iSuppli: Intel-Nokia Partnership Takes a ‘Serious Beating’

Research firm {complink 7427|IHS iSuppli} has concluded that the relationship between {complink 2657|Intel Corp.} and {complink 3847|Nokia Corp.} will take a “serious beating” following the mobile equipment vendor's decision to adopt {complink 3426|Microsoft Corp.} Windows operating system as the platform for its smartphones. The selection of Windows OS means Nokia will eventually have to ditch MeeGo, its operating platform supported by Intel.

“Nokia’s Intel Corp. relationship, which centers on the MeeGo operating system, has taken a serious beating with the Microsoft agreement,” iSuppli said in a research report. “Nokia said it still expects to ship a MeeGo-based smart phone later this year. However, it’s difficult not to view the Microsoft deal as anything other than an abandonment of MeeGo.”

In its analysis of Nokia's recent decision, iSuppli warned that the Finnish company's smartphone shipments will fall sharply in 2011 as customers wait for it to roll out Windows-based equipment. iSuppli said it slashed its “Nokia shipment forecast significantly during every year through 2014,” because the company's immediate “prospects are definitely negative” while the “longer-term implication of the deal is to add uncertainty to Nokia's overall outlook.”

The assessment from iSuppli is similar to other negative short-term outlooks for Nokia from other research firms that have slashed their revenue and profit forecasts for the company. HSBC Securities analyst Richard Dineen, for instance, cut his rating on the company to Underweight, adding “we understand Nokia's thinking behind its decision to adopt Microsoft's Windows Phone as its primary smartphone platform over Google Android — fearing rapid commoditization were it to choose Android instead. Nonetheless, we believe that this course of action is too little and too long-dated to successfully turn around Nokia's fortunes in the smartphone space.”

The lowered ratings have hurt Nokia on the equity market, and the company's market value has fallen several billions in only the last five days. On Friday, after it announced the deal with Microsoft, its shares slipped 14 percent, and they dropped an additional 5 percent on the next trading day. The company's American Depositary Receipts (ADR) closed on Monday at $8.84, not much more than half of the 52-week high price of $15.89. In pre-trading today, the shares have strengthened almost 1 percent, demonstrating investors believe the decline had been overdone.

Here are the key points of the iSuppli report:

  • Nokia Corp.’s agreement with Microsoft Corp. to make Windows Phone 7 its principal operating system is likely to have a negative near-term impact on the mobile handset leader’s smart phone shipments. With the announcement of the deal, Nokia is eliminating any incentive for consumers and developers to buy into its existing smart phone products, which are based on its Symbian and MeeGo operating systems. With the Microsoft deal unlikely to yield any products for nearly one year, Nokia will have no choice except to remain awkwardly reliant on the Symbian and MeeGo platforms in 2011. This will have a further negative impact on the Nokia’s already eroding position in smart phones.
  • The Microsoft deal also could have negative implications for Nokia’s smart phone business during the long term. Unrelated to this news, IHS recently cut its Nokia shipment forecast significantly during every year through 2014. Although Nokia’s immediate prospects are definitely negative, the longer-term implication of the deal is to add uncertainty to Nokia’s overall outlook. This forebodes ill for Nokia, which doesn’t need additional doubt in its story as it strives to maintain consumer and developer interest.
  • With the news, Nokia issued new guidance for its smart phone sales, saying that 2011 and 2012 will be transition years but that it will grow faster than the market thereafter. Nokia said it still expects to sell 150 more million Symbian devices in years to come, giving an indication of how it expects the Phone 7 handoff to work. IHS now forecasts that Nokia will ship 122 million smart phones in 2011. Assuming Nokia’s internal forecast is similar to ours, Nokia’s Symbian sales guidance implies the Windows Phone 7 transition will occur in early 2012, although a Phone 7 model is likely to arrive before the end of 2011.
  • Nokia’s Intel Corp. relationship, which centers of the MeeGo operating system, has taken a serious beating with the Microsoft agreement. Nokia said it still expects to ship a MeeGo-based smart phone later this year. However, it’s difficult not to view the Microsoft deal as anything other than an abandonment of MeeGo.
  • If Nokia wanted to leave mobile operating system development to another company, IHS thinks Google Inc. and its Android software would have been a better choice. Nokia could have reaped many of the benefits it expects with the Microsoft relationship from either Google or Microsoft. But clearly, the unspecified billions in Microsoft cash payments were an important motivating factor in entering into the deal.

3 comments on “iSuppli: Intel-Nokia Partnership Takes a ‘Serious Beating’

  1. eemom
    February 15, 2011

    This analysis mirrors what has been discussed on this board and even what the polls on this site are indicating.  This was a very risky move by a company who is loosing market share.  I understand that they didn't want to jump on the Android bandwagon but with Nokia's name, it would have made more sense than sacrifice two years to try and catch up.  I would be curious as to who Nokia thinks would buy their Symbian and MeeGo phones since they are both dying platforms. 


  2. DataCrunch
    February 16, 2011

    I would assume that Intel had a deal with Nokia to use Intel chips in smartphones that ship with MeeGo and with a history of Microsoft and Intel (Wintel) working together, I would also assume that Intel will benefit from the Nok-Win deal.    Although in an interview in Barcelona, the Intel CEO stated that he believes MeeGo still has a future event after the Nok-Win deal.  The Intel CEO also confirmed that MeeGo will be on tablets this year, as well as used in mobile phones and the automotive industry will be utilizing embedded MeeGo in vehicles.  This should be interesting to see. 

    As for iSuppli’s short term negative forecast for Nokia, they may be right.

  3. Ashu001
    February 28, 2011

    A lot of people seem to think that there is little in the Mobile OS space beyond Android,Apple and Blackberry.

    When in fact Windows mobile also has many advantages-like no need for users to adapt to a new platform.So users obviously feel much more comfortable.

    Also Microsoft can leverage all its existing relationships in the PC space to the hilt here to generate maximum mileage for its smartphones here.

    No doubt that Android is the Big Gorilla in the room,but Microsoft can also throw billions at the problem and eventually come out on top.



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