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Another Blow to Nokia

{complink 3847|Nokia Corp.} 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 {complink 3426|Microsoft Corp.} 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.

43 comments on “Another Blow to Nokia

  1. Nemos
    June 22, 2012

    It seems that adopting Microsoft's Windows operating system it was a fatal wrong move and Nokia must change and focus on the Android platform before it is too late for Nokia.

  2. owen
    June 22, 2012

     

    Barbara, the 20% loss some analyst predict for 2012 could be just the tip of the iceberg. Nomura Holdings analysts just slashed projected sales for 2013 by 41%! 

    http://www.valuewalk.com/2012/06/nokia-corporation-nok-sales-estimates-down-41-after-microsoft-snub/


  3. Barbara Jorgensen
    June 22, 2012

    @owen: thanks for the update. Even in the online world, information quickly becomes dated. I really don't know what it will take for Nokia to pull itself out of the spiral: from the financial perspective, every downgrade means it will be harder for Nokia to capitalize whatever it decides to do next.

  4. _hm
    June 23, 2012

    @NemosL: I agree with you. This was like blind gambling on part of Nokia. They should have kept more options open to them. It is never too late. They can embrace Android or similar OS.

  5. prabhakar_deosthali
    June 23, 2012

      By abandoning one proprietary OS Symbian and embracing another propritary OS Windoes , NOKIA has made its biggest mistake. Microsoft , by lauching its own Windows 8 phone has locked out any further progress for Nokia with its Lumia series.

    Nokia is now lost – No Symbian, No Windows , No Android!

  6. Himanshugupta
    June 23, 2012

    Companies collaborate to maximize their focus and effort to capture more market shares and gain more profit or realign strategy so Nokia did not do something unthinkable by switching to windows phone. But Microsoft stab Nokia in the back by launching their own hardware and software, which will not support Nokia's smartphone. If Nokia realign them to Andriod now then they will loose more precious time, which they do not have much.

  7. Daniel
    June 25, 2012

    Nokia, the pioneer in mobile technology had made many blunder mistakes. First is sacking their own OS Symbian, secondly they made themselves keep away from Smartphone sector and third getting tie ups with Microsoft. I still believe that they have opportunities to diversify their production facility for Tablet manufacturing and a compatible version of Windows 8 for Nokia Smartphones.

  8. Eldredge
    June 25, 2012

    This points out the pitfalls of collaborating with actual or potential competitors in any industry. A joint agreement can be potentially benficial to both parties, or it can give one a competitive edge that is difficult to overcome.

  9. owen
    June 25, 2012

    Nokia (NOK) has dropped over 5% in pre-market trading this morning to a 52 week low of $2.26. For those of you with hope of a turn-around, now may be a good entry point. It would seem that their patents alone may be worth more, but their debt could erode much of that before long. My call… there are other more promising opportunities out there.

  10. Anand
    June 25, 2012

    It seems that adopting Microsoft's Windows operating system it was a fatal wrong move 

    @Nemos, I agree with you. I think this move has taken Nokia by surprise. I think the best option for Nokia is to adopt android OS rather than bank on Windows OS. 

  11. Anand
    June 25, 2012

    For those of you with hope of a turn-around, now may be a good entry point.

    @Owen, why do you think this is the good entry point ? Its always dangerous to catch a stock which is in free fall. I think its better to wait till clear picture emerges rather than enter the stock at this point.

  12. Anand
    June 25, 2012

    secondly they made themselves keep away from Smartphone sector 

    @Jacob, I dont think Nokia stayed away from smartphone sector. They did release some smartphones based on Symbian. But their biggest mistake was that they stayed away from android. Android became instant hit among users because of “Android market”. I think they can definitely make a comeback if they release smartphones based on Android OS.

  13. Anand
    June 25, 2012

    I understand that Nokia is going to replace CEO Elop with Conan O'Brien.

    @Rich, thanks for sharing this info. Any particular reason behind this sudden replacement ? Is Conan O'Brien in favour of adopting Android OS ?

  14. Anand
    June 25, 2012

     If Nokia realign them to Andriod now then they will loose more precious time, which they do not have much.

    @ Himanshugupta, but Nokia doesn't have any other option other than adopting Android OS. Nokia has one of the best hardward features available and if they adopt android OS, I am sure they will give tough competition to Samsung and LG.

  15. Anand
    June 25, 2012

    Nokia is now lost – No Symbian, No Windows , No Android!

    @ prabhakar_deosthali, Infact this can act as advantage to Nokia. It can support Symbian OS, it can support Windows OS. So all Nokia has to do is release android based Nokia smartphones. This will give Nokia the OS diversity and thus it will help it to capture greater market share.

  16. owen
    June 25, 2012

    anandvy, Personally I agree with you and wouldn't touch it, but there are those who, like Finland Economy minister Jyri Hakamie who has said “I believe that we can turn Nokia's current crises into new opportunities and spread the highly skillful talent and innovation capacity to other sectors”. I have serious doubts and believe it to be a highly risky proposition, but their are those who can afford the chance, and look for long shots. BTW the market just openned and NOK is down over 7% to $2.21!

