The dissembling continues at Nokia (NASDAQ: NOK ). After getting rid of its
Symbian mobile operating system last month, the company Monday slashed 4,000
jobs and transferred 3,000 developers in the group to Accenture as part of a
"strategic collaboration." The move is in line with the world largest
handset makers decision to move to a Windows Phone 7-based operating system on
its phones. Nokia's stock price has shed more than 70% in the last three
years, and is in a trading range of $8 $9. Average revenue growth, which was an
astounding 47% through much of the 90s, dwindled to 9% in the latest quarter.
News is bad on the business front, as well. The company has lost market share in
the smartphone category since 2007, and is now down to 26%. Bottom line, the
company lacks a business strategy. Nokias shift to a new operating system is
aimed at reviving its mobile handset business, a category that supplies 70% of
its revenues and almost all of its profits. Nokia develops smartphones for 1)
relatively sophisticated customers in developed markets who prefer a plethora of
applications and features and for 2) entry-level customers who prefer cheap and
inexpensive phones. However, both sets of customers are migrating to smartphones
that run Android and iOS systems, developed by Google (NASDAQ: GOOG ) and Apple
(NASDAQ: AAPL ) respectively. Such phones are popular because they contain
applications written by communities of developers. The custom-developed
applications engage users, developers and, in Apples case, also earn revenue for
the company. Nokia hopes to counter the Android and iOS craze with its Microsoft
tie-up. However, the company faces a double whammy on that front: the Windows
Phone 7 has had lukewarm sales since its launch in October last year. Similarly,
a recent survey among developers revealed that they arent exactly crazy about
developing applications on the platform. App migrations, which make it easier
for application developers to work across mobile platforms, arent happening
either. It wouldnt be so bad if Nokia could rely on its other cash cow: revenue
from emerging markets. But the company seems to be caught between a rock and
hard place and local players provide tough competition. A year after launch,
local handset makers accounted for 17.5% of all sales in India, Nokias second
largest market after China. That number grew this year even as the companys
market share declined precipitously. Unless Nokia can come up with a coherent
winning strategy, the recent layoffs might just be beginning of the end for the
handset company.
No comments:
Post a Comment