How important are smartphones for Nokia? The revenue growth of the non-smartphone unit responsible for low-end models was 1% last year. The revenue growth from the main smartphone division was 34%. Nokia has no sales growth without smartphones. That's why a fumbled platform transition of the N-series alone could be a major issue for the company this year. Nokia has probably gambled more than most investors realize by pushing the introduction of the next-generation display technology into the fourth quarter of 2008 or the first quarter of 2009.
It means the company is stuck with smartphones using the old QVGA display tech for the next couple of quarters -- even if consumers are growing tired of it. The new, jumbo-sized touch displays from Apple (AAPL - commentary - Cramer's Take), Samsung and LG are reshaping the high-end market perhaps faster than anyone anticipated in 2006, when Nokia's high-end strategy for 2008 was locked in. Samsung and LG continue debuting models with fancy touch displays, typically priced below Nokia models equipped with two-year-old QVGA screens. The Koreans use Qualcomm as their key W-CDMA chip vendor -- comparing TXN to QCOM is going to be particularly interesting after the Texas Instruments revenue and earnings warning.
Nokia is a fantastic company, with stellar management, uniquely powerful R&D and a production/distribution infrastructure that makes its rivals look three years out of date. But every three or four years, Nokia screws up a transition between major product platforms. That is the nature of the handset market -- it is so capricious that even the best of companies will have two or three blowups a decade. The previous ones were 2001 and 2004.
Hold on to your hats -- the 2008 picnic promised by many handset analysts may turn out to be a tad stormier than expected.
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