Nokia Corp. (NYSE: NOK) is not shipping enough of its Lumia smartphone to make a dent in the market or pull itself up to be more competitive. CEO Stephen Elop has said as much in a statement pre-announcing the company's first quarter results.
I also pointed out in a previous blog that the company faces major hurdles and may find itself chasing the tail of the opponents as Apple Inc. (Nasdaq: AAPL) iPhones and Google (Nasdaq: GOOG) Android devices accelerate market gains.
Nothing in the above is new. However, analysts are beginning to question Nokia's ability to regain market share and even doubt the strength of its alliance with Microsoft Corp. (Nasdaq: MSFT). That relationship was supposed to help Nokia better compete against Apple and Samsung while breathing new life into Windows smartphone operating system.
I found a recent report on Nokia by Ian Fogg, an analyst with market research firm IHS Inc. both educative and alarming. I have reproduced it below. Nokia's shareholders and other stakeholders (employees, suppliers, and customers) need to forcefully prod management for the kind of shakeup that may revive the company's fortune.
The concerns Fogg raised about Nokia are similar to the ones many identified in the case of Motorola Mobility Inc. (NYSE: MMI) years ago. The company failed to stem the losses and ended up being acquired by Internet search engine provider Google. Nokia may be able to turn itself around -- if it gets the correct treatment. The following paragraphs were excerpted from Fogg's analysis:
Nokia stands on the brink of failing with its smartphone strategy, again. Just over a year ago, in February 2011, Nokia chose to switch from Symbian to Windows Phone as its primary smartphone software. Now, Nokia's Lumia range have been on sale for four months, but Nokia is struggling to achieve sales traction. For every Lumia smartphone shipped in Q1, Nokia shipped five smartphones running the legacy Symbian OS that Nokia is winding down.
Nokia's smartphone revenues make for no better reading. Across all of Nokia's smartphones their gross margins were poor at just 16 percent. The problem for Nokia is that when poor phone shipment results combine with poor revenues at the same time there is little room to maneuver. Nokia has a little tactical room, but it will rapidly vanish unless the results improve in Q2 and Q3.
Nokia's poor results with Windows Phone are not due to Nokia's failures. The Lumia devices have attractive and differentiated industrial design, in a smartphone market where every handset maker is struggling to stand out. Nokia shipped the launch devices on time and at attractive prices. Nokia's problem is that Microsoft appears to have stood still. A year and a half after Windows Phone 7's debut, it has changed little. In effect, the gap in features between Windows Phone and Android or the iPhone has widened and not shrunk as Nokia needed it to.
This current second quarter is the critical time for Nokia and for Microsoft. The Lumia 900, Nokia's first Windows Phone flagship in the US has just gone on sale. The Lumia 900 has to succeed. With large US sales will come a large attractive market of consumers that will encourage the US-headquartered Internet companies to build the quality apps that Windows Phone so desperately needs. With US failure, Nokia will be locked out of the premium part of the US handset market, again, and Windows Phone will need a complete rethink.
When [Nokia] CEO Stephen Elop made the brave move to embrace Windows Phone, he said there was no plan B. Given the results to date, IHS Screen Digest believes that now is the time for Nokia to create a back up strategy to the current Windows Phone endeavor.
I am feeling sympathetic to Nokia over and over again. While being the pioneer of quality and cheap phones in the last 2 decades, I cant believe that within 3-4 years time it stands nowhere esp in the smartphone category. And failing in the smartphone category means failing in the future.
Meanwhile, with rocks thrown from all over the place, Nokia needs to believe in its ability to build user-friendly and quality phones and it will not be for the first time that it has to do it. It carries tons of experience which other manufacturers dont have, atleast that to Nokia's extent and this should be a big plus for Nokia to make a come back.
Also, its worth mentioning that Nokia has still not lost its reputation that much in many developing and under-developed economies, which are and have been big markets in terms of units sold and Nokia should make them their target market if it needs to capture some of smartphone market's ground.
"A year and a half after Windows Phone 7's debut, it has changed little. In effect, the gap in features between Windows Phone and Android or the iPhone has widened and not shrunk as Nokia needed it to".
