Nokia Corp. (NYSE: NOK) is facing yet another hurdle in its efforts to regain its mojo in the mobile communications market. The Finnish handset maker aligned itself late last year with Microsoft Corp. (Nasdaq: MSFT) by adopting Microsoft's Windows operating system for its smartphones.
When Microsoft launches its latest version, Windows Phone 8, in the fall, the software won't be able to run on Nokia's Lumia phones. Analysts believe this will hamper Nokia's efforts to sell more Lumias as users wait for Windows Phone 8.
This will have a significant impact on Nokia's already-shaky financial performance, according to an article in today's Wall Street Journal. Nokia's annual sales fell to approximately €38.7 billion (US$50 billion) in 2011, down from €42.5 billion in 2010 and €50.7 billion in 2008. Analysts estimate Nokia's 2012 sales could decline more than 20 percent to $39.5 billion.
Many in the industry believe Nokia's decision to back Microsoft was one in a series of missteps that has hurt the once-prominent market leader.
"A lot of people equate Nokia's downfall to the company's inability to catch up with the smartphone business, but I think that's missing the point," Junko Yoshida, former Editor-in-Chief of EE Times, told readers yesterday in a live chat. "Where Nokia truly failed is in its bread and butter business -- feature phones." To read the entire dialogue, click here.
tirlapur: I would agree with you. Nokia definitely has some good features including battery life, camera and CPU's. However, like you said they have hampered their sales due to the lack of OS options. Since, windows mobile and symbian OS have failed to capture the market as iOS and Android. Nokia is loosing its market share because of the lack of mobile OS platforms.
The focus should be on improving sales in its segment rather than on seeking a safer business.
@Bolaji, I totally agree with you.I believe Nokia's core strength is its hardware. I am impressed with the Nokia mobile's battery life and camera picture quality. All Nokia needs to do is to adopt multiple OS so that OS is not the bottleneck for its growth.
Tirlapur, I agree. Nokia is in trouble but it is still a formidable company and it would be in even more trouble if it leaves the phone business. There are no "safe" businesses anywhere. The company is taking steps to recover and it has a chance of recovering if costs go down and sales go up. The focus should be on improving sales in its segment rather than on seeking a safer business.
Owen, The deal would make sense for Microsoft. If only for the patents Nokia has. Microsoft would have to pay a nice premium but even a 30 percent to 40 percent premium would still be nice for Microsoft. For Nokia, the offer might be too painful to accept but look at what is happening currently to RIM. I don't believe Nokia will fall into the same hole but it's not gaining traction right now and this could be a way out.
(Excerpt from a recent article published by Forbes re: Microsoft acquisition of Nokia)
A few data points to consider :
.Nokia is now valued at almost exactly what they paid for the Navteq mapping business in 2007. (They bought it for $8.1 billion.)
.Microsoft paid $8.5 billion for Skype, more than the current market cap of Nokia.
.Google paid $12.5 billion for Motorola Mobility, which has far lower market share in the mobile phone market than Nokia.
.Nokia at the end of the first quarter had about $6 billion in net cash...
....which means the company's patents and ongoing business are carrying a valuation of just $2.2 billion.
.HP paid $1.2 billion for Palm. Just sayin'.
.Nokia has by its own calculation 10,000 "patent families."
.Microsoft recently paid $1 billion for more than 800 patents from AOL.
If Microsoft were to buy Nokia, they could draw down some of their massive pile of overseas cash, which can't be used for U.S. acquisitions or to pay dividends or buy back stock without incurring a huge U.S. tax liability. (That was one of the attractions of the Skype deal.)
Is it possible that Nokia will leave the phone business and reinvent itself into a safer business?
@Hospice_Houngbo, I dont think its good idea to leave the phone business at this juncture. Nokia is still spending on new Product Development in China. Looks like Nokia is still optimistic about emerging markets.
we are not certain if Nokia would have been any better without that alliance with Microsoft.
@Hospice, I think Nokia would have been in better postition if they had adopted Android instead of MS. Nokia wasted precious 2 years of development time instead of capturing the smartphone market.
@Hospice_, Nokia's collaboration with Microsoft has not been fruitful. Nokia abandoned their OS in the hope that they can rely totally on MS and the two will be good partners as together they have hardware and software expertise. Now MS launching their own hardware devices, Nokia will be in a lurch.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback 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.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
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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