All Things Digital

You wouldn’t know it from the iPhone lines at Apple (AAPL) stores across the nation, but cellphone sales in the states are slowing. A report Tuesday from The NPD Group reveals that U.S. sales of mobile phone handsets in the second quarter of 2008 declined about 13 percent over 2007. Clearly, Americans are buying fewer cellphones.

More specifically, they’re buying fewer Motorola (MOT) phones. The company saw its share of the handset market fall to 21 percent from 32 percent a year ago. And that 11 percent loss was the competition’s gain. “Quarterly unit-sales of handsets fell to their lowest level since NPD begin tracking the category in 2005,” Ross Rubin, director of industry analysis for NPD, said in a statement. “Even so, most major manufacturers picked up market share that was lost by Motorola.” And that’s left the market in a bit of a three-way tie. Samsung and LG each have 20 percent share to Motorola’s 21 percent. Bringing up the rear: Nokia (NOK) and RIM (RIM) with 9 percent and 7 percent respectively.

A few other data points worth noting: Consumers who actually bought handsets in the quarter paid an average of $84 for them. Of those handsets, 81 percent were Bluetooth-enabled, compared with 69 percent last year. And 65 percent were music-enabled, compared with only 45 percent last year. Finally, sales of handsets with a QWERTY keyboard rose to 28 percent from 12 percent. So while Americans may be purchasing few cellphones, the ones they are buying are more feature-rich and more expensive.

The mobile market is heating up to a roiling boil, isn’t it? This morning Nokia (NOK) said it plans to acquire the 52% of mobile software outfit Symbian that it does not already own in a cash deal valued at about $410 million. But rather than roll up the company’s operations into its own, it’s turning them over to the newly formed Symbian Foundation.

A not-for-profit venture, the Symbian Foundation–which includes Motorola (MOT), Samsung, Sony Ericsson (SNE) and LG Electronics (LGERF.PK)–will steward the Symbian OS as a royalty-free open mobile platform. And that’s a pretty big deal, because Symbian is by far the world’s leading smart-phone software platform. It controls a 60% share of the market with 200 million handsets running its software.

Strategically, the formation of the Symbian Foundation and the opening of the Symbian platform is an aggressive pre-emptive strike against Google (GOOG), its Open Handset Alliance and its open-source Android mobile platform. Perfectly timed too, since Android seems to be falling behind schedule. “It offers us an opportunity to innovate faster on a bigger, united, more widely accepted platform,” Kai Oistamo, head of Nokia’s devices business, told Reuters. “It also enables us to deliver new products, we believe, faster to the market. I’m convinced we will sell more products.”

Soon Nokia mobile phone users will be able to tell people who don’t particularly care what they’re doing, where they’re doing it — not that they cared in the first place.

This morning Nokia (NOK) acquired location-based services venture Plazes, which has developed a sort of social GPS that allows users to tell one another where they are and what they’re doing. For Nokia, the acquisition is a way to add the elements of place and time to its Mosh social network. And for Plazes, which has no business model of which to speak, it’s a quick and easy way to get one.

“If all goes well, in the near future Plazes will be made available to millions of Nokia customers both online and on millions of mobile devices,” Plazes CEO Felix Petersen said in a post on the company’s blog. “Nokia is a perfect partner for us because they share our product vision and have the muscle to bring locative presence to hundreds of millions of people all over the world.”

Presumably the “They were actually willing to buy us” is implied.

By the end of 2009, Apple’s iPhone will be available in 70 nations, but South Korea is not among them. Nor will it be for the foreseeable future, thanks to WIPI (Wireless Internet Platform for Interoperability), South Korea’s cellular middleware platform.

The South Korean government requires all cellphones sold in the country to support the WIPI standard. And for Apple (AAPL), as well as other handset manufacturers like Nokia (NOK) and Sony Ericsson (ERIC), redesigning their devices to do so is a costly proposition. So costly, in fact, that they’d rather not bother.

“Korea is not ready,” an Apple Korea rep told the Korea Times. “We have no comment on [the] iPhone matter in Korea; also, there is no plan to release any further information about launching of [the] iPhone in Korea.” And that suits Korea’s mobile phone-makers, Samsung (005930) and LG (066570), just fine. They’re apparently not fond of unnecessary competition.

“Next time you are in Malta and you need an iPhone 3G, it will be there for you,” Apple CEO Steve Jobs said earlier this week. But not in South Korea. Plenty of Samsung and LG phones, though. And how ’bout that Samsung Omnia, huh? Almost like the real thing …

Sony BMG (SNE) has signed on to Nokia’s (NOK) new “Comes With Music” program and really, who better than the pioneer of the rootkit digital-rights management scheme to endorse Nokia’s DRM-hobbled prebundled music initiative?

This morning, Sony BMG became the second record label to jump on board the Finnish phone giant’s Comes With Music offering, which–when it launches in the second half of 2008, will package mobile phones with a year of unlimited access to music. There are, however, certain caveats to that value proposition, as I pointed out last December:

Though Comes With Music does indeed permit owners of certain Nokia cellphones to download as many songs as humanly possible in one year (with no per-song data charges), transfer them to a PC and keep them at the end of that time, they must pay a per-song usage fee to burn them to CD. What’s more, the songs are wrapped in Microsoft’s (MSFT) ironically named ‘Plays for Sure’ digital-rights management scheme, which prevents them from being played on the iPod, Zune, etc. Finally, another 12 months access to the music catalog requires the purchase of a brand new phone.”

