HELSINKI – Ailing cellphone maker Nokia has the cash to survive seven quarters like the last, but investors are losing faith that it can break the vicious circle that keeps customers and in turn application developers from its new phones.
Chief Executive Stephen Elop, who joined from Microsoft in 2010, gambled last year that ditching Nokia’s homegrown Symbian phone software in favor of a largely untried version from his old employer would put the company back in the driving seat.
Despite getting the new Windows Phone models out at breakneck speed, it has sold fewer than expected, as consumers remain wedded to Apple’s iPhones or Samsung models running Google’s Android system, both of which come with a bigger range of applications supported by a much larger population of developers.
“It is too early to write Nokia off,” said analyst Peter Cunningham at Canalys. “It is still in the middle of its transition to Windows Phone, but it doesn’t have the luxury of time. The next six months will be critical in the company’s long-term future. The Lumia 610 needs to be a success, and it needs some hit products in the market in time for Christmas.”
In the first quarter Nokia sold just over 2 million Lumia phones, compared with expected sales of 31 million iPhones and the 37 million smartphones Samsung is expected to sell in the quarter, according to a Reuters poll.
The market consensus is that it needs to sell 27 million this year, 55 million next year, and 94 million in 2014, according to analysts polled by Reuters.
“If they can show the volume, then the next Nokia tune is ‘Stairway to Heaven’. If not, it is ‘How Low Can You Go’, or ‘Bye Bye Baby’,” said John Strand, founder of Danish research firm Strand Consult.
To make the volumes, the company needs to resolve a Catch-22 dilemma: To sell more phones, you need more apps, but to attract app developers, you need to sell more phones.
There are about 80,000 applications that owners of models running Windows Phone can enjoy, a drop in the ocean compared with the half a billion available to Apple and Android users.
Nokia burned through 700 million euros of cash in the first quarter, leaving 4.9 billion euros (S$8 billion) at the end of March, but as its share price tumbles, it might run out of time before it runs out of cash.
Its market value, about a tenth of its recent peak in 2007, the year the iPhone stormed the market, is just 11.3 billion euros, making it increasingly attractive as a takeover target, though industry followers said predators would likely move only after some evidence that the Windows Phone strategy was working.
A Reuters poll showed Nokia likely lost its position as the world’s largest cellphone maker in the first quarter to rival Samsung Electronics, after dominating the market for 14 years.
“At the moment it seems that the strategic decisions were not correct,” said Timo Rothovius, Chairman of the Finnish Shareholders Union, which represents small-cap local investors who have increased their holdings during the freefall.
“It might be that the Windows phones still take off, but at the moment it is hard to see any light at the end of the tunnel. Something radical has to be done. The company’s credibility in the market is weak, and it suggests that maybe betting everything on one card wasn’t a good thing,” Mr Rothovius said. REUTERS
“At the moment it seems that the strategic decisions were not correct”
At the moment, treat your present product line as transistional, to help you make a better perfect product, software bugs is a publicity nightmare, you need to move on with new software and applications that is near to perfection, and Windows 8 will hold the key. If you are able to measure the demand, by aiming for a perfect product you can sell millions, and processes to fulfill demand with a perfect supply chain strategy will return profitability with maximum profits, are you game for the challenge, to return back to Number 1 all over again?
You need to move volume, if you know this is a transistional product, what will you do? I can play with so many factors of reasons for people to buy a Windows phone, pricing might be close to cost, but you straight away got market share, to prepare your next product which is a winner, to bring back profitability, or else your next perfect product might be muted by your image of branding.
What is your core strength? With Windows you are immediately linked to Office productivity with Skype video communications, if you are able to leverage it out, nobody will come close to you.
If you can give developers a new tool to port their apps from iPhone and Andriod, you don’t even need to your increase your own platform for your own developers anymore. I can give you hundreds of factors to increase your market share.
– Contributed by Oogle.