  17. Anand
    June 25, 2012

    “I believe that we can turn Nokia's current crises into new opportunities and spread the highly skillful talent and innovation capacity to other sectors”

    @Owen, thanks for the reply. What exactly does   Jyri Hakamie mean by this ? Is he referring 10000+ people who were asked to quit Nokia ? How exactly this will help for Nokia's revival ?

  18. owen
    June 25, 2012

    anandvy, Sorry but I don't know what he means, nor do I share his optimism. Their patents, according to a recent Seeking Alpha article (http://seekingalpha.com/article/680101-nokia-start-of-a-comeback?source=google_news) mentions “Nokia's CFO announced he would be willing to sell part of this portfolio to improve the companies cash flow…Nokia has more than 30,000 patents and 10,000 patented innovations, which generate approximately $635 million in revenue each year.” That's the only bright spot as it were that I can see. 

  19. Anand
    June 25, 2012

    Nokia's CFO announced he would be willing to sell part of this portfolio to improve the companies cash flow

    @Owen, really sad to hear that Nokia is planning to sell part of its portfolio.  According to your analysis, who will be more interested to buy this portfolio ? Will it be apple or google ?

  20. owen
    June 25, 2012

    anandvy, If and when, I wouldn't be surprised a Chinese “start-up” might be interested…

  21. Barbara Jorgensen
    June 25, 2012

    Wow. That would be tantamount to giving up entirely. From last week's chat, I discovered Nokia's roots go way back to non-electronics items and Nokia has reinvented itself many times. It would be a shame if it is the smartphone that fells this industrial giant.

  22. Houngbo_Hospice
    June 25, 2012

    “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.”

    That may be a valid assumption. But still we are not certain if Nokia would have been any better without that alliance with Microsoft.

  23. Houngbo_Hospice
    June 25, 2012

    Is it possible that Nokia will leave the phone business and reinvent itself into a safer business? Or it is just too late for that. Have Nkia executive ever have a product diversification strategy?

  24. Himanshugupta
    June 26, 2012

    @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. 

  25. SunitaT
    June 26, 2012

    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.

  26. SunitaT
    June 26, 2012

    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.

  27. owen
    June 26, 2012

    (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.)

     

  28. bolaji ojo
    June 26, 2012

    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.

  29. bolaji ojo
    June 26, 2012

    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.

  30. Mr. Roques
    June 26, 2012

    So why aren't Lumia phones going out with Windows 8? Wasnt' this the entire reason of the alliance?

  31. SunitaT
    June 26, 2012

    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. 

  32. syedzunair
    June 26, 2012

    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. 

  33. owen
    June 28, 2012

    Do I hear any bids, how about Huawei @ 7.8 Billion, interested?  

  34. ahdand
    June 30, 2012

    Not bad but do you think Huwawi is that much valuable ? Does it carry or worth to carry that kind of a price tag ?

  35. owen
    June 30, 2012

    @nimantha.d, Sorry, my post was not very clear. I meant to imply that at that price (Nokia's current market cap), give or take, it might be attactive for Huawei to aquire Nokia.

  36. itguyphil
    June 30, 2012

    I guess we will have to wait and see if any fundamental changes are made but I do personally hope it works out with WP8.

  37. t.alex
    July 1, 2012

    The alliance between Nokia and Microsoft really does no good to Nokia but Microsoft. Microsoft gains the knowhow in the process and came up with its own tablet Surface. Won't it hurt Nokia sales further ?

  38. owen
    July 5, 2012

    Finland refuses to step in and buy NOK shares (ala GM). “Nokia's problems are none of the government's business”… A buyout, or partial liqudation of its' patents seems more likely. 

    http://seekingalpha.com/article/701331-nokia-finland-s-no-may-lead-to-buyout


  39. ahdand
    July 6, 2012

    Well owen still im confused that Huwawi is that much stronger in financially to gain the market or capture the market share of Nokia ? I thought nokia has a better share than Huwawi.

  40. owen
    July 20, 2012

    Nimantha.d, Redarding your question as to the market share comparison, I just came across an article in BLOOMBERG BUSINESSWEEK that you may find interesting. “…Huawei Technologies. A company many Americans haven't even heard of may well have passed Nokia last quarter to become the third-largest smartphone maker…” The entire article may be found at:

    http://www.businessweek.com/articles/2012-07-19/the-new-smartphone-powerhouse-huawei


  41. ahdand
    August 6, 2012

    Well thats some news to me. Anyway to pass Nokia is a great achivement. Thanks for sharing.

  42. Mr. Roques
    August 25, 2012

    I believe Nokia was feeling the heat of the android and iphones and decided to make a move. Maybe they should had gone to Android and simply worried about hardware, which they are/were very good at. 

  43. t.alex
    September 1, 2012

    I think so too. Choosing Microsoft is a mistake.

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