Monthly Archive for October, 2008

Apple Q3 08 powered by the iPhone

Published on October 24, 2008 in Vendors. 1 Comment Tags: , , , , , .

Apple delivered thumping fiscal 4th quarter results earlier this week with the iPhone providing most of the excitement.

Overall the company posted revenues of $7.9bn, up 27% over the year. Net profit came in at $1.14bn which is growth of 26%.

Within the total figure, Mac sales disappointed the market with volume growth of 21% to 2.61m. iPod sales were closer to expectations at 11.05m, a rise of 8% by volume over the year. Revenue growth was 17% and 3% respectively.

But the iPhone stormed in with shipments of 6.892m in the quarter, beating the volumes from the entire iPhone’s life in a single quarter.  Sales from iPhone (and a small amount of Apple TV) were $4.6bn, although revenues taken are lower because Apple uses subscription accounting for the iPhone, spreading the revenue over an assumed 24 month life.

The company turned in $9.1bn of cash during the fiscal year and is now sitting on $25bn in cash.

In spite of this success Apple gave a very cautious outlook for the next quarter, describing October as a “foggy” month, with low visibility. Steve Jobs, CEO, in a rare appearance on an earnings call said “who knows what the future will be given the worldwide economic slowdown”.  However, he also said that Apple is “comfortable with its cash position” and sees the slowdown as an opportunity for companies with cash.

Analysis: It’s easy to dislike Apple for being the smuggest company in the world, but you have to respect performance like this.  Nonetheless Apple is already showing signs that economic conditions are having an effect.

Analysts had been expecting higher growth of Macs, based on performance in the previous few quarters. But the growth was higher than the overall PC market and – importantly – 50% of Macs sold went to people who had never owned a Mac before.  This means the band of Apple Faithful is growing strongly at this level, even if this is the area most likely to be hit by the recession.

With these iPhone numbers Apple has moved into 3rd place by revenue behind Nokia and Samsung.  It achieved this by having an average sale price (ASP) of $660 (compare with RIM’s $230).  It gleefully pointed out that it also overtook RIM on volumes. In doing this, Apple has benefited hugely from its existing channels, something RIM does not have to the same extent.

It’s clear that devices priced at this level are not for the mass market, and Apple pointed out that it needs to be careful “not to leave a price umbrella” that others can exploit.  This presumably means that we can expect both price reductions on existing products as economies of scale bring costs down, and new products at lower price points – the iPhone nano. This would allow Apple to address the much higher volumes that exist in the mid-range of the market. No details or timescales were given.

However, this is exactly where Nokia has put its 5800 and where others will be quick to follow.  Expect some serious fighting from Q1 next year.

So, what can we expect in the coming few quarters?

There is growing evidence that mobile telephony is becoming seen as an essential good, like rice and potatoes. This is increasingly true for broadband and, although it is much younger, mobile broadband. Essential goods suffer less in a recession.

There is also evidence that people continue to spend on feel-good items in a recession, at least for a while. Fashion stores in the UK are still doing ok, where other stores are suffering. As my friends over at UKHotviews pointed out a couple of days ago, sexy gadgets are feel-good items.

When you get a device that combines both of these virtues – and the iPhone is the defining example right now – it really should be more recession-proof than most things.

Taking this together with Apple’s continued international expansion of iPhone distribution, I expect a very strong calendar Q4 for the iPhone.

But the signs are that things will get tougher from then on:

  • The mobile phone market traditionally slows down some in Q1
  • Q1 is when Nokia’s 5800 hits major markets
  • I anticipate Nokia will launch an N-Series touch device before long – a big brother to the 5800
  • With the touch screen as part of S60 v5, Nokia is now in a position to launch a large number of touch devices across a variety of price points
  • I would also expect other vendors to launch sexy touch devices in the mid-range before long

When the iPhone launched it was clear that Apple had opened a new form-factor segment, and had done the mobile phone industry a large favour by doing that.  No-one yet knows how big this segment is, nor how to define it, so the longer term prospects are hard to assess.

