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Nokia and Ollila's legacy

Kallasvuo takes on Zander in battle of handset titans

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Analysis Nokia CEO Jorma Ollila, the architect of the Finnish giant in its current form, is to step down next June, although he will remain as non-executive chairman. Although widely rumored to be after a career in Finnish politics, he has announced that he will take over the chairmanship of oil giant Shell instead.

Olli-Pekka Kallasvuo, currently head of the Mobile Phones unit, takes on the task of retaining the number one position in handsets, while building on Ollila’s key strategies of making Nokia software platforms a true rival to Microsoft’s in the enterprise, as well as boosting revenue and margins with advanced multimedia devices.

These strategies represent Ollila’s second revolution at Nokia, and it is likely that Kallasvuo will continue on the same broad path rather than making any radical about-turns. He will face a far stronger challenge from Motorola than his predecessor faced. Zander is in the process of effecting a turnaround at Motorola almost as impressive as that created by Ollila in the mid-1990s

Much of Zander’s strategy is focused on infrastructure – which is a far larger part of the Motorola revenue base than it is at Nokia – and the ability to offer soup-to-nuts solutions, from handset to base station to IP software, for multi-network convergence and what the company terms ‘seamless mobility’. But there is a special place in the new-look company for the handset, as epitomized by the hugely successful slimline RAZR.

This is not only the unifying design concept behind most of Motorola’s planned high end devices, including music phones and dual-mode Wi-Fi/cellular devices, but also represents the company’s desire to become a consumer brand like Apple or Sony, an ambition cherished for the past few years by Nokia too.

Nokia has a headstart in this respect, being better regarded as a consumer brand than the old Motorola ever was, but it has not had a single device with the same consumer impact as the RAZR. Its N-Gage games console phone, for instance, was an interesting concept, illustrating Nokia’s belief that the handset should become the unified portable device, combining the functions of the music player, business PDA, gaming platform and television. But it did not make a big impact on the market, although Nokia is giving it a new lease of life this fall with the release of the NGage QD Silver Edition.

Now both companies are battling to capture the carriers’ and consumers’ imagination with their latest handsets. Motorola recently launched its Q device, which takes on the RIM Blackberry as an email-oriented, ultraslim handset. The next iteration of the RAZR, called SLVR, will debut in the fourth quarter. This will be a candybar design rather than a clamshell like RAZR, but will be similarly slim. It will come in phones will ship in low, medium and high end models.

In the third quarter, Motorola plans to release another clamshell, the PEBL, as well as the long awaited iTunes music phone, jointly developed with Apple.

Over at Nokia, legendary chief of design, Frank Nuovo, has unveiled his latest creation, the stainless steel 8800, which has just gone on sale in Europe. Nuovo claims the model "reintroduces phone lust” – a claim that could equally be made for RAZR. But the 8800 has a list price of $800, compared to its rival’s $500.

Like the RAZR, the 8800 is designed to be the basis of a whole generation of different handsets over the next five years or more. Of course, there is more to success in handsets than cutting edge design, especially when the companies look at emerging markets and at the budget end of the user base. Out of the marketing limelight, Nokia remains supreme in terms of its streamlined supply chain and huge cost efficiencies, and Zander knows that catching up must be a priority for Motorola.

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Next page: Supply chain

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