Analyst Opinion – Intel and Nokia announced a strategic relationship this week, a relationship that would point to a cooperation targeting the development of next-generation communicatiosn devices. The smartphone space is defined by four product vendors and one processor – none of which are currently Intel or Nokia. ARM is the dominant processor technology that is supplied by companies like Marvell, which uses technology that has been picked up up from Intel and Qualcomm. What is the tactical and strategic outlook of this segment, in which only one thing is certain: Going forward, you’ll generally want a smartphone other than the one you actually have.
From a tactical standpoint, this cooperationshould open doors for Intel with cell phone OEMs. Intel needs to create the impression of a growing feeding frenzy for their new Atom based cellphone processor. Companies don’t like to change technologies, regardless of the benefits. Changes represent risk and there is little in the way of margins in this segment, so mistakes can be incredibly painful for a cellphone company. In general, they practice the “better the devil you know than the one you don’t philosophy” which works against a challenging vendor like Intel. Conceivably, this was a good tactical move for Intel to gain mindshare and then use that to drive future sales.
For Nokia, the tactics of this aren’t as beneficial or clear. Nokia needs to sell current products and this relationship suggests there may be better ones coming shortly, which will obsolete what is already in the market. Developers on their Symbian platform may see this as a signal that Nokia is planning to abandon it. But Nokia has little mindshare in the smartphone space and they may be bleeding Symbian developers anyway. It puts Nokia in the news, however, it could also hurt current sales, creating a risky and potentially expensive tactical risk. There is also beginning speculation that they may not be working on a new Smartphone at all, but a Netbook of some kind, setting an expectation that might not be met.
This is weaker for Intel, because Nokia simply isn’t perceived as a major player in the smartphone space. To be successful, that would have to change. From a strategic standpoint, their relationship with Apple or a partnership with RIM, Palm, or Google would be vastly more powerful, because they are all seen as major players in the targeted segment today.
Strategically for Nokia, this is actually a little stronger, because it puts them in the news as a smartphone player and gives them a chance to start to rebuild an image as a leader in the smartphone segment. Getting people talking about Nokia is one of the first steps to building relevance back. This, coupled with a compelling device could allow them to get back into the game at some future point.
Smartphone wars are heating up
For the most part, this Intel/Nokia relationship won’t bear much fruit until 2010 and until then, the cellphone wars are heating up. Even with a marginal release, Apple beat their strongest challenger to date, the Palm Pre, by around 10x in the first three days of sales and only RIM is currently going toe to toe with Apple successfully, offsetting Apple’s more attractive device and service with better business focus, more carriers, and a much broader line of products. In a few weeks, Google’s Android platform will hit with a vengeance and is likely to stir up this market in a massive fashion. I’m actually hearing good things about the new Microsoft Windows Mobile 6.5 platform and related devices showing up later in the year.
Overall, there are simply too many platforms at the moment and this benefits the three vertically integrated vendors (Apple, RIM, Palm) greatl since they make for an easier and less risky choice. But this market will go through a consolidation phase shortly and it will be interesting to see who emerges from that.
In addition, there are a lot of rumors surround Palm being acquired with Dell listed as the most likely. This means that the only thing that is certain at the moment is that the smartphone segment will experience massive change going forward and that, regardless of the smartphone you buy. Within a year, there may be something in the market you’d rather have. Smartphone buyers, welcome to the wonderful world of high-tech!
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The opinions expressed in this commentary are solely those of the writer.