American Analyst Downgrades Nokia after Apple iPhone News

[Ewan]

I'm not sure how to respond on this one - after the announcements from Apple, American Technology Research have downgraded their stock recommendation on Nokia from 'Buy' to 'Hold' because of the increasing competition, and they are awaiting a competitive response from Nokia. I suspect that response will be coming at some point next week.

Read on in the full article.

[krisse]

A few facts this analyst seems to ignore:

- Nokia's profits and sales mainly come from cheap handsets that cost nothing on contract and average $100 when bought unlocked.

- Even before the iPhone Nokia have had very little success in America, almost all their sales come from Europe, Asia, Africa and the Middle East. Nokia's Middle East sales alone are bigger than their American sales.

- Apple's only dealing in very expensive handsets, mainly targetted at the US market.

Put all these facts together, and it's very difficult to see how Apple's announcement about a US smartphone could be seen as increasing competition for Nokia.

For an analyst to change a recommendation, the situation they're observing has to change. But what exactly has changed?

Nokia was already on the ropes in America, the iPhone doesn't change that.

Nokia was already getting most of its money from cheap phones, the iPhone isn't a cheap phone.


For those who think the iPhone is now cheap, the so-called "$199 iPhone" doesn't cost $199, because you still have to sign up for the expensive long term contract to use the phone at all. You can't even (legally) use it offline without signing the contract.

Add up the total cost and the price of the iPhone has barely changed, they've knocked a bit off the first installment, but you still have two years worth of payments to make after that.

Even charging $199 for the first payment is fairly expensive, many smartphones are $0 on their first payment.

[Wolfcat]

Nokia will innovate with features such as a removable battery, a 5 meg camera and a fully open OS that anyone can develop software on.

hrm, I think first u will see the small players dropping out, then samsung, LG and finally nokia and sony's market share dropping like mad. At which point they will switch to windowsmobile (sony has started).

few years from now only apple and windows mobile will still be around (smaller 3rd party will be blackberry). Truth is mate, most people buy Nokia for the phone, no the OS. I've worked for phone retail for 15 years. I can count the amount of people who ask for a symbian phone on 1 hand. Yet i get people asking for windows mobile OS phones weekly. Really, Nokia make great phones, they should focus on WM7 with a custom UI like HTC and Palm does. And custom Nokia only apps that give people a reason to buy their wm7 os over other wm7 phones. Nokia has some great apps like the fitness tracker and maps 2.0. True, there will allways be people who just what a fashion phone, but once Nokia (and other players) only start to focus on that, your not in the driving seat anymore and it's only a matter of time before they become irrelevant (hello moto? can u hear me? nup). The OS wars are over, time to wake up Nokia.

[Rafe]

I think this just goes to prove that you should probably consider anything an analyst says in context and with your own opinion in mind.

Yes Nokia does face competition in the high end space, but I don't think there's anything new about this. In real terms companies like Samsung and Sony Ericsson will provide more competition in device terms with Google and Microsoft giving more competition in software and service terms. You can argue Apple is also a significant player here, though it yet to prove itself outside the US market.

[krisse]

You can argue Apple is also a significant player here

If we were just talking about smartphone sales in America then yes Apple is significant, but Nokia as a company gets almost all of its money from non-smart phones sold outside America.

How can they possibly be rivals under those circumstances?

I just cannot see how Apple and Nokia could be affecting each other's share price when they're mainly operating in different markets with different kinds of product.

hrm, I think first u will see the small players dropping out, then samsung, LG and finally nokia and sony's market share dropping like mad.

Except that's not happening at all.

Moto dropped market share significantly, and they were a huge player. At the same time, all their rivals increased their market shares significantly. There's no pattern at all.

few years from now only apple and windows mobile will still be around

Let's put this in perspective shall we:

Apple has sold something like 5 million phones which gives them a 0.5% market share, and they hope to increase it to 10 million a year which would give them a 1% market share. Even if they sold 100 million phones that would still only give them 10% of the market.

And something like the iPhone is never going to take over the world because most people buy cheap basic phones. It's too expensive, too fragile and too big (and I'd say the same about Nokia's higher end phones too).

It's the cheap end where market share is won and lost, because those are the kind of phones people actually buy.

Really, Nokia make great phones, they should focus on WM7 with a custom UI like HTC and Palm does

Nokia sell as many smartphones as all their rivals combined. What benefit would it bring them to suddenly switch to an OS used by much lower-selling companies like HTC or Palm?

