It may be the king of mobile phones, but Nokia (NOK) isn't resting on its laurels. The Helsinki-based outfit has announced a wealth of experiments lately, from handsets that tune in live digital TV to phones with high-end music players. But no recent product from Nokia is quite as radical or controversial as the 770 Internet Tablet.
First announced last May, the $359 pocket-size computer lets users surf the Web from the palm of their hands via Wi-Fi or a Bluetooth connection through a nearby mobile phone. With zippy wireless access and a wide color screen capable of accurately displaying Web sites, the 8-ounce device -- barely larger than a BlackBerry -- is the first pocket-size Net browser.
Sounds nifty. But the 770 has raised a lot of eyebrows in tech-land. For one thing, it's not even a phone -- a change of course that confuses the market. Indeed, it's the first Nokia product in more than a decade with no cellular radio. What's more, it's built on the populist Linux operating system rather than the Symbian software Nokia uses in its high-end business and multimedia phones. The reaction from analysts and reviewers has ranged from puzzlement to outright hostility. Online news site CNET (CNET) labeled the 770 "too slow to be useful," while tech newspaper InfoWorld called it "a disaster."
OPENING UP OPPORTUNITY. Fortunately for Nokia, a lot of people are ignoring the critics. Since the 770 started shipping on Nov. 3, eager buyers around the globe have snatched up every available unit. Only a month after its release, wait times for the 770 in the U.S. stretched to three weeks. Now, back orders top two months worldwide, and Nokia is scrambling to jack up production.
The lucky enthusiasts who've laid hands on a 770 are already starting to pack online forums and Web sites with comments and tips. "The screen is incredibly bright and detailed," waxes blogger skynetos on slashdot.org. "All my iPaq (HPQ) and Palm (PALM) friends are very jealous!"
One reason customers are so pumped up is the 770's use of Linux. Thanks to the open-source nature of the operating system, the techie community has already swung into action writing software for the 770. Owners can download these programs for free to add new functions such as instant messaging or GPS support to the device.
"It's different from anything I have used before," says Mark Davis, an information systems manager with Lake Taylor Transitional Care Hospital in Norfolk, Va., who has already added software that lets him use his 770 as a remote to control his wired home.
NOT JUST TALK. Sales of the 770 are still neglible for Nokia, which booked 2005 revenues of $41 billion. It won't say how many 770s have shipped, but analysts figure the number is fewer than 25,000 units. Overall, Nokia's multimedia products group, which includes the 770, saw fourth-quarter sales rise 59% from a year earlier, to $2.4 billion.
What's far more important about the 770 is the message it sends concerning Nokia's strategy. Despite a record year for mobile handsets in 2005 -- Nokia alone sold a staggering 265 million units, out of a market of more than 800 million -- revenue growth in phones is slowing as prices sag. To boost its top line, Nokia is looking for new opportunities. "Nokia definitely has to place some bets, and the 770 is one of them," says Ben Wood, vice-president for mobile devices with research outfit Gartner in Britain.
In effect, Nokia is trying to reposition itself as a maker of all manner of communicating electronic devices, not just phones (see BW, 10/3/05, "A New Wireless Order"). That carries plenty of risks. For instance, in 2003 Nokia tried to wiggle into the video-game business with a hybrid cell phone and portable console called the N-Gage. Sales were disappointing, especially compared to the prelaunch hype, and Nokia suffered a rare black eye.
All of which may explain why its rollout of the 770 has been so low-key. The device has sold mainly over the Internet and through a few select retailers, with no advertising or hoopla.
BUNDLE OF JOY. Now that users have spoken with their wallets, Nokia is taking marketing up a notch. It's trying to sign deals with Internet service providers that might bundle the 770 with online access -- and perhaps even subsidize the price a bit, the way mobile operators often do for cell phones.
"That would be a sweet deal for Nokia," says Gartner's Wood. So far, only one such arrangement has been announced, with France Telecom's ISP subsidiary Wanadoo, and it doesn't include a price break. New Wanadoo customers in Spain will be able to purchase a wireless router and 770 together for $514.
Nokia also plans to continue developing the 770 and its software to boost performance and add features. "We're planning the next versions already," says Ari Virtanen, vice-president for convergence products and multimedia, who says the company will release a major software upgrade in June.
TESTING THE MARKET. The real question about the 770, though, is how far Nokia aims to take it. Thanks to the open Linux software, the new device could easily be retrofitted, for instance, to make voice-over-Internet protocol calls via Wi-Fi and a software package such as Skype. That could alienate some of Nokia's traditional mobile-operator customers, but most of them are rushing into Wi-Fi, too, so perhaps they'll welcome the 770. Nokia also is learning to court a new world of developers from the open-source community -- potentially a vital future source of innovation in telecom.
One way or another, the 770 is a sharp break from Nokia's past that points the way to a dramatically different future. Critics may carp about imperfect specs or missing features, but Nokia is soaking up scads of information and experience by floating the 770 on the market. Now if it can just produce enough of them to meet demand.
Vella is an intern in BusinessWeek's Paris bureau
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