2009, as the market rebounds from a worldwide recession.
"Going into 2010, the overall mobile-devices market is stabilizing, and it is growing more in the areas where Nokia has competitive advantages," Nokia's new chief financial officer, Timo Ihamuotila, said in a statement.
Nokia said its worldwide market share of 38 percent would remain unchanged next year but that the company would increase revenue by focusing on stabilizing pricing on handsets. The average selling price of Nokia's phones had slipped over the past year. In the third quarter of 2009, the company's average price for a handset was 62 euros, or about $94. That was price was stable, compared with the previous quarter, but it was down from 72 euros during the same quarter a year ago.
This past year has been a tough one for Nokia and the rest of the cell phone industry. Nokia was hit hard by the economic downturn, as consumers put the brakes on spending. And for the fourth quarter of 2008, it saw sales drop 19 percent during the quarter, compared with the same quarter in 2007. And the company's profit fell about 69 percent.
Nokia slashed its annual forecast for 2009. And to cope with the deteriorating economic situation, it also announced that it would reduce about $905 million from its budget. Much of the cuts resulted in thousands of workers losing their jobs.
Besides the economic downturn, Nokia has been facing increasing competition from companies such as Apple, with its iPhone, and Research In Motion, with its BlackBerry devices. And now the company is facing even more competition in the smartphone market from Google Android phones, which will hit the market en masse in 2010.
Even though Nokia launched a new smartphone in 2009, the N97, the company still managed to lose market share in the high-end smartphone category.
Nokia says it's made improvements to the Symbian operating system that is used to power its high-end phones. But as the market gets more crowded with devices, it won't be easy to compete against popular iconic devices such as the iPhone. What's more, Nokia still hasn't managed to crack the U.S. market, the fastest-growing one for high-end handsets.
Today only a couple of Nokia's higher-end smartphones are subsidized and sold through U.S. carriers. This is a major problem, considering that the vast majority of American cell phone users buy subsidized devices in exchange for service contracts. The iPhone is currently selling for as little as $99 with a two-year contract from AT&T. Meanwhile, the Nokia N97 costs more than $500 at full retail.
Nokia has also been focusing a lot of effort on building up its services business. The company is building a marketplace and selling services through its Ovi online portal, which enables cell phone consumers to buy music, videos, and navigational maps.
The company is expecting to generate 2 billion euros in sales next year from its services unit. And it expects to grow this number in 2011, when it's expected to have more than 300 million active Ovi users. It plans to maintain a focus on applications for its phones, targeting net sales from its services unit of 2 billion euros or more in 2011 from an expected 300 million active users by the end of 2011.
Meanwhile, Nokia's joint venture with Siemens to sell telecommunications equipment has also been struggling. In October, the company was hit with a 908 million euro goodwill write-down on the business unit.
But Nokia now believes that the Nokia Siemens venture will also gain market share in 2010, even as the communications infrastructure market is expected to be flat in euro terms from the previous year, Nokia said.
Nokia announced Tuesday that it will lay off about 220 employees from its R&D division in Japan, a bit more than 1 percent of the company's worldwide R&D workforce.
The layoffs are part of the company's efforts to align its global research & development operations with new products. Nokia Siemens Networks, the network equipment maker owned by Nokia and Siemens, will not be affected by the reorganization, said Nokia.
Just last week, Nokia said that it will slash 330 positions in total from its R&D units in Finland and Copenhagen as part of the global revamp.
Though Nokia is still the world's leader in smartphone shipments, it has been undercut lately by competition from Apple and Research In Motion. Recent reports have pegged a decline in market share, while Nokia's third-quarter results showed a net loss and lower sales.
Nokia said Friday that a streamlining effort could result in the elimination of as many as 330 positions from its research and development staff, or about 2 percent of its global R&D workforce.
Microelectronics research at Nokia.
(Credit: NOkia)The changes will likely hit up to 230 workers in the company's Oulu site in Finland and roughly 100 at its Copenhagen site. Nokia said it plans to offer voluntary severance packages to the affected workers and to find alternative jobs for as many people as possible.
The company currently employs more than 17,000 workers in its R&D business. It has 2,000 employees at the Oulu facility and 1,000 in Copenhagen.
Though Nokia still holds the top spot in the smartphone arena, its dominance has been eroded by competition from the likes of Apple and Research In Motion. A recent In-Stat report found that Nokia's share of the smartphone market had dropped to 35 percent in this year's second quarter compared with 50 percent in the prior year's quarter.
Another report from Strategy Analytics revealed that Apple had surpassed Nokia in cell phone profits during the third quarter, the first time that Nokia had fallen to second place.
Nokia's third-quarter results showed a net loss of $832 million, while sales dropped around 20 percent. Nokia Siemens, the network equipment maker run by Nokia and Siemens, has also been a drag on its owners, recently announcing its own layoffs and cost cuts as a result of its weak performance.
In the race for mobile phone profits, Apple has overtaken Nokia, according to figures for the latest quarter.
Apple earned $1.6 billion in the third quarter from the iPhone, outpacing Nokia's $1.1 billion cell phone profit to grab the top spot among all mobile phone vendors, said research firm Strategy Analytics on Wednesday.
(Credit:
Strategy Analytics)
This is the first quarter that Strategy Analytics has seen Apple surge past Nokia in mobile phone profits, according to Alex Spektor, the author of the research, who spoke with CNET News.
The contest between Apple and Nokia for top phone profits has been tight in recent months. ... Read more
Henry Tirri
(Credit: Nokia)HELSINKI--It will take years and a technology "breakthrough on multiple fronts" before the battery lives of smartphones will reach "good" levels, according to the head of Nokia's research center, Henry Tirri.
