Thursday, June 9, 2011

Who killed Nokia...

After last week gossip that Microsoft may be looking to acquire Nokia, today the latest rumor says Samsung may be considering Nokia.
Also the credit ratings of Nokia downgraded just a notch above Junk. What happened to the darling of mobile industry? A lot of European companies/people/leaders looked at Nokia as Europe answer to Silicon valley's innovation. Now why Nokia couldn't transform itself like what it did in the past. Lots of questions..

1. Is it Apple who killed Nokia?

I'd say up to some extent yes. Before Apple, the smart phone market was enjoyed by Nokia. When people talk about Mobile OS, it is Symbian. Apps are Symbian apps and Nokia phones are the standard. But with iPhone the marketplace changed overnight. Everyone started to launch new smart phones with bigger screens. Google released Android, Apps became the 'in' thing. But why Nokia couldn't/didn't saw the change coming?

2. Is it the strategy?

I wouldn't comment much here as I can sense the lack of strategy from Nokia after the mgmt changes. I don't think any big company would clearly state that their strategy is to 'partner' with another company :|
Anyway in early days the problem was with the lack of focus. They started symbian, then the number of symbian series/versions were too many. For different purposes they've started different series. (like 60, 80, N, UI etc). I'm sure this would've created a big havoc in their R&D. The development path was pretty slow too.

On the handset front, I still like their handset for intuitive design. What they've missed is the change in physical layer. i.e new networks offering higher data speeds and markets going from traditional WAP to plain internet. If we see in emerging markets like India, Africa, Nokia is still the market leader with considerable gap above No.2 player. But in more matured markets, their pie dropped like hell.

If we look in to their income statement, you can clearly see the problem. It is as simple as this. Their sales dropped tremendously from 2008 (74Billion in 2007, 70Billion in 2008, 58Billion in 2009 & ~57Billion in 2010). When the trend is clear I don't really understand what the management thinking. Are they simply counting on emerging markets to compensate for the dev market drops? Anyway the sales of smartphones is the culprit here.

3. Is it Microsoft/Partnership

I'd still say this is their biggest mistake strategically. There is no synergy between these two players as well as no clear benefits in the long run. When Nokia became submissive to MS, a lot of staunch supporters of Symbian/nokia changed their loyalties. Financially the details are still not publicly available but I've confidence in MS management that thay must have gotten a very good offer :)

To summarize, I'd think it is the management/strategy which affected Nokia. Given the current situation I am extremely pessimistic about their Mobile operations. However their Mobile Networks & other new areas (they've started going aggressively in to IT market with cloud offerings and other service offerings) they may able to make some profits. But the increase is not going to compensate the losses in mobile business. Hopefully they'll be able to turnaround. Afterall most of us started our mobile journey with a "nokia" phone.

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