After three lean years in the fattest part of the wireless industry,
is finally ready to make up for lost time.
On Wednesday, the Finnish cellphone giant laid out plans to accelerate its long-awaited catch-up efforts in the booming CDMA, or code division multiple access, wireless phone market now dominated by
and its allies. Nokia said at an analyst meeting in New York that it would roll out as many as 12 new CDMA phones by the end of 2004.
Nokia has completed 60% of its retooled CDMA strategy and by next year the company will be fully on track, said Soren Petersen, chief of Nokia's CDMA phone unit. Peterson also told analysts that the company will offer a broad line of CDMA handsets including mega-pixel camera phones and "non mono-block" units -- the folding phones the company has previously shied away from. On Wednesday, Nokia surged 66 cents to $17.74.
Cracking the CDMA market has ranked among the handset giant's greatest challenges, and most bitter failures, in recent years. While Nokia is the leader by far in worldwide handset market share, at around 38%, it has achieved that dominance almost entirely in the European-based standard global service for mobile, or GSM, market.
And after spending 12 years and more than $1 billion on CDMA development, Nokia has had little to show for its efforts. In fact, the company's last bold entry into the market, in 1999, saw Nokia fall flat on its face as its new phones turned out to be defective. Nokia CDMA phones then all but vanished from the market until this year.
"In a perfect world, we wouldn't have those years," said Petersen, a gruff Dane who didn't try to dismiss the impact of the company's CDMA failure and the tarnish it put on Nokia's otherwise shiny image. The defect, according to Petersen, wasn't in the chipset or the software, as many had believed -- it was simply the phones' weak antenna reception, says Petersen.
It seems those problems may be behind Nokia. Last month, the company said it had doubled its CDMA market share from year-ago levels, to 15%. Much of that growth has come in China, India and North America. But investors haven't seen this as entirely great news. What Nokia gains in CDMA sales and market share, it loses in margins and average phone prices, given the prices and costs associated with the current crop of CDMA units.
Though this year has been a relative success for Petersen and his CDMA team, the company failed to get its camera phone accepted by
in time for the holiday buying season.
Verizon Wireless is a critical win for any CDMA phone maker. Not only is it the nation's largest cellphone service, but it also subjects phones to a notoriously long and stringent testing period. Though the rigorous tests are important, insiders say Verizon is also known to rotate its favorite phone suppliers, which at the moment appears to be Korean electronics giant
Nokia has long faced a culture clash of sorts. In recent years, CDMA users have taken a liking to folding or "clamshell" phones. Nokia has only recently softened its stance on phone architecture to incorporate foldup phones and pop-open keyboards.
And then there's the matter of antennas. Nokia has stubbornly stuck with stubs and internal antennas, while notably Verizon has typically insisted that all its phones have pullout antennas. However, Nokia did manage to get an internal antenna phone accepted and available with Verizon last month.
Beyond handsets, Nokia officials at the New York conference dispelled
rumors that the company was about to buy
, a London PDA operating system developer that it has a large stake in. Petersen did say that some of the 2004 phones will incorporate Psion's Symbian system.
On CDMA patents, Petersen said there were no current problems with the royalty payments Nokia makes to Qualcomm, but added that it was highly unlikely that Qualcomm will be able to maintain its current royalty stream. Qualcomm gets a
cut of the revenue on all CDMA handset sales and controls about 90% of the CDMA chip market.
But the company can't expect to keep high royalties, said Petersen. "It kills the business over years -- the model is just too expensive," he said.
Neither Nokia nor Qualcomm has commented on the terms of their patent licensing deals. But Qualcomm has said that it has prevailed in previous challenges to its intellectual property claims, namely in wins against
over the past several years.
Qualcomm is currently in court
over patent rights.