Apple gave some clues in the investors’ call that the iPhone could be its first mobile internet device (MID), which suggests that there could also be room to take the iPhone further UP the range. But if it positions strongly on this, it may be harder to take the iPhone down the range.

By contrast, other vendors have started putting touch interfaces and accelerometers into otherwise traditional phones to give them a more tactile user interface (Sony Ericsson C902, G700, Samsung Soul, Nokia 8800 Arte). One operator I spoke to even reckoned that touch-screen devices will make up 70% of their portfolio in 12 months time.

If this works out, then the prospects for iPhone nano should be healthy.

But it’s not a given.  Many people are still critical of the iPhone as a phone, and anecdotal evidece suggests that many iPhone users also carry their old mobile phone and use it for their voice calls.

There’s little evidence yet that a tactile UI adds a lot of value to traditional phones and it remains to be seen whether it is a valid direction. We should expect lots of experimentation and plenty of fierce competition in this area over the coming year before we really know the answer.

Life’s not so good for LG as it slips back into 5th place

Published on October 22, 2008 in Vendors. 3 Comments Tags: .

LG Electronics reported sales ahead of expectations earlier this week, but net profits hit by currency effects.

Overall the company grew its top line by 21% over the year to KRW 6.89 trn – ahead of forecasts. This was driven by strong sales growth of mobile phones, displays and appliances.  But net income dropped 93%  to KRW 24.9 bn from Won 339.2 bn a year ago because of currency fluctuations in the Korean Won.

In mobile phones LG shipped 23.1m devices, up 5% over the year, but importantly down 17% from Q2.

The average sale price of LG devices rose in Q3 from $133 to $143. This took revenues to KRW 3.514 bn, a rise of 41% over the year, but a fall of 6.5% on Q2.

The operating margin on phones improved over the year to 11.5%, but this was down from 14.4% in Q2.

In its outlook the company said it is expecting the overall market to show seasonal growth of shipments in Q4 and that it is expecting to hit its own target of 100m devices for 2008.  It also said that it is doing more risk management because of economic uncertainties – notably pricing reviews and tighter inventory control.

Analysis: Although there is some growth in LG’s mobile phone shipments over the year, these results represent a worrying loss of momentum.

LG has for the last 5 years seen shipments grow in each Q3, but this year it slips it back into 5th place behind Sony Ericsson.  It blamed slower sales in India and other emerging markets where its low-end portfolio needs refreshing, plus partial shipments in Korea and Europe because of subsidy changes and economic conditions respectively.

Offsetting these effects are healthy sales of its top-end phones, where it has made a strong push into the touch-screen space and is seeing good sales of its Viewty, Secret and Qwerty devices especially in the US.

The N.American market was the highlight of these results, with shipments growing almost 10% over the quarter. The big decline was in MEA and CIS regions where shipments fell by a very uncomfortable 50% in the quarter. Part of the reason given for this was inadequate marketing.

LG says that, in response to global economic conditions, it is changing its strategy for the lower-end and will aim to ship half its phones into emerging markets by introducing phones priced from $100-150. The company also said it will settle for single-digit margins on these.

The rise in average sale price (ASP) was because of the changing product mix towards the high end and it bucks the overall market trend.

LG’s operating margin (11.5%) is one of the healthiest in the top 5 vendors. But so it should be with such a high-end product mix. Where it is falling down here is in not getting good economies of scale – Nokia (which does get them) has an operating margin of over 18%.

So LG faces something of a dilemma. Should it stick with the high end and leave itself very exposed to the economic conditions; or would it be better to invest more heavily in emerging markets, with a view to building market share back up and gaining much better economies of scale?

In order to compete effectively in emerging markets, LG needs truly awesome performance on product portfolio, brand, distribution, marketing as well as software and hardware platforms (currently in development for availability during Q2 09).

