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Could Nokia be purposely holding itself back?

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Nokia users, myself included, have been up in arms with complaints of build quality issues and lacklustre high end device hardware.¬† All the while, Nokia’s competitors appear to be catching up, releasing devices with more multimedia features, more powerful hardware, and better, more intuitive, flashy user interfaces. The Finnish tech titan’s reputation has fallen in the minds of hardcore gadget enthusiasts, a demographic Nokia has long dominated. This is an unfavourable position to be in, especially with Nokia being a benefactor of the gadget enthusiast community’s word of mouth advertising.

But are these moves missteps, products of inept leadership and poor planning? Or could I have missed something? Is it possible the latest moves are in fact evidence of delicate yet astute risk calculation? Could it be that Nokia has devised the impossibly perfect business plan to continue to dominate in a metamorphosing market? I’m beginning to rethink my previous analysis, and admit I may have allowed my preference for Nokia hardware and expectations as a consumer to cloud my objectivity. Allow me to elaborate.

Nokia’s latest flagship device, the N96, while a lovely device, is a disappointment for me and most loyal Nseries flagship owners. Despite boasting incremental updates to the previous flagship, the legendary N95, the actual internal components are a computing power downgrade, and several caveats from the previous flagship models still exist, like the lack of any lens protection for its high end optics. And though I find the N96 to be lacking effort or unique qualities befitting a premium brand’s flagship, I believe this is the perfect device to unleash on the market. Before my email inbox becomes inundated with hate mail, allow me to explain how I’ve come to this conclusion. It’s all in the clues.

Nokia has alot of R&D invested in the S60 3rd Edition Feature Pack 2 OS. I’m sure they intend to wring every last dollar from the platform to see a better return on investment. They could’ve created a much better device, but they don’t intend for their flagship Nseries owners to heavily adopt this device anyway. If you’ve never owned the top of the line Nseries, the N96 is supremely appealing. This is good for two reasons. First, they can continue to attract new consumers. Secondly, it keeps their loyal high end customer base from quickly upgrading. Now what sense does it make to create a device loyalists shouldn’t want?

Nokia is facing fierce competition from all corners. RIM, WinMo, Apple, and newcomer Android have all exhibited updated platforms and or devices, many better than Nokia in various aspects. It is of utmost importance that Nokia get its next generation operating system and interface right to maintain their dominant position. Mistakes in the next few quarters will be pronounced. The market is in a crossroads of consumer adoption and building loyalties. Consumers are spending longer examining their smartphone purchases, making the subsequent quarters a virtual audition. A bad impression could cause new consumers to close the door to Nokia and pledge loyalty to an alternative. So their focus is almost entirely on the S60 5th Edition Touch UI OS. The real flagship device will be based on it, not 3rd Edition.

Had they announced the real flagship now, everyone would withhold purchasing Nseries devices for the next couple quarters. Profits are too important, and lack of sales can be detrimental in today’s economy. So they threw the market a bone. They’re wise enough to know most loyal flagship owners won’t defect to another manufacturer due to what I call “faith based” and “politically based” factors. Many have faith Nokia will right the ship, used to the outright hardware dominance Nokia is known for. Others refuse to buy anything from Microsoft or Apple, regardless their quality, to show they disagree with their business tactics on a political or fundamental level.

They know a few will leave for perceived greener pastures. In fact, if you listened to recent interviews of Nokia executives, they admit they’ll be losing in the short term, and won’t war for marketshare just for the sake of gaining a larger share. They’re content to lose a little, confident 5th Edition attached to their suite of services will be enough to regain any lost ground. In the meantime, they’ll hedge bets that none of the latest devices will satisfy the NSeries faithful, and the ones that may will release too close the release of 5th Edition, giving more reason to await a high end Touch UI-enabled device.

This is a risky plan indeed. But Nokia knows if there are Nseries defections, it’ll be to comparable high end devices like the HTC Touch HD and Sony Ericsson Xperia X1, which aren’t very prevalent as of yet anyway except in web articles and reviews. I am willing to wager that the day the Touch HD and Xperia X1 released in the big markets, Nokia will begin leaking info on its next touchscreen flagship Nseries device. And the biggest threat and open source compatriot, Android, has yet to grace any high end equipment so far. And the N95’s hallowed reputation, and the N96 positioning as its upgrade, are enough to persuade new buyers to experience all the things they’ve heard about flagship Nseries devices.

They’d love to have beaten Android to market with its 5th Edition OS, but it always pays to see the competitor’s hand before making a play. Plus, they can allow¬† Android to educate the consumer on relatively new terms like open source, DRM, multitasking, unlocked, and other things they’ll use as selling points. These same benefits of Android will apply to the future Symbian Foundation OS, and they won’t have to waste the dollars on consumer education, instead saving to heavily market 5th Edition and their Touch UI and Maemo 5 devices.

Also, they’ve gotten a good look at everyone’s next generation interface, including venerable Android. Most of Android’s wow factor was its clear and concise interface. Having the opportunity to compare notes and make adjustments will ensure they’re more prepared to take on Android, Apple, and others with the best UI possible. I had initial doubts about the interface, but seeing Android’s interface actually gives me new confidence. Android’s interface design is implemented by The Astonishing Tribe, or TAT, using their Kastor Engine technology. TAT is the same firm helping Nokia develop the 5th Edition interface from the ground up, so expectations are even higher.

This falls into my theory on Nokia’s plan for world domination. Nokia just wants to make it to 2012, when 4G will be more prevalent. Then, the mobile carriers will probably cease to exist as they do today, becoming more of an infrastructure provider, or what the telecom industry calls a “dumb pipe”. I foresee the carriers will either becoming vendors or buyers of the IM/VOIP providers like Skype, Fring, Palringo, and Gizmo, or provide ad subsidized voice network access to compete. Tariffed voice networks will become superfluous, as faster networks, the prevalence of netbooks and UMPC’s, and the advent of advertising channels on our devices, VOIP will become a more common low cost or free alternative for voice communications.

I believe this is why Nokia was diplomatic in its dealings with developers, removing the integrated VOIP application from its latest devices. The next generation OS will allow developers to create more compelling application UI’s, including those with a VOIP component. Nokia knows the best app interfaces spur adoption rates, not only for the app and service, but the OS upon which it works and looks best. And Nokia’s own suite of services will be attached to two open source platforms, Symbian and Maemo. Nokia may one day even create its own VOIP application and service in the future to becoming totally independent of the carriers, a position they’ve seemed more than willing to take lately, learning that operator exclusives slow sales and usually only benefit the carriers.

Of course, nothing’s guaranteed. Nokia could fall on its face and fail miserably. Android could be what the iPhone could’ve been, and adoption could go through the roof. But Nokia wouldn’t take these type of risks without having supreme confidence, which they should. They’ve only been the mobile technology leader for the past four years. Nokia obviously have a captivating trick up its sleeve. Will it be enough to entertain the crowd? We’ll know more in the coming half.

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By , Senior International Correspondent on Sep 29th, 2008 GMT +2

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