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Summary:

Nokia said today it’s slashing 330 research and development jobs in Europe as it looks to consolidate its handset lineup and focus on high-end smartphones. The move is a small one and long overdue, but it is a step toward getting Nokia back in the game. […]

Nokia said today it’s slashing 330 research and development jobs in Europe as it looks to consolidate its handset lineup and focus on high-end smartphones. The move is a small one and long overdue, but it is a step toward getting Nokia back in the game.

The Finnish company’s success selling low- to mid-range smartphones in developing markets is well documented, but Nokia continues to lose ground in the U.S. and Europe as superphones from Apple and Research In Motion chip away at its market share. And Nokia is increasingly threatened by Android, which has gained sudden momentum in the wake of its Verizon Wireless Droid initiative.

Nokia may feel a pinch as it severs the R&D personnel, but the company will surely continue to innovate with its Maemo OS and S60 devices.  And it’s not like innovation has ever been a problem for Nokia — its struggles since the emergence of the iPhone have stemmed from its aging Symbian platform, its unwillingness to bow to U.S. carriers and an utter lack of affordable, iconic devices. Shifting its focus toward higher-end handsets that produce better margins will be a step in the right direction.

  1. RBC Capital Markets Managing Director – Mark Sue gives his take on Nokia’s prospects, “We’re looking for constructive comments at Nokia’s analyst day to be held in Helsinki on December 3rd. With improving demand despite the choppy environment, we’re increasing our 4Q09 unit forecast for Nokia from 120M units to 122M, a +12% QoQ increase. Supply constraints may limit additional unit upside as components remain tight across the chain. The incremental units and Nokia’s market share of 38% implies that global mobile device units may finish the year down approximately -6% YoY on a sell-in basis.

    “Nokia is enjoying decent demand for its 5800 Touch and mid-tier N series and while early, we estimate ASPs may be tracking flat sequentially at EUR62. Nokia will spend much time at its capital markets day discussing two separate segments to improve operations. On the volume product side, we look for Nokia to discuss plans to further leverage its scale and distribution to improve margins on feature phones. More importantly, on the solutions side, Nokia may articulate a message to improve its smartphone market share as it expands its ecosystem to improve the end user experience.”

    Sue continued, “Nokia’s global smartphone market share has slid from 41% early this year to ~39%. We’re not expecting any major product launches at Nokia’s CMD but rather a discussion of corrective action to improve execution on the smartphone side. Nokia may reiterate its commitment to the Symbian OS while also making investments in its Linux based Maemo OS for the high-end.”

    Sue added, “Separately, while previously not interested in the Nortel Metro Ethernet assets, Nokia Siemens is now partnering with One Equity Partners to bid this Friday morning. At the moment, we believe Ciena and Nokia Siemens will be the only likely bidders. Ciena’s initial bid is $521M.”

    Sue concluded, “While Nokia’s portfolio remains challenged relative to Apple and others, we don’t believe the rate of share loss is worsening. With stabilizing share and incrementally better units, Nokia’s shares may display some relative outperformance as we finish the year. Furthermore mobile devices operating margins are expected to rebound sequentially from 11.4% to ~12.8% as Nokia works on reducing variable expenses. Nokia’s shares are currently trading at 0.7x our CY10 revenue estimate and 13x our CY10 EPS estimate.”

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    Sincerely,

    Brad Reese on Cisco
    Network World Cisco Subnet: The Independent Voice of Cisco Customers

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  2. Jacob Varghese Friday, November 20, 2009

    I agree. This is a great move for Nokia.

    Focus on one OS and a small number of phones – 10-20.

    It’s interesting how Apple is teaching the these veterans a lesson or two.

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  3. Martin Lawrence Friday, November 20, 2009

    hmmm.

    from what I read on Reuters, Nokia is focusing “on launching fewer, but more iconic, phones”

    Did Nokia really say the are focussing on smartphones? After all, a featurephone can be iconic, too.

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    1. A very basic device with a browser is a smartphone. Features are silly, because they only work with predefined systems. Web systems work with anything.

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  4. Three platforms, with multiple skins for regions — physical and UI — would be ideal. Tis about time, and it is easy to suggest that for Apple, but I would not expect Nokia to do this. They should make a bigger push into smart devices as well. Collaborative objects working on a personal area network in my mind is the goal.

    Using the first N tablets, I became aware how much a PAN would make sense. A vary small object that provides the network attachment and authenticates the services and applications is really the future. In the same way that I would like to see an Android camera, a Nokia camera with Kodak could be quite interesting.

    As a designer, prototyping such things is cool, but the handset manufacturers never quite pick up on it. That is the draw of Android. Why somebody like Nikon would not be looking at such OSes to power cameras is beyond me.

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  5. Really hope they figure out their platform strategy and would suggest that in a perfect world that they would select a single platform and build good phones on it.

    One thing that Espoo seems to not get is the huge advantage Apple has because of the fact they have not fragmented their installed base. iPhones and iPod touches call all more or less run the same apps, something which you cannot even say for S60.

    This single platform advantage extends (to a lesser extent and with more complications) to Android.

    Recent experience with Symbian touch screen devices including the N97, N97mini and X6 lead me to believe that Symbian hit its peak in the non-touch E71, a great phone that I still love. More limited time with the N900 suggests that while this platform has potential, it is still immature and perhaps not yet at the level Android was at when the G1 was initially launched.

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  6. i own nokia 5800 touch screen its a decent phone with higher specs then iphone ….almost 50% of cost iphone unlocked …..also most andriod phones just cost too much

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  7. [...] Nokia to Consolidate Handset Lineup…Finally The Finnish company’s success selling low- to mid-range smartphones in developing markets is well documented, but Nokia continues to lose ground in the U.S. and Europe as superphones from Apple and Research In Motion chip away at its market share. And Nokia is increasingly threatened by Android, which has gained sudden momentum in the wake of its Verizon Wireless Droid initiative. [...]

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  8. [...] move to consolidate its lineup isn’t entirely unexpected — Nokia said two weeks ago it planned to whittle down its number of new models — but the degree to which it’s reducing its portfolio is drastic given that it churned [...]

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