Hiring Microsoft's Elop won't erase Nokia's U.S. woes

The move may help it boost share, but big changes will be needed worldwide, analysts say

Hiring an American CEO isn't all Nokia has to do if it wants to succeed in the U.S., mobile industry analysts said on Friday.

Stephen Elop, the former head of Microsoft's business software group, is set to take over the world's largest mobile-phone company later this month. He will succeed Olli-Pekka Kallasvuo, who was let go after Nokia turned in a string of disappointing business results.

Nokia, based in Espoo, Finland, still holds the biggest share of the world's mobile-phone market. In the second quarter, it sold 34.2 per cent of all handset units, far ahead of Samsung's 20.1 per cent, according to research company Gartner. But that marked a drop from a 36.8 per cent share a year earlier.

The company is largely missing out on the booming market for smartphones in the U.S., according to IDC. In the second quarter of this year, Nokia had just 3.5 percent of that market, far behind the leaders, Research In Motion with 33.4 per cent and Apple with 19.5 per cent.

It will take big changes to make Nokia a major player in the U.S., especially in smartphones, analysts said. Despite his local background, Elop is unlikely to be a visionary savior the way Steve Jobs was for Apple, according to Gartner analyst Ken Dulaney.

"He will be best at hiring the people that fix the things that Nokia must address rather than taking on that role himself like Jobs does," Dulaney said. Elop faces two sizable hurdles, having no mobile software background and no experience working for a Finnish company, Dulaney said.

Analyst Phil Marshall of Tolaga Research was more blunt. "It's a little unclear to me ... what they're going to achieve by bringing this guy into the business," Marshall said. However, it's a good idea in general for Nokia to make its top management more internationally diverse, he said.

Nokia is struggling even in its traditional strongholds, Europe and Asia, because the Symbian OS that underlies most of its devices is losing ground in the smartphone arena to Android and Apple's iOS, analysts said. However, they say the company has particular problems in the U.S.

Nokia's whole way of doing business is built around the company being able to develop and distribute phones on its own, as manufacturers can in much of Europe and Asia, Marshall said. Selling in the U.S. requires working closely with mobile operators, which distribute most phones and want more control over them. Rivals such as LG and Motorola understand this, but Nokia hasn't done well with it, he said. Though carriers' control over phones in the U.S. is gradually diminishing, Nokia can't simply wait for that day to shine, Marshall said.

The company has also failed to craft a design and interface approach that suits the U.S. market, said Mobiletrax analyst Gerry Purdy. The typefaces, screen layouts and hardware designs of Nokia phones still all fit a European sensibility despite the company having established a design center in San Diego, he said.

"They're going to have to be very different ... if they want to be able to gain share" in the U.S., Purdy said. It might take a separate business free of control from Finland, he said. The company would have been better off buying Palm before Hewlett-Packard snapped it up, in Purdy's view.

In addition to its handset woes, Nokia's efforts to inspire third-party application developers and build a successful online app market have been weak so far, analysts said. But one of the biggest problems weighing the company down may be its reliance on the Symbian OS.

"They can't afford to religiously follow the Symbian-centric strategy," Tolaga's Marshall said. Though it still has a place in the mobile world, particularly on lower-end phones, Symbian is too phone-centric to succeed against smartphone platforms such as iOS and Android, which were developed for devices that go beyond the role of a phone, he said. Marshall thinks one way in which the hiring of Elop could help Nokia would be if the new CEO brings the company closer to Microsoft.

"In spite of Symbian being a very mature phone OS ... I don't think it's going to be a successful OS 10 years from now," Purdy at Mobiletrax said. Measured by unit shipments, Symbian was the most popular smartphone operating system in the second quarter of this year, with 41.2 percent of the market worldwide, according to Gartner. One year earlier, it held 51 percent of the market.

However, the company seems too devoted to its longtime platform for Elop to bring about that big a change, according to Gartner's Dulaney.

"I doubt that this will cause Nokia to drop Symbian and bring in Windows Phone 7," Dulaney said. "Symbian is their core product."

Tags applicationstelecommunicationMicrosoftPhonesNokiasmartphonesMobile operating systemssoftwaremobileMobile handsetsconsumer electronics

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Stephen Lawson

IDG News Service

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