Global Economics

Nokia's Do-Everything Phone


The handset maker is betting on the multimedia, Web-prowling, map-navigating N95 to take market share from Motorola—and even from iPhone

If Nokia had its way, you would throw away your iPod, your digital camera, maybe even your PC and TV—and certainly all those road maps cluttering the glove compartment of your car. Instead, you would own a Nokia (NOK) "multimedia computer" that not only makes phone calls but also does the work of a host of other digital devices, including a GPS navigator.

The Finnish handset maker hasn't quite sold the general public on its vision of mobile phones as do-it-all communications portals—yet. But Nokia's N95, its current, top-of-the line, multimedia handset (which launched in the U.S. in April) shows how determined the company is to become the center of people's digital universe.

"It's very important in terms of showing the world and leading consumers what can actually can be done," says Anssi Vanjoki, Nokia executive vice-president in charge of the company's multimedia business unit, which will likely book revenues north of $13 billion this year. "You can expect these features will become more standard over time."

Nokia won't divulge sales figures, but early indications are that the $750 N95 is a hit with the technophiles it's aimed at. As the leading edge N Series phone, the N95 certainly takes some of the credit for the gains in sales of high-end, multimedia handsets that have been helping Nokia take market share from rival Motorola (MOT). And a perusal of N95-related blogs shows that the product is generating significant discussion, as well as a fair amount of enthusiasm. "It should be a flagship product for Nokia," says Jari Honko, deputy head of research at eQ Bank Limited in Helsinki.

Jack of All Trades

The multimedia unit's strong operating margins—expected by eQ Bank to be about 17.5% this year—also help compensate for brutal price pressure in entry-level phones and other more commoditized sections of the market.

The N95 is not quite a direct competitor to the soon-to-be-launched Apple (AAPL) iPhone. For one thing, it doesn't have the iPhone's touch screen, though it has other features the iPhone lacks, including support for global positioning system (GPS) services. But the N95 is a crucial part of Nokia's strategy to capture the high-end, design-conscious users who will also be intrigued by the iPhone. "We can stage a good competition for the iPhone," says Vanjoki, who says he welcomes Apple's entry into the market because of the awareness it's generating for multimedia phones. "The PR job that [Apple CEO] Steve Jobs has done is fantastic for the whole market."

No question, the N95 packs a lot into a small package. With its slide-out keypad, the device superficially resembles a predecessor called the N80 that launched last year. But the N95 has a number of design and technical features that make it a more credible replacement for devices such as an MP3 player or digital camera. For instance, the handset face slides in two directions: up to reveal the numerical keypad, down to reveal media and music player controls. The N95 also has a jack that takes standard headphones, like an iPod. And the 5-megapixel, Carl Zeiss lens offers photo quality to rival dedicated digital cameras.

All You'll Need

What really sets the N95 apart from the N80 as well as most competing phones is built-in GPS. Assuming the user is within satellite range, the device figures out where it is and automatically downloads maps as well as information on local services. The maps are free, though a Nokia service that provides audio navigation costs about $135 for a three-year subscription in Europe. The N95 also contains an Internet browser, as well as the technology to receive video feeds and broadcasts.

Analysts don't expect mobile handsets will soon replace all these dedicated devices. But for casual use, many people will find a handset like the N95 is all they need, especially since it's always handy. Gartner (IT) analyst Carolina Milanesi says she no longer brings a camera on vacation, instead she uses a Sony-Ericsson K800.

And while people aren't likely to throw away their laptops, young people especially are using mobile phones as a way to stay connected to the Internet when they're on the move. This trend is accelerating as big Web brand-names such as Google (GOOG), MySpace (NWS), and Yahoo (YHOO) create mobile phone interfaces. "That underlines the fact that there is so much of that world coming to mobile," Milanesi says.

Ewing is BusinessWeek's European regional editor.

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