Mobile // Mobile Devices
Commentary
6/14/2012
09:25 AM
Eric Zeman
Eric Zeman
Commentary
Connect Directly
RSS
E-Mail
50%
50%

Nokia At Risk Of Joining RIM And Palm

Watching Nokia slowly fall from the leadership role in the mobile industry is gut-wrenching. The company is at real risk of becoming a has-been like Palm.

Organizational changes Nokia announced Thursday mark the umpteenth time the company has attempted to reinvigorate its sagging smartphone business. They likely won't be the last strategic changes undertaken by Nokia, a company desperately struggling to ward off the undertaker.

The worst part about the announcements coming from Espoo, Finland, are not the 10,000 layoffs, not the closed plants and refocused business units, but that we've heard it all before. Once every eight months or so, Nokia heaves itself upright with shifts in its internal organization, shuffled executives, and facility changes. I feel like I've written this same story a dozen times since 2008, and each time it becomes more depressing.

So what's actually changing?

Nokia will reduce its headcount once again, this time trimming its workforce by about 20%. It will close up several plants in Europe and Asia, and will reorganize several existing plants to handle different tasks. It's going to cut off some organizational fat and promises to focus on its core smartphone business even more so than it already does. Several long-time executives are leaving the company later this month and will be replaced by others. Nokia promises it will invest in technologies that will make its phones stand out, and will renew efforts to make its feature phones successful in developing markets.

[ What would you think of a free Nokia Lumia 900? See Seton Hall Gives Nokia Windows Phones To Freshmen. ]

"We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia," said Stephen Elop, Nokia president and CEO. "We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions."

Blah, blah, blah. Excuse me if I don't believe a word of it.

Nokia needs to do one thing: sell more smartphones. Let's repeat that: Nokia Needs To Sell More Smartphones. Any effort that doesn't help it do that is wasted.

Nokia has taken a huge gamble on Microsoft's Windows Phone platform. So far, that gamble hasn't paid off. It announced in February 2011 that it would dump Symbian as its main smartphone platform and would instead go with Windows Phone. The result was an almost immediate plunge in sales of Symbian smartphones, which crushed Nokia's revenue throughout 2011. The company fielded its first Windows Phones, the Lumia 800 and Lumia 710, in late 2011 and the followed them up with the Lumia 900 and 610 later in the year.

Sales have been OK, but not spectacular. Nokia has not said exactly how many Lumia phones it has sold to date. We do know one thing about Lumia sales: they aren't anywhere close to sales of Google Androids and Apple iPhones.

The danger facing Nokia is that it smartphone sales may not sustain it financially in the long term. Nokia has pared down its sprawling business units, but is still burning through cash. Nokia's finances are facing a two-pronged attack. First, the transition from Symbian to Windows Phone requires a significant capital investment. It doesn't help that the company has reorganized itself repeatedly over the years and has had to clean house at the executive level. Second, the nosedive in Symbian smartphone sales has crushed Nokia's revenue, further constraining its cash position.

What's bothering investors is that Nokia has two bonds coming up that it might default on. Its bonds are already rated at junk status. The first amounts to 1.25 billion Euros of 5.5% maturing in 2014. That represents more than a quarter of Nokia's current cash reserves. The second bond, for 500 million Euros at 6.25%, doesn't mature until 2019. Some analysts polled by Reuters don't think Nokia will have the cash to pay either.

We've read about problems such as these before. I'm talking about Palm and Research In Motion. Palm tried very hard to relaunch itself as a premier smartphone maker with webOS and the Pre, Pixi, Veer, and other smartphones. Sales of those devices, however innovative they may have been, weren't enough to keep the company afloat. Despite the fact that HP acquired Palm, it didn't back it up financially and the entire company was eventually lost.

RIM is in a similar position. It is struggling to relaunch itself with a new platform and new hardware, but its time is running out. The company has hired bankers to explore strategic options (which often means a sale of some sort), and sales of its BlackBerry smartphones have taken a beating thanks to Android and the iPhone.

