NEW YORK-Nokia Corp. has spent the past five years refining lessons learned from its attempts to jump-start digital cellular in the United States, said Matt Wisk, vice president of national marketing-USA.
“In 1995, we tried to make the first generation of digital happen in the U.S. with TDMA, building wonderful products with no network to support them, and we found out the meaning of profit warnings,” he said at a recent Bear, Stearns & Co. Inc. conference.
“As we learned from the first round of TDMA, it doesn’t always pay to be the first inflection mover.”
Today, Nokia is keeping a watchful eye out for the inflection point on the graphical depiction of a hockey stick that will mark the vanguard of a full-blown market for wireless Internet access. From the manufacturer’s present vantage point, this looks like it will happen sometime in 2002 or 2003.
“Everyone overestimates the take-up rate, and we see that with wireless Internet … and not everyone will want a full-blown connector because there are different values people place on access,” Wisk said.
“In the U.S., most people view phones as a calling device and many don’t even know they can use a handset for data. A lot of the two-way messaging, which we’ll soon introduce in phones, is associated here with pagers.”
Nokia, which accounts for 70 percent of the profits in the wireless handset sector, according to Wisk, is working to guard against two kinds of excess: in product diversity and retail presence.
“There will be segmentation in how the game plays out, but we don’t want to over-segment the market. Managing this will predict our future success,” Wisk said.
Being everywhere at once, while it seems desirable at first consideration, also can prove to be a negative.
“There was a point at which our market share was greater than customer preference for us, and that was disturbing because it meant we were over-distributed.” said Wisk.
“We haven’t passed Motorola in total (consumer) awareness. It’s at the top of the line. But we are well-positioned to compete with Motorola.”
For its part, Motorola Inc. sees 2000 as the year in which it will regain market share and improve operating margins in its handset business, said Ed Gams, director of Motorola investor relations, at a recent Donaldson, Lufkin & Jenrette Securities Corp. conference.
“Our market share stabilized in the second half of 1999 after declining for the three-to-four years before, and our goal is to gain market share on a unit basis in the second half of 2000,” he said.
“We are improving operating margins and are on track for 10 percent in the fourth quarter.”
Motorola is hard at work on lowering costs as it makes the transition to new lines of products, which it will introduce in the third quarter, Gams said.
“The components situation continues to improve,” said Gams. “It’s more of a nuisance than a material factor for us,” he added.
Wisk said Nokia continues to be “worried” about components shortages, but it takes advantage of its status as a profit leader in its negotiations with suppliers for procurement of handset building blocks.
Gary Pinkham, vice president of investor relations for Ericsson Inc., said the component shortage looks like it will ease during the second half of this year.
Ericsson said it is on track with its planned introduction of new models that are scheduled to be released in stages during the last six months of this year. Many of these new phone models will be in the mid-range to high-end category, including those that use General Packet Radio Service technology.
