Ronnie05's Blog

Nokia: Nowhere near recovery

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 17, 2010

Nokia World showcased an unprecedented amount of hope by Nokia, a hope belied by the facts that:

1.Nokia has lost market shares across globally. Nokia’s grip on the smartphone markets has reduced from a monopolistic 60% to a struggling 45%
2.It had lost 67% of its Market Cap after the introduction of Androids and iPhone, in the last three years.Nokia market value has shrunk by 60 billion euros in these three years.
3.It had recently seen a change in the top as OPK (Olli Pekka Kallusvuo) stepped down and Elop stepped in. OPK’s exit wasn’t on the best note given Point 1 and 2 earlier.
4.Nokia had also seen another important person at the top, Anssi Vanjoki stepped down and is serving his 6 month notice period with the company
5. Ovi hasnt set things up for Nokia the way they would have liked it to.
6. Nokia has also been struggling to maintain its ASP. The ASP drop is around 20%.

What really comes as a surprise however, is Nokia’s enthusiasm is based on 12MP device with Xenon Flash! The N8 is the panacea, or so Nokia would like to believe. There were no Meego announcements made(and this was hyper anticipated). Is the problem at Nokia a myopia in identifying the real problem. Where is the software focus?

This ethos was brilliantly captured in an email sent by a former Nokia engineer to John Gruber, a well-known tech blogger. “Here’s the problem. Hardware rules at Nokia. The software is written by the software groups inside of Nokia, and it is then given to the hardware group, which gets to decide what software goes on the device, and the environment in which it runs. All schedules are driven by the hardware timelines. It was not uncommon for us to give them code that ran perfectly by their own test, only to have them do things like reduce the available memory for the software to 25% the specified allocation, and then point the finger back at software when things failed in the field.”

Nokia’s problemis that it’s fundamentally a hardware company. In the early days of the mobile phone industry, that was a good thing to be, because then it was all about handsets, and Nokia was very good at designing and making them. It was also astute in spotting the strategic importance of the GSM standard, and pushing hard for its adoption – which is what enabled Europe to leapfrog the fragmented US mobile phone market. So for a long time, Nokia flourished – as a hardware manufacturer. Of course its phones had software, but in those days it was very much a secondary concern because it wasn’t expected to do very much. But there came a moment in the evolution of the mobile phone when suddenly the software was more important than the hardware. That moment was the arrival of the iPhone. And Nokia missed its significance for two reasons: its senior people – being hardware-focused – didn’t see it; and the company lacked the software capability to compete. It didn’t, for example, have a mobile operating system that was up to the job. In fact, it still doesn’t, which is why it will eventually be forced to buy one in from outside. The only available options are Windows Phone 7 and Google’s Android. So, in the end, it looks as though Nokia’s future will be as an OEM (original equipment manufacturer) of handsets running someone else’s operating system.

Nokia World: If betting on recovery purely basis hardware be the signs, Nokia is not out of the woods yet. Nokia will need more than a structural change in thought with regards to software and user experience. It will need a more fundamental change in the way they see the horse (software) and the cart (hardware).Currently the focus is quite the opposite.

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  1. […] terms of market share. The Nokia Dual SIM handsets would certainly get additional sales, but it is difficult for Nokia to come back to 36% in view of steady growth of the white-labeled handset […]

  2. […] Nokia stocks took the hammer today and haemorrhaged 17.5%, following a dramatic downgrade of its 2Q,2011 outlook. Nokia expects net sales from its Devices and Services division to be substantially below its previously expected range of 6.1 billion euros to 6.6 billion euros ($8.77 billion to to $9.48 billion) it previously expected. Nokia expected to earn somewhere between $530 and $850 million off its Devices and Services business this quarter, and now expects those figures to be “substantially lower”—right around a breakeven point. The second quarter results are expected by July 2011. […]

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