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Nokia Buys a Mobile E-Mail Strategy

Business 2.0 :: Online Article :: Wireless Report :: Nokia Buys a Mobile E-Mail Strategy

Spending $440 million on Intellisync gets the cell-phone maker into the lucrative corporate e-mail market. Just one question: Did it wait too long to jump in?

By Matthew Maier, December 06, 2005
Nokia's (NOK) move to buy Intellisync, a Silicon Valley-based developer of e-mail software for cell phones, highlights the company's strategic dilemma: Wireless carriers control most of its sales, and it derives little profit from the services its phones deliver. With Intellisync under its wing, Nokia hopes to crack the lucrative market for mobile e-mail, which is forecast to grow from $400 million this year to $2 billion before the end of the decade.

Just selling hardware puts Nokia in a three-way race to the bottom with Motorola (MOT) and Samsung to see who can make the cheapest phones. And while Nokia has marvelously efficient manufacturing operations, the Finnish giant has aspirations that go beyond being the Dell (DELL) of cell phones.

But what did Nokia get for the $440 million it spent on Intellisync? The startup was just one of several companies in the fragmented market for mobile e-mail services, a sector that includes Good Technology, Seven Networks, Visto, and the current leader, Research in Motion -- not to mention Microsoft (MSFT), the world's largest software company. RIM, which started out selling e-mail-only BlackBerry devices, has in recent years moved aggressively into the phone market. A big selling point of RIM's BlackBerry phones is the e-mail software and services that come with them. With Intellisync, Nokia, the world's largest phone maker, plans to sell companies phones, software, and services to link them all. Most important, Nokia, like RIM, will now be able to extract a steady service revenue stream for its clients instead of just relying on selling phones.

On the surface Nokia's timing looks good. RIM is practically synonymous with mobile e-mail, but the Waterloo, Ontario, company is facing a patent lawsuit that could threaten its core product. And delivering e-mail to cell phones is quickly becoming one of the most important services for today's mobile workforce. While the number of users checking corporate e-mail on their phones today is small -- about 7 million -- that figure is expected to explode next year.

But that explosive growth means Nokia has no shortage of competition -- and Microsoft presents the biggest threat. Though it was late to the market, it has a ready-made customer base. Nearly half of all business customers use Microsoft's Exchange software to access their e-mail. E-mail administrators can install Nokia's e-mail software on top of their existing Exchange servers or just stick with Microsoft's own mobile e-mail solution, which is increasingly becoming compatible with a wide range of devices, including ones from Palm and Motorola.

Was Nokia's money put to good use buying Intellisync? That is -- pardon the expression -- a tough call. For a company with $39 billion in revenues, a $440 million acquisition is practically spare change, and the deal gives Nokia a stake in the mobile e-mail market. It will likely have to spend more than that, however, as it retools Intellisync's software and gears up an enterprise sales force. Selling to corporate IT managers is very different from selling to wireless carriers. And providing a service -- especially one like mobile e-mail that users depend on -- requires a different mind-set than engineering a cell phone. We'll have to watch closely to see if Nokia delivers.

December 10, 2005 at 01:00 PM in Wireless | Permalink | TrackBack (10) | Top of page | Blog Home