When it Rains, it Pours
Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Things are not looking good for the Finnish smart-phone manufacturer Nokia (NYSE: NOK) as the company runs into controversies again. Both management and employees have points to worry about as the company announces job cuts and as Nokia faces problems which may just bring down the company.
Nokia in Troubled Waters
Someone needs to come up and clean the mess Nokia is in. The company has been taking repeated beating from its peers such as Apple (NASDAQ: AAPL) and Samsung which is powered by Google’s (NASDAQ: GOOG) Android OS. Nokia has lost its leadership position in the global mobile market and now is in the third position with a mere 8% market share as against Samsung’s 29% and Apple’s 24%.
The financial results of the company also fail to impress the investors. In the fiscal 2012 first quarter, the company reported earnings which were much below what the street had expected. And now, all the major credit rating agencies of the world, such as Fitch and Moody’s have downgraded the stocks of the company since they expect the share prices of Nokia to plunge further.
Nokia’s situation worsened when a new problem cropped up on top of all the existing ones. The reputed securities law firm Faruqi & Faruqi announced that it is investigating Nokia for a potential securities fraud. In April, 2012, the company had disclosed that it was expecting its fiscal 2012 first quarter performance would be bad as the company was facing some issues related to the new range of handsets powered by Microsoft’s (NASDAQ: MSFT) Mango OS. As a result of this disclosure, the price of Nokia’s stock plunged 16% immediately. The law firm wanted to check if the disclosure made by the company and its officer was violating any of the federal securities norms.
Maybe Downsizing is the Way Out!
And among all these issues, how many times will Nokia take the downsizing way? Well, that even the management can’t predict probably. But, so far, this is the third time in the past 15 months that the company has decided to downsize. Recently, the company announced its plans to cut 10,000 jobs worldwide. Prior to this, the company had reduced its employee pool by 4,000 employees in February, 2012 and by 7,000 employees in April, 2011. However, Nokia is not the only company which is laying off. With the world economy in such a state, many big players are taking the path of downsizing or rightsizing as they wish to call it. Few weeks back, the IT giant, Hewlett Packard (NYSE: HPQ) had announced a worldwide job cut of 27,000 employees.
Nokia also announced its moves to shut down its production facility in Finland as well as its R&D facilities in British Columbia and Germany. The intention behind the moves is very simple – reduction of cost. The company is a little tight on its cash position and thus as an obvious reaction is looking at disposing off those units which are not performing.
The Foolish Takeaway
Nokia is not looking good and its form may fall further in the coming quarter. The problems it is facing in its operations may have a roll-over effect on the results of the fiscal 2012 second quarter. However, there is a good chance for the situation to improve. At one point in time Nokia was the market leader. If the company can leverage its past reputation backed by solid innovative offerings, the company will again taste success. Nokia also has plans to launch the next generation tablets powered by Windows 8, the latest from Microsoft. We hope things work out for Nokia as it would be sad to see such a company fall.
analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.