Nokia's 'Unpolished Gems'

Recently appointed Nokia Corp. (NYSE: NOK) CEO Stephen Elop dug deep into the metaphor mine today as he described the Finnish handset giant as "a landscape of unpolished gems," and highlighted some of the issues he has encountered during his first few weeks in his new job. (See Nokia Dumps CEO, Hires Elop.)

He said there is an "embarrassment of riches" within Nokia, but that those riches can only be realized if the true value of the gems can be released. There are some that can be polished into something shiny and profitable (my words, not his…), while the company will be "setting aside those that are less relevant."

Elop was addressing analysts and investors on today's third-quarter earnings conference call, during which he explained the reasons behind 1,800 job cuts and lower-than-expected sales. He said he is focused on developing a clearer strategy for Nokia and a "greater focus on execution." (See Euronews: Oct. 21, Nokia Reports Q3 , and Nokia Cuts Jobs .)

One issue Elop and his team need to address is an ongoing components shortage that Nokia says held back its third-quarter handset sales, affecting in particular the "low end of the market" where it is very strong. The shortage, which hampered the sourcing of components such as displays and cameras, is set to continue into the fourth quarter and into 2011, noted the CEO.

In the third quarter, Nokia sold 83.9 million devices, down 9 percent year-on-year and 4 percent compared with the second quarter.

And that's not Elop's only concern.

He also noted that Nokia is "characterized as a place where it is hard to get things done," while a lack of success in North America is "characterized as a weakness." The vendor has also been challenged by the way it is organized, he noted: Products and solutions have been developed by individual teams in isolation, which isn't very efficient, hence the "streamlining" announced today that will see 1,800 staff lose their jobs.

Elop, though, is "very excited" about the applications development of the MeeGo operating system, which he believes will attract greater developer interaction with Nokia, which has decided to focus on Qt as the "sole application development framework will ensure that applications will continue to be compatible with future evolutions of Symbian as well as upcoming MeeGo products." (See Nokia Updates Qt.)

Less exciting is what's going on around those operating systems: There aren't going to be any MeeGo products until 2011, while the Symbian community is close to meltdown. (See Symbian Chief Exits and NoGo for MeeGo.)

In addition, Nokia says it is supporting HTML5 "for development of Web content and applications for both Symbian and MeeGo platforms."

— Ray Le Maistre, International Managing Editor, Light Reading

optiwizard 12/5/2012 | 4:20:50 PM
re: Nokia's 'Unpolished Gems'

Amazing that they don't tell anything about Nokia Siemens Networks. What is going to happen to that disaster JV ?

Losses are increasing, people are demotivated and maybe they will end at a zero profit in 2010 and 2011 although that is rather unlikely. When will Nokia divest this ugly part ?

Decision has to be made very soon by the new CEO or they will end like Siemens Enterprise networks that disappeared from the market.



digits 12/5/2012 | 4:20:49 PM
re: Nokia's 'Unpolished Gems'

Nokia has never divulged much about NSN when it issues its financial reports.

A new CEO at Nokia - who will be looking to see which bits of the business can be buffed up to be nice and shiny - and NSN's acquisition of Moto's wireless networks might create a tipping point in 2011...

But NSN isn't going to disappear - if it did it would take down a lot of networks with it, given the number of managed services deals it now has. I think the company will continue to lean more heavily on its services division.

As for consistent profits.... we'll have to see.   

optiwizard 12/5/2012 | 4:20:48 PM
re: Nokia's 'Unpolished Gems'

It is indeed clear that the acquisition of the Motorola business will give NSN more sales. It is however not clear how they will increase their margins to be able to make profit and to create shareholder value. The Motorola business will not help them to realize that.

Beside of that fact, the CEO of NSN already announced that NSN is talking to different financial groups to divest NSN away from Nokia. NSN has at the end only 1 big problem : their costs are too high compared to their income. When the JV was announced they had about 60.000 people and they announced at that time that they had to reduce that number to 45.000 people, however they never succeeded in doing that. The question is also how they could reduce so many people without jeopardizing their sales. They closed a lot of managed service deals recently, but these deals very often also include that they have to take over a number of resources of these operators (like in Germany, 3000 people last year)


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