If you’re in any doubt about the importance of a successful smartphone strategy, you need only look at the recent CEO departures at Nokia and LG. Both cited weaknesses in smartphones as the trigger for installing a new executive charged with transforming the companies’ fortunes in the high-end phone space.
On paper neither company is doing particularly badly. Nokia comfortably remains the world’s largest handset vendor – even in smartphones – while LG is a solid number three. But both are deemed to have missed the boat in terms of smartphones; Nokia has struggled for years now to come up with a device on a par with Apple’s iPhone (and failed spectacularly), while LG’s smartphone strategy has been virtually non-existent. But this is about more than mere gaps in the portfolio; it is now having a serious impact on the bottom line. LG recorded a US$101 million loss at its handset unit last quarter, while Nokia’s share price has fallen by almost two-thirds since the iPhone was launched in 2007.
So will a new CEO make a difference? The Nokia appointment is more intriguing in that it appears to represent a cultural shift as well as a management change. Canada-born Stephen Elop, formerly of Microsoft, is the first foreigner to take control of the Finnish firm and an appointment clearly designed to make a break from the past. Nokia’s management has appeared out of sync with the industry in recent times, so a veteran North American CEO should at the very least help its public and investor relations.
Elop will have some big decisions to make early on, the biggest of which will surely be whether Nokia sticks with its Symbian platform – in which it has invested millions in R&D over the years – or diversify into new operating systems such as Google’s Android. Nokia’s outgoing smartphone chief Anssi Vanjoki summed up the firm’s current attitude to Android in fine fashion this week by declaring that if Nokia were to adopt it, it would be “like boys who pee in their pants for warmth in the winter” – a short term fix that will lead to problems later on.
Analysts believe that the market will support multiple mobile operating systems for the foreseeable future so sticking with Symbian is not necessarily a bad move – especially as it means Nokia will be able to differentiate its devices from the raft of Android-based products. As Nokia acknowledged at its Nokia World event last week, a greater challenge will be to bring developers on board and change Symbian’s reputation among developers as an overly-complex and hard-to-use platform.
The challenge facing new LG CEO Koo Bon Joon is more straightforward: get some smartphones out of the door as soon as possible. It has pinned its hopes on a new Android-based smartphone range called Optimus and is targeting 10 million in sales for its flagship Optimus One device alone (the vendor has had no smartphones reach the 1 million unit sales mark to date). LG devices running Microsoft’s new Windows Phone 7 platform are also expected before year-end.
Motorola provides an interesting example of how getting the smartphone strategy right can revive a business. On the brink of disaster 18 months ago, Motorola’s handset division concentrated on developing a range of new Android smartphones – notably the high-profile DROID device for Verizon Wireless – which last quarter helped the unit report its first profit for years. Motorola cannot yet be said to have returned to its former glory, but it was the appointment of a new CEO at the handset unit – former Qualcomm exec Sanjay Jha – that brought it back from the brink.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members