The last five years have taught Nokia — and the world — that being the biggest mobile company doesn’t insulate you from the havoc a changing market can wreak on your bottom line. Nokia’s Q4 2012 results are teeth-grindingly bad: Overall revenue is down 29 percent to $9.7 billion, and the company is losing $1.8 billion (18.5 percent) of revenue. While they were once the top dog of the mobile space, the advances of both Android and iOS have caused the giant to stumble and, now, move into crisis mode.
Monday Note looks at three factors that are leading to serious problems for Nokia in the here and now — problems which must be overcome if Nokia is to survive, much less regain any sort of claim to mastery in the mobile space. Firstly, the issue of Nokia burning cash: Massive haemorrhaging of money could soon put Nokia in a position where assets need to be liquidated or, at worse, bring bankruptcy. Second, the “dumb phone” (aka not-a-smartphone) market is what they call a “race to the bottom”, which is to say sales of the product that has historically been Nokia’s ace is now seeing huge slowdowns in sales (especially in developing countries) and their smartphone business keeps sinking (-51 percent in volume compared to the same quarter last year). Third, not everyone loves the Lumia, which is their Hail Mary entry into the smartphone market. Reviews are mixed at best and that’s not all, according to Stephen Elop, Nokia’s CEO:[quote]Going to the earnings release, I searched for the word “Lumia” in the document. It appears 29 times. — without any number attached to it, just words like “encouraging awards and popular acclaim”. Which can only mean one thing: Actual numbers better left unsaid.[/quote]
Monday Note goes on to predict a few possible outcomes for Nokia’s current trajectory — none of them good. Stepping back, one can see that the biggest failures in the current generation of mobile technology are those corporations that clung too hard to past successes and assumed they were too far ahead with too much momentum to be overtaken or even relegated to obscurity. Nokia’s huge decline echoes failures that RIM has suffered with their bumbling and uncertain entry into the modern age of mobile technology, and on a daily basis we see more and more evidence that customers no longer see these brands as vital to the markets they seek to capture.
Source: Monday Note