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Tuesday, September 3, 2013

The End of an Era in Mobile

In the summer of 2007, Nokia was on top of the world. The company had a market valuation of around $120 billion, $10 billion more than Apple. Nokia’s share of the global smartphone market was an astounding 48.7 percent.

But by the third quarter of 2012 â€" just five years later â€" Nokia was worth a paltry $8.2 billion, $624 billion less than Apple, and its share of global smartphone sales had slipped to just 3.5 percent.

Monday night, the company announced an agreement to sell its handset and services business to Microsoft for $7.2 billion. (Which, it should be noted, is about what Apple made in profit in the second quarter of 2013.)

What happened? First, the Apple iPhone was introduced, then came Google’s Android operating system. Like a one-two punch, Nokia went down.

“Nokia’s acquisition symbolizes the end of the old mobile era,” wrote Thomas Husson with Forrester Research in an e-mail. Nokia was king when hardware was king, he added.

And that’s not the case anymore.

Back in 2007, before the iPhone, there were hundreds of variations of Nokia mobile phones on the market. There were those that flipped open, some with minuscule two-inch screens, and others designed to look like fashion accessories.

Then came the era of flat, rectangular screens, where the design of a smartphone became secondary to the design of the software on those smartphones. People also started making purchases based on apps and ecosystems. Before long, those same ecosystems expanded to other gadgets. Companies like Apple and Google started offering tablets and television-like experiences that connected to the smartphone, allowing apps to roam between devices.

Nokia and BlackBerry are examples of “companies â€" in the consumer electronics space itself â€" that failed to understand the shift to touch-screen devices and tablets,” Mr. Husson wrote in a blog post. “The Nokia story highlights the need to consider mobile as the catalyst for broader technology and marketing changes.”

Juniper Research echoed that sentiment in a report about the future of smartphones. Juniper noted that Nokia was once a famous brand in the mobile phone market, but the company “found it difficult to carry this success over to the high-end smartphone market where Nokia saw a 65 percent decrease in its smartphone shipments in 2012 compared to 2010.”

Of course, Nokia was not the only company damaged by the iPhone and Android. BlackBerry, formerly called Research in Motion, for years commanded more than 50 percent of the North American smartphone market, according to the research company Gartner.

Now, BlackBerry has 3.4 percent of the market.