Its hardware, its software and its fightback against the likes of Apple...
The mid-2000s represent something of a high-water mark for Nokia. In 2005, it was the undisputed king of the mobile market having sold its billionth handset.
Today, while Nokia remains the world's largest seller of mobile phones, its prospects have changed dramatically. The company now faces slipping market share, competing mobile operating systems and a world where Apple and Android are regarded as the smartphone leaders.
For a tech company, Nokia has a longer history than most. The company started life as a paper mill at the Tammerkoski Rapids in south-western Finland in 1865. Over the years, it added business lines including rubber boot manufacture - the wellies are still sold at Nokia's Finnish HQ in a nod to the company's past - and cable-making before it ended up as an electronics company in the 1960s.
Despite first making computers, Nokia really made its name as a manufacturer of portable phones.
Its first mobile - in the way it's understood today - was a GSM phone launched in 1992, the same year that Jorma Ollila became Nokia's president and CEO. Ollila steered the company though the mobile boom of the 1990s and early 2000s and remains the company's chairman to this day.
Today, the company has expanded beyond simply selling mobile devices and now has four main business strands: devices - its handset business; services - apps and software; Navteq, which covers mapping and location services; and its networking joint venture, Nokia Siemens Networks.
Apart from a tentative return to its computing roots with a netbook launch last year, Nokia's hardware business is focused on mobile handsets.
Nokia breaks its handsets down into two categories: common-or-garden mobiles and "converged internet devices".
The pure-play mobiles often bear a model name made up of numbers and are voice- and text-centric. The converged internet devices, which sport model names often consisting of a letter and a number, are more expensive and come with the usual array of features expected from high-end handsets, including apps, GPS, a multi-megapixel camera and perhaps an accelerometer.
Nokia's Services unit looks after its software and, as the name suggests, internet services which are brought together under the Ovi brand - Ovi is the Finnish word for door.
The usual suspects are available through Ovi both via the desktop and Nokia mobiles - online storage and back-up for photos, videos, calendar and contacts; mobile email; music; gaming; maps and Files, an application that allows users to download and view files held on your PC via your mobile.
Nokia also runs the Ovi Store, the Nokia equivalent of Apple's all-conquering App Store, where users can download extra apps for their devices from Nokia as well as third-party developers.
With Nokia also aiming to increase...
...sales in emerging markets, its Services business has created a range of products under the Life Tools brand, which provides agricultural and education information as well as entertainment software, including horoscopes or ringtones.
Life Tools is aimed at users in markets such as China, Indonesia and India and designed to work on Nokia's lower-end handsets. According to Nokia, Life Tools has some 6.3 million users in India, Indonesia and China.
Another venture for developing markets by Nokia's Services business comes in the form of Nokia Money. Launched last year, Nokia Money gives users access to basic financial services, such as person-to-person payments, and is aimed at the billions of people around the world with no bank account.
Nokia acquired Navteq for $8.1bn in 2007, in one of its largest takeovers. Nokia retained the Navteq brand and still operates the company as an independent subsidiary.
At the time of the acquisition, mapping must have seemed an attractive market. Sat-nav maker TomTom bought Navteq rival TeleAtlas earlier that year and the market for portable navigation devices was booming, while GPS - and thus navigation - was making its way onto more and more mobile handsets.
As well as providing the maps for Ovi Maps, Navteq now sells its wares to sat-nav manufacturers, car makers for in-vehicle navigation systems and internet firms such as Microsoft for its Bing search engine.
Nokia Siemens Networks
The Nokia Siemens Networks joint venture was first announced in 2006 and began operations a year later.
The eponymous JV installs and maintains infrastructure for both fixed and mobile networks around the world.
It's had a difficult few years since its inception. The company's original CEO, Simon Beresford-Wylie, left last year and it has yet to break even, racking up a €1.6bn loss in its last set of annual results Accordingly, it's instituting a cost-cutting programme aimed at shaving €500m from annual costs by 2011. It's a move that will hit the workforce, with between seven and nine per cent expected to be cut from staff numbers.
The battle of the operating system
Of all Nokia's businesses, it's still the traditional handsets and accompanying services that are making the money. According to Nokia's latest set of quarterly results, some 28 per cent of the company's sales come from Nokia Siemens Networks, two per cent from Navteq, and the remaining 70 per cent from Devices and Services combined.
Of course, Devices and Services are in many ways interlinked. In today's high-end market - and to a certain extent in emerging markets too - smartphones win or lose on the apps and services they can deliver.
Nokia is the biggest seller of smartphones on the planet, but its position is not necessarily a comfortable one. Its market share is falling as new entrants such as Apple's iPhone OS and Google's Android devices continue to steal its lunch and RIM's BlackBerry shrugs off its business image and wins over consumers.
To put things in perspective, Nokia still sells about...