I think Nokia will need to come up with a quick strategy here. It is unlikely Lumia 900 will bring Nokia the leverage anticipated at least not in the US by all accounts.
Nokia's LUMIA model is being advertised very agreesively in India market with a lot of TV commercials and it seems to have made some imapct here . Recently I saw my niece buying this phone and it looked really sleek , light weight compared to the Samsung Galaxy and elegant.
In India Nokia brand very popular because of a very sturdy and durable design of its phones and I am sure with agressive marketing here Nokia can regain its leadership position.
"Nokia can look for new and different market and will get eventual breakthrough in near future."
Easier said than done. This new and different market is called "emerging countries". But there Nokia can just sell its low-cost products. Obviousely, that cannot help the company compete with its rivals.
I like the Lumia phone in terms of it's looks and hardware specifications. However, compared to Android, the downside to it would be that there will not be a large number of apps available for Windows Phone right now. If Nokia and Microsoft really need to make a name for themselves in the smartphone market, they have to engage more developers into making apps on Windows platform so that they can compete with Andrioid and iOS.
That would probably dependent on how consumers see attractiveness in the phone. In US and Europe Apple has the total control, where in Asia and Africa market portion has been slashed into pieces to scramble for --- there competitive seem far dictative by low income earners unlike in US and Europe.
Good point raised. There is still a considerable % of mobile users in many countries that have not yet shifted to smartphones and for Nokia, those should be the potential consumers that may try out Windows based smartphones. However, to capture this potential customer segment, cheap handsets and good marketing are the key which can override the widespread word of already smartphone users of IOS and Android. We should not yet write off Nokia's Windows adoption decision and may be there is a lot to come.
@WaqasAltaf, thanks. Do you think iPhone and iPad series are really appealing to larger percentage of mobile consumers in those areas? Considering lot on extreme low incomes. Nonetheless, if Nokia had taken the advantage fighting it out with few Android based phone makers, who have little or no credibility in phone business then by now it would have probably be in market front foot.
"Do you think iPhone and iPad series are really appealing to larger percentage of mobile consumers in those areas?"
Yes. In this era of global village, the grapevine is so rapid that every news about whats best in the market spreads lightening fast. However, when we compare the reputation of Nokia in the developed economies (which I assume has been strucken quite bad) with that in developing and underdeveloped economies, it still aint that bad. So before left positive reputation of Nokia catches fire too, Nokia should come back hard and only way to do it is right marketing and cheap products. That shouldnt be as easy as I recommend; I know.
"Nokia stands on the brink of failing with its smartphone strategy, again." Despitethelackinshipment,IbelieveNokiaisinthegoodpathrightnow.IhavechangedmymindsinceIheardexcellentreviewsaboutthenewwindows7fortablets(somethingsimilarwillseeonthemobilesalso).
@Nemos: Nokia's success with Windows is still a speculation and no concrete results are out yet which can indicate how profitable the move was for Nokia. I still think Nokia made a very premature decision by signing up for a Windows-based tablet without properly assessing the success with Windows-based smartphones.
"...the very good reviews that the windows 7 platform has until now."
"Until now." Lol.
Well, I'm glad it got good reviews. It may time to join the collective, which may have been the secret message behind CEO Elop's announcement ("Only the Lonely," see below). In other words, when a user joins Microsoft by getting a smartphone with Windows inside, that person will never be lonely again, as he or she will then become part of the Microsoft interconnected community, of which Bill Gates is the central religious figure, and Nokia CEO Elop his son. Elop will then be promoted by one rank in the alphabet from E to F. (And don't say Elop is Pole spelled backwards, because you've already missed your chance, and, besides, we refuse to take the blame.)
In all seriousness, though, I hope their new phone is boffo good. I root for them to succeed, the same way I root for the Mets and Cubs.
And if they let me review it, I might find some good things to say (if I can find good things) I have been brutally honest in the past, and was very unhappy when I had to write bad reviews, because it sometimes meant the loss of a huge amount of work on the part of one company or another--bad work, it turned out--but when the product is already offered for sale, then the reviews have to be honest. Better that a company asks for private reviews before release of the product, and then incorporates the suggestions, but then again maybe the market moves too quickly for very extensive QA feedback.
