Innovate And Dominate

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And so the race is on. Ollila admits, "It's early days for everybody," but he does have a battle plan. In September, Nokia started forming an Enterprise Solutions Division to outfit corporations with handsets, software and services that help road warriors tie into databases and applications back at the office. It also acquired expertise in selling information technology to corporations when in November it named Hewlett Packard veteran Mary McDowell as the new division's chief. Ollila hopes that McDowell, with her HP pedigree, can help convince corporate IT buyers that Nokia knows the nuances of tying mobile devices into corporate computer systems.

Ollila concedes that in the corporate market Nokia is "still putting all the elements together." None of the 9500's three pilot customers are in the U.S., for example, which suggests that Nokia has yet to make major headway in the world's largest corporate market. Until now, Nokia's corporate sales have tended to be to smaller departments buying phones for relatively simple voice and messaging tasks. The Enterprise Solutions division will focus on reaching the higher-level chief information officers (CIOs) who make companywide decisions for multibillion-dollar firms. As Ollila notes with classic Finnish understatement, "We're working on it." One potential approach: strike alliances with IT companies like IBM or EDS, and with application vendors like Seibel, accustomed to selling to CIOs. Of course, that would mean sharing the proceeds — a bit of a shock for a company accustomed to having big operating margins all to itself.

But solving challenges like that is precisely what put Nokia on top. Like all its competitors, Nokia suffered when the tech market cratered in 2000. But thanks to cost-cutting and layoffs, slick engineering and buying power, the company was last month able to report 2003 operating margins of 23.6% on mobile phones, and an 18% increase in mobile-phone sales, outpacing the handset industry's overall growth of 16%. As a whole, Nokia — which also sells network equipment — recorded j3.7 billion in profits on j29.5 billion in sales. Can they keep it up? Ollila thinks so. "We've always targeted in excess of 20% on the operating level," he says. "I don't see any reason why we couldn't continue on that level. But it takes good implementation and a successful run of new products."

And new products are one thing Nokia has plenty of — it's more than just the 9500. With j11.3 billion in cash, Nokia can afford to bring out new and unusual wares, to throw them against the market and see what sticks. There's the curved jukebox-shaped 7700 audio and video player, the pride of multimedia group vice president Anssi Vanjoki — an excitable, high-decibel executive who stands out in the quiet crowd of Nokia managers. "Look at this," he exclaims with wide eyes, picking up the device. "You can play whatever music or show whatever videos are available on the Internet." Vanjoki expects to deliver the 7700 in the spring, at the rather hefty price of j600. Vanjoki's eyes widen even more as he raves on about Nokia's future in camera phones. "The camera is going to die, and this type of mobile device will take over," he says, predicting the digital camera's demise within five years.

We'll see if Vanjoki's predictions pan out. Not all Nokia launches work. Vanjoki concedes that Nokia's N-Gage gaming gadget is "selling at the lower level of expectations." And according to one analyst, earlier versions of the Communicator have "barely been selling." The other trick for Nokia will be to stay on top in consumer phone sales. Relations between Nokia and carriers like Orange and Vodafone have long been checkered. Mui notes that some of the lesser-selling vendors like Samsung or Siemens are more willing to make branding and pricing concessions to the operators.

Nokia marketing vice president Timo Poikolainen acknowledges that "there are good days and there are not-so-good days" in operator relations, but in general the two sides remain "close." And despite the contentiousness, IDC's newest market numbers show that Nokia maintained a milewide lead over Motorola in 2003, with 33.6% of the market compared with Motorola's 14.1%, even if Nokia's overall share dipped slightly from 35%. According to IDC, Nokia has owned 30% or more of the market since at least 2000. If Nokia can parlay even some of that success into the corporate market, then its future is as expansive as the Finnish wilderness.