After Black Friday, Nokia acts to halt share slide
Lock down the exits, quick
Why did investors who rallied to Nokia two weeks ago, when new CEO Stephen Elop hinted at a Microsoft deal, desert the company on Friday?
The market wiped $17bn off Nokia's share price on Black Friday, once the strategy was disclosed, with the stock losing almost 14 per cent in value in a day. The fall continues: three per cent down this morning in pre-market trading.
Last night Nokia acted to soothe investors. Statements by Elop and the new head of smart devices at Nokia, Jo Harlow, at Mobile World Congress 2011 in Barcelona all point to assuring the markets that the transition period will be less bumpy, and also hint the Microsoft deal is sweetened by pots of cash. Yet the reports circulating today wildly overstate the case.
Some reports suggest that Harlow said the first Nokia Windows Phone will appear in 2011. In fact, she made no such commitment. Pressed when the first WP7 devices would appear she merely noted that, "I can't tell you when, but my boss has told me he would be much happier if that time was in 2011." And that was all.
A wire report claiming that "Microsoft is paying Nokia billions of dollars to switch to Windows Phone 7" is equally ill-founded.
What Elop actually said was that the "net benefit" of the strategy changes he announced would ultimately save Nokia billions. "The value transferred to Nokia is measured in billions not millions," he said.
That's not the same thing. Ending Symbian and Meego development, and using Microsoft as an outsourced supplier, ought to save substantial R&D costs. Perhaps this will add up to billions of dollars, eventually. But this doesn't mean Microsoft is providing nine-figure marketing and engineering support - as the headline on the original wire report suggests.
Let's return to the original question - why do investors think Elop's strategy is a dud today, when they were so enticed by the prospect of a fresh start just two weeks ago? Analysts called for Nokia to offer competitive smartphones once again, and cut its costs, and so rallied to heavy hints Elop dropped of using an outside platform. Hasn't he ushered in the changes they craved?
Reality sinks in
One factor is that Elop has gambled on an all-or-nothing strategy, kicking the ground from under Symbian (which is being grandfathered) and Meego (which becomes a small labs project). This increases the short-term and medium-term risks - risks which are now being factored into the share price.
Some investors are also waking up to the reality that Windows Phone 7 is much less advanced than many suppose. It is not a carrier-grade OS and lacks many of the tick-box features operators and users demand. In many ways it resembles Symbian circa 2001. It's a long way from being "finished" (let alone "Finnish-ed"... yes) and it's going to take a lot of work to reach parity with the competition - who of course, aren't standing still. Nokia's engineers know how hard this task is, having laboured to put them in Symbian (and lately into Meego).
The short-term danger is that customers turn away from this year's Nokia Symbian offerings for 2011, declining to spend money on a dead-end platform. Perhaps this is overstated, as Symbian had poor take-up as a "platform" for content and applications in comparison to Apple and Android.
So Harlow talked last night about how Symbian will be "continuously renewed". The only thing that can assure investors in the long run is great Windows devices, but they are some way away. And even after the latest press statements (and cynical leaks of hurriedly-drawn device mockups to Engadget), nobody knows when that will be. ®
It's worth putting Black Friday in perspective. Nokia lost $8.7bn in value as shares slid, to value the company at $35bn. Nokia's value in November 2007 was $148.5bn.
Elop should pick up the phone
Elop should pick up the phone, his village is calling him and they sorely miss him.
Nokia has spent 15 years instilling an "Everything but Microsoft" mentality into its user populace. Most nokia smartphone users have moved to Nokia in the days when the choice was between WinMob and Nokia and has liked the change. Otherwise they would not be a Nokia user.
Most of that populace will not pick up a Microsoft phone. As a Nokia user I can say - I could have swallowed a move to WebOS or even Little Britain "No, But Yes, But No" Java AKA Android. I am not however going to buy a Windows handset. That is the reaction of most Nokia smartphone users I know and the market is simply picking up the vibe and reflecting it onto the share price.
The only thing to keep Nokia smartphones afloat at this point was the brand loyalty most of which was fuelled by an Anti-(Microsoft/Apple/Google) sentiment. Elop just spat all over that. The market is correct in reacting to this. It is simply the messenger which shows what the users who were going to buy these phones think about this idea.
I want Symbian not WP7
I've been a loyal Nokia customer for 12 years. I love my Symbian phone and I actively chose it over Android because it had features I needed that Android didn't have (surprising though that may sound), although Android ran it very close. I never even considered a windows phone, there didn't seem to be much point. If Symbian is being dumped for WP7, then my next phone will be an Android, which won't come from Nokia.
Action was unnecessarily drastic
The reason investors are so rattled by this move is simply that the CEO has wiped out any value in the company in a single stroke. If he had said that a joint venture with Microsoft was an interim step or sideline while Nokia got the rest of its house in order, e.g. developed a compelling alternative platform, we could at least believe that Nokia had something unique going for it.
But he's burned the whole lot. Nokia is reduced to me-too Windows phone workshop. All hope of further innovation or breakthroughs have been extinguished. I'd be running too if I had any investment in Nokia.