Building those up to be somewhat better than they were earlier this year will require major investment and spending, which means that its margins must suffer in the short term.

This is a shift in strategy rather than a U-turn.  But pursuing it shift in strategy as the world (probably) heads into recession is risky stuff.  Clearly LG is pessimistic enough about the economy, and about its ability to produce true hit models in developed markets, that it feels it has no choice.

Sony Ericsson stops the rot

Published on October 17, 2008 in Vendors. 1 Comment Tags: , , .

Sony Ericsson’s Q3 results today surprised the market by being better than people had feared. And, most encouragingly the company stuck to its outlook for the overall market growth this year but took trouble to acknowledge that the climate is uncertain.

Shipments for the quarter were 25.7m, flat over the year, but up 5% from Q2.

The average sale price (ASP) fell from €120 a year ago to €109, so net sales were €2.81bn compared to €3.11bn a year ago and €2.82bn in Q2.

Gross margin was down slightly from earlier this year, at 22%, but the operating margin (excluding exceptionals) stabilised at 0%.

The company took a restructuring charge of €35m which meant that net income was -€25m for the quarter.

President Dick Komiyama described the quarter as “challenging, as we expected” but said Sony Ericsson has acted quickly to stabilise the business and rationalise the portfolio. Together with new phones that have recently begun shipping, like the Xperia X1, he said Sony Ericsson is starting to be much better placed to compete although the full impact will not be felt until the end of H109 when the restructuring programme is complete.

Analysis: Sony Ericsson has stopped the downward slide and is starting to come out of a difficult period – its “RAZR moment”. A lot of this has to do with the refreshed portfolio, which has some good devices, and the rest comes from a quick response on restructuring.

For the first part of this year Sony Ericsson was over dependent on a couple of old hit models, notably the  K800 and some of the Walkman devices. Subsequent launches had not brought devices that sold as well.

During this year, though, the company has launched a large number of new phones, some of which are gaining high acceptance in the market – notably the C902 Cybershot. The flagship Xperia X1started shipping right at the end of Q3, so did not make a material contribution to Q3 revenues. But it has been well received and looks to be a winner.

Having said that, many in the media are investing too much hope in the X1.  It is not a mass market phone and, although the price (and hopefully profit) will be high, Sony Ericsson also needs phones that sell well in what Nokia calls “the Golden Middle”.

In Q3 Sony Ericsson has followed Nokia into the All-You-Can-Eat music business with the launch of its PlayNow Plus service that will come with the W902 Walkman phone. No-one knows how popular these services will be yet, so it’s too early to assess the likely impact.

The ASP decline was on trend and still leaves Sony Ericsson with the highest € ASP of the top 5 vendors. During the quarter, without a really strong top-end phone in the market, the mix of phones sold shifted towards the lower end. There were also currency effects helping to push ASP down. As the X1 ramps up we may see this rise during Q4.

The decline in Gross Margin was due to the twin factors of price pressure in the market, and inflation on component costs.  According to Sony Ericsson (and this differs from Nokia’s view yesterday), the general component cost trend is still down but some specific components have become more expensive and this is set to continue into Q4.

With the investment in the new portfolio, Sony Ericsson has seen substantial increases in R&D and – to a lesser extent – in sales and marketing costs. These held its operating margin down.

The restructuring programme is substantial, affecting the product portfolio, the structure of the company and the way it deals with its supply chain.  Overall this will save €300m per year but the full effects will not kick in until the end of Q2 2009.

One key aspect of the restructuring is a review of its operations in Japan.  The Japanese handset market is shrinking in volume and value, so it a tough place to be.  Sony Ericsson said it has re-focused the efforts of its Japanese engineers so that they can help to get some of the key technologies in Japan out into phones for the rest of the world. Contrary to some of the rumours, it said it has no plan to exit the Japanese market.

