Nokia’s Silence is Hurting Shareholders

Saif is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Nokia (NYSE: NOK) once upon a time had more than 30 percent of the market share in the mobile industry. Its durability, pricing, features, accessibility and services were impeccable and that’s what created a vast number of loyal fans for Nokia. But the picture isn’t the same anymore especially after the introduction of Smartphones.  Their market share has declined drastically, frequent change in top management is hurting, profit's are fading, and customers are slowly drifting away towards the other mobile providers with one optimistic thought in mind – “Nokia will fight back, it is just waiting for the right time!”

<img src="/media/images/user_14008/saif_image1_large.JPG" />

*X-Axis –Market Share in Percentage

*Y-Axis – Quarter of the year

*Source – http://www.gartner.com

Can Nokia really fight back?

When the Symbian software lost its ability to fight in the Smartphone wars – Nokia gave it up and entered into an agreement with Microsoft. People appreciated the fact that they made the change that was required in a quest for survival. But a lot of question was raised over the fact that why did they choose Windows of Microsoft (NASDAQ: MSFT) over the more popular Android from Google (NASDAQ: GOOG).

The problem here is not that Windows from Microsoft is incapable of competing with Android. The main problem lies here in over-dependency of Nokia on Microsoft for the software as they cannot opt for any other software. Microsoft is coming up with the latest version of Windows operating system for the phone – Windows 8 and Windows RT. Interestingly Windows 8 is available to all the carriers whereas Windows RT has been exclusively designed for ARM devices such as tablets. They are also launching their own tablet called “Surface” due to hit the market in some time which will be available in two different versions: one that runs on Windows RT and one that runs on Windows 8 Pro.

Microsoft’s CEO Steve Ballmer was present during the launch of Nokia’s latest Smartphones – Lumia 920 and Lumia 820, which gave hints that this is probably the start of a special bond between the two companies. Also, it was expected that Nokia will get an edge over the other phone providers. But that is not so true, as Mr. Ballmer was also seen in the launch of HTC’s new phone 8X and 8S which have a look and feel of Lumia, carrying Windows 8. It might not be as good as Nokia in terms of its features and hardware, but it has made the announcement that it will be available through 150 carriers across 50 countries.

As far as Microsoft is concerned, they are marketing Windows 8 and competing aggressively with Google’s android. They are launching Windows 8 with Samsung, Nokia and now HTC. This is quite fair from their end as showing loyalty to Nokia would cause them to lose out on the potential market. They want to create the same market as Google’s Android. They want to compete with Apple (NASDAQ: AAPL) in the tablet market as well. They are also launching the latest Windows operating system for PC along with the latest office version as well.

There are basically two strong competitors that Microsoft is dealing with:

  1. Google: Google’s Android is celebrating its 4th birthday and what a way to celebrate, with figures displaying that you are the leader of the market. The current market share in U.S. is as high as 55%, which makes them the market leader in Mobile Operating system.  Google is not shying away from this fight with constant upgrades that they have been doing. Inclusion of a 3D view in its Google Map, ability to scan your calendar and  reminds you of your appointments, and many other features makes it better than the other operating system available for the phones.
  2. Apple: Apple is the market leader in terms of Smartphone devices sold. They have their own unique operating system iOS. They announced the release of iOS 6 – the upgraded version of its iOS. They have also sold five Million iPhone 5's in a matter of three days of its release beating its previous record for iPhone 4 of four million within the same time frame. This shows the craze people have for its product. Their stock market price surged to an all time high during that period to reach $700. But a lot of complaints for their iPhone 5 has led to a decrease in the expected number of sales. This has also resulted in a decrease of share price by 9 percent i.e., from around $700 to only $635.

With such tough competitors in the market, the desperation shown by Microsoft is quite reasonable. If they want to survive this fight they better have some good weapons in their armory along with a very aggressive approach.

Isn't this Silence Hurting?

Nokia announced in September that Lumia 920 and Lumia 820 will soon be available in the market. After almost a month they have declared that it will be available with AT&T. They have not yet announced the number of countries they will be launching, and the plausible date when the phone will be available (as of November is the probable month when it will be available). A company which is in such a bad state in terms of its finances and is coming with one last hope (it’s latest lumia 920/820) doesn’t seems to show the aggressive approach. They are silent on all fronts: dates, price, and availability - How can they be? This also raises the question of their ability to provide the market with the required number of phones.

The company surely has got some potential and that is the very reason they had attained a state of leadership in the past. But the world is getting harsh and competition is becoming tougher. They have come up with a very good product in these Nokia Lumia 920 and 820 with features quite distinctive from their competitors like – Its PureView Camera including 8.7MP sensor with advanced optical imaging stabilization, wireless charger along with an internal storage of 32GB! Wow, that’s exciting and surely something to look forward to, but it’s not just about making good product, it's about your ability to reach out to the consumer and say it is the BEST!

Conclusion

The company needs to learn from past mistakes so that it can fight its way out of this dire state. They need to be more aggressive because of the high level of competitors in the names of Apple and Samsung, along with Google. They need to shout loud about their potential and do not die out without even giving a fight!

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Saifnu has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. 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.

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