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How Does a Nokia Notebook Sound to You?

By John F. Jacobs, Director, Notebook Market Research

Telecom service providers around the world, and finally in the US, have jumped on the notion of subsidizing mini-note PCs (or netbooks as Intel would prefer to have them called, despite the lawsuit in progress between Psion and Intel over the use of the term). Thus far, most of the demand for these devices has come from regions outside the US, due in part to significantly less expensive data plans and better connectivity. A number of US brick-and-mortar retailers have been quite bearish on the market, while on-line retailers have had a fair amount of success with these products.

A few days ago, Nokia’s CEO, Olli-Pekka Kallasvuo, in an interview with Finnish national broadcaster YLE when asked if Nokia plans to make notebooks said, “We are looking very actively also at this opportunity. We don’t have to look even for five years from now to see that what we know as a cell phone and what we know as a PC are in many ways converging.  Today we have hundreds of millions of people who are having their first Internet experience on the phone. This is a good indication.”
Although I personally think the term convergence has been over-used, I must agree with him on his point that, at least in terms of internet access, more and more people are getting to the web through their phones. (DisplaySearch data details the transition from small (1.5”) to larger (3.5”) displays and from low resolution (ex. 176 × 144) to higher resolutions (ex. 640 × 480) in mobile phones and the rapidly growing popularity of smart phones.)

The first question that comes to mind is “What can Nokia add to the notebook market that the current hardware (Acer, Apple, Asus, Dell, HP, Lenovo, Sony, Toshiba, etc.) and software (Apple, Microsoft, Linux, and possibly Google) do not currently offer?”

I have read an opinion that Nokia could be successful in the notebook market because it would be able to take advantage of its existing large scale manufacturing operations, supply chain and distribution. This leads to my next question: “How many similarities are there between cell phone manufacturing and notebook manufacturing?” The answer is precious few. While Nokia still manufacturers quite a bit of their phones at their own factories, most notebook PC brands use contract manufacturers. The largest notebook contract manufacturers are Quanta, Compal, Wistron, Inventec and Pegatron. Only a very small number of notebook PC brands continue to operate their own manufacturing facilities, and with the exception of Panasonic, the percentage that in-house manufacturing accounts for is less than 10%. In the cell phone market, the largest contract manufacturers are Hon Hai/Foxconn, Flextronics, and Solectron.

The next piece of the puzzle is supply chain.  To my knowledge, no cell phones are using hard disk drives from Seagate, HGST, or optical drives from  LG Electronics, Pioneer, Samsung, Sony, etc., or many of the other components that are unique to notebooks (heat sinks, fans, etc.) Developing relationships with suppliers takes time. In the display industry, the leading notebook panel suppliers are AUO, LG Display, and Samsung. In the handset market the leading panel makers are Samsung SDI (now Samsung Mobile), followed by Wintek, Sharp, Epson and TPO. There is currently limited overlap between the leading suppliers of flat panels to the notebook market and those to the mobile handset market, though there is evidence that AUO, LG Display and Samsung are becoming more aggressive in gaining display market share in the handset space.

Nokia has a very well-known brand and could likely leverage that recognition to negotiate good supply agreements. However, they are still entering a very well-established market and will face challengers with far more expertise. All one has to do is study the challenges that Dell has had over the past several quarters as they began to place more emphasis on the retail segment.

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  • http://www.nokia.livtube.com/how-does-a-nokia-notebook-sound-to-you/ How Does a Nokia Notebook Sound to You? | Nokia Blog

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  • http://www.ruggedpcreview.com Conrad H. Blickenstorfer

    I think your assessment of how Nokia could possibly enter and prevail in this market given their current product lines, expertise, connection, channels, and relationships is very rational. On the surface, there is no good fit. And there are numerous examples of even leading companies failing to successfully crack new markets (witness HP with digital cameras, rugged notebooks, or phones), but there are also examples of ordinary companies with a better idea coming to dominate a market (like Flip Video). And sometimes weird things happen — how likely was it that a sleepy Finnish rubber company became the world’s leading cellphone maker? Between their magic sauce, enormous brand recognition, and a growing frustration with Microsoft, a clever, sleek, subsidized Nokia notebook/netbook product might just become a megahit. Imagine an always-connected US$199 Nokia netbook that combines the market-accepted netbook form factor with some sort of iPhone/Pre-style smoothness instead of an Atom platform valiantly trying to run Windows.

  • http://www.displaysearch.com John Jacobs

    Conrad,
    Hi! Hope all’s well. In regards to Flip Video, at first glance it seems their success is heavily reliant on price points. They are not trying to compete with more expensive and feature rich DVRs. Regarding Nokia, I believe they are losing market share in the smart phone segment. Not that long ago, that was a small subset of the mobile phone market. Now, it is probably the fastest growing segment, thanks in large part to the iPhone. Big uphill battle there.
    Growing frustrations with Microsoft? Old news. Vista is a mess, but all reports indicate the Win 7 is far, far better. (But, I’ll keep my Mac, thank you!)
    Could they do it? Sure. Successfully? Maybe. I wish them luck negotiating with multiple carriers, all of who generally want their own customized OS. And we have heard that return rates on non-XP mini-notes/netbooks have been as high as 65-70%. Mainstream users do not want the challenge of figuring out how to manage and sync multiple operating systems. Paradigm shifts happen, but they are rare.

  • http://compliantly.com/2009/06/12/nokia-actively-considers-notebooks/ Nokia actively considers notebooks | Compliantly

    [...] is seriously contemplating entering the notebook market, according to research firm DisplaySearch. A blog entry by analyst John Jacobs quotes Nokia CEO Olli-Pekka Kallasvuo as saying in an interview with Finnish [...]

  • http://www.ledtvprice.co.uk LEDTVPrice

    Nokia will just go and buy a load of prefab parts, and rebrand them. People will buy the Notebooks because Nokia is a brand associated with easy to use and quality technology.

  • http://www.1008ha.co.uk Laptop Man

    I agree.

    There’s no way a company like Nokia that are leading the way in phone technology, will ever splurge a load of it’s cash on developing it’s own Laptops netbooks or Notebooks.

    Nokia will “dip their toes” in the water by doing what you say, and if it’s viable, then we may see something original from them.

  • http://www.displaysearchblog.com/2009/07/telecom-subsidized-netbooks-what-do-they-really-cost/ Telecom-Subsidized Netbooks: What Do They Really Cost? | DisplaySearch Blog

    [...] some cases a notebook PC, at a slightly discounted price. An additional point of similarity is that mobile phone brands are also considering supplying netbooks to service providers. So, are these offers a good value? First, let’s examine the current [...]