So Sony Ericsson has made a lot of change internally to address the issues it had and to fit the business to the current market.  The big question now is about the market outlook and whether there is enough  business to help it back to good health.

Sony Ericsson still expects the overall market to show 10% growth in 2008. But it also said that consumer confidence has suffered and this will have an impact – we should not expect normal seasonality for Q4 this time around.

It is being very cautious in its planning assumptions, reckoning on a longer period before the economic conditions are stable and a slow recovery of consumer confidence.

With zero operating margin Sony Ericsson is still in a precarious position and it is right not to do what Motorola did last year and bet on a substantial recovery in volumes.  Any adventurous views in this market would just be dangerous.

Nokia Q3 ’08: “we’re a safer bet”

Published on October 16, 2008 in Vendors. Closed Tags: , .

Nokia’s Q3 2008 results today were slightly below expectations, but it pleased the market with positive messages on its outlook.

The company saw net sales of €12.24bn, down 7% over the year. Operating profit fell 21% with net income down 30% from €1.56bn to €1.09bn.

Nokia shipped 117.8m devices, up 5% over the year but down 3% on Q3 – Nokia’s first sequential dip in Q3 for 5 years.

Nokia estimates that the overall device market was 310m with its share at 38%,  down from 40% in Q2 as it had warned. It blamed this on aggressive pricing by other vendors (people are assuming Samsung in China and Europe).

The average sale price dropped slightly from €74 in Q2 to €72, mostly because of changes in the portfolio.  Over the year the decline was larger, with about half of that caused by currency effects.

The services business fell slightly with revenue of €115m from €119m in Q2. Navigation dominates Nokia’s services with 50% of phones shipped now containing GPS and 70% of those having a Navigation trial bundled in with the purchase.

The Devices and Services division’s operating margin fell slightly from 21.2% to 18.6% over the year, however this is an improvement on Q2 (17.2%).

The results also show Navteq broken out, now that the acquisition has closed. Revenue was €156m, with an operating loss of €80m thanks to a goodwill write-down of €109m.

Nokia Siemens Networks lifted its performance, with revenue down 5% over the year to €3.5bn, but operating margin improving to 0%.

Olli-Pekka Kallasvuo, CEO, said that Nokia expects Q4 handset volumes to rise, delivering overall market volume of 1.26bn for the year (just over 10% growth) and that Nokia should hold or lift its market share in Q4.

He and Rick Simonson, CFO, went to some lengths to explain that they have an 80-90% variable cost business and, while the outlook for 2009 is highly uncertain, Nokia is better placed than its competitors and could even benefit competitively from current market conditions.

Analysis: The bulk of the interest is on the handset market here, being 70% of the business. And the volume decline drives everything.

Looking at what would have happened (using market and market share trends from the last couple of years) shows that the market was down about 10m units on the trend and Nokia was down about 20m.

Some rough calculations show that 30% (6m) was due to losing share in the smartphone segment and 20% (4m) was because of market conditions getting worse. So the other half of the Nokia’s deficit (10m) was thanks to competitor pricing and other factors.

Nokia was very clear that current price aggression is not sustainable, “economic gravity will apply to those players over time”. Samsung’s margins have been healthy this year, but need watching.

In the smartphone market it’s easy to assume that the iPhone has been destructive for Nokia.  However industry discussions suggest the iPhone has mostly been additive to the growth of smartphones, and that Nokia’s share loss has been taken by Samsung, LG, RIM and HTC.

In Nokia’s phones, a smartphone is anything with Series 60 software inside, which spans the N-Series, E-series and a number of other phones in the 6000 and 5000 ranges. When you look at the best selling Nokia devices in Q3 it’s amazing how few of them have launched this year – most were from 2007 (or before).

Nokia’s worst region in Q3 was Europe where its lack of a touch screen smartphone hurt. Its European volumes were flat from Q2 although the market grew 8%.

