Oh how the mighty have fallen.
In less than a decade, Finnish phone giant Nokia has seen it?s dominant market share and corresponding share prices tumble with the advent of iOS and Android Phones.
In the first quarter of 2012 it reported a huge ?1.34bn ($1.7bn) operating loss despite sales of $7.4bn ($9.7bn) in sales. Its share price has fallen from a high of US$40 in 2007 to well under US$3 in 2012. This prompted speculation that it could be a takeover target by Samsung (which Samsung denied)
However, with the recent launch of the Lumia series of smartphones powered by Microsoft, Nokia signals the intention of clawing back onto the smartphone market.
It is an uphill task. Some factors will still hamper any progress that Nokia makes.
Lumia: Swimming Against the Current
Despite Lumia?s decent reviews and if ? that?s a big if ? the Lumia is a winner for Nokia sale-wise. It is still not as profitable as the iPhone.
The components of the Nokia Lumia 900, which sells for $450 without a phone contract, uses $209 worth of parts, according to research firm IHS iSuppli. Meanwhile, the comparable 16-gigabyte iPhone 4S, sold for $649 without a phone contract, is made of components that cost $190, iSuppli says.
In Short, Nokia pays more for its parts and sells its phone for less, thus making only $241 compared to Apple?s $459 (Lumia 900/iPhone 4S, no contract). There are 2 reasons for this:
(1) Apple is the master of Supply Chain Management ?sourcing for the cheapest parts and getting them to be assembled most effecient way possible.
(2) Nokia used some expensive parts in the Lumia series ? namely the screen ($58 for Lumia vs $29 for iPhone), and the wireless chip (Lumia?s LTE chip is $38 vs. $23 for iPhone)
Unlike the Porn industry – Sometimes Bigger isn?t always Better
To begin competing effectively, one trait that Nokia has to get out of its system is to stop pulling out the big guns at any chance it gets. It?s adoption of the LTE chip for the Lumia line only adds to cost when there isn?t really widespread adoption for LTE (yet). Its not much, but little drops of saving make an ocean.
Another vision of excess is Nokia?s upcoming 808 Pureview with a killer 41 MP camera. Features include:
- Has a large high resolution 41MP primary camera
- Is powered by a single-core 1.3GHz processor
- Has 512MB of RAM
- 16GB built-in storage
- HSDPA 14.4Mbps, HSUPA 5.76Mbps
- Wi-Fi N with DLNA
- Bluetooth 3.0
- GPS and A-GPS
- Stereo FM radio, and NFC connectivity
I am not knocking the phone ? I am sure it takes great 41Megapixel pictures.
However, if I owned any shares of Nokia, I would be asking which marketing focus group return with the result that the market was crying for a super duper 41 MP camera.
Nokia has also one of the largest product lines producing phones for virtually every segment of the market. Each phone has varying features and functions, thus a different user experience. Apple only has one ? the iPhone ? thus making it easier to manage its supply chain effectively. Also, 1 team for 1 phone is better than many teams for many phones.
Nokia has made efforts to streamline its range by cutting off some of its parts. It is my opinion that Nokia has to shed much more extra weigh really fast if it wants to survive in the near future.
Lumia ? a bright start
The Lumia is off to a good start. More than sound hardware, good battery life, and a growing number of apps are coming onboard the Windows Smartphone train.
Microsoft and Lumia are doing all they can to promote the phone. Going as far as giving phones away to freshmen at Seton Hall ? a College in New Jersey.
In the Smartphone market: Its all about the apps
In the new Phone World Order, demand is App driven. Perhaps Microsoft and Nokia could go another step further by enticing app developers by throwing cash and resources at them? Pick the top 20 apps in every category of the App store; invite developers to port their apps into the Windows Mobile environment. This would make users migrating onto Windows based phones much easier with the apps they are used to using.
This is only the beginning
The Smartphone market is still in its infancy. It was brought to life by the iPhone and its ubiquitous App store?s success. Phone makers subsequently jumped on the Android wagon to get a piece of the pie.
With the entry of the Lumia ?a product forged by the marriage of Microsoft and Nokia ? a credible phone with its accompanying ecosystem has emerged.
I like Nokia, and I think they build excellent hardware. But the fragmented nature of Nokia meant that buying a new Nokia phone didn?t always bring about the same features as the old one. If you wanted the same feature of your previous phone, you had to understand the varying firmware builds of Nokia or the varying versions of the Symbian OS.
Downloading apps from the previous Nokia store didn?t always play well on the phone. Screen size may vary or the apps don?t work as they weren?t built for the version of the phone. This is a chore Android developers are facing, build an app and having to test it on every version of the phone is trying for Android, even more so for Nokia.
Lumia is supposed to solve that entire problem. I think that Microsoft has partnered with an excellent partner to provide hardware for its OS. However, Nokia has got to clean house and make itself leaner to survive in this new environment.
Maybe the unthinkable is a Good thing
I cannot imagine how many more quarters Nokia can keep announcing losses and survive before the stock gets so cheap, Nokia get bought over for its worth of patents. Remember that Nokia sits on atop a treasure trove of patents and has active licensing programs with more than 40 licensees.
The very thought of buying Nokia for its patents is not unthinkable. Maybe then will Nokia be able to shed its legacy product lines and really work on products that will keep it profitable and relevant.