Nokia Focuses on Software to Lure U.S. Buyers

Nokia Corp. is the near king of the world -- except in the U.S. -- when it comes to smartphone and mobile device shipments. Now, the Espoo, Finland-based company is in the midst of a long-term push to rectify its problems in this country.

Nokia Surge
For instance, Nokia is trying to sell more mobile phones and smartphones through U.S. carriers and is seeking ways to make its Symbian operating system software more friendly to American users, said Ira Frimere, product portfolio manager for Nokia North America.

And Monday, Nokia introduced a new smartphone called Surge, the first time the traditional manufacturer has shipped a model without a number in its name, which analysts see as a subtle move by the engineering-focused Scandinavian firm to start using American marketing techniques. The Surge slider device, jointly developed with AT&T, includes a physical QWERTY keyboard, noted Frimere.

"Our strategy is to get as many devices into U.S. carriers as possible," Frimere said in an interview. "We want to be number one in the U.S."

That goal will require some heavy lifting on the company's part as Symbian and Nokia remain relatively unknown to most American consumers, analysts noted, especially when compared to their European and Asian counterparts who appear to love the technology.

IDC recently forecast that 92 million Symbian OS-based smartphones will ship worldwide during 2009, and will hold 46% of the market. Those numbers make Nokia the worldwide leader in smartphone sales -- by a wide pargin. But in the U.S., shipments of Symbian smartphone shipments are only projected to reach just over half a million this year, slightly more than 1% of Nokia's total shipments. The Nokia operating system lags far behind Research in Motion Ltd.'s BlackBerry software, as well as Windows Mobile, Mac OS X, and Palm (whose numbers now include the WebOS), in the U.S.

Sean Ryan, an IDC analyst, noted that the research firm's forecasts show Symbian losing a bit of market share in coming years as Google Inc.'s Android and other new operating systems join the fray. "It really is a big difference in the way Nokia does in the U.S. compared to abroad," Ryan noted. "Mention Nokia to the average American and nobody has ever heard of it."

Frimere is one of a team of Nokia executives charged with improving the company's smartphone business in the U.S. He compared his own experience as an engineer learning marketing techniques to what Nokia is going through. "I've learned it's not what I like, but what my customer likes," he said. "A smartphone is an extension of your personality."

To meet those U.S. consumer needs, Frimere said Nokia must improve the capabilities of the software that runs on its

well-regarded smartphone hardware. "With software, we have had an engineering mindset. We need to do more hand-holding with the users," he said. "We've decided we need to spritz on some cologne before we head out."

Ryan agreed that Nokia needs to study the U.S. consumer "to understand how they navigate and use [smartphone] devices." Nokia's smartphone interface "really appeals to Europeans and Asian users more, and they are more accustomed to the way it works," he added.

Frimere suggested that Nokia is moving to quickly improve its user interface with some minor tweaks. One is to ship phones with default settings that show users the phone's capability without requiring them to search for specific key features and then turn them on. Also, he said, a smartphone could ship with wallpaper that shows a scene from nature, instead of a simple blue background. Engineers are also working to add an hourglass users traditionally see during the moment between activating a function and seeing it fully loaded.

New features would help, Frimere and analysts say, but Nokia's most direct pathway to success in the U.S. will be getting more carriers to sell its phones. The said Nokia would likely have an easier time working with GSM carriers like AT&T and T-Mobile USA than with top CDMA players that include Verizon Wireless and Sprint Nextel Inc.

Nokia has started penetrating the CDMA market in the U.S. with Verizon, which now sells three Nokia mobile phones, the 7205 Intrigue, the 2605 Mirage and the 6205. All are considered "feature" phones that focus on music or messaging, not smartphones with additional capabilities. Nokia won't say when it plans to ship a CDMA-based smartphone in the U.S., though a spokesman said the company will "do everything possible" to be the number one smartphone supplier in the country.

AT&T recently began offering Nokia's E71x and the Surge smartphones, while T-Mobile carries the Nokia 5310, the 5610 and the 7510 devices.

Nokia also sells unlocked smartphones through distributors at two Nokia stores in New York and Chicago. Three of the high-end unlocked phones it offers are the N97, E75 an E71. Frimere acknowledged that unlocked smartphones are sought by less than 10% of phone buyers, since buying one requires an upfront payment of $500 or more, and time and patience on the part of a buyer to buy services from a willing carrier.

To further its courtship with U.S. carriers, Nokia operates a facility in San Diego to help manage its relationship with Verizon and AT&T. Nokia is also fostering more direct relationships with third-party developers through Forum Nokia and its Ovi Store, which sell third-party applications similar to those sold by Apple Inc.'s App Store, Frimere said. Ovi -- Finnish for "door" -- is Nokia's services portal, where users can set up Ovi Share, an e-mail client, and cloud storage and other applications.

Frimere called Ovi an example of how Nokia is improving its software tools. Services are very important to U.S. users "since everybody in the U.S. is so Internet savvy," he added.

To compete against a growing number of operating systems and interfaces, Frimere said Nokia also plans to continue creating a wide variety of devices, including smartphones with touch screens and others with physical keyboards. The company is also developing devices that offer both features. "We've learned it's different strokes for different folks," he said.

Nokia is also moving to begin shipping its smartphones in the U.S. at the same time they ship in other countries, Frimere said. "It used to be six months before a model would appear in the U.S.," he said.

The Surge will ship July 19 for $80 after rebate with a two-year commitment. It has not yet begun shipping anywhere else, partly because it was co-developed with AT&T, Frimere said.

However, Nokia does plan to ship the Surge to other countries, although no timeline has been announced. When it does sell abroad, it will be called the Surge 6790, an apparent concession to Nokia's strong tradition of using numbers with its models that is familiar to users outside the U.S. "The naming is not down to a science yet," Frimere said, smiling.

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