Nokia's New CEO Faces High Expectations Amid Industry Challenges

Strategic Insights -

Nokia Oyj's new Chief Executive Stephen Elop is set to present at an investor event in London on Friday, amidst high expectations after warning of a difficult start to 2011. Despite a brief share price recovery following the announcement of a possible change in software strategy, Nokia faces significant challenges, including the loss of market share in the high-margin smartphone market to competitors like Apple Inc and Google Inc. The company's flagship Symbian software has lost appeal to developers, while its answer to high-end competition, the MeeGo platform, remains unproven.

Key Takeaways:

  • Nokia has lost its No 1 spot in the smartphone market segment to products based on Google's Android platform last quarter.
  • The MeeGo platform is unproven and has attracted only 6% of developers, while Symbian has lost its appeal to developers.
  • Analysts expect Nokia's phone business to bottom out in January-March, with the underlying operating profit margin improving in the April-June quarter.
  • Elop is expected to unveil longer-term forecasts on Friday, potentially including a major management shakeup.
  • Many market followers expect Nokia to adopt either Google's Android or Microsoft's Windows Phone 7 as part of a revamped software strategy.
  • Nokia's problem lies in mobile software developers' reluctance to work on its software platforms, with only 6% developing for MeeGo.
  • Nokia may consider partnering with Microsoft to create a third ecosystem in addition to Apple and Google.

Statistics:

  • Nokia has lost 30% of its share in the high-margin smartphone market to new entrants.
  • Analysts expect Nokia's phone business to bottom out in January-March.
  • The underlying operating profit margin is expected to improve in the April-June quarter.
  • MeeGo has attracted only 6% of developers.
  • A survey of 2,200 developers showed that Nokia's software platforms are not the priority for developers.
  • Nokia's share price could rise by 30% if it changes its software strategy.

Sources:

  • Canaccord analyst Michael Walkley
  • MKM Partners analyst Tero Kuittinen
  • Somo Ltd's Carl Uminski
  • CCS Insight's Ben Wood
  • I Media LLC 2011
  • Syndigate.info an Albawaba.com company