Nokia’s downward slide worsens
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.
Nokia’s dilemma in choice of OSs
“.. we must build, catalyze, and/or join a competitive ecosystem”.
Stephen Elop has sent the rumour mills ablaze with the statement of “joining” a competitive ecosystem. Elop’s first quarter at the helm of Nokia operations has seen a mix of good and bad news for the no.1 mobile devices company in the world. Net Sales have grown but profits have nose dived and while ASPs have been north directed, Nokia’s fall in smartphone market shares have been staggering. Elop is having a rough time steadying the ship and is now expected to announce major changes in strategy on 11th February. Many see it to be Nokia’s move into Android or Windows Phone.
Nokia already has Symbian and Meego Oss for its devices. While, there is merit in letting the ageing Symbian slowly drop off and possibly feature it only at the low end devices, Meego would be Nokia’s high end devices.Unfortunately, there is a little problem: a phone today is appealing if it comes with developers. And developers go where there are a lot of phones. There are no MeeGo phones, therefore there are no Meego developers.Developers today build for iPhone first, then Android. If they have a good reason (i.e. Microsoft paying) they build for Windows Phone 7. If they are in the enterprise, maybe they look at BlackBerry. If they want to support the existing bunch of devices, they suffer and go with Symbian as well. Hard to think they will pick yet-another-OS
Will developers go for MeeGo? Honestly, it is hard to be optimistic. Thus, there is just one alternative, unimaginable until a year ago: that Nokia will start building phones with a third party OS, like any other device manufacturer excluding Apple.
Options? Probably just two: Android or Windows Phone 7.
While Elop could leverage his old roots at Microsoft to forge a new Nokia-WinMo combo, there is one problem – Windows Phone 7 is still not a winner (yet) and it needs to attract developers (a lot). Going with Microsoft is a bigger risk, but Nokia will be treated as “special” for sure by Microsoft. In any case, it must be an attractive proposition, because Microsoft will offer the moon.Windows Phone 7 needs developers and, possibly, having Nokia behind it will attract them. If that happens, we’ll have a third OS with equal chances to Android and iOS.
However, Nokia could take the Android root. Google is not the easier partner to work with and Nokia will probably not be considered “special” by them. But it is a sure bet. Nokia with Android will sell a lot. It is a killer combination.
So, from what it looks Elop would have to choose between being Android’s many wives, loosing differentiation but boosting sales or partnering with WinMo, which will take time in terms of the developers base building up, sales kicking in. What is it… the Hobson’s choice?
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