You are probably bored to tears reading about Nokia and its current woes, and The Insider is certainly getting bored writing about its spiraling demise, but now the ‘conspiracy theorists’ are sticking their bib in it’s getting interesting again.
Depending on which of the latest news stories covering the massive Q2 losses at Nokia you read, you will either be elated as shareholder or suicidal. Some things, and I don’t mean the accounts, are just not adding up. For a company that has decided to follow the Windows Phone route, it must be puzzling that 60 percent of its sales are still being driven by its legacy Symbian and MeeGo devices.
Why is it that after announcing a staggering €1.4 billion quarterly loss, Nokia’s share price improved by 18 percent? Michael Carroll, writing for Telecom Asia, attributed this to the firm’s net cash and liquid assets position that sat at €4.1 billion in the recent quarter – an increase of 8 percent on 2Q11. Adrian Kingsley-Hughes at ZD Net feels that Microsoft is either going to continue bailing Nokia out, or is looking for the company to hit rock bottom before making a move to buy it. Perhaps the market also anticipates this and the subsequent spike in share price as well. Reuters said the markets were also buoyed by better-than-expected smartphone sales during the period. All good reasons but hardly enough to cause an 18 percent hike, surely?
Maybe an approach may come form an unexpected quarter. Chinese giant, ZTE, has aspirations to become one of the world’s top three handset makers. Acquiring Nokia and its distribution channels would surely help in that endeavor.
It must be heartening for CEO, Stephen Elop, to see sales growing in the previously barren North American market, but equally disheartening that worldwide sales are shrinking. Nokia managed to sell over 4 million of its Windows powered Lumia smartphones but has resorted to heavy discounting in the U.S. to keep sales moving. That doesn’t send the right signals to the market, surely?
And who can explain why Microsoft would launch a heavy pre-release promotion of Windows Phone 8 knowing it is not backward compatible with any existing Windows Phone devices, including the Lumia range thus rendering every existing Windows Phone device obsolete. Elop said that “we plan to provide updates to current Lumia products over time, well beyond the launch of Windows Phone 8,” but that will hardly placate new smartphone buyers who expect phones to be upgradeable for at least two or three releases.
Perhaps the biggest question being asked is why doesn’t Nokia take an each-way bet and opt for an Android powered model in its range. As Kingsley-Adams points out, “the problem with Nokia is not the hardware – the company makes some of the most solid and reliable handsets available today – the problem is the operating system. Choosing Microsoft’s was a massive gamble, especially given that no other company had managed to take the platform mainstream.”
Is there simply a political barrier to Nokia offering Android or are there strenuous conditions attached to the agreement with Microsoft preventing this. Has Elop’s previous employment and continuing affinity with Microsoft and its CEO, Steve Ballmer, clouded his judgement? Previous Microsoft stalwarts, HTC and Samsung, appear to be booming on the back of Android-powered smartphones. For Elop to make that move it would result in some loss of face but would surely put Nokia back in the race.
Of course, he will need skilled people to adapt the existing and planned phones to Android, and vice-versa. This may be his biggest challenge. Despite announcing that “Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources,” they will probably showing their real feelings by looking for new jobs before the inevitable cutbacks that always seem to follow poor quarterly results.
Seems like a real ‘Catch-22’ for Elop, and serious decision time for Nokia’s board that appears to have lost its voice, gone brain dead or settled on letting their sacrificial lamb take the rap. Maybe they simply miss the good old days of wood pulp and rubber mills or long to go ice-fishing? If this keeps up they may have plenty of time for that soon enough.
First published at TM Forum as The Insider, 20 July 2012.