I've worked for phone retail for 15 years. I can count the amount of people who ask for a symbian phone on 1 hand. Yet i get people asking for windows mobile OS phones weekly.

It's not about how many people ask for Symbian, it's about how many people BUY Symbian. Symbian phone sales are something like three times bigger than Windows Mobile phone sales.

Hardware manufacturers make their money from selling hardware, not from how many people are fans of its OS.

People generally don't buy phones for installing software on, they buy them for the features that come built in. That's why the iPhone got a lot of positive coverage even though you couldn't install any software at all on the first version. Some of us do of course install software, that's what sites like AAS are for, but we're very much in the minority.

In fact even on desktop computers you'll see the number of people installing software going down as more and more people use them purely for accessing online services like websites, VOIP, e-mail etc. The whole culture of installing software is gradually dying away, and the significance of the OS with it.

A phone OS isn't just there for users to install third party apps though, it's also to allow built-in apps to run, either from the manufacturer or from the phone network operator. In this regard Symbian is streets ahead of Windows Mobile.

True krisse. Thats why HTC focus the Touch and Diamon on Asia and europe. But, sorry guys (and im an old Nokia fan) the iPhone now comming to the rest of the world, it's going to be massive. Here in Aus Optus are having launch parties and taking $50 reservations (no dout vodafone is doing something the same as well). I've never heard of this happening for any other phone release, ever. It's going to be big.

And Nokia releasing a touchscreen S60 device almost seems an embarrassment. Nokia have allways been at the cutting edge, they have had a year to play with the iPhone and plan before the 3G release and what have they done? The n96 and n78? some same old e-series devices? sigh. Don't know why i care, not like i work for them or anything. It's just a shame thats all. They are making the same mistake Palm did with Palm OS. Dump s60 from the highend phones and focus on windows mobile, still make S60 phones, but focus on windows if they want to still be a around in the space a few years from now. Palm was diehard anti-MS, and even they are focusing on windows (Treo 850 looks nice).

Anyway, time i go scrounge up $50.

[snoyt]

Some personal observations;

All mobile phones are migrating more and more towards smartphones. Thus simple lowbudgetphones will require a decent smart OS. Looking at the market there are Windows Mobile, OS-X (Mobile), Linux, Java OS, Symbian, Blackberry. At some time all lowend phones will be smart because it is the cheapest production option.

Current major OS'es based on salesfigures last year are RIM, OS-X and Symbian. Strangely/happily Windows Mobile is absent since smartphones with touchscreens are currently the fashion.

Symbian (excluding the by SE abadoned Symbian based UIQ) is the only OS not having touchinterface support. So yes, the stockmarket is watching wether or not Nokia will release a timely touchscreen based smartphone, to stay on top of the market. Yesterday's annouced iPhone 3G, lacked voice navigation software and a decent mobile camera. Which also means Nokia is a bit of the hook with a quick release of the touch interface.

Per now Nokia shares are going up again. Every one will be looking and comparing the S60 Touch interface with the iPhone, thus Nokia can not do hardware first and fix firmware later with S60 Touch. I expect Nokia to make their first S60 touch announcements end August. making the shares go up with a bang. Apple would have done a lot better to make the 3G iPhone a real hardware upgrade.

Currently the Nokia smartphone software add-ons and firmware give a better feature package than the iPhone but that will not last long. They need to outperform also in hardware and at least be equivalent in the finesse of the userinterface.

Hi again Krissie

->
Except that's not happening at all.

Moto dropped market share significantly, and they were a huge player. At the same time, all their rivals increased their market shares significantly. There's no pattern at all.
-
Don't forget Palm, Siemens, that UK maker (forget the name). Anyway, I only think a year or two from now, there will be a clear pattern on what’s going on. I'm just saying, I’ll check back then and u can call me names if I’m wrong


-->
Apple has sold something like 5 million phones which gives them a 0.5% market share, and they hope to increase it to 10 million a year which would give them a 1% market share. Even if they sold 100 million phones that would still only give them 10% of the market.

And something like the iPhone is never going to take over the world because most people buy cheap basic phones. It's too expensive, too fragile and too big (and I'd say the same about Nokia's higher end phones too).

