COM W. Clark. Nokia has not been idle in addressing the business market. It has sold the following to enterprises:

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1 W. Clark Research Note 4 April 2003 Commentary Nokia Needs Partners to Compete as an Enterprise Supplier Nokia is far from being a strategic enterprise supplier of mobile devices worldwide. Businesses and application developers must hedge commitments to Nokia platforms, as Nokia faces stiff competition outside its dominant market. Enterprises can select from more than 900 different models of wireless devices to support their mobile users. More than 400 million mobile phones and more than 14 million personal digital assistants (PDAs) will ship in Nokia's position as the world's leading mobile phone manufacturer is largely based on consumer segments, shipping more than 140 million of these devices in Nokia has not yet transformed its consumer successes into market leadership for enterprise mobile applications. Continued failure to do so could eventually erode Nokia's overall position, especially when the mobile device market bifurcates into a two-tier market (0.7 probability). The two tiers of the mobile device market will be inexpensive (albeit sophisticated) phones serving consumers with low-margin and commoditized application frameworks (which will support business-toconsumer applications focused on imaging, entertainment and media), and a higher tier of devices that contain middleware, more memory and better displays to support business applications. This segmentation will result in approximately 40 percent of mobile workers carrying business-focused devices by 2007 (0.7 probability). Enterprise users will pay more for business-focused devices. Based on the value of their immediate datacapture capabilities, they will also pay a premium for voice and data services. Enterprise-focused carriers such as Nextel obtain nearly $75 average revenue per user per month, as opposed to an industry average in North America of approximately $58. Mobile network operators will increasingly give shelf space (and "air time") to business-oriented devices. However, these devices only make sense when key and application servers are readily available. A significant threat to Nokia is the possibility that IS organizations will direct their users toward specific phone models based on other operating systems, similar to what is done with computers and PDAs. Nokia has not been idle in addressing the business market. It has sold the following to enterprises: Mobile phones such as the 9200 Series Communicator, 6800, 3650 and 7650 Gartner 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Infrastructure offerings to carriers that extend the core messaging technologies of Short Message Service (SMS) and Multimedia Messaging Service (MMS) Cellular protocol stacks, such as Global System for Mobile Communications/general packet radio service (GSM/GPRS), Enhanced Data Rates for Global Evolution (EDGE), code division multiple access (CDMA) and wideband CDMA (WCDMA) TETRA-based private radio networks Machine-to-machine modules Location servers Firewall/virtual private network and intrusion detection appliances Wireless Application Protocol (WAP) gateways GPRS/wireless LAN network interface cards Thin/slim-client mobile solutions through initiatives such as Nokia One. Nokia's 6800, as well as 3650, 7650 and 9200 series, all have offline client and personal information management (PIM) with IMAP4/POP3 standard, in addition to browser-based applications. These offerings are tactical. Users in the enterprise market require enterprise application integration outside of the network integration of infrastructure and devices. Satisfying this need is a key challenge for Nokia. The Open Mobile Alliance To gain a position in the enterprise, Nokia must differentiate itself from Microsoft by leading the Open Mobile Alliance (OMA). The alliance was formed as a coordinating body in 2002 from the remnants of the WAP Forum, along with other smaller standards bodies. Assessing whether Nokia's investment in OMA will show a return is challenging. The investment can best be measured by the broad adoption of mobile applications, such as mobile Internet browsing; however, these applications rely on more than the output of OMA as a standards body. Criteria for measuring OMA success relies on incorporating "enabler" package features (for example, location services, XHTML, WAP 2.0 and SyncML) into more application platforms, mobile infrastructure servers and devices. Gartner expects that WAP 2.0 will struggle this year, due to the same limitations of deeply nested menus, the limitations of "walled garden" content and the lack of a compelling business case. SyncML, a "checklist" item, has not gained widespread acceptance due to competition from proprietary solutions such as ActiveSync from Microsoft and vertical application synchronization engines from Extended Systems and Synchrologic. Participation in standards activities such as OMA offers limited benefits to Nokia. More important is whether Nokia can shepherd the mobile phone industry through a variety of methods to design similar machines that have a common environment. Another cornerstone of the mobile phone industry is Symbian. It was formed in 1999 to rally other handset manufacturers around a non-microsoft-based platform. Nokia has "hedged its bet" on Symbian by announcing Series 60, an application framework that can run on top of Symbian and that Nokia licenses in source code to other mobile phone manufacturers. Nokia has bypassed the Linux platform route, although developments in Asia might reverse this decision. Nokia has said that the core solution is 4 April

