Outlook Hazy for Nokia's Chances in Notebooks
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During an interview with Finnish broadcaster YLE, Kallasvuo responded to a question about whether Nokia (NYSE: NOK) is considering entering the notebook or netbook market. He replied that Nokia is "looking very actively" at producing a PC device.
"We don't have to look even five years into the future to see that what we know as a mobile phone and what we know as a PC are converging in many ways," he added. "Today, we have hundreds of millions of people who are having their first Internet experience on the phone. This is a good indication."
A Nokia spokesperson declined to elaborate further to InternetNews.com on Kallasvuo's comment.
It's thus unclear how Nokia expects to translate its market-leading position in mobile handsets to the PC market. And that sort of transition may be especially difficult, coming at a time when sales of most PC categories are slowing.
Industry observers say the company's success will depend on what Nokia actually brings to the table. One factor is whether Nokia is considering notebooks, netbooks, or both -- a key difference that Kallasvuo did not specify.
"I don't believe they can do [notebooks]. I don't believe they have the skill to go after that," Mike Kitagawa, principal analyst for Gartner's client computing group, told InternetNews.com. "An extension of a mobile Internet device could be possible if they want it."
"But I really don't think a regular notebook would be the case," he added, pointing to the high hurdles Nokia would have to surmount, like starting from square one with original design manufacturers (ODMs,) who produce hardware for companies like Nokia to rebrand.
"The margin is low and Nokia doesn't have any connections with the ODMs," Kitagawa said.
Where would Nokia fit in?
But perhaps the biggest challenge might come from the economy, which makes this terrible time to be expanding into new markets. Gartner is projecting a scant 4.5 percent worldwide annual growth in the PC market for 2009, which may change, and the sales in the U.S. are expected to contract 7.4 percent this year.
"This is a declining market. How could they find a space where they could fit in?" Kitagawa said. "The netbook market is growing and is strong, but it's strong because it's sold as a subsidized system."
Many carriers in Asia and Europe, for instance, are offering netbooks as part of a multi-year Internet contract, just like the mobile phone companies do with their phones. That gimmick has not taken root in the U.S. yet.
[cob:Special_Report]Richard Shim, research manager for IDC's Personal Computing program, also doesn't like the idea of a general-purpose notebook from Nokia, either. "If they are thinking of being a general, mass-market player in the PC industry, it's going to be really tough," he told InternetNews.com.
"But if they are going to be really specific about their opportunities, then there's a decent shot, depending on distribution, price point, product and features," he added. "They have a strong brand, but they'd have to make a new niche for themselves in the PC industry."
To Symbian or not to Symbian
Shim also noted that what could be Nokia's biggest strengths might also be its biggest weakness.
One of the questions surrounding a Nokia notebook/netbook is whether the company should use the Symbian OS it now owns as the operating system for the device, just like on its smartphones. Shim thinks that's a bad idea given Windows' dominance.
"Symbian seems like it would be a difficult proposition because many of these other systems are running Windows," he told InternetNews.com. "There are not a lot of legacy apps. That's the advantage of the Windows platform. A lot of people will think that Symbian device is competing with Windows devices, and if they can't run anything on the Symbian, so why would they want it?"
Symbian has a decent application base of 9,834 third-party applications as of last June, according to Symbian. But the Apple iPhone has already blown past the 10,000 app barrier in under a year.
Still, those are primitive, simple applications for smartphones. A notebook, or even a netbook, would demand more complex apps.
As a result, Shim, like Kitagawa, thinks Nokia is best off going after the netbook market.
"I imagine that the opportunity they are looking at is the space between a smartphone and a notebook," he said. "That's kind of what netbooks are trying to go after."
"If Nokia goes after that space, with a notebook-type product optimized for mobile broadband, thus taking advantage of their legacy in the smartphone space, then that could be a differentiated offering and they would have some expertise in that area."