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.
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.
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.
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 !
Why did they lose faith in their existing Symbian OS and decided to switch to Windows?
I think panic and uncertainty could have lead to decision --- ditching Symbian for Windows. Market is too tight for Nokia now to get back to its past glory.
@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.
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?
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.
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.
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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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