Symbian Profits Mask Dependence on Nokia

Smart phone operating system maker Symbian has recorded its first profit, but analysts have warned it faces problems—including dependence on Nokia.

“Symbian is too dependent on Nokia and its Series 60 platform,” said Andy Brown, IDC’s European program manager for mobile computing research. With the Nokia-owned platform making up 98 percent of Symbian’s sales in Western Europe, it needs new designs, he said.

Symbian isn’t visibly worried, with royalty revenues of 37.9 million pounds (US$71.53 million) in the second quarter giving it its first profit. It also shipped 12.3 million phones, a 58 percent increase on the previous quarter. The company is profitable, chief executive Nigel Clifford told Reuters, and remains the leading open OS in the mobile phone market.

However, much of this growth is from Japan, said Brown. IDC described Symbian growth in Europe as “flat,” partly due to users’ preference for regular “feature phones,” which led to disappointing growth in smart phones.

“Despite claims to openness and despite having licensees, S60 is a Nokia shop,” said Brown. It has gone from an 89 percent share Symbian phones in Europe, to 98 percent over the past year, thanks to ambivalence from manufacturers like Motorola, and to Sony Ericsson’s failure to deliver the new P990 quickly, he said. The P990’s problem is in the transition to the latest version of Symbian, and of the UIQ user interface, he explained.

Also, S60 devices are effectively “phones,” sold for one-handed use by consumers, so they have found it easier to break users’ reluctance to embrace smart phones—unlike pen-based Symbian devices such as the Sony Ericsson machines.

Symbian has predicted a 75 percent standard quarter-on-quarter growth in units, so the second quarter’s 58 percent actually represents a slowing of the growth rate. However, the company expects to resume its normal growth, thanks to lower royalties that began in July, designed to push the operating system into still-cheaper phones. “The big challenge for Symbian is to drive it down further,” said Brown.

Another twist in Symbian’s fate is its success in third generation (3G), which some predicted would be a problem. The company claims to be supplying 92 percent of the world’s 3G smart phones (a somewhat specific sub-sector of the market) and again, much of this is in Japan.

While data-based, business-oriented smart phones aren’t doing as well as some might hope, Symbian seems to be making the best of its inroads into the consumer space. Clifford lauded the “smart phone lifestyle,” pointing to phones such as Nokia’s pedometer-equipped 5500 phone for joggers.

“We’re not criticizing Nokia for selling a lot of phones,” said Brown, who predicts that Symbian will maintain a steady share of around 65 percent of the smart phone market in Europe all the way to 2010, holding Windows Mobile to 30 percent. Symbian’s problems are ones that other suppliers, like Palm, might prefer to have.

“The outlook for Palm is bleak,” said Brown, with its Treo 650 blocked from sales in Europe, and its new products delayed.

-Peter Judge, Techworld.com (London)

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.