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Informa Analysts Comment On Developments At Nokia
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Thursday, June 14, 2012:
Today Nokia announced that it is cutting its earnings forecast for the second time this year, Informa Analysts comment on these recent developments at Nokia.
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• Mark Newman, Chief Research Officer at Informa Telecoms & Media.
“For some time now Nokia has believed that its location capabilities could be an important differentiator. But the question is whether mobile phone users or the developer community also see this as a major advantage that Nokia has over its competition.”
“It is also interesting to see that Nokia is hoping to use location as a way into the business market. Nokia says that it wants to “extend its mapping technology to multiple industries”. Nokia has struggled for a long time with its enterprise strategy but it looks as if its new thrust is going to involve more of a push into the M2M sector and developing a revenue stream outside of the sale of devices.”
• Dave McQueen, Principal Analyst at Informa Telecoms & Media.
“Location has to be an important differentiator for Nokia having paid $8.1bn for Navteq 5 years ago and there is still no discernable ROI. Nokia’s mapping offers a better experience than Google’s, plus new applications like Nokia Maps, Drive, Transport and City Lens should be at the forefront of its marketing. Apple dropping Google maps also makes this space interesting.
The company is hoping to gain market leadership in music and imaging, notably with its PureView and now the purchase of Scalado. All these have to combine with better smartphones using new materials, new technologies and location-based services to provide stronger points of differentiation, whilst making them available at a range of price points.
The company is in transition, which is reflected in poor financial results and rapidly-declining sales across smartphone and mobile phone segments. Moreover, the company remains very reliant on its devices business to generate profits and, as it is being hammered in the high-profit smartphone market at the moment, greater cost control was needed as the only way for it to ‘create a structure that can support our competitive ambitions’.”
• Julian Jest, Research Analyst at Informa Telecoms & Media.
This really doesn’t come as a big surprise, in making the cuts to its workforce, Nokia will buy itself more time as it seeks to turn around its recent woes. Despite the backing from Microsoft to implement the Windows Phone OS, Nokia’s revenue has been on the decline and their credit rating cut. Nokia have an excellent history of producing attractive, well built handsets, including the current crop of Lumia devices. As a result they are prime targets for a takeover bid.
Facebook, for example, have plenty of cash to invest as a result of their recent IPO. In regards to its business in the mobile space, Facebook has not had much success, and may be considering new strategies, including developing their own phone. To avoid such threats, drastic action such as the announced cuts should give Nokia more time to build on its strengths and reverse its declining fortunes.
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