...40 per cent more mobiles than its competitors and Symbian shifts over 30 per cent more smartphones than any other OS. But in mobile circles, there's a lot of tutting and head-shaking. In Q3 this year, Nokia's mobile market share was 28 per cent. In the corresponding quarter of 2009, it was 36.7 per cent. It's a similar story for Symbian smartphones: 44.6 per cent of the market in Q3 this year, down from 36.6 per cent in Q3 last year.
In many ways, Nokia's shrinking smartphone market share can be traced back to the launch of the original iPhone in 2007.
For several years Nokia had been selling devices running the Symbian OS, a reliable if uninspiring operating system that nonetheless was the biggest game in town.
But after the appearance of the iPhone, Symbian's offerings appeared clunky and outdated by comparison, unable to compete with Apple's slick user interface and the subsequent app ecosystem that the handset generated .
The iPhone also engendered the rise of the touchscreen device. While PDAs and business-focused smartphones with styluses had been around for a while, the iPhone's use of a capacitive touchscreen made new multitouch features such as pinch to zoom a reality.
Like every other handset maker post-iPhone, Nokia launched its own take on the touchscreen device with the Nokia 5800 Xpress Music. It was a poorly received effort and Nokia's decision for it to be used with a stylus showed how out of touch and slow to innovate the company had become.
Nokia has been struggling to regain its position as smartphone leader ever since. It is still the biggest seller of phones, both smart and otherwise, but it's seen Apple, Android and even RIM's BlackBerry sail past it in the cool stakes.
Its response to the software war it now found itself waging was to take a fresh look at the Symbian operating system it relied on for its high-end devices.
Symbian was founded and owned by several mobile makers in 1998 - Ericsson, Motorola, Nokia and PDA company Psion - and Nokia's influence over the company grew and grew throughout its lifetime. Any mobile maker was able to license Symbian software, but Nokia became its majority shareholder and biggest user by a country mile and made an abortive attempt to buy the company outright in 2004.
In those days, smartphones were booming and Symbian was the market's biggest...
...operating system. Its owners - which by then had grown to include Samsung, Sony Ericsson and Siemens, among others - didn't want the operating system to lose its independence.
By 2008, the market had changed. Very few of those involved in the project were still using Symbian OS and Nokia needed a radical way to fight back against Apple and the looming threat of the soon-to-be-released Android.
Its solution was interesting - buy the company outright and turn it into an open source outfit, the Symbian Foundation. By doing so, Symbian could retain its independence, theoretically innovate faster thanks to its open source development model and even encourage greater take-up of the software itself by ditching the licence fee.
It subsequently performed something of a volte-face, taking control of the Symbian OS back in-house and winding down the Symbian Foundation to little more than a licensing organisation.
It also decided to make more iterative improvements to Symbian, rather than bundling them up and making them part of the full release schedule.
And while many commentators have questioned if Nokia's loyalty to Symbian is really paying dividends for the company, Gartner analyst Carolina Milanesi believes Nokia is not likely to shed its Symbian focus.
"There's nothing fundamentally wrong with Symbian as a core OS. What sucks is the UI. What you need to fix is the user interface on top of Symbian.... If they ditch Symbian to embrace something else, it would mean throwing away years of experience and effort to start all over again and they would be even further behind their competitors," she said.
However, Symbian is not Nokia's only software bet, as the company's offerings span everything from the most low-cost mobiles for the emerging markets to flashy high-end hardware for the developed world's gadget freaks.
Along with the S40 and S60 platforms it uses for lower-end feature phones, Nokia had previously been working on another operating system called Maemo, used to power its range of Linux tablets.
Earlier this year, it decided to merge Maemo with another open source operating system, Moblin, made by Intel. Screenshots and teasers of the combined OS, known as MeeGo, have been leaked over the web for some time and the reaction from industry watchers seems to be largely positive.
But MeeGo has yet to ship on any handsets, although Nokia has coyly promised an announcement - likely to be a device or devices - before the end of the year.
How Nokia will split its high-end product portfolio between...
...MeeGo and Symbian is a subject of much debate. Some reports indicated that Symbian would end up solely on lower-end handsets, replaced by MeeGo on flagship devices like the Nseries.
According to Lee Williams, the former Symbian Foundation's executive director, there will be four strands of phones in Nokia's portfolio: S30 will be used for devices in emerging markets, S40 for mid-tier devices - S30 and S40 are simple software platforms for lower-end devices - Symbian for more mass-market mid-tier devices and some higher-end smartphones, with MeeGo used for the most high-end or risky product segments.
But a blog post in July from Anssi Vanjoki, the then head of Mobile Solutions at Nokia, seemed to suggest a more complex arrangement.
"MeeGo offers us an opportunity to take mobile technology beyond the smartphone, and into a new world of connected devices. As Symbian gears up to compete with the likes of iPhone and Android, MeeGo is taking clear aim at the computing space.
