Ronnie05's Blog

Nokia’s downward slide worsens

Posted in Mobile Devices and Company Updates by Manas Ganguly on May 9, 2011

My last blog on Nokia had appeared 3 months back. That was around Nokia WP7 tie-up. Nokia has been having a continually downward spiral and generally unexciting products over the last 4 years now. To me the last of Nokia’s giant products was really the Nokia N-95. After that, Nokia slipped into a catch up game trying to match Blackberry, Android and Apple innovations.

A precipitate of Nokia’s slow, steady decline is now that Nokia is loosing market dominance in the very markets where it was unbeatable till a few quarters back. For instance, in Western Europe which was Nokia’s backyard, Q1,2011 saw Nokia being relegated to No.2 position in Mobile phones and in Smartphones. Samsung and Apple are the new leaders in mobiles and smartphone categories. While Nokia’s decline has been a long time coming, this sea change in its home market underscores just how much ground the company is losing in traditional areas of strength.

Nokia is one of the most recognized and appreciated brands in Europe, but Samsung was the one understanding the trends first and moving faster. Samsung understood early the trend on touchscreen devices and became the market leader on feature-phones by providing a full range of devices at very competitive prices. On smartphones, Samsung has quickly moved to Android as well as investing in its own platform, Bada. Flexibility and being able to address all market segments have contributed to Samsung’s ability to quickly adjust to the market trends.

Apple, on the other hand, coming from nowhere in the mobile phone business, capitalized on its strong brand and user-experience innovation. It took years for competitors to come up with devices that could challenge consumers’ preference for the iPhone. And now, iPhone has caught the fancy of all and is galloping up in volumes. Like Western Europe, Apple is mounting the pressure on Nokia volumes globally as well. There were 5 million units that separated Apple from Nokia in the Q1,2011 Smartphone shipments. While Nokia tries staying afloat with rehashed Symbian and Annas, Apple’s juggernaut has been more definitive in terms of its upswings.

Stephen Elop’s illustrations on “How to put Symbian to sleep?”

It has become increasingly hard to see how the once-mighty Nokia can ever regain its formidable status. For a company that once dominated the handset market, its first-quarter results and the planned cuts in operating expenses seem to condemn the company to a slow decline over the next two to three years into a faint shadow of its former glory.The company has failed on so many fronts that only its low-end products are seemingly saving it from complete annihilation.
What happened to cause such a hugely successful company to fail will be analysed by many aspiring business graduates and industry experts alike. But there is no simple answer to this debacle.

The next few quarters are going to be very dicey for Nokia. The Nokia-WP7 alliance would be rolling in 2012 onwards and Symbian’s slow death is a planned inevitability (see Elop’s presentation themes on Symbian phase out). Having said that Elop wants to sell another 150 million Symbian Smartphones. The question that begs an answer here is if Symbian is the proverbial burning deck, then why would a user buy it in the first place. That puts into question, will Elop make 150 million Symbian studded Nokia Smartphones sell? The statistic and the argument don’t feel compelling enough. Nokia could be relegated to 10% of the smartphone market shares before WP7 is launched. That could be a disaster situation for Nokia but that is what stares beleaguered Nokia at its face.

With its share price at a 13-year low, it’s perhaps difficult to imagine if Nokia can sink any lower in terms of its worth.
The latest to cast doubt on the company’s hopes has been the ratings agency Moody, which last week downgraded Nokia’s credit rating from A2 to A3. This followed a similar move by Standard & Poor’s a week earlier.The analyst viewpoints driving this demotion have revolved around the probability of Nokia regaining its dominant market position, given the threats and uncertainty that surround its partnership with Microsoft for the Windows Phone 7 (WP7) platform. Adding salt to Nokia’s open wounds was the reports that the Taiwanese smartphone vendor HTC, Asia’s second-largest smartphone developer, had surpassed Nokia in market capitalization. On balance, HTC’s sudden rise could be attributed to the huge demand for smartphones running on Google’s Android platform, albeit that HTC’s handsets are recognised for being among the best today.

One Response

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  1. […] on Nokia’s face but it did not react compounding the crisis. The Q2,2011 outlook downgrade is the proverbial tipping point and I expect small disasters ahead. We will wait to know if Elop’s Windows Phone association does […]

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