Nokia has only recently started to refresh its mainstream S60 portfolio (because of delays) and the benefits will now start to feed through in the Q4 numbers.

It’s a relief that 80% of Nokia’s volume shortfall was down to competitor moves or internal issues, with only 20% caused by market conditions getting worse.

Although it’s a business with a very high degree of variable costs, Nokia didn’t scale its costs back to match the reduced revenues this time. Much of this was because of additional R&D, sales and marketing costs associated with Navteq. The other major factor was inventories rising in handsets and networks, gearing up for the seasonally larger Q4.

The decline in services is mostly because of the recent decision to discontinue some of the enterprise services. Nokia was at pains to point out that:

  • The growth areas are all about consumer services – the bit they are keeping
  • Revenue recognition is slower in services. Billings were up 15% from Q2, but the revenue is deferred and taken over the life of the subscription.

In trying to weigh up the outlook, Nokia made a key point that rising commodity and energy prices hit people harder if they have lower disposable income.  Now that commodity and energy prices are falling again, the industry should have more favourable conditions in the emerging markets going into 2009.

And is Nokia really better placed to ride out whatever the market might throw at the industry?

Yes, it is.  Why?

Scale advantages, flexible financial structure, industry-leading margins, portfolio strength across the segments and brand strength especially in most regions. Nokia believes it will be a preferred partner for many of its customers if there is a “flight to quality” and it’s hard to argue.

Where Nokia is most vulnerable is in the smartphone segment. The once all-conquering N-Series isn’t the powerhouse of profit and growth that it was last year.  A lot depends on success for touch-screen 5800 and its (hopefully soon-to-be-announced) big sisters.

Android devices will need better support for the way people use their media and content

Published on October 13, 2008 in Operators and Vendors. 2 Comments Tags: , , , , .

A recent T-Mobile analyst event brought the opportunity to test out an HTC G1.  The phone and its UI have had plenty of coverage already, but there has been less coverage of the fit between the device, the software, its target market, the use cases that exist and whether the open source model is up to plugging the gaps.

T-Mobile were clear that the G1 is aimed at younger people who do a lot of social networking.

For them good internet working is paramount and the device delivers well on this, preloaded with relevant Google applications, and with the promise of many more from other sources through Android Market.

The difficulty is that younger people who do a lot of social networking also tend to have large media collections on their PC at home.  And the device is weak on inter-working with content on your PC.

For example the G1 will, (of course) play music and videos and it will store and show photos. It will up- and download those from the web nicely.  But, for the content on your home PC, you have to treat the device just like a memory stick – copying files across from the PC to the phone.  There is no PC software for media management, nor for synchronisation with PIM software such as Outlook.

Most people have a lot of media on their PC and it’s not always stored in a neat and tidy way. So they will experience problems with directory structure complexity, DRM, playlists and media metadata incompatibilities, as well as having to recreate all their contacts, calendar entries etc from scratch.

In this sense the G1 is more like the Nokia N810 than a regular mobile phone. The N810 is the 3rd iteration of an experimental product line, unashamedly aimed at people who live their life in the web.  There’s some of that positioning with the G1, but I have the sense that Google and HTC would like it to sell as a mainstream phone to large segments of the population.

The stock response to the weakness is:- this is the first Android device, the software is open source, the developer community will address these issues over time.

I’m not convinced for two reasons.

First, the G1 breaks an established principle (in developed countries) that the mobile device, the PC and the web should form a mutually reinforcing triangle supporting complex media use cases. All the existing vendors approach it this way, with Apple probably having the tightest integration to date.

If anything this triangle is becoming more important and complex as developed world households accumulate ever more media and start moving to media servers, streamers and network attached storage.

Anyone who ignores the triangle is generally asking for trouble.

Second, having seen it first hand with the N810, the developer community may not plug the gaps. The open source community with the N810 has produced some excellent software but it’s most commonly “a simple task manager” or “a straightforward note-taking program”. Very few have tackled large, architectural projects across the PC and the device and – to date – there’s nothing for synchronising with Outlook and there’s no PC-based media manager.

