Will Microsoft’s fragmentation take Nokia down?
Even while Windows8 has just been announced, the spectre of platform fragmentation is turning out to be a real bogey for the bealeagured Nokia.
Nokia shares plunged 18 percent this June after forecasting a wider second-quarter operating loss from handsets and 10,000 job cuts. After wiping out about $100 billion in market value, Espoo, Finland- based Nokia trades at a 38 percent discount to its net assets, the least expensive on record, according to data compiled by Bloomberg dating back to 1995.
Reeling under the impact of business slowdown, loss of market share both in smartphone as well as low and mid range, Nokia had pinned all its hopes on the Windows platform as a differentiator and a saviour. However, if the Windows8 is any indication Microsoft doesnot really accord as faith and importance to Nokia as much as Nokia would have really liked it. The Windows8 will be released with 4 OEMs – Samsung, Nokia, HTC and Huawei. Thats not much comforting for Nokia having to vie with an in-form Samsung .
6 months back, the Lumia 900 was considered the exemplar of Microsoft’s new operating system, Windows Phone. However, the saviour of Nokia smartphones was not quite the messiah it was touted to be. As a result of poorly planned platform migration, Microsoft Windows8 would not be available to Lumia 900 owners. Eevn while Nokia sold two million Lumia handsets in the first quarter of 2012 but the company’s top device has essentially been rendered out of date within a year.
This can be looked at from two ways – Microsoft’s platform fragmentation and its inability to bridge the Windows7.5 and Windows8 platforms can leave a lot of the early OEMs high and dry. Worse with the hype and hoopla around Windows8, sales of the Windows7.5 devices are effectively going to stall for a while. The OEMs will be under pressure to undercut prices for distress sales. Thats not great for the bottomline of Nokia which has increasingly been loosing faith with the markets. (Moody’s, Fitch and S&P have already cut down Nokia’s credit rating to Junk).
Secondly, while, Elop’s strategy of jumping of the Symbian “burning platform” was good forbearance, its deserting of Meego and “dont even touch it” stance with Android have really not worked for Elop. Possibly a risk diversification would have helped especially with the Meego platform.
So while Windows fragments, Nokia’s primal fear is to stay afloat in an environment which evolves from Windows7.5 to Windows8 on cash reserves which aren’t comforting really. Will Nokia see the end of 2012? 60-40 it wont.