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Nokia catches Portalitis

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Nokia is expected to announce ambitious plans for its Club Nokia portal at its Capital Markets Day in New York tomorrow.

Club Nokia is an overlooked part of the phone services jigsaw, but one that will be increasingly important as the Finnish giant focuses its artillery on Microsoft, and tries to coalesce an array of carriers and terminal suppliers to unite against a common enema. [Don't you mean 'enemy'? - ed.]

"Nokia has always been a software company," execs told us at the Comdex launch of its open platform a fortnight ago. With that milestone announcement, Nokia has begun to license much of the essential goodness that makes a Nokia phone - the user interface - along with middleware and applications, in source form, to anyone who asks.

But the Club Nokia parlay isn't just a case of the Finns catching portalitis - the peculiarly late-90s fashion where vendors aggregated as much useless content in one place as they could find, in the hope of capturing traffic. No, instead an expanded Club Nokia will become a marketplace to sell content and services, too, much as Redmond envisages all the disparate Windows tendrils leading back to its Hailstorm hub of web services.

In an interesting analysis of what he dubs the 'Clash of Civilisations' between Nokia and Microsoft, a piece which puts the Club Nokia announcements into a broader context, Keith Woolcock of Nomura Research concludes that The Beast will ultimately prevail.

Woolcock is no Microsoft shill - in the same research note, he describes efforts to sell the phone manufacturers its Stinger, aka the Microsoft Smartphone platform, as having "failed miserably". But he thinks Microsoft will prevail because of the breadth of its existing penetration in the PC business - it's rapidly amassing customer information through Passport already - and through the .NET development tools. Adding, too, that Club Nokia faces competition from the carriers themselves for services portals.

Traction

It's an interesting note (and if you nag us enough, we'll nag Nomura to make it public, somehow) but by our reckoning he's taking a highly pessimistic view. Or optimistic, if you're Microsoft.The biggest handicap Microsoft has is that its mobile client platform "lacks traction", as the VCs like to say. Or in other words, no one wants a Microsoft phone. As Woolcock points out, most of the major manufacturers have seen and declined Stinger. Only Samsung is gung-ho about the platform, although Mitsubishi (through its Trium subsidiary), can reasonably be expected to have a dabble. The bright British company Sendo is betting on Stinger - but Sendo only shipped its first phone this year. Even if Siemens and Alcatel are added to this number, it leaves manufacturers who hold 80 per cent of the current voice handset market doing their own thing.

And the phone business, unlike the microcomputer market in 1981, isn't about to be taken over by a great unifying outsider: the handset manufacturers voted for their own OS platform by creating Symbian, and most of what else matters - like Bluetooth, WAP, or MMS - is decided in time honoured fashion, laundered through industry committees.

There's another, more bleeding obvious reason why phones now aren't like PCs then. There simply isn't a telcomms vendor now that is as dominant as IBM was in 1981, even though the phone business is making the same tottering fall from being a vertical industry into a horizontal industry, just like the PC. People rightly credit Gates' foresight in envisaging a horizontal personal computer business, but Microsoft's success owes much more to its role as the preferred supplier for the IBM PC than anything else. It was the IBM blessing, not amazing software, that legitimised Microsoft.

ASCII Art

Yet there's another factor, too, that's usually overlooked. Let's suppose Stinger turns out to be astoundingly good, much better than the competition. Then surely, world+dog will beat a path to the Stinger manufacturers' door, pausing only to throw away its 2G handsets en masse. And today's phone giants respond to the demand.

But it isn't really going to be like that: smartphones will be a luxury item at first, getting progressively more affordable. And in the meantime, the 2G manufacturers will exclusively be providing their own, or industry standard applications. Microsoft has given little thought to how the splashy services for smartphones 'degrade' on less capable handsets.

This we'll call it the ASCII Photo problem, (because it hasn't really been given a name yet). Nokia's new imaging smartphone, the 7650, let's you take snaps and send them as MMS messages to your friends. If your friends don't have an MMS-capable device, they're sent a URL to a web location (Ker-Ching! It's a web service revenue opportunity!) ... which they later access from their PC.

Now the really smart thing, we suggested to Nokia in Barcelona last week, would be to scan the photo and create a little ASCII art picture, the kind of which you still see in some sig files. That gets sent to the recipients crappy little phone, and surely, joy is unconfined.We were joking but the underlying conundrum is serious: and it's how to lure 2G phone users into the 3G promised land.

It's a conundrum that all operators and handset manufacturers face, and one we venture, that Microsoft is particularly badly placed to cope with. We might be wrong, but we suspect it hasn't even given it a moment's thought.Multimedia rich smartphones play to all Microsoft's strengths, at least on paper. Redmond astutely saw off applications competitors in the early 90s by appealing to the PC magazine's tick list mentality - more features! better! - and it's successfully used this tactic to win significant market share in the PDA battle against Palm. (Although Palm deserves much of the blame for ceding this battle). PocketPC doesn't really win best of class in any utility comparison - it's the most awkward address book, the worst MP3 player, and the most expensive communicator you can buy - but it promises the earth, and it sure looks great: the lovely retro Chrome styling of Compaq's iPaq makes it look like an American classic.

It's personal

Despite the bewildering and frequently abstract talk of web services, this one should be fairly simple to call. It's a battle between consumer vendors over who owns your address book, your buddy list, and the web services that spin-off this simple decision are the rewards for these competing armies. Our Smartphone Roundup earlier this year drove home a couple of points: not only is a single converged device, no matter how tacky, more useful than two discrete gadgets (phone plus PDA), but that in a head-to-head, the more personal device can be expected to win.

Or put another way - you can give a lot of voice to a data device, and it won't feel like it's ubiquitous or personal. But give a little data to a voice device, and it's your friend for life. This battle, as Nomura suggests, is truly epic, and only a fool will declare a winner at this stage. But in terms of "stickiness" we'll vote for a stupid voice vendor over a clever data vendor. And Nokia isn't stupid. ®

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