Nokia Archives - Recon Analytics

Research in Motion is the most recent example of how hubris comes before the fall amid the harsh realities of a competitive marketplace. Once upon a time (or, to be more exact, in late 2008), RIM was at the top of the world. It had won the enterprise world with its outstanding mobile email implementation and was making inroads into the consumer market. Carrier demand for its BlackBerry devices was exploding.

It seemed as if RIM was on a steady course. Its market share was growing as it continued to innovate and perfect its product, competing harder than its traditional rivals Microsoft and Palm.

And then the iPhone happened. In June 2007, the iPhone was released with good, but not blockbuster sales. The $400 price tag for the first generation iPhone muted demand. This all changed a year later, when Apple dropped the price of the mainstream iPhone to $199 because of subsidies from AT&T and the introduction of apps.

AT&T was suddenly going to market with a magic weapon, the iPhone 3G, and all the other carriers fought back with feature phones, the equivalent of the weapons of mere mortals. If you remember those days, AT&T was decimating the other operators and it was not a pretty sight anywhere but in Atlanta. Carrier executives were longing for a competitive answer, just as RIM was positioning the BlackBerry as a competitive weapon against the iPhone.

To be fair, the BlackBerry sort of looks like an iPhone. It had email, and a Web browser. Every carrier but AT&T tried to sell a BlackBerry to any prospective customer who was interested in something like the iPhone. As a result, BlackBerry sales exploded and RIM’s leadership thought this validated its strategy of marketing BlackBerries to consumers.

The problem is that RIM mistook the good fortune of being a barely adequate iPhone alternative for a grand validation of their business plan. As long as there was no real competitor other than the iPhone in sight, it was all working out. And then Google’s Android took the stage.

And that’s when RIM’s problems really started to materialize.

For a year, Google was in a quasi-public beta at T-Mobile with its G1 devices. It sold well, but not anywhere near what the iPhone did. Only when Verizon, which until then had been a mainstay of RIM’s business in the United States, threw its support behind Google’s Android platform did Android sales grow significantly. Quickly behind Verizon were Sprint and T-Mobile and all three carriers were rounding out a robust Android product portfolio that was growing to be the number one mobile device operating system in the United States.

But where was RIM?

The tragedy in these events is that almost four years later, RIM still believes that its enterprise-centric devices are attractive to consumers, rather than recognizing that the reason they sold so many to consumers was that they were force-fed to those consumers by operators desperate to have an answer to the iPhone. Even after a management change, the company still does not seem to understand the severity of the situation it is in and how much it is off course.

While it increased its overall phone shipments worldwide, and in the most competitive smartphone market in the world, the United States, sales are continuing to fall precipitously. RIM’s current device line up is simply not competitive anymore. At the same time, Microsoft together with its allies Nokia and HTC are launching very competitive devices with an appealing operating system. Their goal is to become the third operating system in the U.S. and thereby in the world.

In an interesting twist, both Nokia and RIM, the national champions of each of their small nations, are at a similar crossroads. What they do next will decide the fate of the two companies, but that’s about where the similarity ends. The decisions the two companies made about their future leadership couldn’t have been more different. Nokia made a dramatic break with its past by selecting an outsider to deliver it from its troubles, while RIM chose an insider who stands for continuity.

Nokia and its OS provider, Microsoft, are painfully aware that this is the time to deliver and they are putting all their efforts behind this endeavor. RIM’s new CEO thinks that better execution and marketing will do the trick. If Nokia and Microsoft succeed, RIM is dead. If they fail, Nokia will die. There is simply no room for four operating systems. But what really separates the two is that Nokia has nine months to sell a series of devices that are very strong and differentiated before RIM brings its new BlackBerry 10 devices to market. Nokia knows that the survival of the company is at stake, while RIM seems to be in denial about the state of affairs.

The future does not seem to be bright for RIM… by the time its first BB10 device comes out, it will likely be competing with the iPhone 5, Windows Phone 8, and the next generation Android after Ice Cream Sandwich. These choices likely will be two to three generations ahead of where RIM is now.

There is an important lesson for the entire mobile industry in the sage of Nokia and RIM. The industry moves so fast and is so competitive that even a company with leading technology and huge market share can’t rest on its laurels. If it does, in as little as two to three years it will find itself an outlier with few options and a dim future.

Sure, there were exceptions. But overall CES 2012 was pretty dismal for anyone interested in wireless.

This year’s CES was pretty dismal for anyone interested in wireless. Sure, AT&T had some good stuff and the Microsoft launched the LTE Windows Phone 7. But other than that, most people would’ve been better off hitting the snooze button.

