Can the Nokia brand survive?

Richard Milton

July 6, 2011

Only three years ago Finland’s industrial giant held a world lead in mobile handset manufacture and sales that seem unassailable.

Now, industry analysts are asking can Nokia even survive any longer in the mobile market?

At least one industry source predicts that the brand will disappear or be sold in the next 12 months.

Nokia’s problems have been caused by increased competition, failure to adapt, and what is widely regarded as a colossal blunder in product development.

The Finnish company has fallen a long way in a short time.

In the fourth quarter of 2009, Nokia owned almost 40 per cent of the global mobile phone market. This share had fallen to only 30 per cent by Q4 of 2010, according to Strategy Analytics, and currently is estimated to stand around 25 per cent.

For a leader in any market, these figures represent catastrophic decline.

In the United States, for instance, Nokia handset sales fell by 32 per cent in the year to Q4 2010 and have continued falling since.

By the beginning of June this year, CEO Stephen Elop was withdrawing the company’s financial projections for 2011 and warning investors of serious problems, citing “competitive dynamics and market trends across multiple price categories, particularly in China and Europe.”

At the back end of last year, Nokia was considered to be holding its own although coming under criticism in several areas.

Commentators argued that Nokia’s average sales prices have been dropping and low prices often indicate poor performance.

The other criticism is that even their smartphones are not used as smart but often sold without data packages simply for voice and text.

Buyers were staying loyal to Nokia when they updated, but were not migrating to Nokia’s smart offering in significant numbers.

As recently as late 2010, it was still possible for one commentator, Horace Dediu of Asymco, to defend Nokia saying, ‘But these knocks against Nokia still should not detract from the fact that they do sell a lot of Symbian phones. . . And in many parts of the world, Nokia is synonymous with mobile phone. Many of those buyers will migrate to future Symbian devices.’

If Nokia had stuck with its Symbian operating system, it might have recovered its position.

But it acquired its new CEO, Stephen Elop, from Microsoft in September 2010 and one of his first actions on taking office was to axe Symbian and replace it with Microsoft’s Windows Phone 7.

On paper the move must have seemed a smart one.

Symbian can be a difficult operating system and Nokia had perennial problems finding enough Symbian programmers and software developers.

And apps developers were ignoring Symbian and concentrating on iPhone and Android.

The switch to Windows enabled Nokia to make 4,000 job cuts, most of which were Symbian programmers and developers. And it was hitching its wagon to Microsoft who continues to enjoy a dominant position in internet developments.

The problem is that despite its prominent position, and its recent purchase of Skype, Microsoft has so far failed to make any impact in the most recent developments in mobile computing.

According to Netmarketshare, Windows Phone 7 has a share of 0.02 per cent of the U.S. browsing market compared with Apple’s 5 per cent and Android’s 2.6 per cent. Compare this also with the half a million of Google’s Android phones that are currently being activated each day.

Windows Phone 7’s share is actually less than than Symbian’s 0.03 per cent share – calling into question the idea that a strategic partnership between Microsoft and Nokia can achieve anything for either of them.

Financial analysis site 24/7 Wall St. makes annual predictions of brands that will disappear in the coming 12 months. In this years’s batch the site has included Nokia, saying the mobile brand is finished and likely to be sold off.

Microsoft, HTC and Samsung are seen as the most likely prospective buyers.

Before dismissing the prediction Nokia should take note that 24/7 Watt St. has an enviable record of making accurate predictions.

Last year’s list included Borders Books, Newsweek, Fannie Mae and Freddie Mac – all now gone or in intensive care.

Perhaps Nokia can draw a crumb of comfort that 24/7 Wall St.’s current hit list also includes Sony Ericsson.


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