In the case of the N810, you could argue that it has hit its target market beautifully and – being web dwellers – why on earth would they want anything that links them better to old-world paradigms such as Outlook.

Google may argue something similar. By offering services such as web-based contacts backup and Google Calendar, they are providing equivalent functionality, encouraging more people to embrace the web-lifestyle and leave things like Outlook behind.

If so, I expect the G1 to attract a loyal, but small, following and not enough developers to take Android quickly into a large market.

I think it would be cleverer for Google to ensure that there is support with Android for some of the more complex use cases and to make it easier for people to work with their existing content.  Google doesn’t have to do all this itself – it could make key tools available within Android and encourage the device vendors to produce versions of their media management and PC Suite software for Android.

T-Mobile announces a new option in the battle to connect the laptop

Published on October 7, 2008 in Operators. Closed Tags: , , , , , .

Last week, at an analyst event, T-Mobile UK showed off its new Mobile Broadband Share Dock – a wireless router that connects to the internet over an HSDPA USB modem at up to 7.2 Mbits / second and allows a number of laptops to share a single mobile broadband connection

It’s a small device that’s designed to be visible and not look too techy (unlike most routers). It only works with the T-Mobile USB modem plugged into it.

T-Mobile said that the service would be priced at £20 per month with an 18 month contract, with the USB modem included for free.

The whole area of connecting the laptop over mobile broadband networks is rapidly becoming huge – witness the recent GSMA initiative in which 16 companies will collectively spend $1bn in the coming year promoting mobile broadband. Now that mobile networks finally provide a true broadband experience, suppliers are rightly and quickly embracing the opportunity to add a whole new (and large) class of subscriptions without cannibalising the existing installed base.

3G / WiFi routers are not completely new and have been sold in other countries, such as New Zealand and UAE. But this is a very consumer-friendly version.

I challenged T-Mobile on two points:

  • Whether this product serves anything more than a very small niche.
  • Whether the pricing is sustainable, given that it’s 25-30% higher than fixed broadband, which appears to  compete with the Shared Dock.

The discussion was enlightening, and entirely based on who this is aimed at.

Of course this appeals to mobile workers, especially teams of them.  These occur in professional services with accountants, consultants, bankers.  Useful too for journalists, some in healthcare, police for incidents, some types of maintenance. Also very good for events, such as the Mobile World Congress.

Given the current focus on losing sensitive data, it would be well worthwhile for a number of these teams to have broadband access into a corporate system, rather than carrying memory sticks and data CDs. However, these are hard to reach in marketing terms.

On the consumer side the main target group is people renting their property.  Interestingly, T-Mobile pointed out that student loans plus soaring house prices mean that this target group has recently expanded  rapidly in many countries to encompass large numbers of people aged between 18 and 35. They have now become a significant proportion of the population.

For them, the fixed broadband providers are often unhelpful, slow to respond and difficult to deal with. By contrast this product is available in the shop, is activated very quickly, requires no installation visit (book a day in 2 weeks time, then take a day’s holiday) and works out of the box. Nice.

Unlike wireless broadband chips embedded in laptops, this also separates the laptop purchase from the service selection. This will suit a lot of buyers.

Of course there are a few potential downsides, though they apply to all cellular solutions not just this product.  In-building coverage is a weakness for many high speed 3G networks resulting in slow service or no coverage in some areas. The quality of the service will depend on who else is using the cell (contention is also an issue on fixed broadband). People generally have higher consumption when using a PC in fixed mode – more streaming and downloading – so T-Mobile will need to ensure that the fair use cap fits the usage. Also, if the connection is shared it will be difficult for one member of the household to take the USB Modem with them when they travel.

Overall T-Mobile have thought this through carefully and – if they market it correctly – they could have a good popular product here.

