Surprise: Nokia profits fall again!

by Gaurav Kheterpal on January 28, 2011

Things seem to be going from bad to worse for Nokia as the world’s largest cellphone maker yesterday reported a 21 per cent slump in profit at 745 million euros for the quarter ending December 2010. The company’s global market share shrank from 35 percent a year ago to around 31 percent in the fourth quarter.

Besides increased competition in the smartphone industry, the Finnish-giant has also been plagued with internal unrest and instability within the company in wake of a recent management shake-up.

The smartphone segment continues to boom and Nokia continues to struggle. So, what’s wrong? Plenty!

When you are in a desperate situation, the first thing to do is to admit it. I’m glad that Nokia’s current CEO Stephen Elop has no qualms in admitting that the company is struggling in the smartphone business. He’s spoken about the company’s need to “build or join a competitive ecosystem” thereby fueling speculation that the adoption of Android or WinPho7 cannot be entirely ruled out. 

Elop believes there’s a strong distinction between the low and high ends of the markets and Nokia is well-positioned to take advantage of both these opportunities. I’m not so sure if the dual-OS strategy is the best way forward for the ailing phonemaker. For a start, Nokia needs to clear its stand on Symbian as well as its future plans on MeeGo. Being in two boats will eventually drown you and I’m afraid Nokia hasn’t learnt that lesson yet.

I have no doubt that Nokia must act quickly and the decision cycle needs to be shortened if it hopes to regain lost ground. Or else, it’s surely going down the Palm route. Nokia has already indicated that it will delay devices on its new high-end platform, MeeGo, until an unspecified date this year. Having said that, adopting Android would be a pitter pill for Nokia as using the former is like “peeing in your pants” for warmth. IMO, WinPho7 looks a more likely candidate to side with Nokia as it would be win-win situation for both parties.

To make matters worse for the Finnish giant, Nokia Siemens Networks has been facing a torrid time in wake of intense competition from Ericsson, Huawei and others. Unsurprisingly Nokia also warned that results in the next quarter would be weak, with operating profit margins expected to drop to between 7% and 10%, down from 11.3% in the past quarter. Haven’t I heard that before?

To say that Nokia faces “some significant challenges” would be a gross understatement. The smartphone industry has changed, now it’s time for Nokia to change faster or else it would be too late. Your thoughts are welcome.

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Written by: Gaurav Kheterpal. >. Follow > by: RSS>, Twitter >, >, or Friendfeed >

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