Last year, by contrast, AT&T and especially Verizon Wireless made a huge splash with 4G announcements. There was so much excitement that I thought it might upstage the CTIA Show in the spring, which could have faded into oblivion like so many other trade shows.

But this year’s CES made it clear that, for the wireless industry, CES is still optional and the CTIA Show remains the industry’s premier event. So, now that I’ve got you down about CES, let me tell you what I was able to get out of it. There were a couple of bright spots, so it wasn’t a complete waste of time.

AT&T came out swinging again with several big announcements. The company showed an impressive array of support for developers who want to take advantage of GPS, carrier billing integration, and AT&T’s U-Verse TV service. This kind of integration, while limited to AT&T, can lead to richer and more exciting applications. Check out Glympse to see what’s possible with GPS integration.

AT&T has done the best job of selling smartphones to existing customers, with a 99-cent iPhone 3GS and several other smartphone devices under $30, all requiring at least a $15 entry-level monthly data plan. AT&T’s announcements built on that strategy, with the launch of three “LTE for the masses” smartphones for less than $50 and the launch of two types of Windows Phone 7 with LTE, one from HTC (the Titan II), and the other from Nokia (the Lumia 900).

Peter Chou, CEO of HTC, gushed with praise for the Titan II, noting that it’s his personal device. Nokia CEO Steven Elop was a bit more coy about what his company was unveiling because he wanted people to show up for his own press conference later that afternoon.

The Lumia 900 is a gorgeous device, upping the ante on virtually everything the Lumia 800 delivered: a larger, more luminous screen and LTE. It’s well-known that Nokia has also a CDMA + LTE version in the works, which, if it launches with Verizon Wireless, would give it the necessary breadth of operators to make a significant impact in the market. The operators have a vested interest in having at least three competing operating systems. Negotiations are a lot easier when one party has more than two options. With RIM imploding, Windows Phones are in a prime position to take that third slot.

The lower-priced phones are a big deal because people with disposable income already have smartphones. Reaching the rest of the people is the trick. It comes down to cost. A $200 phone and an additional $30 every month for data is not at the top of the list for some people in this economy. But today’s smartphones are addictive. Before people try them, they wonder what they could possibly use them for. After carrying one for a week, they can’t live without one and often end up upgrading.

One more big deal: With a lot of fanfare, Samsung introduced the Galaxy Note–a hybrid smartphone/tablet. In all likelihood, this will fail. Just one look confirms why. It’s too big to be a phone and it’s too small to be a decent tablet. It doesn’t pass the pants-pocket test unless you wear cargo pants all the time, and it looks absurd next to somebody’s ear–like holding a personal pan pizza next to your head.

Other operator and device announcements were underwhelming to say the least. Verizon Wireless and Sprint made announcements that they could have made during any other average week of the year. T-Mobile USA’s “we are still alive” press conference at CES was cute, but not much more than that. T-Mobile’s suggestion that the next iPhone could work with its AWS spectrum also made some waves, but probably irked the secretive Apple more than it it wowed regular consumers.

A few miscellaneous thoughts.

I am very skeptical regarding the Intel/Motorola multi-year, multi-device announcement. This means we will get two Motorola devices in two years using Intel’s new chips. Why am I so pessimistic?

Historically speaking, Intel’s chipsets were a lot more power hungry than ARM-based chipsets, while the radio Intel bought from Infineon is substantially inferior to Qualcomm’s. Have you heard of significant complaints about dropped calls with the iPhone since Apple has switched from Infineon to Qualcomm? Neither have I.

At the spectrum and Federal Communications Commission panels, the focus was on the broadcaster incentive auctions. Almost everyone, including FCC Chairman Julius Genachowski, thinks the auctions need to get done now. Only the broadcasters, which need to be convinced to give up the spectrum, do not see any urgency–the longer they wait to sell their spectrum, the more money they’ll get.

For the incentive auctions to go ahead, the House of Representatives and Senate first have to agree on the terms and conditions of the auction, which recent history shows is not likely. The auctions will put up for bid unused TV spectrum for wireless use. Republicans in the House want to limit the restrictions on the space, while Democrats in the Senate and the FCC want to be able to modify the rules on who can bid. One block of 700MHz spectrum in the 2009 auction had conditions put upon it, and never garnered enough interest by bidders, highlighting what happens when too many restrictions are in place.

So, it was a dull week with a few bright spots. I haven’t completely given up on CES, but am anxious to see what the Mobile World Congress next month and CTIA show in the spring have in store.