I think Nokia truly messed up the transition from its excellent mobile phones to the smartphone market. I am not sure why that happened or how it was allowed to happen. With such a huge market share on the mobile phone market in the past, where did it all go wrong for Nokia in the smartphone market? Why did they lose faith in their existing Symbian OS and decided to switch to Windows? Was Symbian's capabilities so much inferior to Windows to prompt such a sudden change in direction?
I have ben a loyal Nokia customer until recently when I bought an N8 with confidence because it carried the trustworthy Nokia brand on it. However, the disappointments I had with this smartphone made me go cold turkey on Nokia's smartphones altogether. I am sure I am not the only customer who feels this way. I have been reading many posts by other smartphone victims who have moved away from Nokia.
Therefore, besides the technical reasons why Nokia's smartphones are not doing well, one big reason for Nokia's failure is the loss of customer confidence. Nokia should have never rolled out substandard smartphones to the market to make a quick buck. That was a huge mistake; a mistake that Nokia is and will be paying for for months to come. The first smartphone from Nokia should have been something eye catching, reliable and usable. That would have really helped Nokia to make its mark besides other smartphone giants.
The question Nokia should be asking itself now is not which operating system or which touchscreen but how to restore the customer confidence that has been lost. I am not sure how Nokia will achieve this but judging by the way things are going if tomorrow Nokia announces that it will close its smartphone shop and open a tablet/PC shop with Windows OS on it, I would not be surprised !
Wale, Nokia panicked. That verdict may seem unjust to the current management but I believe it sums the situation where CEO Stephen Elop threw the baby out with the bath water. Symbian had a respectable market share and it could have been pushed harder, its kinks worked out and backed with great hardware.
People are touting Nokia's Lumia today but that's not just because Windows OS is so terrific but because the underlying hardware is attractive. Symbian should have done for Nokia what Windows OS is doing for the company today. They underestimated the impact of the decision to dump Symbian.
I myself is also Nokia user for quite sometime. The device hardware lasts long, the symbian OS is fast and responsive, and hardly did I need to reboot the phone. Until recenty i laid my hand on an Android phone..
The problem with Windows phone that i encounter is that only a few people will carrys such a smartphone. The ecosystem is fragile and as compare to the andriod phones, not so many apps that can keep you and your friends busy. Moreover, if one person has windows and others Andriod then it is just difficult to get enough help or information about configue or apps.
Rich, If Nokia is "lonely" today it's because it pushed itself into the wilderness of the handheld operating system market. It could have chosen Android but instead dropped Symbian for Windows where it is truly an orphan adopter.
"If Nokia is 'lonely' today it's because it pushed itself into the wilderness of the handheld operating system market."
Victims of self-injury still need our love. Maybe Nokia's code-naming of their new smartphone the "Masochism I" was just Nokia's way of tapping into a new customer psychographic. Who knows? They may be on to something. If people want Windows on their smartphone, they may also want to replace the ring tone with an electrode and crisp, high-voltage shock.
I for one want to extend the hand of sympathy and love to CEO Elop, and let him know I have a place for him in my house whenever he wants it (there used to be a bedroom in the basement that I can reconvert).
@Rich Krajewski, you show little sympathy for Nokia's plight :). Nokia's market situation clearly shows that the strategic partnership agreement between both Nokia and Microsoft might be short lived, if market appraisal fails to improve for Nokia I think.
Well, I wouldn't automatically equate making fun with lack of sympathy, or ill will. A lot of the time it is just a way to point out that a situation needs correction (where the correction involves hiring me once I finish my Finnish studies). So my kidding Elop and Nokia isn't really connected with lack of sympathy or ill will. And, besides, Elop et al are so far removed from any harm I could do them, that their well being doesn't depend in the least on what I say. So, I'm free to kid them with clear conscience that my kidding will not dent said Elop's grocery money, but will instead delight the millions and millions of readers who come to this site looking to learn more about the top links in the global supply chain.
I'm especially free to point out Nokia's problems when the New York Times does it, too! Here is an online version of an article they published under the print headline of "Windows Phone's Mixed Success is Slight Salvation for Nokia." (The online version of this article is slightly different, with a different headline and somewhat different text, but it's practically the same article. I checked. Not surprisingly, the online version incorrectly references the print version's headline. The New York Times should hire me to fix those things for them, once I learn New Yorkese.)
