Posted by: qmaxim | June 14, 2011

Can Nokia survive?

About  three years  back, I purchased my fifth  (or was it sixth?) Nokia’s just released  business smartphone  model E71 with all the bells and whistles one can imagine. For INR 30k, it had full function keyboard, Wi-Fi , Blue tooth, web surfing, 3G, business e-mail, GPS, camera, etc, etc that is pretty much everything  at that time. My  reason for buying was that I could transfer data from previous phones and more importantly Nokia was the pioneer in digital mobile telephony ,clear market leader and I reckoned that it is going  to be leader for many years to come.

Going by the recent reports I am not sure about the last part anymore.  Since the release of this device (& other similar devices)  Apple released its super hit iPhone . More importantly, phones running on Google’s  free Android platform  gained market traction  rapidly and now have the largest market share. Samsung has become the leader among  the Android phones. Nokia lost  market share in smartphones  so quickly that it is now has mere 27% market share from almost  49% a year ago. Incumbent CEO was replaced by ex-Microsoft man Stephen Elop. He likened the situation at Nokia to a worker jumping from  burning offshore oil exploration platform, Nokia being the oil exploration platform.

After much introspection his  first move was to abandon Nokia’s  Symbian operating system powering its smartphones  and jump on to Microsoft’s nine-month-old Windows Phone 7 software bandwagon. Windows Phone 7 runs on mere 4 millions phones as of now whereas 400 million Symbian phones are in the market at the moment. He decided also to abandon new mobile platform under development with Intel called MeeGo as it was unlikely to pickup slack any time soon. In the mass market  segment Nokia has been the clear leader for many  years. In this segment also in countries like India  it is under attack and losing market share to Indian companies producing handsets in China and Taiwan and to South Korean companies . In other words, Nokia is under attack in all segments of the market it operates in.  As the bad news piled up share price tanked and now there is even rumour that Nokia is a takeover target which has been refuted by the company.

 

What went wrong?  

Now coming back the story I began with about  the smartphone I purchased.  Though it was feature rich, I soon realised that  there was no improvement in the software compared to previous Nokia models. User interface was  of  Windows 95 vintage  and I found GPS was not working for some reason. The keyboard letters were difficult to read as backlit light was switching off prematurely.  Contacting the service centre and internet search found no solution to making the keyboard light  stay on longer. Even after 2 years in the market no new applications other than the essential ones were available in the Nokia website whereas thousands of  programs are available for Android and iphone platforms.  This  was a  common problem for most Nokia smartphones – company refused to see the writing on the wall that market has shifted from being hardware -centic to software centric. Probably, it was constrained by the  development centre and manpower concentration  in Finland. Other device manufacturers meanwhile bet on  2-3 platforms and abandoned the ones  not finding favour with the customers. 

Same thing is now happening  in the ordinary phones as well.  Most of Nokia’s competitors in India  (which is its second largest market ) began selling phones with 2-3 SIM cards   to take advantage of most people  preferring to have multiple connections to take advantage of attractive schemes offered by the different carriers. Nokia refused to listen to market – they still don’t have a popular multi- SIM phone in the market even after two years. Consequently, it is losing market share  rapidly- if  market figures are to be believed its share has sunk from 60% about a year ago to  29% now.  Nokia is hotly contesting these numbers. Meanwhile prices of  ordinary phones are falling rapidly putting further pressure on the bottom line. ( Chinese unbranded full keyboard phone with 2 SIMS was available for INR800 when I checked last)

Can Nokia recover?

Most people are not hopeful. But, the company still has   strong  R & D &  hardware  design capabilities and high manufacturing competency which very few companies  in the world can match.  I think it is too early to write Nokia off.

 

 

 

 

 

 

 

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