3 only partially reliant on Symbian because it believes browsers and downloadable Java are the real tools that enterprises will employ on top of Symbian. The vision for the enterprise, although not clearly articulated in the marketplace at this point, is that the downloadable Java and XHTML model used for consumers will work in the enterprise, but only if there are connectors to back-end applications. Nokia's strategy is based on the premise that business users already have cellphones and that these extensions (Java and XHTML) form the least-expensive initiative in extending mobile applications. However, cellphone screens are small, and data entry can be difficult. Another difficulty in meeting the vision of application interoperability is that Java implementations still vary greatly from platform to platform, as vendors add extensions to make their handsets unique. Despite the support of the five leading mobile handset vendors, Symbian still has almost no presence outside of Western Europe. PDAs based on Symbian technology are outsold by Palm and Pocket PC devices, even in Europe (Nokia's home base). Nokia's flagship phones for Series 60 are the 7650 and Enterprises must view Nokia's application frameworks as tactical solutions until Nokia reconciles its overall enterprise server strategy. Although Nokia announced new partnerships with IBM and Oracle at the 3GSM World Congress, it will be at least six to 12 months before solutions are widely available. Gartner believes that these initiatives will not support widely interoperable solutions until the end of 2004, with some notable regional differences. Europe Nokia's initial initiative targeted to European business needs is Nokia One, an enterprise server that links to IBM Notes and Microsoft's Exchange to deliver online to mobile phones. Nokia One cannot support other applications, but it supports network-independent applications and security options such as SecurID from RSA Security. Nokia's highest probability of success in enterprise applications will be thinclient extensions of and messaging, and lightweight vertical applications (field service, sales) on the 7650 and Type A (leading-edge technology adopter) companies in Europe using Nokia enterprise solutions are Fujitsu, Vattenfall and AstraZeneca. Nokia's offering has significantly less enterprise adoption than those from Research In Motion (RIM), IBM and Microsoft, other mobile /pim offerings and other wireless application gateway vendors (see "Mobile /PIM Magic Quadrant: Emerging Choices"). Asia/Pacific Nokia's biggest opportunity in the Asia/Pacific region is in China. Nokia will likely port the Series 60 framework to Linux to meet the long-term demands of the Chinese government that push for zero-cost licensing for operating systems. Nokia will have great difficulty in delivering enterprise applications in Japan and Korea because of barriers to entering the tight-knit business communities there. Nokia will likely have sporadic success in supporting enterprise applications in Australia and Singapore. North America Nokia's weakest market for mobile phones is in North America, where its priority has been GSM above CDMA development and product introduction. Motorola nearly surpassed Nokia's unit volume of mobile phones in North America for 4Q02, and will likely surpass it in Nokia's enterprise strategy is to focus on the 9290 smartphone for thin horizontal applications. 4 April

4 In the enterprise arena, Nokia faces two significant incumbents that have specific mobile strategies. Motorola's strategy is based on Java 2 Platform, Micro Edition (J2ME), rather than on standards. Motorola successfully supports targeted vertical applications, integrating voice and data services into its iden products, particularly in the construction and transportation markets. Nokia has not been successful in cultivating business application developers that can create connectors to these types of back-end system logic. In addition, it has failed to integrate technologies such as the Session Initiation Protocol, which will allow its handsets to mimic Motorola's iden's push-to-talk functionality on GSM or CDMA systems. Gartner believes such initiatives will take at least until 2006 before they deliver scalable commercial offerings. Microsoft poses a particular threat in North America due to its strong business application toolkit. Microsoft's tactic to enter the corporate market is to influence IT decision makers to purchase products based on Pocket PCs, by emphasizing product ease of development and content availability. Nokia's response centers around the 9290, 6800 and 3650 series phone and its plan to license RIM's client technology on these devices to deliver end solutions to businesses by YE03. This approach has two significant weaknesses: It will take another year for Nokia to deliver a significant enterprise platform, and the 6800 phone contains limited functionality and text display better suited for the SMS market in Europe and Asia, for which it was designed. To succeed in North America, Nokia must: Form multiple partnerships with major application product suite vendors, such as IBM, SAP, Siebel Systems, Oracle and Sybase. Consider becoming a channel partner for RIM and other server vendors. Focus on the platform capabilities that enhance these application and server offerings across all of Nokia's devices. The 9200 series is the only platform that supports IBM (Notes, DB2) and Oracle (9iLite). Deliver a significantly stronger portfolio of smartphones with more memory and CPU power to increase support for more data-centric, rather than browser-centric, sets of business applications through Outlook As Nokia attempts to enter the enterprise market, it needs to confirm its commitment to the consumer market. It has no plans at this time to participate in the wireless PDA market (defined as devices that prioritize data capabilities over voice). This poses a liability for enterprises that need to support thick applications on offline clients, because: 1) it leaves Symbian without a powerhouse hardware vendor to support it in the PDA market; and 2) it forces enterprises to consider yet-another development environment. Although some enterprises will take on the task of integration of a new platform, Symbian alone has little chance in the enterprise against Microsoft or Linux, making Series 60 the key product to follow for enterprise customers. Many Gartner clients have said they will probably not embrace new development environments simply for the sake of mobile device development efforts. Economic pressures will continue to force IS organizations to work with fewer vendors to make their operations less complex. To become a strategic enterprise player in all regions, Nokia needs to: Strengthen its partnerships with other handset manufacturers 4 April

5 Provide commoditized Series 60 platforms running on Symbian or Linux platforms Ensure interoperability across Java platforms Nokia will fail to dominate the smartphone market as a direct enterprise supplier and will rely on third parties to specify its products for enterprise use by 2006 (0.6 probability). Nokia will, nevertheless, remain a strong influence for enterprise applications on mobile phones, as the top-five handset manufacturers worldwide will offer two to four different operating system platforms, including at least one from Nokia or Symbian in 2006 (0.7 probability). Bottom Line: Nokia must forge bold partnerships, linking its mobile platform to application platform suite vendors to extend the success of its consumer-oriented applications to enterprises. To support these partnerships, Nokia's Series 60 should be "commoditized" to run on a variety of handsets that support native, Symbian or Linux operating systems. Through 2005, enterprises need to evaluate Nokia products and application platforms as tactical investments until these (and other vendors') mobile offerings mature. 4 April