This is a painful moment for Stephen Elop, the newly appointed CEO of Nokia Corp. (NYSE: NOK). The man is under withering attack from a battalion of foes who have taken him to task for the decision to replace the company's Symbian operating system with Windows OS. But the controversy and uncertainty dredged up by his action are turning out to be even more painful for Nokia investors, who have seen billions wiped off their holdings in the Espoo, Finland-based company over the last few days.
Today, at the World Mobile Congress conference in Barcelona, Spain, Elop was taken to task by investors and analysts. Here are his justifications for the move:
First, Elop says he is not a "Trojan horse." Yes, he was recruited from Microsoft Corp. (Nasdaq: MSFT) five months ago, but this doesn't mean his mission was to help his former employer establish a more concrete presence in the mobile equipment OS market. Nokia, according to Elop, will be receiving billions from Microsoft over the next few years to fund the development and expansion of the Windows OS.
To reassure Nokia investors, Elop said he will be selling all of his Microsoft shares soon -- he has already sold some, but had to stop for regulatory reasons because the divestment was having a "material effect on both companies." Second, he plans to buy Nokia shares and add to his portfolio of holdings in the company as soon as possible, just to show his conviction the changes being implemented are in the best interests of the mobile equipment vendor.
Furthermore, Nokia did consider adopting Google's Android rather than Windows OS, but Elop chose the Microsoft offering because he believed it was in the best interests of the industry. If Nokia had picked Android, the mobile OS market would have turned into a two-horse race between Google (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL), he said. Selecting Windows OS would create competition and offer OEMs, developers, and consumers a wider variety of offerings, Elop insisted.
Finally, by adopting Windows, Nokia will save on the development cost it is currently pouring into Symbian. This is crucial for Nokia as it is trying to cut down on its R&D and other product development costs. The company will be working on further reducing its total costs over the next couple of years and can use the advantages offered by the Microsoft deal to gain leverage in its operations.
Those were Elop's reasons. I already expressed my take on this in an earlier blog. (See: Nok-Win a No-Win Combination.) However, it bears repeating here that the news that Nokia will be receiving "billions" from Microsoft to facilitate the development and advancement of Windows OS only confirms the perception that other OEMs will gravitate towards Android. Why, for instance, should Samsung Electronics Co. Ltd. (Korea: SEC) continue to support Windows OS when funds for its development are being directed to a competitor? Or, does Microsoft also intend to give Samsung and other mobile OEMs "billions" for Windows OS development and customization?
Furthermore, why has Elop, on behalf of Nokia, taken on the task of ensuring the mobile OS market does not morph into a duopoly landscape where Android and Apple iOS are the only players? The argument is ridiculous, in my opinion. Prior to his decision, the market was competitive enough. Symbian had a greater market share than Windows OS. So, the logic of effectively killing off Symbian to adopt a competing product with a lower market share is highly defective. Certainly, Symbian faced an uncertain future, but so did Windows OS, until Nokia adopted it.
And I don't buy the argument that what clinched the deal for Nokia was the chance to lower development costs associated with Symbian. Adopting Android would have offered the company the same deal, but without some of the murky controversy. Additional information gleaned from press reports indicates that Microsoft will not be giving Nokia cash; rather, it would be in the form of "discounted software licenses, marketing cooperation and other non-cash benefits," according to the UK's Telegraph. (See Nokia chief claims Microsoft deal is worth "billions").
Elop's move has only thrown the Nokia community of developers, partners, and investors into further uncertainty. On Monday, February 14, the market demonstrated its further disapproval of the company's direction by further pounding its stocks, following a spate of downgrades by investment analysts. Shares fell about 4 percent, shaving billions off Nokia's market valuation.
Here's the bottom line. Elop has three years to make this work. Nokia shareholders and workers won't give him a day more, and if he fails to deliver, he will be eased out. That would be a shame because it would only further setback the company, when what it needs most is vision and forceful direction. Nokia's future is murky; for Elop, there's always Microsoft.
