It has been some time since Nokia represented a sizeable chunk of the CDMA phone market.a It has concentrated nearly all of its resources in recent years on its efforts in GSM phones. Indeed, its high end enterprise-class phones are only available in GSM versions, thus severely limiting acceptance and deployments in
Nokia, who makes much of its own silicon, has been fighting Qualcomm for some time, due to what Nokia claims (and others support) are outrageous royalty payments (Qualcomm owns and licenses CDMA technology). As such, Nokia has declined to buy Qualcomm chips (Qualcomm is the major producer of CDMA chip sets), and instead worked on its own silicon. However, it recently (about 6 months ago) announced that it was re-examining its strategy, and that it would enter into a joint venture with Sanyo to produce CDMA phones for those markets requiring the technology (mainly North America). Sanyo has struggled to build market share against rivals such as Samsung and LG, and saw Nokia as an ideal channel to increase distribution of its devices. Nokia saw Sanyo as a way to avoid the needed engineering investments and constraints of licensing agreements while allowing it to enter the CDMA market with a branded product. A win-win scenario?
We believe this joint venture (JV) was a bad idea from the start, and that the disbanding of the JV was a good move on Nokia’s part, though not a positive move for Sanyo. Nokia has established its brand and reputation based on a particular class of phones. Although it currently plays in the low end of the market in a big way, what it primarily needs is to establish itself in the mid to high end enterprise class smart phone segment of the market, a high growth area with good margins. Its new E-series devices go a long way towards that goal, as they provide email, applications capability and rich features that business users want (and in a more compelling form factor than the previous Communicators). It competes in this market with Palm (Treo), RIM (BlackBerry), and Motorola (Q), among others. However, one major failing is that the E-series devices only come in GSM flavors. That limitation prevents users who may be on CDMA carriers from deploying those devices. In
Although not having a CDMA enabled smart phone hurts Nokia in the North American enterprise market, it nevertheless is better for Nokia to forego this market segment rather than alienate its customer base by having a disjointed product line. Therefore ending the JV makes sense. However, its lack of a credible enterprise device available on both CDMA and GSM will give its competitors who have deployed the same devices on both, a major advantage. Nokia will therefore have a tough time in the North American smart phone market, even though it will have an ODM designed device for sale sometime in the future, though likely at the lower end of the market.
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