After a 14 year-run as the largest maker of mobile phones, Nokia lost out this year to Samsung Electronics Co. The company is fighting back. It introduced its Lumia smartphone in April, though buyers can't seem to find it in stores.
Nokia invented the world's first smart phone, launching it in 1996. It was called the Communicator and it weighed slightly less than one pound. It even appeared in a movie called "The Saint." It failed to take off commercially. When Motorola's Razr phones took off around 2004, investors slammed the company for losing out on the dumb phone market.
Nokia's biggest misstep might have been in 2006, when the company merged its smartphone and basic phone operations. The priority shifted toward the more basic phones, which are more profitable. Now, the company is struggling to take back market share from Apple's iPhone and Google's Android. It's betting on Microsoft software to power its operating system and accelerate momentum for its Lumia phone.
On Saturday, we talked about the ubiquity of basic Nokia phones in places like Africa. Instead of staging a very expensive, uphill fight against Apple and Google, Nokia might want to focus on their basic bread and butter business for now and figure out where it can fight.
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Today, S&P downgraded Nokia Corporation’s long-term corporate credit rating two notches to BB- and gave the firm a negative outlook, leaving room for further reductions. S&P also cut the company’s unsecured debt rating by two. This is the second downgrade S&P has made to Nokia since April. The other rating agencies have cut ratings similarly, too. As we know, below investment grade status has expensive implications when it comes to raising capital, which will make a return to profitability even more challenging.
Nokia’s second quarter earnings included a 19 percent drop in sales, and net loss of $1.8bio. The firm is the midst of transitioning away from Symbian- and Meego-based phones, which have fallen out of favor with the increasingly preferred Windows operating system. Nokia has tried to compete in this space with its Lumia, however, Apple’s iPhone and manufacturers using Google’s Android software (Samsung, HTC) are strong competitors in the smartphone market. Nokia lost its decade long title as world’s leading mobile phone maker in the first quarter of this year and market share fell below 30 percent, with expectations to shrink further.
Rumor has it that the new Lumia powered by Windows Phone 8 software could be launched in less than a month – one week before Apple is expected to launch the next iPhone.
Nokia is in a rather dire situation. Late to the game in the smartphone arena seems to be taking its toll. As a consumer, I hope they are able to pull it together, because ultimately the results are more options and choices for me. But, perhaps in terms of smartphones, Nokia's ship has sailed.
http://www.washingtonpost.com/business/sandp-downgrades-long-term-credit-rating-for-struggling-finnish-cellphone-maker-nokia/2012/08/15/8f15d3d4-e6d4-11e1-9739-eef99c5fb285_story.html
http://www.pcworld.com/article/260900/nokia_expected_to_launch_windows_phone_8_lumia_in_september.html
It's been quite a while since Nokia CEO Stephen Elop issued his "burning platform" memo, where he basically called the company out as being near death. The most interesting thing to remember about Nokia is that it still has the second highest market share in the world. Most of the world uses feature phones, and the company may want to focus on a high end feature phone market that can allow it to continue its dominance in the African and Indian subcontinents.
Separately, it is interesting to note that Nokia is now on the Windows 7 platform, after essentially shutting down Symbian OS. If Google's Motorola acquisition does, in fact, alienate the non-in-house device manufacturers (notably Samsung and HTC), there could be a relatively rich suite of smartphones on Windows 7.
I can appreciate that Elop is trying to align his company with a titan like Microsoft, receiving the benefit of their aggressive ad campaigns as they try to launch their operating system.
However, when I actually began to consider this point, it seems almost silly to me. Nokia is popular in the global arena and could be a key player in the US markets as well.
The question that I wonder is, why would Nokia try to align itself with an operating system that is not popular yet and does not have a ready made fan base, when it could jump on the Android ship and be launched right into game with the big players, if they have a viable smartphone that can compete against the Samsungs and HTCs?
For Nokia, I think the way of the future is utilizing the benefits of the Android OS and I sincerely hope that Nokia's current foray into the smartphone game doesn't end in disaster for them.
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