Nokia and Palm’s Dilemma

Nokia’s Story

Nokia faced the same problem as palm, however it was in a different proportion. Nokia was extremely weak from day one in the US, with no more than 20% marketshare in the country at its peak. With the advent of the iPhone and a refreshed RIM Nokia’s American marketshare plunged from 20% to 5% in less than two years, literally erasing them from America. Apple also made some inroads in Europe mostly in Britain and France where it sold a few million devices. Nokia was also facing pressure with a growing base of dissatisfied customers and an ailing joint venture with the German company Siemens electronics. By the end of 2008 Nokia’s smartphone marketshare slumped from a high of 65% in 2006 to 35%, a loss of thirty percentile points. In 2009 Nokia faced increasing financial pressure and had a deficit of over 800 million euros in Q3 2009, mainly due to the joint venture with Siemens. The Finnish company, faced with increasing pressure did what Finns are known for since world war 2, they held the line and defended it.

Nokia and Palm compared

The main factor preventing a collapse of the Finnish giant was not just endurance but its sheer size. Nokia was several times larger than Palm in terms of revenue, sheer userbase size and brand. In 2009 Nokia had a revenue of over 40 billion euros, seventy five times the size of Palm with  revenue of just us$732 million. Nokia also had the 5th most recognizable  brand name in the world and sells almost half of all phones sold worldwide. The sheer size of Nokia allowed them to take far more risks than Palm like the failed ngage 2.0 ,and buying a multi-billion dollar mapping company and just giving maps away for free. The revenue intake of Nokia and its stable financial situation allowed it to make far more sophisticated moves than Palm, who is limited by their small market value.

The apple iPhone has put Nokia under pressure and has almost eliminated Palm from the US

Palm dumped their traditional garnet palm operating system in favor of a new fresh OS called webos. Webos is based on a Linux kernel with an application layer composing of web technology(html, css, javascript). Palms new webos was viewed by many as the most revolutionary move since the original iPhone, with many praising the move as a recovery for palm. Despite reinventing themselves however, palms limited sphere of influence, compounded by their tiny revenue did not allow palm to do a take over of the smartphone industry as was predicted. Palms diminutive size meant that they could only try to compete in the saturated American smartphone market, rendering them unable to negotiate with foreign operators to back their new smartphone. Their only option was to stick with their longtime partner sprint, the 3rd largest network in the US. Sprints limited reach prevented them from making a big impact in the critical few months after launch, selling just 1.7 million devices by the end of 2009.

Verdict

To understand the problem faced by these two companies, you must take into account each unique characteristic that make them different. Both companies are under pressure, however the company’s size make quite of a difference here. Nokia’s size and global reach gave them the ability to negotiate quite well with operators worldwide, using their weight to push operators to agree on certain terms. Nokia’s financial situation also enables them to make quick and decisive blows to competition; take the free release of ovi maps as an example. These are things smaller companies such as palm are incapable of doing, palm can only stick to what it has got, which isn’t enough now or ever. A recovery would only come through partnering with a higher power, perhaps merging with another company with more influence than palm currently wields. Anything to be done should be done quite soon, Palm might not survive much longer.