RealTime IT News

Nokia to Sell U.S. Branded-Phones?

Nokia may be considering a plan to allow U.S. advertisers to customize its phones with marketing messages -- like logos and promotional multimedia content -- that would potentially lower the phones' costs to end users.

Under such a plan, which follows some success with a similar program in Brazil, advertisers would pick a Nokia (NYSE: NOK) phone that best suits their targeted demographic and pay a yet-to-be determined amount of money to Nokia. In return, they receive the right to include logos and promotional content such as games, music or other multimedia. They may also have the option to subsidize the phone.

Nokia recently conducted a small brand-based phone campaign in Brazil with Unilever's personal care division, and a Nokia spokesperson said the company "shared its experience with some U.S. carriers."

But despite a report by AdAge.com in which David Kohl, Nokia interactive head of sales for the Americas, said such a program could be introduced here by the end of the year, the Finnish mobile giant is not going on record with any details.

"We did a small campaign around branded devices in Brazil, but there's no official announcement about expanding that to other regions," Laurie Armstrong, Nokia's director of communications, told InternetNews.com.

Still, such an idea may seem a tantalizing way to gain share in the U.S. market, considering that while the largest phone maker in the world still dominates global sales and overseas markets, it's lost ground stateside to Apple's (NASDAQ: AAPL) iPhone and Research In Motion's (NASDAQ: RIMM) BlackBerry devices.

And despite its presence overseas, Nokia reported bleak financial results for Q1.

One reason Nokia's U.S. sales are dismal compared to competitors is that until recently, it sold phones directly to customers without the marketing muscle and subsidies from mobile network operators -- which meant Nokia's prices hovered around the $400 mark for smartphones comparable to models available more cheaply from rivals.

However, AT&T (NYSE: T) just last week became the first U.S. carrier to subsidize one of Nokia's smartphones -- the Nokia E71x, available for $99 with the standard commitment of a two-year contract.

The release of the E71x with AT&T is just part of a major strategy shift by Nokia that could salvage its hopes for stateside market share, Charles Golvin, principal analyst with Forrester Research, told InternetNews.com.

But Golvin said a successful branded-phone rollout needs to have a harmonious distribution deal in which both operators and advertisers are happy -- and that may be hard to accomplish.

"There has to be a clear mechanism for how its released in the market," he said. "This is just a hypothetical scenario, but if you have Coke or Nike distributing handsets through their retail partner channels, that's not a formula for success because the operators will be upset. There's channel conflict because if the carrier is subsidizing the phone, they'll want to sell it."

"Will the advertisers want to subsidize it and pay for the advertising? It's not clear to me how you'd extract the same value that would warrant a subsidy," he added. "Operators do it because the get the contracts and fees for services."

Still, he's optimistic that Nokia is taking steps to correct its course in the U.S. He said the company last year realized it needed to offer carriers phones designed to fill holes in their portfolio of offerings, and the e71x is one of the first results of that strategy.

"I don't think it's too late for Nokia. They embarked last year on a new strategy to regain market share in the U.S. and it could work," he said. "Rather than build one device and sell it across the board, as they do successfully in Europe, they now are customizing devices to meet the specific needs of each carrier. So if you want AT&T to carry your phone, you put AT&T's proprietary navigation product on it, you change the color, you make the design fit into the portfolio."

Avi Greengart, mobile research director and analyst with Current Analysis, also thinks the E71x is promising -- but cautions that it's just a start and Nokia has a lot of lost ground to make up.

"The E71x is the first competitive smartphone that Nokia has offered in the U.S., with carrier distribution, a terrific thin QWERTY form factor, and an attractive price point," Greengart told InternetNews.com. "However, it is not nearly enough to give Nokia a viable presence in the U.S. market overall."

"It is just a single phone at a single carrier and the user interface is somewhat confusing -- Europeans may be used to Symbian S60's quirks, but it is an entirely unfamiliar OS for U.S. consumers," he said.

He also took issue with the phone's positioning.

"In Europe and Asia, Nokia is marketing the E71x as a business phone -- the Eseries is Nokia's business sub-brand -- but AT&T isn't even marketing it as a smartphone, but as a text messaging phone. AT&T approach is probably the right one to drive sales, which just shows how far Nokia is from being a smartphone power here."