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.