In the article, CEO Elop explains that he's irritated with himself. "Clearly, we are disappointed with our performance," he said, barely able to see for the tears flooding his eyes and running down his cheeks. Most people thought the tears were over Nokia's performance, but those in the know realize it is part of separation anxiety. Elop is a child of Microsoft's (he used to work for them), and it is only natural for him to feel upset now that he is living with his other parent, Nokia. It's also no wonder that he wants his new parent Nokia to date his other parent, Microsoft, even though Microsoft rides a broom and wears a peaked hat. All it will take is a little marketing to patch things together and everything will be alright.
In fact, Nokia's marketing department is on the job right now. They have purchased all the rights to the movie The Ten Commandments, and will digitally insert CEO Elop into the role of Moses. He will be shown holding a Lumina cellphone instead of stone tablets. They are thinking of replacing the musical score with some of the Microsoft harmonica music that you currently hear when Windows starts. Microsoft and Nokia will be so proud of Elop, that they will marry immediately. Then the naysayers will open their eyes. My sources tell me that there is a large banner in the Nokia marketing department that says, "Brink of failing!? This will show that Bolaji!"
Okay, here's some preview music until Nokia can get the rights to Microsoft's harmonica music:
Rich, Wicked! Just plain wicked! But seriously, I thought it ridiculous Stephen Elop's claim that he was surprised at the company's performance. What was he expecting? He cuts off the wrong limb and proclaims shock the patient didn't get well. Ridiculous.
As much as Nokia has tried to regain market shares, Microsoft needs to take some of the blame also. They have left the Windows OS stagnant for the last year and that has hurt Nokia. While Nokia was making the change to Windows OS, Microsoft should have been working on the OS and making a splash to draw customers away from Android or Apple.
Right. It's not clear what Microsoft is doing to push Windows OS for handhelds or is this all on Nokia (backed by Microsoft's money)? Is Nokia supposed to be the only company using Microsoft OS aside from a handful of other OEMs?
I've never been a fan of Microsoft although I use its products every day. I simply haven't had the passion--yet--to convert to Apple or Android. I use my cell phone as a phone and that's it. But Android and Apple have clearly captured the imagination of a loyal set of users, and I agree, Nokia embracing Windows instead of promoting its own OS was a bad move in a market that thrives on differentiation.
If I were a phone maker, the last user I would go after is someone such as myself--someone who uses a phone to make and receive phone calls. There are a lot of markets in which being a replacement player is profitable, but mobile phones ain't one of them.
As a fan of plain-vanilla phones, I'm not the best person to advise Nokia, but what I would say is there is not a lot of value in being an also-ran. In other words, Windows is not a differentiator in the cell-phone market. If Nokia is looking to break new ground, Windows is not the way to go. I'm not even sure the poplulation of Windows apps is a good reason to use the Windows OS. Symbian might have been the differentiator Nokia needs, but at this point we may never know.
What puzzles me is why Nokia adopted Windows operating system after deciding to kill Symbian OS. I suppose the amount of money and support Microsoft was willing to throw in convinced Nokia's management and perhaps the relationship CEO Elop had previously with Microsoft where he previously worked. Beyond that, it didn't make sense to go and support "an also ran" as you put it.
Symbian may have been problematic for Nokia in that it had been overtaken by Apple and Android but it still had a bigger market share than Windows OS. Finally, why couldn't Nokia simply insist on supporting at least two operating systems? Why reject Android? Google might have been convinced to also support Nokia although its decision to buy Motorola Mobility may have been a hurdle.
Finally, today, I don't even think about the operating system behind the phone when making a purchase. I don't care whether it's Android, Symbian or Windows (please note I didn't include Apple iOS). I just want the device to work well and be easy to use. That's all. I wouldn't care either whether it is a Motorola Mobility, Nokia or Samsung device. It doesn't matter that much anymore. I buy based on what I see (aesthetic) and ease of usage. Could Nokia managers be finally convinced they don't need this "we-are-Windows" slogan? They need to focus on hardware and let the OS market sort itself out.
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.