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          Nokia and the art of the phone
           Commentary: Resurgence is tied to design acumen

                 By John C. Dvorak
                 Last Update: 3:39 AM ET Oct. 20, 2004
           | | | |

     BERKELEY, Calif. (CBS.MW) -- Nokia recently surprised the investment
community with positive earnings news while its main mobile phone
competitor, Motorola, seemed a bit flat with its numbers.

                             .

     I've followed the analysis of both these companies and everyone seems
to completely overlook the obvious.

     Nokia (NOK: news, chart, profile) simply makes a better phone and,
more importantly, a better looking phone. Does anyone think this may be a
factor?

     It's not that Motorola (MOT: news, chart, profile) makes a crummy
phone, but there is already talk in the trades about Samsung soon sneaking
up on Moto and taking the number two spot. Has anyone considered that
Motorola is doing something wrong?

     On paper the phones have the same features as the competition. They
have cameras and work with all the various transmission standards. Motorola
has the GSM phone and the CDMA phone and the company makes those Nextel
phones with the walkie-talkie feature.

     All that notwithstanding, the fact is that Motorola phones exhibit all
the design modernity of a 1950 bullet-nose Studebaker. For a company that
was largely responsible for popularizing the pocket cell phone with its
early Star-tac clamshell phone, the entire line now seems a little dated.

     And it's not because Motorola isn't trying hard. Over the years it has
developed various phones that flash and blink and phones that hope to
supplant the increasingly popular Blackberry e-mail device. Still, they seem
to lack pizzazz. They are missing the "it" factor.

     Nokia has the "it" factor. And the company has done a lot of things
right. Everyone is always impressed by the fact that over the years Nokia
has one standard charger for all its phones. If you've ever owned a Nokia
phone you probably still have the charger and it keeps working in the next
Nokia phone. Other makers go from one weird connector to another and if you
lose the charger, you have to pay a small fortune for a new one. Users
appreciate this. It's endearing. In fact endearing may be a theme with
Nokia. The company promoted phone "skins" to change and customize the look
of the phone and it pushes so-called polyphonic ring tones which add
high-fidelity and make your phone ring unmistakable and personal.

     The Nokia phone designs also minimizes the clumsy and dated clamshell
design so reminiscent of the 1960's Star Trek communicator used by Kirk to
demand a "beam up" from a planet to the ship. Get over it.

     I think these factors are largely ignored when analyzing the mobile
phone business because the number of units sold -- 630 million estimated for
all handset makers in 2004 -- makes it look like a commodity business. It's
not.

     These phones are often expensive, costing hundreds of dollars. There
are cheap low-end phones that can be thought of as throw away commodity
junk, but even these have a lot of new competitive models introduced each
year with newer and jazzier features.

     All this (and the "it" factor) is part of the art of the phone. The
Finns seem to have a better sense of art than the competition. People hate
to admit it, but art sells. A good design will sell more than a bad design
all other things (including price) being equal. Companies who employ the
best Italian industrial design firms have known this for a long time. Some
companies have even realized that a great design on a mediocre product will
often do better than the superior product with the ugly design.

     Distribution channels, margins, marketing, hello Moto programs and the
rest of it are all important, but when the public is confronted with a
choice it tends to go with the best looking product. That's why Nokia is
winning this battle. It's the best looking product time and again. It's that
simple.