Nokia Oyj. (HEL:NOK1V) is
the world's largest smartphone maker. Nokia also has a very big problem.
The company recently tied the knot with Microsoft Corp. (MSFT),
promising to phase out its proprietary Symbian smartphone operating
system for Microsoft's slick new Windows Phone 7 OS. The
company insisted that the move had nothing to do with the fact that an
ex-Microsoft Canada executive recently became Nokia CEO.
Regardless of the move's origins the question quickly became when would the
switch to Windows Phone 7 be made? Nokia has opted for a "gradual" transition in
which it slowly phases out the operating system. At the same time it will
release Windows Phone 7 handsets, which will live side by side with Symbian handsets.
The approach has its merits, when looked at from a certain perspective.
But Nokia badly underestimated a major issue raised -- nobody will want a
phone on a dying platform.
According to reports Nokia's market share loss has accelerated from a
slow bleed to a pouring stream.
Signs of this have crept up in recent financial filings. Nokia has lowered its Q2 2011 outlook[press release] for
devices and services. It went from predicting 6.6B € ($9.5B USD)
to 6.1B € ($8.8B USD). That's a big drop. The drop is
fueled by lower predicted volumes -- which seem to be stemming from poorer than
expected Symbian smart phone sales.
At the same time the company's operating margins have dipped from a predicted 6
to 9 percent to "around breakeven."
Annual targets are also being scaled back.
If there's one ray of sunshine among the storm clouds it's that Nokia reports
an "increased confidence" level that it will deliver Windows Phone 7
handset(s) by Q4 2011.
The question, though, is whether that will be too late. For now Nokia
will have to continue trying to pitch customers a dying platform -- Symbian.
Nokia predicted sales of 150 million more Symbian smartphones "in
years to come." Now, as customers defect to Apple, Inc. (AAPL), Research
in Motion Ltd. (RIM),
and Google Inc.'s (GOOG)
Android, it seems like a matter of time before that number becomes the latest
financial figure to be slashed at the Nokia headquarters.
quote: Their mistake was announcing this transition 3 quarters too early, before they have Win7 products in brick and mortar cell shops for immediate purchase. At that point they would simply halt manufacturing of symbian smartphones and restrict it solely to the $49 dumbphones they sell zillions of to basic, low income and emerging markets, where it could die a slow, quiet death or continue to work perfectly fine for that application as it has for the past ~10+ years. Smartphone users are picky and typically replace their devices every couple years anyway for the newest and shiniest, so it would be no skin off their back. Everyone wins.
quote: MS is doing the equivalent of drowning the rescuer to prevent themselves from going under in the mobile marketplace.
quote: Whether their intention or not, the stock drop would make buying Nokia a better deal.