"The current phase of MeeGo development is looking awesome. We believe it will power the computers of the future. And the computers of the future will not be tied to a desk or even a lap - they will fit in your pocket.
"From the ground up, MeeGo is a computer operating system."
After Nokia released its first netbook last year, Vanjoki's statements could signal more such devices powered by MeeGo could be on the way.
It could also signal a new way of looking at the company's product portfolio: S30 and S40 are edged out and disappear as today's smartphones become tomorrow's low-end devices, which run on Symbian. The high-end segment meanwhile is taken over by MeeGo, heading up Nokia's efforts to recover the top spot in smartphones.
As Vanjoki put it in his blog: "I am committed, perhaps even obsessed, with getting Nokia back to being number one in high-end devices. Achieving this will require performance and efforts over and above the norm... There is no denying, that as a challenger now, we have a fight on our hands."
Beyond the operating system: Nokia as services company
As the average selling price of mobile phones continues to drop and app sales continue to boom, Nokia has wised up to the importance of selling more than just phones.
While it arrived late and arguably half-heartedly at the app store party, launching its own Ovi Store in mid-2009 with ill-equipped servers, Nokia has suffered through comparisons with market-leader Apple.
While Apple has a tiny slice of the mobile market as a whole and Nokia remains the 800lb gorilla, the number of apps on their respective stores would suggest...
...the reverse is true: Apple has around 300,000 apps on the App Store for the iPhone, whereas Nokia has some 13,000. The App Store is thought to sell about 10 million apps a day, Nokia's equivalent shifts about three million.
To make the Ovi Store a more compelling proposition, Nokia needs to woo developers onto its platform and that's no easy task. However, it's making some moves in the right direction.
It has announced Qt as its single development platform so developers can create works for both Symbian and MeeGo using just one platform. Nokia has also amended the Qt development kit to cut the amount of code needed to create Qt apps and provided new ways for developers to monetise their apps, including in-app purchasing and creating an SDK for its touchscreen Series 40 mobiles.
Perhaps its most successful Ovi play so far is Ovi Maps. At the start of this year, it announced that it was to give away its navigation software and maps for free with over one million users having downloaded them.
"From a maps perspective they've done a stunning job... it's been their strongest [Ovi] offering," Gartner's Milanesi said.
"Their maps offering is the best thing for them and the context part will be absolutely crucial - there's so much that comes from context-awareness, from advertising to [getting] more knowledge on the users to services you can put in place to the link into social networks. Absolutely that is the way the world is going and Nokia has been working on this for quite some time," she added.
As well as luring consumers and the all important third-party app developers with the free software, Nokia is also hoping to sell location-based services, such as advertising, to business as well.
Nokia's hasn't been shy when it comes to acquiring companies to support its mobile location-based services ambitions. Along with Navteq, which cost it $8.1bn in 2008, Nokia has also acquired development firm bit-side to work on Nokia Maps, mapping company gate5, check-in outfit Plazes and the consumer portions of geographic information provider MetaCarta.
It has also bought a number of social networking companies that could also be combined with location-based services to give an additional layer of information to users about the whereabouts of their friends or businesses nearby.
According to Saverio Romeo, a senior industry analyst at Frost & Sullivan, location-based services have a key role to play in the mobile world, describing location as "probably one of most important elements that make the mobile phone different from the laptop at home".
"I definitely believe [Nokia] is a company that has a position of leadership in mobile location-based services - not just in terms of usage... but in terms of innovation that the company has put in place in the segment, in terms of commitment which the company has definitely showed," he told silicon.com.
However, while Nokia may be well positioned in terms of mobile location-based services, it remains a market that - apart from enterprise offerings such as fleet management - is far from mature and a successful revenue model has yet to be established.
"Around the exploitation of mobile location-based services from a revenue point of view, there is a long debate - how do we make money from mobile location-based services? Is there a revenue mobile that really builds on mobility and really builds on location-based services revenue flow?... It's at an early stage," Romeo said.
Before the market can take off, the use of mapping in a...
...social context will need to increase, he continued.
However, even then, there are numerous issues that companies seeking to capitalise on the social network-location overlap will need to solve before the market will be lucrative.
"The problem they have is that it's not clear which revenue model can work there - yes, it could be advertising-based, but what type of advertising? Do you advertise the cinema, the restaurant, the big chain - how? How is the engagement with brands? Also, there are issues in terms of metrics - how do you measure the return on investment of being on your map?" Romeo said.
Nokia for business
While Nokia might not be the name that immediately springs to mind when you think of enterprise devices, but it's had its own dedicated range for the corporate market since 2005, when it launched the first three Eseries devices.
The Eseries is still present in Nokia's device line-up. The company unveiled the latest addition to the range, the E7, at Nokia World and at first glance little appears to have changed since it first took wing five years ago. The focus of the range is still corporate messaging, as it was at launch.