Nokia Series 60 touch user interface – frustrating after waiting so long

Published on October 3, 2008 in Vendors. Closed Tags: , , , .

Half an hour spent with the 5800 yesterday is not enough to form a fully considered view of the new touch user interface (UI), but it’s useful to log some first thoughts.

In the first briefings about Nokia’s touch UI nearly a year ago, Nokia made clear that it would be a touch UI incorporated into the S60 software platform, supporting existing product forms and applications, rather than a whole new UI from Nokia.

And that raised a concern.

Today’s S60 UI depends heavily on the three context buttons above the keypad on the phone and – given the sheer amount that S60 can accomplish – the result is now too much for those buttons and the whole thing is too complicated.

The great opportunity with a touch screen is to increase the bandwidth of the UI because you have more space on the screen and can put more controls on it.

But, if the touch UI also has to be compatible with devices that only have the three context buttons, it has the same constraints as S60 has now. This takes away much of the benefit that could be realised.

So what is the UI like in practice? It’s a good start, but it needs to develop.

On the positive side …

Nokia has tried hard to open up the UI and introduce some innovation.  Various areas of the S60 home screen are active – for example touching the clock opens up the clock app.

Nokia also now describes it as a “Human Interface”, rather than a user interface because of two new introductions:

First is an external touch button that loads a media and internet shortcut bar wherever you are in the menu system.  A useful addition.

Second is an option for the home screen that allows you to have your 4 favourite contacts always on the home screen as tabs, with a mini history of your communication with them, and an option to add 2 RSS feeds for each to keep up with what they’re doing on various social networks, blogs etc.

Nokia has an impressive list of touch input options with finger, stylus and a plectrum (music, eh?).  These come with haptic feedback and can be applied to an on-screen phone keypad, landscape qwerty keypad, portrait qwerty keypad (left or right-hand optimised) and handwriting recognition – all covering 60 languages.  Given that it’s S60 we should also add speech to text as a possibility.

Nokia has put a lot of effort into helping developers port their software across to the UI. An application that uses all the S60 controls correctly should port across easily.  But apparently roughly 50% of applications use hard-coding of the buttons and other parameters, so may not work correctly when ported.  To address this Nokia is releasing a software tool that crawls over the code and advises developers of areas that need to be fixed for compatibility.

On the not so positive side …

The screen uses resistive touch, rather than the capacitive touch of the iPhone.  The benefit of this technical difference is that it can work either with fingers or with a stylus – important in some markets. The drawback is that you have to press a bit harder and the whole thing feels more clunky and less sleek than the iPhone.

Apple has set the expectations here and, although you can get used to the Nokia UI, I think many people will be put off by their first experience with it.

The new approach with the 4 favourite contacts on the home screen is an interesting step forward, but – after a moments’ thought – you ask why didn’t Nokia do this for the whole contacts book and give users the option to have as many favourite contacts as they want?  The answer will be “according to our research people in the mass market on average only use 4 main contacts”.

Designing for the average is dangerous.  It is the reason why British trains don’t work when it snows, and are horribly uncomfortable when it’s hotter than 20˚. I believe this design approach is not good enough for mass-market software. It exists in quite a lot of Nokia’s software thinking and it alienates power users.

As far as I could tell the UI is not designed around the Coverflow approach of flipping quickly through photos, menu screens, album covers, web pages etc.  That approach is gaining currency as a way of presenting material across various platforms including (of course) the iPhone, plus AT&T’s Pogo browser, the Firefox add-in, PicLens, and the SearchMe visual search engine. It was starting to appear in S60 too, with the browser, the carousel menus and the gallery. Because of the iPhone, this will be one of the first things people try to do with the Nokia touch UI and they will wonder why it does not work.

It also does not support the kinetic scrolling for lists that is popular on the iPhone (and exists in some applications on the Nokia N810). Instead you use the scroll bars on the side of the screen, with the result that your finger moves down while the items on the screen move up

The UI is inconsistent.  Scrolling in menu lists is different from the way you move around web pages or maps, where you drag the picture by putting your finger on it. Some controls use single tap, others use double-tap.

