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Nokia sings the mid market blues

Confirms market share collapse

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Gartner confirmed today that Air Nokia's sales have hit not just some minor turbulance, but a very deep air pocket. The company grabbed 38 per cent of the handset market last year, but this year has seen its share fall from 34.6 per cent in last year's first quarter to 28.4 per cent this Q1, according to Gartner. Although units shipped rose, share crashed 10 per cent in the EMEA region alone.

All of Nokia's biggest competitors Motorola, Samsung, Siemens and Sony Ericsson benefited, in measures roughly proportional to their existing market shares. There's no sign of one of the chasers breaking from the pack, although third-placed Samsung looks the healthiest and Gartner warns second-placed Motorola, buoyed by good sales of its latest models, not to get complacent.

It's no secret that a weakness in the mid range of Nokia's portfolio is to blame. Nokia's low end looks extremely competitive and its high end is faring well, despite some concern with the 3G products. However, amongst the meerschaum poured on the company by the Stateside press, there is some very strange advice. According to the Wall Street Journal Nokia had concentrated too much on the high-end. (You can almost hear the editors: "these pesky furreners, leave the fancy technology to us. We'll get there in the end.") But if there's one thing more risky than neglecting the mid-range, it's killing the goose that lays the golden egg. The breakneck pace of the handset industry shows no sign of slowing down, and yesterday's high end is this evening's mid range. In addition, the most expensive models generate the highest margins for the company and not surprisingly give operators the most money too, as they sell to businesses and to consumers who can stomach high data charges. Nokia can ill afford to cut back on bringing high end smartphones and feature phones to market, even when as with Digital Radio and TV, the fruits of the expenditure aren't guaranteed and at best, may lie far off in the future.

Such bad advice stems from a variety of interests. Some of it is plain ignorance (one major newspaper group here contracts a specialist gadget correspondent ... who doesn't have a cellphone!), and some of it is from the stubborn Not Invented Here crowd. But an increasing amount is from the new confluence of deregulation ideologues and the Wintel industry, who want to dismantle the existing spectrum management framework so they can create the next speculative bubble. Not all of these groups are mutually exclusive.

Nokia's midrange weaknesses are more subtle than they first appear. In terms of hardware capabilities, the models lack for very little. However the Series 40 user interface that these use - an evolution of the NaviKey HI which played a large role in Nokia's dominance - looks dated set alongside newer rivals. Even though, as we discovered with the mid-market 6820, it's much easier to use. Nokia really has to rediscover a model that all manufacturers aspire to, which is creating coveted fashion phones with a low bill of materials: exemplified by the 7210. It also needs to spruce up the look of Series 40 without sacrificing usability. That's quite a challenge. ®

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