However, perhaps the most notable difference in Nokia's enterprise strategy is its approach to partnership. Initially, it concentrated on pushing its own software while still having deals with other enterprise stalwarts such as Microsoft and RIM to have their software on Eseries devices.
However, since 2008, it has relied far more on a few big-name partners such as Microsoft and IBM to provide the applications enterprises run on its devices, after severing ties with RIM and other enterprise email providers and announcing the same year that it was to "cease developing or marketing its own behind-the-firewall business mobility solutions".
"About two years ago, we still had our own infrastructure products in the corporate space, so software that we sold to enterprises that they were basically utilising in mobilising their workforce - I would say as in a similar way as what RIM does today," Ilari Nurmi, VP of Eseries, told silicon.com.
"Two years ago we made a strategy change where we decided to...
...really go with partnership strategy... Rather than us building what you could consider as competing products to the Microsoft and the IBM email servers, we were basically moving to partnership strategy where we are the number one handset partner for these companies to work with in providing mobility to companies that are deploying Microsoft or IBM infrastructure," Nurmi said.
He added: "Companies have their own inherent strengths and we decided that obviously in the business space there are companies that are very strong and we [could] make a better offering by working together with these companies."
The decision to back away from providing home-grown enterprise software is one that led some to question Nokia's commitment to a dedicated enterprise range. According to Nurmi, however, Eseries sales are at an all-time high with year-on-year growth of 50 per cent from the first half of this year to the corresponding H1 of 2009.
"Nokia's presence in business-optimised smartphones is stronger than it ever has been," he said.
But with enterprise hardware becoming increasingly consumerised - and even potentially moving more towards a bring-your-own model - the future of pure-play business brands is an uncertain one.
"Clearly there is a blending between these functionalities. Probably still three, four years back the segments are quite different, but that is clearly happening... Consumers today expect both the business functionality as well as multimedia functionality in their business handsets and because of that, our latest Eseries products come packed with full multimedia experiences too," Nurmi said.
Meanwhile, the enterprise focus for the Eseries remains, with an ongoing partnership with Microsoft for "design, development and marketing of productivity solutions for the mobile professional" that has so fair yielded a version of Microsoft Communicator for the Eseries and will develop a version of Office Mobile for Nokia smartphones, including the Eseries.
A time of change
At Nokia's most recent Nokia World shindig, the company's execs was of a "fightback" with the company adopting the tone of a battered heavyweight - down but not out, ready for another shot at glory.
"Yes, we're going through a tough, challenging transition, and have a lot more work to do but I'm not going to apologise for the fact we're not Apple or Google or Samsung or anyone else. We're Nokia," Niklas Savander, EVP of markets, said.
"I recognise that we haven't been as competitive as we want to be in smartphones. Well, that's about to change. Today we...
...shift into high gear in Nokia's fightback for smartphone leadership," he added.
The fightback will be headed by Stephen Elop, the former head of Microsoft's business division, who replaced outgoing CEO Olli-Pekka Kallasvuo on 21 September.
Kallasvuo had been with the company for over 30 years in a career spanning legal and financial roles. A steady pair of hands, Kallasvuo nevertheless failed to give the company back the sparkle of its earlier days.
Kallasvuo's replacement - the company's first non-Finnish CEO - has met with a muted response, with many commentators questioning whether appointing the director of another staid tech company is really the best choice to deliver the innovative thinking Nokia desperately needs.
The effects of Elop's arrival have already been felt at Nokia - Anssi Vanjoki, head of the mobile services unit, announced his resignation shortly after Elop's appointment. Vanjoki had something of a name for himself at the handset maker and was tipped by some as a likely successor to Kallasvuo.
However, Nokia instead opted for Elop - a sign that the company was serious about a transformation. Rather than bring in another internal candidate and signal a continuation of Nokia's old ways, Nokia picked a north American CEO and broke from its all-Finnish past.
"They had a tough choice, because there aren't very many people out there who are visionary and at the same time know how to deal with the complexity of a corporation as big as Nokia," Gartner's Milanesi said.
With his background in operations and his history with Microsoft, Elop certainly knows how to deal with the complexity of a tech outfit. But is he visionary? Perhaps not.
However, according to the Gartner analyst, he may not need to be, if he can get Nokia to deliver on its current strategy.
"Nokia's vision is still valid and something that when executed on will get Nokia where it needs to be. The idea is that hardware alone is not important any more, that software is more important and the services on top and everything, and all that is linked to give you a solution... it's very much what Apple has been doing for users. You almost buy a lifestyle," Milanesi said.
Elop has made the first steps towards realising the dream of executing Nokia's strategy, announcing a streamlining of the company, its portfolio and its approach towards Symbian.
Nokia is headed in a new direction. All eyes will be on Elop to see which one.