Clearly, Sony, like Universal (VIV.PA) before it, doesn’t see these issues as off-putting to consumers. “When you give consumers the key to the candy store without any limitations, there’s a lot more opportunity for discovering music that you might not have found before,” said Thomas Hesse, president of global digital business and U.S. sales for Sony BMG Music Entertainment. “We think this will energize the discovery of music.”

It might energize Sony BMG’s bottom line a bit as well. When Universal first signed up for Comes with Music, sources close to the company said that Nokia would pay the label up to $35 for every phone that offers access to its library. Nokia subsequently denied it was paying that amount, but it’s definitely paying something–to Universal, Sony and whatever other labels it manages to line up for the service.

If terms of Nokia’s new “Comes with Music” program appear impossibly generous to the consumer, who will pay no monthly fees for Universal Music Group’s entire catalog, it’s because they are.

Though “Comes with Music” does indeed permit owners of certain Nokia cellphones to download as many songs as humanly possible in one year (with no per-song data charges), transfer them to a PC and keep them at the end of that time, they must pay a per-song usage fee to burn them to CD. What’s more, the songs are wrapped in Microsoft’s ironically named “Plays for Sure” digital rights management scheme, which prevents them from being played on the iPod, Zune, etc. Finally, another 12 months access to the UMG catalog requires the purchase of a brand new phone.

All of which makes perfect business sense–after all, Nokia’s not in the business of giving away music–though it certainly would like to be perceived that way from the looks of the company’s press release. “This is how the consumers will consume music going forward. This is a step toward where this business we believe will be moving to in two to three years time,” Rob Wells, Universal’s SVP of digital, told Reuters. “Consumers will have access to all the recorded music available through the price of the device, or the price of service, or the price of broadband.”

And they’ll pay an additional price to use it as they see fit.

Looks like Ed Zander has a new title for that book he once joked about writing–“I Lost My Job. I Hate My Customers.” On Friday, Motorola said that Zander would turn over the job of chief executive to President Greg Brown on Jan. 1.

“It was a tough decision because I love the job,” said Zander. “I will be 61 in January and it is time to make way for one of the younger guys.” Sure is. With Motorola’s global market share slipping into the mud–it now ranks No. 3 after Nokia and Samsung with around a 13% share, down from about 21% just a year ago–the company is in desperate need of a turnaround.

Whether Brown’s the guy to do it remains to be seen. Certainly, investors aren’t so sure. “There are some investors who are disappointed that they didn’t bring in somebody from the outside,” Kaufman Brothers analyst Raimundo Archibold told Bloomberg. “This would have been an opportunity to bring in some fresh blood.”

Joan Lappin, president of Gramercy Capital Management, agreed. “I don’t see him as a person who is going to come in and razzle-dazzle the troops,” she said. “He’s kind of a bland guy.”

It might seem like a lot of money–$8.1 billion–to pay for a company whose reported second-quarter net income was just $40.9 million on revenue of $202.3 million. Unless you happen to be the world’s largest cellphone provider. And you believe the company in question to be the key to your success in the location-based services market.

Then, $8.1 billion (54 times current earnings!) seems reasonable. As it did to Nokia, which today agreed to acquire mapping-data provider Navteq for exactly that sum. “This is Nokia’s largest acquisition ever,” said Mats Nystrom, an analyst at SEB Enskilda Bank in Stockholm. “This is a very high valuation for the U.S. company, so yes, this is a high price to pay. But navigation is a hot area and fits well with Nokia’s strategy.”

Indeed. With sales of navigation-ready cellphones on the rise, the Navteq acquisition would seem to leave Nokia poised to take good advantage of the booming location-based services market. In more ways than one. By acquiring Navteq, not only did Nokia “get a resource to power whatever GPS wonderfulness it plans for its own phones or future devices, it also kept a valuable property out of the hands of some powerful players with mapping interests, like Google, Microsoft and Yahoo,” notes Good Morning Silicon Valley. “All three, in fact, use Navteq data in their own mapping services. Nokia is likely to look for ways to nurture and leverage these relationships, because competition remains in the form of Tele Atlas, now in the process of being bought for $2.8 billion by Dutch GPS gear-maker TomTom.”

So much for Microsoft CEO Steve Ballmer’s claim that “there’s no chance the iPhone is going to get any significant market share.” According to market-research outfit iSuppli, Apple’s iPhone outsold all smart phones in the United States during July, outpacing sales of Palm’s Treo and Research in Motion’s BlackBerry, not to mention handsets from Nokia, Motorola and Samsung.

In its research note published this morning, iSuppli said that the iPhone accounted for 1.8% of all mobile handset units sold during the month. Although this could reflect first-month demand for a product people had been waiting to buy since January, it’s nevertheless not bad for a new entrant in a very competitive market. And a remarkable achievement for one partnered up with AT&T. “While iSuppli has not collected historical information on this topic, it’s likely that the speed of the iPhone’s rise to competitive dominance in its segment is unprecedented in the history of the mobile-handset market,” iSuppli wrote. “While the speed of the iPhone’s ascent to the top of the smart-phone and feature-phone charts is remarkable, it’s equally amazing that Apple achieved this in the face of numerous, well-entrenched competitors.”

Seems Apple is well on its way to exceeding its goal of 10 million iPhones shipped during calendar year 2008–roughly 1% of global cellphone shipments.

[Image Credit: Meandering Passage>]