Mobile Battle Heats Up Between Apple, Nokia

One company is the entrenched market leader, still powerful and in command, but losing share regularly to an upstart and media darling that is again challenging the status quo to the delight of its fanatical followers. But this isn't Microsoft and Apple and the desktop PC market we're talking about, not this time. Instead, the market in question is the mobile market, and while Apple is again in the role of underdog innovator, the market giant it's targeting this time is Nokia.

Unlike Microsoft, however, Nokia isn't waiting to mount a counter attack. This week, the mobile giant issued the second in a series of complaints against Apple, alleging that the Cupertino juggernaut infringes on numerous Nokia patents. Nokia's escalation of its war with Apple is notable, however, because this time it has complained to the US International Trade Commission (ITC) and has expanded its complaints to include MP3 players and PCs.

Nokia previously sued Apple in October, claiming that the iPhone maker infringed on 10 Nokia patents for smart phones. Apple countersued in early December, charging Nokia with infringing on 13 Apple patents. This week's new round of complaints from Nokia includes yet another patent infringement lawsuit against Apple as well. But now Nokia is saying that Apple infringes on Nokia's patents in "virtually all" of its mobile products, including Macbook computers, iPod portable MP3 players, and iPhones.

Nokia is clearly protecting its steadily shrinking market share. At stake is what most believe to be the mainstream and volume computing market of the future: Smart phones and other highly mobile devices with always-on Internet connectivity. Currently, Nokia dominates this market, with about 39 percent market share. But that's down from 42 percent share from a year earlier. Apple, by contrast, is growing and now commands about 17 percent of the global smart phone market. A year ago, the iPhone controlled 13 percent.

Oddly, Apple isn't even Nokia's biggest competitor, at least not yet: RIM Blackberry is the number two player with 21 percent, up from 16 percent a year earlier. So why all the emphasis on Apple? Unlike other smart phone makers, Apple's success has come almost exclusively with consumers, and Apple's entry into this market has jumpstarted sales in this important category. So while Nokia, RIM, and others race to catch up with consumers, Apple has maintained a comfortable lead with this crowd.

Apple is also performing more strongly in its biggest and most important market, the US. As with the Mac, the iPhone's share of users in the US is dramatically bigger than it is internationally, with Apple now the number two smart phone maker behind RIM, but ahead of Microsoft and Palm. Nokia is an also-ran in the US in part because of its emphasis on international-friendly GSM wireless technologies.

Apple is also an unparalleled media darling, with high profile news publications, including the "The Wall Street Journal," "The New York Times," "USA Today," and others seemingly incapable of providing anything other than a modicum of criticism of any of the company's products or strategies. In fact, they seem to serve as free PR for Apple, regularly promoting every Apple product, whether they're relevant to their readers or not. In fact, it should come as no surprise that readers of those publications believe Apple's share of the PC market to be much higher than 3.5 percent (less than 8 percent in the US) it really is simply because of the amount of press Apple generates.

Another more relevant example is the mythical Apple tablet device that is following in the footsteps a similar Microsoft initiative by 8 years but is now expected to unleash another round of innovation and sales. This despite the fact that the existing Tablet PC product line, which has been regularly enhanced over those 8 years and expanded into a range of device types, garners only yawns by the Apple mouthpieces who are now trumpeting the iTablet on an almost daily basis.

Looking ahead, it only gets worse for Nokia. Both Nokia and Apple now have another mobile competitor to fear, with Google's Android platform off to a torrid start. After just a year of limited availability, Android already controls 3.5 percent of the worldwide smart phone market. And with new devices popping up regularly on multiple wireless carriers, and Google's bottomless wallet, Android is sure to grow even more rapidly in 2010. In fact, many mobile analysts already expect Android to battle with the iPhone for the number one spot in the years ahead. That, of course, would leave Nokia to mop up at the bottom of the market. And if this week's lawsuit and ITC complaint are any indication, that's not going to happen without some kicking and screaming on the way down.

But don't mistake what these complaints really are: The death throes of a company that simply let a market slip away from it due to cluelessness and hubris. Apple doesn't have a lock on the future, despite its great products and media savvy, but it certainly will control a bigger share of the market than will Nokia going forward. And that will be just as true worldwide as it in the US.

It's only a matter of time.

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