Nokia’s distress is likely to last a while
Analysts do not believe that mobile giant will resolve its problems anytime soon
The problems encountered by the Finnish mobile phone manufacturer Nokia will not ease off until next year at the earliest.
Analyst Tim Boddy of Goldman Sachs estimated in his report that the new smartphones based on the Symbian 4 and Meego operating systems will be launched no sooner than in the middle of next year.
”The new phones based on the Symbian 4 and Meego platforms will be much more important for Nokia than is the N8 Symbian 3 smartphone”, says an experienced Nokia analyst who wishes to remain anonymous, adding that the new smartphones are expected to be on the shelves of stores in the spring or summer of next year.
However, the N8 smartphone is to be finally released next autumn.
It is the first of Nokia’s new smartphones with which the company expects to improve the usability of its handsets, a feature which has been a source of competitive advantage for many of Nokia’s rivals.
The modest sales of Nokia’s high-end smartphones, combined with an increase in the manufacturing costs of the company’s low-cost models, forced Nokia to issue a profit warning on Wednesday.
The reason for the increase in the manufacturing costs has been the recent depreciation of the euro.
In addition to the current second quarter, it is likely that even the third quarter will be difficult for Nokia.
However, the sales of the fourth quarter are expected to be brightened up by the Christmas shopping season.
Analyst Ben Wood of the market research company CCS Insight believes that one of Nokia’s fundamental problems has been the compay’s inability to put its plans into practice.
”Nokia has made wise decisions by investing in software and services, while putting its investments into effect has been painfully slow. In addition, the company has acquired numerous small companies that have not given it any concrete benefits”, Wood notes.
Nokia understood the significance of software and services at an early stage. However, the company did not set out to improve the Symbian operating system that runs its smartphones, a fact that has led to Nokia’s current malaise.
”For far too long, Nokia failed to recognise the fact that its difficulties were attributable to Symbian. Now they have detected it, but the company is lagging at least two years behind its competitors at the high end of the market”, Wood argues.
Nokia’s mobile phones are based on two operating systems of its own, namely Symbian and Maemo, which is based on the Linux open source code.
”For a long time, Maemo was just a development project that a select group of product developers were working on. Nokia should have accelerated Maemo’s product development in order to manage to compete against Apple and Google”, Wood continues.
At present, Nokia is developing a new mobile operating system MeeGo, in cooperation with Intel. MeeGo is also a Linux-based open source mobile operating system. Its aim is to merge the efforts of Intel on Moblin and of Nokia on Maemo into one project.
The project is a major effort and will inevitably take many years.
For a long time, Nokia’s success was based on a modus operandi in which different mobile phones were made to run on the same hardware platforms in order to cut costs.
A mobile device platform describes the hardware architecture and software framework of a mobile phone, in other words an operating system.
”Nokia has tried to apply to software the same rules as it has used for hardware, by concentrating on platform solutions on Symbian. In this the company has failed”, says another anonymoys analyst.
It is likely that this stumbling has somewhat tarnished Nokia’s earlier gleaming reputation.
The investors’ faith in Nokia has been faltering for a good long time now, which is seen in the steep decline in the company’s share price.
”Nokia has launched poor smartphones on the market, which is why the company has lost some of its market share at the high end, while its reputation as the leading mobile phone manufacturer has been somewhat dented. This all is now seen as a dramatic decline in operating margins”, Wood concludes.
As reported yesterday, on Wednesday Nokia’s share price plummeted by roughly 9% on the Helsinki Stock Exchange following the profit warning.
The price fall continued on Thursday, but at the end of the day the pace slowed down, ending just 0.8% down at EUR 7.16.
In the space of the past 12 months, the Nokia stock has shed roughly a third of its value.
Previously in HS International Edition:
Nokia issues 2Q profit warning, leading to crisis of confidence among investors; weak sales in smartphones to blame (17.6.2010)
Helsingin Sanomat
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| 18.6.2010 - TODAY |
Nokia’s distress is likely to last a while
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