After several quarters of bad performance and loss of market share, Nokia appointed Stephen Elop as its CEO to get the company back on track. Yet no radical changes have been made since his appointment apart from the departure of some key executives and bringing Symbian back home.
This February, after almost five months in the office, Stephen Elop will update investors on Nokia’s new strategic directions. Informa Telecoms & Media believes he should take this opportunity to announce a much-needed new strategy for converged devices, including smartphones, tablets and smart-books. In this segment, the company saw its market share declining from more than 50% in 2008 to less than 36% in 2010. This decline is partly due to the investment Nokia made to open-source Symbian. The vendor suffered all that pain, only to bring it all back in-house, costing it almost two years in the smartphone race – and the competition is not diminishing.
Today, Nokia can no longer afford to lose market share in this environment at a time when the mobile industry is converging very fast with the computing market. To put it into context, Informa expects that, by 2015, sales of smartphones in Europe, Nokia’s main market, will represent 74% of the region’s total handset sales. So any further loss in market share in this high-ASP and high-margin market could induce a loss in the company’s overall value share and result in a failure by Nokia to maintain its leadership and brand prestige in the global mobile market.
So far, Nokia has persistently used Symbian to compete in the converged devices landscape, but is this platform fit enough to stand competition from alternative OSs? Informa has long maintained that Symbian is not flexible enough to handle the innovation required for modern features, hardware solutions and new functionalities that are now musts for converged devices. In addition, the transition to the open-source world was difficult and has resulted in delays in the release of newer versions, while the competing platforms are evolving at a much higher speed. Instead of focusing on innovation to differentiate itself in the smartphone market, Nokia went on offering free navigation on all Symbian phones in its portfolio and also decided to slash prices and reduce margins associated with these phones, which has helped it to improve its sales of Symbian phones during the last two or three quarters.
Having said that, Informa continues to believe that, in the mid-term, Symbian is the right platform for powering low-end smartphones that target the mid-range segment of the mobile handset market. However, it is becoming increasingly obvious that Symbian is no longer an option for Nokia to compete in the high-end smartphone and tablet markets. It was striking that Nokia did not make any impression at the CES this January, while almost all device manufacturers revealed innovative smartphones and tablets powered by various mobile OSs. In addition, systematic delays in launching flagship devices, such as the N8 and the E7, do not help the industry’s confidence in the Symbian brand. This lack of confidence has gone even further in the US, with the cancelation of key Symbian smartphones – for example, the X7 and the Nuron 2 which were meant to be launched this quarter exclusively with AT&T and T-Mobile, respectively.
Nokia has already revealed that it will use MeeGo to tackle competition in the tablet and high-end smartphone markets. But could MeeGo on its own enable Nokia to regain market share in these segments? A straight answer to this question is NO!!
Given the growing momentum of innovative devices powered by competing OSs, including Android, iOS, QNX, WebOS and Windows Phone, MeeGo is unlikely to make any strong impact on the market in the near future. It was striking that, nearly a year after MeeGo’s launch, no enabled device was demonstrated at the CES this year while a host of Android smartphones and tablets were launched during the show.
In the longer term, MeeGo could be a success if Nokia takes the risk of investing massively in order to guarantee enough support from the industry – from the developer community in particular. But is this really a risk that Nokia should take while alternative OSs have already hosted a number of innovative features and have received a wide acceptance by both the industry and the developer community? Nokia is a large-scale vendor and relying on a single OS in a fast-growing converged devices market is strategically wrong. If Nokia decides to carry on with its in-house OS strategy, then the company might face the risk of continually having to cut prices for its smartphones to remain competitive and for it to maintain its market share.
Would it not be wiser for Nokia to adopt a multiple-OS strategy and deploy OSs such as Android and Windows Phone 7 in parallel with MeeGo to address high-end smartphones and and tablet PCs? Would this strategy not allow Nokia to make significant savings in operating expenses, compete better on both time-to-market and pricing, and provide existing Symbian users with a better path for upgrading their phones? Would it not enable the company to free up resources and focus more on what it does best – the device design – in order to maintain its large-scale and brand advantages? Would it not allow Nokia to strengthen its position in the North American market, a region that has proved difficult for the company to penetrate so far? Finally, would it not be an interesting offer to its partnering operators that are wary of locking themselves into a single OS?
However, although multiple-OS adoption could enable Nokia to win back market share and regain more support by the operator community, there are two main downsides to such a strategy:
• Nokia will have to rely on both Google and Microsoft to update their OSs and could lock itself into the roadmap of these partners.
• Both Microsoft Windows Phone and Google’s Android are more than just terminal OSs, they are each a part of a wider ecosystem for applications development, distribution and monetization.
The adoption of these OSs could compromise all the investments that Nokia has made in developing its own ecosystem including Ovi and NavteQ. However, the company could use its Qt to create a cross-platform environment across all these OSs and steer application development back to its Ovi ecosystem.
In summary, as the pressure of the financial community is growing on Nokia, Stephen Elop will use Nokia’s Analyst Day on February 11 to reveal some new strategic decisions he will take in order to bring Nokia back on track. Informa believes that the new CEO will focus mainly on Nokia’s strategy for converged devices, including smartphones and mobile broadband devices. He should enlighten the industry on the future and the roadmap for both Symbian and MeeGo. He could also potentially reveal a new market segmentation whereby a multiple-OS strategy could be deployed, with Symbian and Android focusing on low-end smartphones, while high-end smartphones and tablet devices could be addressed simultaneously by MeeGo, Android 2.x and 3.x, and Windows Phone.