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Cambridge, MA, August 21, 2006—Nokia’s acquisition of Loudeye put it squarely at odds with its largest customers, but it is still the right move. Writing in Pyramid’s latest Next Generation Trend Letter, analyst Guy Zibi argues that Nokia can’t grow if its model is inherently tied to carrier subsidies. The move also puts Nokia in a position to launch a cell/phone music player before Apple does.
“Nokia has to free itself from the shackles of cellular-only and become a strong electronics/multimedia manufacturer which just happens to have a strong foundation in mobile handsets,” comments Zibi.
The company has made other moves in that direction, most notably a revamping of its US distribution network to emphasize its own stores, and more investment in building brand equity in the US market.
“Mobile carriers—not Nokia—are swimming against the tide,” states Zibi. “Their main, albeit vulnerable, leverage is handset subsidization.”
Pyramid found that mobile carriers are unlikely to subsidize or even stock handsets that would cut them off the value chain. In markets such as the US where handset manufacturers are extremely dependent on network operator brands, the leverage could be effective in the short term.
“Ultimately, mobile carriers would be denying their subscribers the opportunity to fully converge their handsets and portable music players,” continues Zibi. “This could potentially create opportunities for those mobile carriers that would effectively encourage such convergence.”
About Pyramid’s Next Generation Trend Letter
These global newsletters examine key developments in communications markets around the world. They help clients to assess the strategies dominating the telecoms industry and stay on top of important market-shaping industry events. Published monthly, they provide company snapshots, assessments of best practices, and analysis of the drivers and barriers to the success of new business models and technologies.
About Pyramid Research
For twenty years, Pyramid Research has helped companies in the converging communications, media and technology industries stay ahead of market trends, understand competitive threats and capitalize on opportunities. We advise the world’s leading telecoms equipment vendors, service providers, and the financial community on how to implement best practices, build offensive growth strategies, and drive profitability.
Press Contact:
Amalia Vega
Pyramid Research
P: 617.494.1515. ext. 231
E: avega@pyr.com
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