Nokia and RIM are both in danger of entirely failing to compete with Android and the iPhone. Some question whether or not Nokia should have chosen Android instead of Windows Phone. It if had, there's no doubt it would be selling more devices--though at the cost of its soul.

I don't want to see Nokia go the way of Palm, but it is looking more and more probable of late. We can only hope that Nokia's latest organizational change is the one that sticks and effects actual change in the company.

Mobile Connect addresses the strategic direction that will define enterprise IT for the next decade--building and managing information systems that run on a mobile platform. Mobile Connect will bring together enterprise mobility thought leaders to discuss the innovations in mobile, and how forward-thinking companies are getting the technology to work for them, providing unprecedented business value. It happens in Boston, June 18-20. Register today.

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
clak
50%
50%
clak,
User Rank: Apprentice
6/29/2012 | 7:47:27 PM
re: Nokia At Risk Of Joining RIM And Palm
If you don't like their products, why is it "gut-wrenching"?
clak
50%
50%
clak,
User Rank: Apprentice
6/29/2012 | 7:46:08 PM
re: Nokia At Risk Of Joining RIM And Palm
Does it matter?
Philip
50%
50%
Philip,
User Rank: Apprentice
6/20/2012 | 12:05:29 AM
re: Nokia At Risk Of Joining RIM And Palm
I know of at least two Windows Phone 7's with physical keyboards:
HTC Arrive: http://www.htc.com/us/smartpho...
and
Dell Venue Pro (http://en.community.dell.com/d....
EVVJSK
50%
50%
EVVJSK,
User Rank: Apprentice
6/19/2012 | 6:04:55 PM
re: Nokia At Risk Of Joining RIM And Palm
If Nokia really thinks Symbian is that limited, then I would say Meego. Meego already has a development environment that is out and a suite of products that could easily be continued/improved. From my understanding it is a Linux variant so there may be a stable of easily ported apps to further flesh out the Meego OS (I know some are calling it Medfield or something like that, but Meego is what the Nokia N9 was associated with). As stateted elsewhere if Blackberry and Symbian are going away, there is a nice Physical Qwerty fan base out there that likely would be at least a decent start for a new phone OS that embraced Physical as well as touch.
EVVJSK
50%
50%
EVVJSK,
User Rank: Apprentice
6/19/2012 | 5:57:01 PM
re: Nokia At Risk Of Joining RIM And Palm
"Second, the nosedive in Symbian smartphone sales has crushed Nokia's revenue, further constraining its cash position.

"
Many Nokia regulars predicted this and pleaded with Elop to make an announcement saying that Nokia would let Symbian, Meego, and Windows Phone compete for Nokia users. Microsoft could have still have had much of the development resources it has had (Symbian and Meego have had some resources, but I would be not a lot in comparison). The fact that the Nokia Pureview phone being released is on Symbian and not on Windows Phone (or at least parallel) tells us that Windows Phone isn't ready to handle some tasks as of yet. The fact that there is no Physical Qwerty Windows Phone model (similar to the Nokia E6 and E7s) probably also indicates Nokia hands are tied at enticing former Nokia and RIM Physical Keyboard loyalists. Tied possibly by Microsoft not wanting to support/being able to support a Physical Qwerty device properly ?
Guest
50%
50%
Guest,
User Rank: Apprentice
6/16/2012 | 4:03:30 PM
re: Nokia At Risk Of Joining RIM And Palm
having said all that, I still think RIM's products are good but have come up short. Nokia has been in a pile of heap by 2008, while RIM was crushing it being the fastest growing company in the world (yes even after iPhone launch).

The PlayBook is by far the best piece of software and hardware that RIM has ever made, so I'm optimistic for BB10. I own two PlayBook's.

