Nokia's Bad Call on Smartphones - Wsj.Com

Topics: Mobile phone, Nokia, Smartphone Pages: 8 (2480 words) Published: April 22, 2013
TECHNOLOGY July 18, 2012, 10:31 p.m. ET
In an interview with The Wall Street Journal, Nokia CEO Stephen Elop talks about innovation, management, and guiding the embattled company through a difficult transition. By ANTON TROIANOVSKI and SVEN GRUNDBERG

Frank Nuovo, the former chief designer at Nokia Corp., gave presentations more than a decade ago to wireless carriers and investors that divined the future of the mobile Internet. More than seven years before Apple Inc. rolled out the iPhone, the Nokia team showed a phone with a color touch screen set above a single button. The device was shown locating a restaurant, playing a racing game and ordering lipstick. In the late 1990s, Nokia secretly developed another alluring product: a tablet computer with a wireless connection and touch screen—all features today of the hot-selling Apple iPad.

"Oh my God," Mr. Nuovo says as he clicks through his
old slides. "We had it completely nailed."
Consumers never saw either device. The gadgets were
casualties of a corporate culture that lavished funds on
research but squandered opportunities to bring the
innovations it produced to market.
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Nokia's Bad Call on Smartphones - 1 of 6 4/01/13 2:08 PM
Dan Krauss for The Wall Street Journal
Former Nokia designer Frank Nuovo says the
company had prototypes that anticipated the
Noting Nokia's History
More photos and interactive graphics
Nokia led the wireless revolution in the 1990s and set its
sights on ushering the world into the era of
smartphones. Now that the smartphone era has arrived,
the company is racing to roll out competitive products
as its stock price collapses and thousands of employees
lose their jobs.
This year, Nokia ended a 14-year-run as the world's
largest maker of mobile phones, as rival Samsung
Electronics Co. took the top spot and makers of cheaper
phones ate into Nokia's sales volumes. Nokia's share of
mobile phone sales fell to 21% in the first quarter from
27% a year earlier, according to market data from IDC.
Its share peaked at 40.4% at the end of 2007.
The impact was evident in Nokia's financial report for
the first three months of the year. It swung to a loss of
€929 million, or $1.1 billion, from a profit of €344
million a year earlier. It had revenue of €7.4 billion,
down 29%, and it sold 82.7 million phones, down 24%.
Nokia reports its second-quarter results Thursday and
has already said losses in its mobile phone business will
be worse than expected. Its shares currently trade at
€1.37 a share, down 64% so far this year.
Nokia is losing ground despite spending $40 billion on
research and development over the past decade—nearly
four times what Apple spent in the same period. And
Nokia clearly saw where the industry it dominated was heading. But its research effort was fragmented by internal rivalries and disconnected from the operations that actually brought phones to market.

Instead of producing hit devices or software, the binge of spending has left the company with at least two abandoned operating systems and a pile of patents that analysts now say are worth around $6 billion, the bulk of the value of the entire company. Chief Executive Stephen Elop plans to start selling more of that family silver to keep the company going until it can turn around its fortunes.

"If only they had been landed in products," Mr. Elop said of the company's inventions in a recent interview, "I think Nokia would have been in a different place." Nokia isn't the only company to lose its way in the treacherous cellphone market. Research In Motion Ltd. had a dominant position thanks to its...
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