By "good," Tirri meant phones that can last on a weekly power charge, which will support battery utilization closer to what basic phone models require today, he said at a media interview here Tuesday.
Lamenting the current state of smartphone battery life, he noted that most high-performance models with large screens do not last more than eight hours of constant usage on a single charge....
Read more of "Smartphone batteries need 'breakthrough'" at ZDNet Asia.
Nokia is replacing potentially dangerous phone chargers for free, the mobile giant said Monday.
The recall affects 14 million chargers, according to the Associated Press.
The affected chargers are manufactured by third-party suppliers, Nokia said. A loose cover could potentially expose the charger's internal components and thus pose an electrical shock hazard if accidentally touched during use, the company said.
Chargers involved in the exchange are 2-pin types and include the AC-3E and AC-3U models manufactured between June 15 and August 9, 2009, as well as the AC-4U model made between April 13 and October 25, 2009. A Nokia site offers more information.
Read more of "Nokia rolls out charger exchange program" at CNET Asia.
Consumer demand for smartphones seems to be unstoppable.
In the third quarter, vendors shipped a record 43.3 million devices, up 4.2 percent from last year's third quarter and up 3.2 percent from this year's second quarter, says a report released Thursday by market researcher IDC.
(Credit:
IDC)
Among smartphone vendors, Nokia still enjoys the greatest market share, according to IDC, with a 37.9 percent slice for the third quarter. ... Read more
In the battle between LTE and WiMax for wireless broadband, LTE may have just gotten another boost.
A group of leading telecom service and equipment providers, including AT&T, Verizon, Nokia, and Samsung, announced a new standard Thursday for delivering compatible voice and messaging services using Long Term Evolution (LTE) networks.
The standard, dubbed the One Voice initiative, offers a set of technical functionalities that telecommunication companies can use in their LTE services and products to provide both voice and Short Message Services (SMS).
The group of companies setting up One Voice (which also includes LTE proponents Orange, Telefonica, TeliaSonera, Vodafone, Alcatel-Lucent, Ericsson, Nokia Siemens Networks, and Sony Ericsson), see the standard as a way to provide interoperability for broadband voice and SMS services. The goal is to give telecom providers and manufacturers a convenient technical profile for working with each other and save customers from wrestling with different and conflicting LTE technologies.
LTE has been fine at supporting data, which uses IP-based packet switching. But it's faced challenges trying to incorporate traditional circuit-based switching voice and SMS services onto IP-based networks. One Voice is the group's attempt to resolve that issue.
The new specification will use existing functionality known as IP Multimedia Subsystem (IMS), which already defines how to provide data, voice, and other content over an IP-based network. IMS was established by the 3rd Generation Partnership Project (3GPP), a group comprised of telecom industry associations trying to set standards for 3G mobile networks.
"Open collaborative discussions have concluded that the IP Multimedia Subsystem-based solution as defined by 3GPP, is the most applicable approach to meeting the consumers' expectations," said One Group in a statement.
In recent years, LTE has been duking it out with WiMax to be crowned the upcoming broadband wireless standard. In one corner has been telecom giants like AT&T and Verizon, both of which have announced plans to deploy 4G wireless networks using LTE.
In the other corner has been Sprint, which is eyeing a rollout of its own 4G network using WiMax. Sprint owns a majority stake in WiMax provider Clearwire, a wholesale distributor of 4G services. Clearwire recently unveiled a huge WiMax testing sandbox in Silicon Valley where developers could play with the technology.
However, Clearwire has been waffling on the choice between LTE and WiMax. In a recent interview with Dow Jones Newswires, Clearwire CEO Bill Morrow said he would be willing to switch to LTE if helped the company.
Damaged by lower sales, huge operating losses, and a falling market share, Nokia Siemens Networks is pinning its hopes on a major reorganization.
The network equipment maker, jointly owned by Nokia and Siemens, announced Tuesday that it will lay off 5,700 employees and cut its five business units to three as part of a plan to slash expenses by 500 million euros ($740 million) by the end of 2011.
The layoffs will represent around 7 percent to 9 percent of the company's 64,000 global employees and is likely to be felt across all countries in which Nokia Siemens has a presence. The company did not state which jobs would be affected but did say that any disruption to sales positions that deal directly with customers should be limited.
The three new revamped business units are expected to launch on January 1 and will include Business Solutions, Network Systems, and Global Services.
"As our customers make purchasing decisions, they want a partner who engages in issues well beyond a traditional discussion of technology," said Rajeev Suri, chief executive officer of Nokia Siemens Networks, in a statement. "Business models, innovation, growth and transformation are now very much front and center when it comes to the selection of a technology partner - and our planned new structure will position us well in this changing market."
The company said it's also looking at potential new acquisitions and partnerships that could enhance its product line or expand its customer base. In June, Nokia Siemens bought Nortel's wireless technology for $650 million.
"We recognize that we are operating in a market where customer needs are evolving fast," said Mika Vehvilainen, chief operating officer of Nokia Siemens Networks, in a statement. "We see acquisitions and expanded partnering as important tools to help meet these needs in the fastest, most efficient way possible."
Formed in early 2007, Nokia Siemens has seemed cursed from the start. Its launch was initially delayed a few months due to a bribery scandal involving several former Siemens executives.
The new company had hardly gotten off the ground when it announced it wouldn't meet financial expectations. And it's struggled since then, hurt by the economic downturn and increasing competition.
Third-quarter sales fell 21 percent to 2.8 billion euros, while its operating loss widened to 1.1 billion euros. Parent Nokia was recently forced to spend 908 million euros to write down the value of the deteriorating business.