It's the cheap end where market share is won and lost, because those are the kind of phones people actually buy.
-
True mate, all I’m saying, if Nokia want to focus on fashion phone (cheap glitzy phones bought on mass) then fine, (but that wouldn't include eSeries and nSeries phones). Problem with that, your just selling cans of Coke. Nothing wrong with that, but with the new media, leaders can take charge and change the direction of the whole industry. Look at iTunes. From selling online music they have defined what an online music shop has to be, what an mp3 player is (they own the mp3 market by using software - lesson to be learnt there). And now they are using the industry they own and changing direction again into the mobile market. Heinz 2.0

Anyway, I’m just venting. I just expected and wanted more from Nokia. I've using and selling Nokias for donkey’s years and have been watching them slowly grapple the new face of the PDA like a bar of wet soap.

[bartmanekul]

Since nokia makes its living by selling the lower end phones, if the 6220 classic does come out for free on reasonable contracts, and assuming its also a reasonable price on PAYG, who on earth will have anything that can even offer a remote comparision?

[Ratkat]

I have to say though the iPhone's are starting to get tempting, the feature set is improving all the time. And the app store is a stroke of genius, no mucking about looking for apps, they are all in the same place, piracy becomes harder and developers get 70% of the sale price without having to muck about with credit card fees etc
And if you release as freeware there are no costs at all.


Gameswise Super Monkey Ball looks awesome and it looks like the iPhone will be everything N-Gage could (and should ) be. I can see a lot of the major games companies developing for the iPhone.

And yes the iPhone internet browser is great but..............

'You can't eat toast and surf the web on an iphone'

It's not about how many people ask for Symbian, it's about how many people BUY Symbian.
-

me again.

Problem is mate, these people buying symbian phones aren't buying them because they are a symbian phone. What that means is, they will switch to something as soon as something new comes out. Enter the top selling iPod into the market (everyone knows an Apple iPod) and you have people moving off without a thought. The questions will be "does it play iTunes" which, the answer for all other makes will be "no".

The first rule of sales, never say "no".

This alone will have an effect on sales. And at the end of the day, will I be buying a Symbian phone that a million people buy (knowing no different) and me, picking around the internet trying to find 1/2 decent applications for my Nokia n81 or a shiny new iPhone with a mass of developer support behind it, with software that can be bought as easy as buy a song from the #1 music reseller in the world?

anyway, sorry to go on.

Originally Posted by krisse

- Apple's only dealing in very expensive handsets, mainly targetted at the US market.

The next iphone will be released in 22 countries. The iphone will be free with a contract in the UK.

Maybe the analyst was incorrect as from what you guys have said that all the profits are in selling large volumes of low end phones. That said the new iPhone is pretty good, the price is better or at least comparable to the competition and so challenges the high end Nokia phones. It appears that the only area that Nokia are doing better is the camera. kudos to apple! hopefully this will spur Nokia on and get them to release something great - for me the next batch of Nokia high end phones isn't that exciting compared to my N82. I will probably get a new iPhone mainly because the new Nokia's aren't that exciting..

WinMo is never going to dominate... It's such a crap OS like the desktop counterpart which is getting worse aka Vista. So many stability issues... Can't make a call sometimes...

Get real. You've been in sales too long which has clouded your judgement with the day to day BS you give to customers.

Even WinMo users complain how frustrated they're getting and moving elsewhere.

[Rafe]

I think the point people make about comparing at the high end is that today high phones are tomorrows mid-tier phones. i.e. Apple is helping set the conversation at the high end. (Though I do agree making sweeping generalisations and comparisons without taking into account a major part of the business is ridiculous). I think the media also is partly responsible for this - the shiny high end stuff gets the attention, but perhaps devices like the 6220 have the potential to shift the mass market more?

I think one of the things that is strange about Apple / iPhone is it receives a disproportionate amount of attention. There's been some other successful devices in its class (e.g. HTC Touch). And of course Nokia's Nseries. Yet they receive little attention despite being just as influential (i.e. the idea of converged devices for the consumer, arguably the most fundamental shift in mobile, has been largely driven by Nseries). I think it underlines the importance of Apple's brand creation and marketing.

However I think Apple may face problems in the longer term given its closed garden strategy (i.e. providing all the services in your digital footprint). Technical stuff will be an issue (e.g. the background thread stuff is quite telling in software terms) as will other bits of the value chain (its not just about devices - distribution, logistics etc become very important the larger you become).