Nokia, IBM, Oracle team up against Microsoft

CANNES, France: Nokia, the world's top handset maker, promised on Tuesday to deliver its first, new-generation mobile phones by July as it armed up to help stave off advances from software giant Microsoft. Nokia said it had sent a batch of around 10,000 third-generation (3G) handsets to operators Vodafone Group Plc and Orange and equipment makers Ericsson and Nortel to allow testing to begin.

The Finnish heavyweight is late to the European market with 3G phones, which offer video services and other fast, multimedia products. Arch-rivals such as NEC of Japan and Motorola of the U.S. have already delivered their 3G phones here.

However, despite spending over 100 billion euros ($107 billion) on 3G licences in 2000, equipment makers' top customers -- mobile phone operators -- have delayed commercial 3G launches as they await evidence that customers want the new services before investing further in the costly technology.

In the meantime, Nokia is teaming up with computer technology giant IBM and the world's biggest enterprise software maker, Oracle, to dig deeper into the lucrative market for mobile access to e-mail, calendar and corporate databases.

The move is a response to Microsoft, which wants to muscle into the mobile phone software market with its Windows operating system -- already a powerful force in the personal computer (PC) industry -- which allows access to corporate networks.

"We can deliver all that (mobile access to corporate networks etc) now and at a competitive price," Niklas Savander, head of Nokia's Mobile Software unit told Reuters in an interview at the 3GSM World Congress in Cannes, France.

However, Erik Anderson, head of Nokia's enterprise mobile phone unit, is not underestimating Microsoft. "Microsoft is joining the party, making handsets, and it's a great challenge for us," he said. "They have great capabilities, deep pockets, determination and knowledege."

Banking on IBM, Oracle

Nokia is hoping that bringing IBM and Oracle on board will help sell more of its top-end mobile phones, supporting the sagging average selling price of handsets -- which analysts watch closely for revenue guidance.

"The volumes will never match the volumes of consumer products, (but) the margins will be better and customer stability will be different than in the consumer roller-coaster," said Anderson. "Yes, we expect good margins in this business."

Nokia, unlike many others in the hard-hit telecom equipment sector, has been showing double digit profitability throughout the sector's two-year fall with its operating margin reaching 25 percent in the fourth quarter of 2002.

Nokia said it expected to sell 10 million of its high-end phones, built on the advanced series 60 software this year -- roughly the amount of all Personal Digital Assistants (PDA) sold annually.

"We are going to see exponential growth in these phones after 2003," Savander said. A Nokia spokesman added that the company still stood by its fourth quarter guidance that average selling prices would bottom out in the first quarter of this year -- despite wide analyst scepticism. Other industry players expect a decline in prices of around 10 percent.

Nokia lags on 3G

News that Nokia is on track with its first 3G deliveries comes one day after smaller rival, Sony Ericsson, unveiled its first 3G mobile phone, but said it would be available commercially only in the second half of this year.

While some European mobile phone manufacturers are only starting to unveil 3G phones now, their overseas counterparts have been securing some of the early deals.

Japanese heavyweight NTT DoCoMo became the world's first operator to start selling 3G phones in its home market in 2001 using home-grown vendors such as NEC, Matsushita Panasonic and Fujitsu.

But Hutchison 3G, the joint venture controlled by Hong Kong conglomerate Hutchison Whampoa, is planning Europe's first commercial 3G launch next month, also using non-European manufacturers.

Shares in Nokia, a technology bellwether, ended 1.4 percent higher at 13.40 euros, underperforming a 2.48 percent rise for the DJ Stoxx European technology index.

© Reuters