I've never heard anyone say any other advantage for iOS or Android other than apps. That's not a long term advantage of either OS. Open wins in the long-term and as such, web apps should win the day. The webkit browser is becoming very powerful and all mobile devices use it. 99% of apps do not need the power of native C code. I'd say the BlackBerry browser is the best, or at least tied with Chrome for desktops. They both eat javascript fast and display correctly.
Guest
50%
50%
Guest,
User Rank: Apprentice
6/16/2012 | 3:49:50 PM
re: Nokia At Risk Of Joining RIM And Palm
I actually had an interview with RIM in 2009 with their product management team. After going through a 1 hour phone interview with HR and with the product manager (BBM) I was brought in for a 3 hour interview.

The Compliance Manager role was to act as the main liaison between marketing and legal. They said they hadn't done this role yet and as such, marketing efforts were not always aligned with what their legal department would advise. Things like using BBX etc.

I remember showing up and being disappointed by the nothingness of RIM business park. It was disorganized - staff were housed in whatever buildings could be found. Inside the lobby of one of the buildings, I walked along the walls of all their patents. Tons. But the foyer was so typical of a mid-class enterprise.

Then I was brought to my interviews. Through offices of sterile cubicles I passed. This was not a startup environment. It was nameless. Apparently again were disorganized and had to shuffle my interview. I was to meet with the Regional Director of Product Development first.

This guy was my age at the time, about 28-32, gold chain, real geek, and he had been a University of Waterloo graduate who rode RIM's success up. He liked buzz words and in my experience, people overuse buzz words to cover up their lack of knowledge on the subject.

I thought geeze, this guy must have hired a few hundred people already. So what does he do? He tells me to wait while he gets some interview questions. He goes on Google, searches for a site, and then I wait for him to print them out.

I was like - you are a director and I am incredibly smart, I am a designed accountant, degree in marketing management, great related experience. Don't you have specific questions to see how I will handle this actual role? Why at your level are you printing questions like strengths and weaknesses, while I already managed to BS these type of questions well with HR. Do Directors at RIM just want to hear talk, or do you want to know what I can do?

I was a bit pissed and when he asked me one of the questions, almost angry, I couldn't come up with the answer. After the interview he made fun of me for the question immediately outside his office and said he didn't think I was the right guy. What professional does that? Who is that arrogant to make someone feel that awkard? I spent the entire night taking my family out so I could buy a shirt and tie. I took the afternoon off work! Time is tight. If you don't think I'm the right fit, you take your conversation to another office - not just outside your office in the cubicles where I can hear you word for word - and he knew it. Apparently that's how the Regional Director of Product Development at RIM roles.

The hiring manager defended me and said it was just a question, but this director pushed. I think he didn't like that I was a decent looking guy, 6'4", looking stellar of course, same age or a couple years younger. And maybe he knew I thought he was full of shit after he disappointed me with his printed questions.

So I did the next hour with the hiring manager and it went great. Lots of chat on cool new features.

One thing I did observe inside RIM was that its managers were very much 25-35 years old's. This is great insight into what has gone wrong at RIM. The younger managers are great at tech and ideas, but they fail in terms of organization. RIM's struggles at present are because of two things: they grew to fast and did not take the time to organize their employees so they were a cohesive machine and second, their senior level product management was arrogant.

That was my experience in 2009.

unlockworldwide
50%
50%
unlockworldwide,
User Rank: Apprentice
6/16/2012 | 3:31:03 PM
re: Nokia At Risk Of Joining RIM And Palm
What problems for Research In Motion; their dual strategy is working just fine.

Only this week they announced yet another exclusive $2K Porsche design aimed at Paris Hilton (market aspiration maybe 3000?) and the Curve 9220 selling for 11K rupees, which potentially (if they make a profit on 11K) may keep them alive until they launch BB10.

