Up Next for Nokia: A Major Change in Strategy


Nokia Corporation, which trades on New York Stock Exchange under the NOK ticker, is hosting an investor meeting in London next Friday, February 11.

Watchers suspect the event is meant to discuss the company’s shrinking earnings, sliding market share and the obvious inability to compete effectively on the high-end with the combined onslaught of Android superphones, Apple’s popular iDevices and RIM’s BlackBerry.

Make no mistake, it’s a significant milestone for the Finnish company that had long ago invented cellphones. The Helsinki-based firm shed little light on its investor site apart from stating the obvious, the when and where:

This event will be held on February 11, 2011 at the Intercontinental Park Lane Hotel in London. It will be a half-day event, with registration and lunch starting at 11 a.m. UK time, followed by presentations and Q&A from 12:30 p.m. to 3:30 or 4 p.m. UK time. For those not attending in person, a webcast will be available.

Matt Shimao, head of Nokia investor relations, was more specific in a recent conference call with analysts, describing the event as "a strategy and financial briefing" meant to focus on Nokia’s "medium to long-term strategic and objectives." Stephen Elop, Nokia’s new president and chief executive, jumped in by promising a "comprehensive update on the key decisions and changes relayed to Nokia’s strategy going forward."

He also kinda acknowledged Nokia’s missteps and hinted at a major change in strategy. The game is now the ecosystem, not the hardware, he elaborated in the call:

Nokia faces some very significant challenges. The game has changed from a battle of devices to a war of ecosystems and competitive ecosystems are gaining momentum and share. The emergence of ecosystems represents the broad convergence of the mobility, computing and services industries.

Today, the winning ecosystems at the high-end to mid range deliver great hardware, compelling user interfaces and the coherent aggregation of search, advertising, ecommerce, social networking, location-based services, entertainment and unified communications, just to name a few.

At the same time, we see a different type of ecosystem building around mid-range to low end devices and developing markets involving very low cost components and manufacturing processes. In this range, brand, scale, price, design, distribution and speed are critical. It is on this basis of ecosystems that Nokia must now compete.

In addition to changes in the competitive landscape, there are challenges that are specific to Nokia. For example, our experiences are not competitive in all markets. As a result, we witnessed a pattern of disappointment in those markets. Therefore, we must always deliver great products and we are actively raising the operations and execution bar within Nokia.

We also continue to learn that we need an attitudinal shift within Nokia. We need to operate as the challenger in this market. This means we must improve the quality of our execution, accelerate the speed at which we execute and enhance the effectiveness of our partnerships.

Elop is also expected to host the upcoming investor meeting. Since he took the CEO job, this former Microsoft executive has yet to detail his long-term strategy. He arrived interesting times for the ailing company. Nokia, still the world’s largest phone vendor by unit count, is however rapidly loosing market share to Android and profit share to Apple. Market research firm Canalys reported (table below) that Nokia in the December quarter surrendered its share of the smartphone segment to Android.

They company ended the quarter with 30.6 percent global smartphone market share on shipments of 31 million unit. Just a year earlier, the firm was leading the smartphone race with a whooping 44.4 percent market share. What a difference a few quarters make.

As a result of the sliding market share and a notable sales slowdown, Nokia has suffered shrinking profits for the past three consecutive quarters.

Earnings fell from ?948 million in the year-ago quarter to ?745 million on sales of ?12.65 billion in Q4 2010, a whopping 21 percent annual decline. Heads rolled: The board had to let go Lalita Gupte and Keijo Suila and further board reshuffling ensued.

With the new management comes new strategy so it makes sense that the company would like to share those changes with the investment community.

I would be totally surprised if Nokia announced the unthinkable, that it’s dropping Symbian and MeeGo and switching to Android or Windows Phone – or both. But then again, maybe the ailing king needs a shock therapy. No need to worry, though, as Nokia’ is most likely going to lay out plans for the future and explain how it’ll make use of its huge ecosystem to get back on its feet. And that, if you own Nokia shares, can only be a good thing.