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IHS: Nokia Windows Phone Strategy ‘On Brink of Failing’

{complink 3847|Nokia Corp.} 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 {complink 379|Apple Inc.} iPhones and {complink 2294|Google} 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 {complink 3426|Microsoft Corp.}. 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 {complink 12925|Motorola Mobility Inc.} 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.

31 comments on “IHS: Nokia Windows Phone Strategy ‘On Brink of Failing’

  1. ITempire
    April 14, 2012

    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.

  2. Anna Young
    April 14, 2012

    “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.

  3. prabhakar_deosthali
    April 14, 2012

    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.

  4. _hm
    April 14, 2012

    Nokia can look for new and different market and will get eventual breakthrough in near future.

  5. Houngbo_Hospice
    April 14, 2012

    @_hm

    “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.

  6. Houngbo_Hospice
    April 14, 2012

    It seems that the end is coming for the Finnish company. When you have little tactical room with no apparent backup strategy, you have certainly reached a critical point in your business.

  7. t.alex
    April 14, 2012

    How many Lumia phones have been shipped so far?

  8. Nemos
    April 14, 2012

    “Nokia stands on the brink of failing with its smartphone strategy, again.” Despite the lack in shipment, I believe Nokia is in the good path right now. I have changed my mind since I heard excellent reviews about the new windows 7 for tablets (something similar will see on the mobiles also).

  9. Wale Bakare
    April 15, 2012

    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.

  10. Taimoor Zubar
    April 15, 2012

    @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.

  11. ITempire
    April 15, 2012

    @ Wale

    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.  

  12. Taimoor Zubar
    April 15, 2012

    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.

  13. Cryptoman
    April 15, 2012

    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 !

     

     

  14. Wale Bakare
    April 15, 2012

    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.

  15. Wale Bakare
    April 15, 2012

    @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.

  16. ITempire
    April 16, 2012

    @ Wale

    “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.

  17. Jay_Bond
    April 16, 2012

    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.

  18. bolaji ojo
    April 16, 2012

    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?

  19. bolaji ojo
    April 16, 2012

    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.

  20. bolaji ojo
    April 16, 2012

    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.

  21. Nemos
    April 16, 2012

    Yes it is a speculation of course, and it is based at the very good reviews that the windows 7 platform has until now.

  22. t.alex
    April 16, 2012

    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..

  23. _hm
    April 16, 2012

    I do have Nokia Symbian mobile. It work very good for my son and he is very happy. Nokia should revive Symbian OS.

     

  24. Himanshugupta
    April 17, 2012

    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.

  25. bolaji ojo
    April 17, 2012

    This is the headline of a story on Nokia this morning: “Nokia can't compete with Apple, Android, say European carriers”. Nuff said.

  26. Barbara Jorgensen
    April 17, 2012

    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.

  27. bolaji ojo
    April 18, 2012

    Barbara, So, what's the survival strategy Nokia should be looking at? It may be too early to conclude but I am even more convinced Nokia is backing the wrong operating system in Windows OS.

  28. Barbara Jorgensen
    April 18, 2012

    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.

  29. bolaji ojo
    April 18, 2012

    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.

  30. Anna Young
    April 23, 2012

    @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.

  31. bolaji ojo
    April 23, 2012

    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.

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