In the browser it is much harder than it should be to move around the page. And it’s too easy accidentally to touch the permanently enabled zoom button, resulting in effects you really were not expecting.

Nokia has not used the bandwidth of the touch UI enough. For example, in the clock application there are large free areas where they could have put touch buttons for setting the alarm, the city and “Done”.  Instead, it has just put touch versions of the phone buttons, leaving the usage and the menus more complicated than they need to be.

Overall

There are some good innovations in the new S60 UI and, because of the proposition around the 5800 device, I expect it will ship in large volumes.

But there are a number of areas where the UI is deficient and hobbled by the need to be compatible with other form factors using the S60 platform. You can hear the crowing comments from the Apple faithful already.

I am happy to acknowledge that I haven’t spent enough time with it, and may not even have used the finished version. I’m happy to be talked through some of the areas I may not have understood fully.

But I really hope Nokia is listening carefully to the world’s feedback and can produce updates quickly.

Nokia launches the 5800 and gives Apple a headache

Published on October 3, 2008 in Vendors. Closed Tags: , , .

In a big glitzy event in London yesterday Nokia launched the 5800 Xpress Music phone, together with it’s unlimited music offer Comes With Music.

Nokia is positioning it as the big brother of the 5310, which they say is the best selling music device in the world (having shipped 10m of them). In doing that, Nokia is trying hard to avoid direct comparisons with the iPhone, but that is just not possible given that it’s also their first touch UI phone.

The main areas Nokia was looking to improve were: audio quality especially on loudspeaker use, ease of use on side-loading, playback times and storage capacity.

The resulting device comes with a hugely impressive spec for the price of €279 unsubsidised. Some key features will give the iPhone a hard time – notably the multi-tasking so that you can play music while texting your friends, the video record and playback facilities, plus the volume and quality of sound from the loudspeakers.  Oh, and the price.

Nokia is also keen to emphasise that it now offers a truly competitive all-round music experience with the release of its new Nokia Music Manager PC software, the much wider availability of the Nokia Music Store and the roll-out of the unlimited music service Comes With Music.

The new PC software is a big improvement on the previous version, though it is attracting criticism from some power users for being too simple on its playlist functionality. It is especially good for loading music onto your device and is also tightly integrated with the Nokia Music Store bringing some interesting features around recommendations.

The positioning of the event was around playlists and how old music concepts such as “Album” and even “Song” need to be questioned in the new digital music age. To reinforce this, Will.i.am from the Black Eyed Peas helped out, talking about some of the work he’s done in making music less linear and more interactive.

To make this positioning stick Nokia really needs to be out at the front in terms of how we use music. While it has made big steps forwards in this area, I think it is now competitive in the mass market but is not yet pleasing the more pioneering power users. For example Apple’s new iTunes 8 playlist functionals are very interesting and somewhat beyond what Nokia offers today.

Weirdly for a London launch Nokia announced that the 5800 will be available first in Russia, Spain, UAE, India, Taiwan, Hong Kong, Indonesia in Q4 08, then in other markets during Q1 09. This choice is for “commercial reasons”, and is probably driven by roll-out of the Nokia Music Store, plus operator acceptance of the Comes With Music offer (currently zero acceptance in UK).

Unless there is large-scale rejection of the new touch screen user interface, this will be a big selling phone and it is a clever move by Nokia in positioning for competition with Apple.

You would expect one of Apple’s key next steps would be to address a wider market by offering a variety of price points – i.e. bring the iPhone down the range as it did with the iPod Nano.

But any device that competes head on with the 5800 will need to outperform the current iPhone 3G, and at a lower price point. So Nokia has boxed Apple in, making it difficult for Apple to reach a mass market without cannibalising sales of its existing product. One to watch.