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Poor Nokia (NYSE: NOK ) . It was only about three years ago that the company felt the "smartphone wars" were done and over with. Its favored platform, Symbian, had left Microsoft's (Nasdaq: MSFT ) Windows Mobile and Palm's (Nasdaq: PALM ) Palm OS in the dust, and the Finnish giant must have figured that it could just deal with rival phone manufacturers -- who, of course, would mostly be Symbian licensees -- by using its historical strengths in manufacturing efficiency and mass-market phone design.
A stumbling smartphone business
Apple (Nasdaq: AAPL ) and Research In Motion (Nasdaq: RIMM ) clearly had other ideas. And even now, it's hard to say that Nokia has figured out how to properly respond to the giant monkey wrench these two firms threw into its best-laid smartphone plans. Nokia's attempts to slow down RIM's manic growth among enterprise users and messaging addicts, headlined by its E-Series Symbian smartphones and Nokia Email service, just lacked the punch delivered by the seamless hardware, software, and service integration delivered by RIM's Blackberry platform. And the less said about Nokia's attempts to counter the surging popularity of the iPhone with its N-series phones, the better.
What's especially unsettling about Nokia's smartphone stumbles is the attitude it's displayed as Apple and RIM steadily gained ground -- an attitude that's been equal parts dismissive and stubborn. When the iPhone was first announced, a Nokia exec infamously expressed skepticism about its potential as a mass-market device. It wasn't until December 2008 that the company released its first touchscreen N-series device, the N97. And it wasn't until last year that it realized that just maybe Symbian wasn't cutting it in the eyes of consumers as a rival to the iPhone, and announced its N900 phone based on the Maemo operating system, along with plans for a new version of Symbian to be released somewhere in 2010.
Yet even now, a slow-and-steady approach seems to be the order of the day for Nokia: The N900 is, by the company's own admission, not a mass-market device, and even the head of Nokia's mobile division said that the company won't fully catch up to Apple and RIM until 2011.
All the while, we can expect Apple and RIM to continue gobbling up market share, and create customer loyalty through their growing app bases. And with Google's Android also joining in on the action, and drawing the support of Symbian licensees such as Motorola (NYSE: MOT ) , Sony Ericsson, Samsung, and LG, the 3% annual smartphone unit share decline that Gartner believes Nokia saw in Q3 2009 -- a number that's probably higher in terms of revenue share -- could look like child's play compared with what's in store for 2010.
Turning to the courts
It's against this backdrop that Nokia's October 22nd patent lawsuit against Apple -- moves which Apple just returned in kind -- seems perfectly logical. Considering that Nokia has signed plenty of patent cross-licensing deals over the years with rival phone manufacturers, and that Apple apparently has no problem paying royalties to Qualcomm (Nasdaq: QCOM ) and Interdigital for their 3G patents, you'd figure that these two adversaries would work something out. But with Nokia desperate to do anything it can to slow down the iPhone's momentum, maybe it decided that the courtroom is a good option.
Of course, if Nokia was truly serious about slowing down Apple, the company wouldn't turn to the courts, but to a serious overhaul of its business strategy. It would follow Google's lead and try to quickly bring to market a variety of new Maemo devices, and it might also make a play for Palm, whose WebOS operating system would arguably gives its hardware a better chance of standing out. But Nokia has historically preferred to take a gradual approach to major platform changes, and it's long been wary of North American companies hawking proprietary wireless platforms -- just take a look at the company's historical battles with Qualcomm and Microsoft to see what I mean.
Hence the lawsuits, and hence a smartphone strategy that looks like it's based more on hopes and dreams than on market realities.