Telecom Lead Asia: Mobile phone major Nokia’s current struggle is not fully associated with strategies of rivals Samsung and Apple.
For instance, Nokia Location & Commerce (legacy NAVTEQ) has reported €189 million operating loss in H1 2012.
The division generated €77 million operating profit on an adjusted basis. Nokia Location and Commerce may generate adjusted profit of €154 million in 2012, according to analysts.
€154 million adjusted profit in 2012 is inadequate after paying €5.7 billion in cash for NAVTEQ in 2008.
“The industry may have questioned the price that Nokia paid for Navteq, but the product has never been in question. They have a good level of detail—especially in emerging markets where Nokia has a better market situation—and a rich database of ‘points of interest’ which is increasingly important. The problem has been that Nokia’s preferred distribution system—bundled in Nokia smartphones—has not been a successful monetization strategy for no fault of Navteq’s,” Yankee Group Senior VP of Research Wally Swain said recently.
“Broadening the distribution strategy—such as the Amazon deal and perhaps deals with some of the wannabe alternate OS—will be critical to making Navteq a success and filling in some of Nokia’s other cash flow holes,” Swain added.
Nokia’s shyness to enter the global tablet market that will reach 172.4 million units in 2013 has also added to the agony.
Nokia is now considering tablet foray.
Apple iPad mini and Android OS are driving tablet market. By 2016, worldwide shipments should reach 282.7 million units, up from a previous forecast of 261.4 million units, according to IDC.
Apple is continuing to dominate tablet market with 55 percent unit shipment share in the third quarter of 2012.
ABI Research says despite maintaining its lead for 10 straight quarters, competition from tablets powered by Google’s Android OS continues to eat away at Apple’s success. Fifty-five percent is the lowest share Apple has ever had since launching the iPad in 2010.
Instead of focusing on its own OS, Nokia relied on Microsoft Windows.
Nokia Lumia is yet to find huge acceptance in smartphone market dominated by Apple and Samsung.
In Smart Devices, Nokia will extend its strategy by broadening the price range of Lumia and continuing to differentiate with the Windows Phone platform, new materials, new technologies and location-based services.
The entire world is moving away from feature phones as smartphone will account for more than 50 percent of the market in 2013 and beyond.
But Stephen Elop, Nokia president and CEO, said: “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.”
READ MORE: Strategies of Stephen Elop, Nokia president and CEO
Nokia wants to improve the competitiveness and profitability of its feature phone business. But Asha will not last long as cost effective Smartphones from Huawei, ZTE, LG, Samsung and Lenovo will be in demand.
Analysts note that Nokia has been selling mobile phones since 1971 and smartphones since 2000. How long does it take Nokia to get its act together?
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Krishna Aravind
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