Jormaspeak - Nokia CEO explains targets, culls and price cuts

Ollila sucks the bullet

In Helsinki this morning Nokia CEO Jorma Ollila was a man with just a little explaining to do. A while back when Nokia's market share was around 32 per cent he was bullishly aiming for 40, but mysteriously Nokia hit 28 per cent instead. Not, however, that he's been asleep at the switch since then or anything - a few rapid about-faces have brought clamshells, good cheer for the network operators in terms of customisation, price cuts, even some roadkill on the roadmaps. And if you look at what coming for Q3 and Q4, Nokia's prospects could even look promising.

This sounds kind of like a story you could spin up into one about a giant having the flexibility to react swiftly to market changes and bounce back from reverses leaner, meaner and - perhaps - a tad humbler. Unfortunately, the way Jorma tells it, it doesn't sound quite like this.

This spring's product review is key to the proceedings. "We made some shifts relating to timing and focus," Ollila tells us, adding that the Series 60 and 40 platforms present "an excellent basis for customisation" and citing recent work with Vodafone and T-Mobile as examples of this. Vodafone has of course been a key player in the operators' war for the branding of the handset, whereas Nokia had been the manufacturer most likely to insist on maintaining its own branding. The two announced a peace treaty of sorts (aimed ostensibly at 3G handsets) at GSM World Congress earlier this year, and clearly the spring review has resulted in an acceptance on Nokia's part that it's going to have to continue down this road.

Is it still holding its nose? Possibly. Ollila lobs in some hostages to fortune in his run-down of the spring review: "Earlier this year we said we would review our product portfolio. In the spring we conducted a thorough analysis of our roadmaps. We reviewed and pruned products, and even killed some." This has resulted in "new products, accelerated products, we have a more competitive products range," with a total of 35 planned for this year.

Alongside the new enthusiasm for customisation we have clamshells aimed at practically all points in the range, colour screens in entry level phones, and lower prices.

But plausibility starts to go pear-shaped at the Q&A. What about that prediction of 40 per cent then, Mr Ollila? Ah, what prediction might that have been? Says Jorma: "The target has been 40 per cent, I didn't predict." OK, so when do you think you might make the target then? "We haven't set a date, but it's a very good target." Kind of like you meaning to give up smoking some time, we suppose.

Well alright then, could you maybe just tell us how you expect to do in 2004? Apparently not: "We are not in a position today to discuss q4, q3, or q2 financials. This communication will happen through its own routes and we will do it in due course... We are working very hard and I'm sure the results will be there."

And then, after deftly fielding a request for 3G handset shipment expectations for 2004 ("We will not discuss..."), it's on to price cuts, which he allegedly mentioned earlier this year. But did he? "I'll need to look at the tape of what I said. I said we will use somewhat more the leverage that one gets from making somewhat of a compromise in the margin, towards a price move which will then result in a better traction in some key segments in the marketplace."

Got that? OK, that might sound like it boils down to price cuts to you, but we've got a complex and intricate set of supply chain relationships covered here as well, so 'price cut' is an oversimplification. Or at least we think that's what he's saying. Still not admitting price cuts as such, he adds: "I don't think there's been any particular price war. Lowering [not cutting, honest] our prices in some key segments has had the desired impact. We have reached the required price points [still not cutting, evolving] in key areas. We have had their desired impact and it is very good."

Ollila escapes from the podium without having to deal in detail with the clamshell volte face and the products he alluded to having been culled in the spring review, but Senior VP Juha Putkiranta is not so lucky. As the Far Eastern companies have demonstrated, clamshells are what a large segment of the consumer market wants, and Nokia has been caught flat-footed (to an extent, explicably, given that back in the good old days Nokia comprehensively murdered Motorola and its clamshell obsession). "Sometimes," says Juha, "we need to copy with pride. And we will do that."

EVP Matti Alahuhta meanwhile showed star quality in dealing with the dead products question. "We decided to take more time in media devices and use the 7700 only as a pilot." So, just the one death, and it's merely a case of a product being knocked back to pilot stage, in preparation for mass-market media devices to be launched in 2005. There surely must be more. So Juha has another crack at it: "We put new devices on our roadmap, go through marketing and engineering milestones, then we make decisions. This spring we were somewhat more thorough and disciplined about what we did."

As we know, however, there's more to this than just the routine shooting of half a dozen fluffy phones, phones shaped like frisbees, phones for household pets and so on, and the downgrading of the 7700 to a pilot seems key to this. The dead product with no name was the Series 90 CX2 (see link below), and Nokia's increased enthusiasm (which first underwhelmed us at GSM World) for the 9500 plus the scaling up of Series 60 screen size fits in with the 7700 knock-back. The 9500 line provides a stop-gap for the enterprise market, while beefed-up 60s provide some defence against challengers from below. We do now have a commitment that Series 90 will be launched at the mass market via 7700 successors in 2005, but there does seem to be scope for segmentation problems here. ®

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