The Nokia of today is a very different, much diminished company
compared to the giant of the mid 2000s. If not a spent force, then
certainly a much reduced one: smaller, less profitable, with
fewer assets, and
resources
at its command — and dwindling cash reserves (net cash fell to €3.6
billion by the end of Nokia’s Q3 2012, down from €4.2 billion in its
Q2). It doesn’t even own its own headquarters any more: earlier this
month it
agreed to sell and lease back the building to raise €170 million. Rumours of Nokia being an acquisition target continue to swirl — helped by the company’s historically
low share price (currently around $3-$4, it has dropped as low as $1.33 this year) — with
Microsoft and even
Apple named as potential buyers.
Since Nokia’s first non-Finnish CEO, Stephen Elop, was appointed in 2010,
job cuts have been a regular
headline story for the company.
Nokia now has 44,630 employees
in its mobile and location division — down from 60,995 in Q3 last
year. The company’s changing shape is the result of Elop ‘realigning’
the business to fit the new strategy of using Microsoft’s OS, rather
than developing smartphone platforms in house — leading to various
in-house software efforts to be discontinued from
Qt, to
Meltemi, to
Maemo/MeeGo. But Nokia’s CEO has also had to slash costs as profitability plunged.
If
you look at any of the handset manufacturers that have had really hard
times and they come back — they come back half the company they were.
Nokia swung to an
operating loss of €1.073 billion 2011 and has reported a string of quarterly operating losses this year: €1.34 billion
in its Q1; €826 million
in its Q2; and €576 million
in its Q3 –
with a “challenging” Q4 expected. A full-year 2012 loss of more than €3
billion looks likely. Combine those losses with dwindling cash reserves
— and Nokia’s apparent failure to ignite significant consumer interest
in its Windows Phone-based Lumia line of smartphones and the company’s
very survival looks to be at stake. Nokia hasn’t broken out sales of its
new Windows Phone 8 devices yet, but sales of WP 7.x devices have been
unimpressive to date: Nokia reported 2.9 million Lumia sales in its Q3; 4
million in its Q2; and more than 2 million in its Q1. (For context,
worldwide sales of smartphones rose to 169.2 million units in Q3 alone
this year, according to
Gartner.)
Yet wind the clock back five years and Nokia was riding high
as master of its own mobile hardware and software, and a hugely
profitable business (its
2007 operating profit was €7.985 billion).
Today it’s neither profitable nor in control of its own destiny. Its
smartphone business depends on Microsoft’s fortunes. And, in a market
dominated by Android and iOS, even a company as typically bullish as
Microsoft can only talk about trying to become the “third ecosystem” (in
the event, Windows Phone still trails Symbian’s global marketshare: 2.4
percent vs. 2.6 percent, according to
Gartner’s Q3 figures). In short: Nokia had it all, and now it’s gone.
“Overall if you look at the dominant market position that Nokia had –
40 percent marketshare, if you go back a couple of years — there is no
way even with a successful Windows Phone 8 story, and even with the
strategy they laid out, that they’re ever going to return to that kind
of marketshare, that kind of dominance,” says Adam Leach, principal
analyst at Ovum.
Leach is better placed than most to comment on Nokia’s decline,
having previously worked at Symbian – including on projects such as the
Nokia Communicator:
arguably the world’s first commercial smartphone (a device that
included the ability to download apps — some 10 years before Apple
‘invented’ the iPhone App Store).
“Even if they achieve their plans and achieve them well, it’s
unrealistic to think Nokia is going to come back anywhere near like the
company they were. If you look at any of the handset manufacturers that
have had really hard times and they come back — they come back half the
company they were,” he adds, name-checking the likes of Motorola and
Sony Ericsson.