Ringing in the changes

With the arrival of Apple and Google on to the mobile scene, Finnish company Nokia is ready for battle, writes Derek Scallyin Helsinki

The gleaming steel and glass facade of Nokia's seaside headquarters in Espoo, outside Helsinki, didn't even register the two industry earthquakes this week - today's iPhone's launch in Europe and Google's entry into the mobile phone market.

The expensive hush in the orchid-filled lobby is broken only occasionally, appropriately enough, by the world's most famous ringtone on the phones of Nokia employees as they hurry to work.

While Google and the iPhone grabbed this year's technology headlines, the Finnish giant has powered ahead almost unnoticed. The one-time paper manufacturer is now the fifth most valuable brand in the world, with a mobile phone market share soon expected to hit 40 per cent.

Nokia's share price has risen by nearly 70 per cent this year alone, pushing up stock options to over €1 billion and the company's market value over €100 billion. But the arrival of Apple and Google are the opening salvos in the next stage of convergence of IT and mobile telecoms. Though full of compliments for their new competitors, the Finns are ready for battle.

"The iPhone has done a great service to the industry. People are starting to realise that the mobile phone can be more than voice-centric," said Arja Suominen, senior vice-president of communications at Nokia Telecommunications. "The entrance of Google is clear proof of convergence of IT and telecoms.

"But the convergence market doesn't belong to anyone yet. We are all starting from our own strongholds - Nokia from mobility. And mobility is not the easiest thing to learn."

With growing demand in emerging markets like China and India, the company now produces more than one million mobile phones a day, requiring hair-raising logistics bringing together hundreds of millions of tiny components. It's a corporate joke at Nokia that the company's logistics team are only able to do what they do because they don't know it's impossible.

A decade after hitting the big time in the GSM era, no one at Nokia is prepared even to guess what the company will look like in another 10 years. Only one thing is certain: Nokia will retain its typically Finnish never-give-up perseverance.

"It would be arrogant to say, now that we are larger, that we can sit down comfortably, because then you're gone," said Suominen. "Around the corner someone will hit you the moment you get complacent. You need to be a little paranoid to survive."

In 2004, the company began a new multimedia content strategy and has since launched an online music store and a mobile video co-operation with YouTube.

Nokia has since opened a research centre in California and has gone on a spending spree for innovative convergence technology. Perhaps its most interesting acquisition is Pixto: its "Point&Find" product allows GPS-enabled phones to download online information related to the user's location. Cinema-goers could - so the company hopes - point their phone at the multiplex and check out showtimes and buy tickets.

But while Nokia keeps at the technological cutting edge, a visit to its flagship store in downtown Helsinki suggests that the company is flagging badly in the design stakes. There's a Blackberry clone, a Samsung tribute and even a Motorola Razr copy - the flip-phone Nokia said it would never produce.

Then there's the all-round N95 device with inbuilt GPS and 3G, technology that leaves the iPhone wanting. Despite this and a huge advertising push, the N95 with its clunky design has been left in the Apple phone's shade. Nokia insiders say its iPhone beater is at least eight months away.

Darragh Stokes, managing director of the Hardiman Telecommunications consultancy, predicts that it is mobile operators and not Nokia that will get squeezed in the next round of the convergence war.

"There will be a major shift right across the board but phones are still going to have to be manufactured," he says. The Finnish phones won't win any design awards, he says, but have an unbeatable familiarity effect.

Nokia is also well-placed if the current operator-dominated mobile model ends. "If the market changes to content-based, Nokia already has the jigsaw pieces like the music store. This isn't about Google versus Nokia - there's nothing to stop Nokia jumping on board when Google's operating system is up and running."