The problem is that Apple appear to be saving up so many BIG bangs that BB10 will emerge unnoticed.
Whatever, I love a good wake (that's not caused by a boat, it's a British word for a funeral party)
Eric Z
50%
50%
Eric Z,
User Rank: Apprentice
6/16/2012 | 1:12:24 PM
re: Nokia At Risk Of Joining RIM And Palm
Frank - First, thanks for taking the time to read and share your thoughts. I'm sorry you think I hate RIM. I don't. I don't hate *any* company in the mobile space. I am, however, hard on companies who I believe can do better. Nearly every company that makes smartphones and their platforms (including Apple and Google) can do a better job than they are, but RIM has dropped the ball more so than the others with respect to their device strategy and response to competitive threats.

Is RIM still profitable? Sure, for now. But 70% of the company's revenue comes from device sales. Those sales have taken a significant downward turn. Every analyst firm out there sees RIM's share of the smartphone market contracting further over the coming quarters. The company warned that it is going to take a $1B write-down on the inventory of unsold BlackBerries this quarter. At $500 a pop, RIM is sitting on about 2 million unsold devices. That's a serious problem.

I agree with your point that RIM is taking too long to get BB10 out the door. It could have moved faster had its former CEOs responded to changes in the market adequately. They didn't.

I've said plainly in my columns that I think RIM still has a chance. I've met the new CEO, seen him speak, and have listened to his plans. He's a smart guy, he has the right vision, and is doing everything he can. But BB10 is still an unknown factor. We've seen a few slides and demos, but
nothing significant about the new operating system. I fully expect BB10 to
be better than BB7, but it has to be as-good-as -- or nearly as-good-as --
Android, iOS and WP8 to remain a relevant player in today's market. It has
to have enough appeal to bring back the former BlackBerry faithful who've
departed for Android or iOS.

Please understand, I don't want to see any company fail. I want to see a
thriving competitive market. I want everyone to love their smartphone. But
this is a brutal space in which to be competing and platform consolidation
is going to happen whether we like it or not.

Eric.Zeman@gmail.com | +1(973) 970-5664 | @phonescooper | GTalk: eric.zeman
| Google Voice: (646) 389-3626
Frank Castle
50%
50%
Frank Castle,
User Rank: Apprentice
6/16/2012 | 11:06:01 AM
re: Nokia At Risk Of Joining RIM And Palm
Eric has had a hate on RIM for awhile now, now he outright makes up crap

"Nokia at risk of joining RIM and Palm"

The headline is total BS, Nokia has been losing billions and has failed to make a smartphone that people want. RIM is still profitable and has areas where they are actually doing quite well.

"It is struggling to relaunch itself with a new platform and new hardware, but its time is running out. The company has hired bankers to explore strategic options (which often means a sale of some sort)."

How is RIM struggling? I'd say they are taking a long time (too long) but I also understand the massive effort they are doing. Is there a countdown clock running? That reeks of fanboi opinion. Apple left the door pretty wide open by failing to really do much with iOS 6, I now fully expect iPhone 5 to be a marginal update as well. Android continues to push hardware specs but at the expense of leaving owners with outdated hardware and unable to upgrade their OS at a blistering pace.

Other options RIM is exploring are partnerships, licensing of BB10, BBM etc. A sale outright has already been eliminated. Unless someone is going to pay a premium to overtake RIM they got another 2-3 years to operate as is. Much to the dismay of blogs like Eric's, Verge, BGR, GizModo who have their own agenda and companies they prefer. I'm sorry RIM is the bur in your butt ... Do all Blackberry fans a favor and stop writing about them.
Page 1 / 2   >   >>
Building A Mobile Business Mindset
Building A Mobile Business Mindset
Among 688 respondents, 46% have deployed mobile apps, with an additional 24% planning to in the next year. Soon all apps will look like mobile apps – and it's past time for those with no plans to get cracking.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 24, 2014
Start improving branch office support by tapping public and private cloud resources to boost performance, increase worker productivity, and cut costs.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.