Ronnie05's Blog

Is Apple reliving Nokia? (Part I)

Posted in Mobile Devices and Company Updates by Manas Ganguly on May 3, 2013

This is the first of a two part blog on Apple reliving the mistakes that Nokia made 4-5 years back.

In 2007, Nokia was the biggest thing in the mobile phone market. It held 60% of the global smartphone market and more than 40% of the overall handset market. Its handset operating margins briefly topped 25%, something that was thought to be impossible in the phone business. In the summer of 2007, Nokia released the N95 – a 2.4” screen dual slider phone with a 5MP camera which in 2007 was a package that couldnot be bettered. N95 went on to create a roar in the markets – but imperceptibly Nokia’s slide was beginning. 3 months after Nokia launched N95, Apple launched iPhone and the rest is history.

Nokia N96 versus iPhone

The initial iPhone and even the early Samsung phones played on the large screen format – 3.2” – 3.5” and the likes. Nokia’s response to the first smartphones, was a bettered N95 – the N96 – crammed with more features which failed to tickle the market. Touch was catching on – and Nokia was lethargic in its reaction. In an age when customers were falling head over heals in love with the iPhone, Nokia was lamenting the iPhone on subjects such as 2MP Camera and lack of Bluetooth and loaded up the 2.6″ N96 to fightback (in vain). By the time, Nokia responded with the 5800 XpressMusic, it had fallen behind on its tracks. It repeated the mistake with N97 – a large screen which was woefully resistive – in an era when the iPhone3GS ruled and the Androids were beginning to fly. Nokia was edged out of the market – and had fallen behind. Nokia’s next releases N900, N8 failed to woo customers clamoring for the iPhone.

2013 – Apple’s incredible run through from 2007 onwards is slowly running out of steam and gross margins had peaked in early 2012. Apple played economies of scale on standard screen sizes to keep its BOM (Bill of Materials) cost low – driving operational efficiencies in production. However, they seem to have been reading the market wrong as the era of large screen devices was stepping up considerably against the 4” iPhone. Premium buyers were increasingly flocking to the 4.5” segment smartphones and the 5.5”+ phablet space and Apple’s roadmap to large screens is already a couple fo years behind.

The sense of déjà vu is not wasted – as Apple repeats the same mistakes in 2013 that Nokia made in 2007.

Continues to Part II

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