Mobile device users determine market trend and which way wind blows for phone makers. More importantly, software application (OS) crucial role in emerging technology and innovation cant be under -estimated. It is the mover and shaker of mobile devices. Who are the leading software technology firms? they are (1) Microsoft (2) perhaps Google.
Due to the innovative spot-on of Google today; this has made pendulum swung in favour of Android platform based smartphones and tablet devices. I salute Google and its bright ideas anyway. Nonetheless, we cant completely rule out future market of Nokia phones. I bet, distinctional design may soon emerge from the partnership of Nokia/Microsoft. And besides, Elop quite understand the huge task ahead of him, and how he could swiftly turn things around for Nokia in the world of smartphones.
Am opininon that Nokia will bounce back by pitching its tent with Microsoft.
It has now become apparent that battle to control markets of smartphone in the world will be strongly determine by capability, scalability and richness of software - OS of phones not only that, even tablet gadgets.
No doubt about it Google's Andorid opened up more fierce battle in smartphone markets. Nonetheless, Nokia to regain its top spot as the leading phone maker has lead to compromise its Symbian OS with Microsoft.
Bolaji and all, there was an intensive discussion at the time of first Nokia-Microsoft announcement; several posts were related to market, strategy, technology, competion in front to major players as Apple, Samsung, Motorola; maybe issues and concerns on organizations and processes weren't discussed in depth. Today is reported Nokia is starting a plan to cut jobs by the end of coming April. Could it be a consequence of the alliance or is it simplest way to save costs and promise to investors in short/mid term good financial results?
Very good article. I share your views and opinions.
In one of the Finnish papers it was published this week that Nokia's share price fell about 20 percent. Investors have also started to say they are not interested in Nokia after the announced partnership. This, obviously, is not a bright beginning and I don't see how it will change.
1) "Nokia, according to Elop, will be receiving billions from Microsoft over the next few years to fund the development and expansion of the Windows OS."
This sounds like Microsoft could be in the position of claiming reign over Nokia in some years' time. It sounds like a trap.
2) "To reassure Nokia investors, Elop said he will be selling all of his Microsoft shares soon"
Yeah, he will be selling his Microsoft shares? What a good dude! He doesn't look like the kind of good samaritan. There is something fishy behind the whole story. He may keep his Microsoft shares somehow.
Investors simply don't look at Nokia as a good investment target anymore after the partnership and are holding back.
If Nokia can't predict now earnings for 2011, who will?
In my opinion every one wants to go with who has technology and proper plan for future,but some people wants go with present and past trends, Elop doesn't belongs to either one.Elop has got three years time to prove him self as a good CEO for Nokia, but adapting microsoft windows OS for Nokia smartphone has no future plan and it pulled Nokia Investors into a big trouble. Elop is not a Trojan Horse, may be worse than that. The way he defends his plan has no sense.
Bolaji, I wouldn’t be surprised if we see a company like VMware in a couple of years offer mobile virtualization platform that can run multiple mobile operating systems simultaneously or at least switch between two or more mobile operating systems.Then users can choose their top two or more preferred mobile operating systems to load on their mobile devices/tablets.The app stores would definitely benefit from this, one device, multiple apps for multiple platforms.
Dave, My money is on Nokia coming out within the next three to five years with a phone equipped with Android. Why are these OEMs boxing themselves in anyway into a platform? If consumers want Android, give them Android and if they want Windows, give them Windows. I don't see how it hurts the OEM aside from the development costs but Google and Microsoft chose to offer operating systems so they should also bear the development costs.
How Elop defends himself sounds quite funny. Giving a chance to Windows since he doen't want the mobile OS race to become a two horse race is completely meaning less. He should had have strong arguments to support his decision to with Micorsoft. But alltogether this might turn out a good one for Nokia also but they can't have their trademark like before. Now people will call it nokia phone with windows os rather than just a nokia phone.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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