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Elop promises ‘urgency’ as Nokia takes a $1.8bn beating

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Will the gloom ever lift for Nokia(s NOK)? Not yet, it seems — in fact, the storm clouds are looking distinctly ominous.

In its latest quarterly results, the Finnish handset maker said things were “mixed” in the face of “greater than expected competitive challenges”, as it posted a loss of €1.3 billion ($1.8 billion).

The problem stems in large part from dramatic falls in mobile sales. Despite the recent launch of the lower-priced Lumia 900, net sales for the first quarter were €7.4 billion — down 29 percent on the same period last year — and Nokia witnessed falls from top to bottom. There was a 52 percent drop in smartphone sales revenue on the same time last year, and a 32 percent reduction in revenue from featurephones.

Chief executive Stephen Elop tried to mitigate the damage in a statement. Much of the losses relate to the restructuring of Nokia Siemens Networks, the company’s infrastructure arm — but the lack of momentum was something he could only hint at:

“We are navigating through a significant company transition in an industry environment that continues to evolve and shift quickly. Over the last year we have made progress on our new strategy, but we have faced greater than expected competitive challenges.

We have launched four Lumia devices ahead of schedule to encouraging awards and popular acclaim. The actual sales results have been mixed. We exceeded expectations in markets including the United States, but establishing momentum in certain markets including the UK has been more challenging.

We have a clear sense of urgency to move our strategy forward even faster …We are confident in our strategy and focused on responding urgently in the short term and creating value for our shareholders in the long term.”

The bad news had already been telegraphed last week, when the company signaled that things were proving tougher than expected by issuing a press release saying it had sold only 2 million Lumia smartphones.

But once that news was out, a pile-up started, led by ratings agency Moody’s deciding to relegate Nokia stock down to just one level above junk.

So what can Elop do?

The trouble is, there’s nothing really new to the company’s plight. Nokia is the victim of an intense crush of competition from both sides of its mobile business — Apple (s AAPL) and Android (s GOOG) at the lower-volume, higher-profit smartphone level, and rivals like ZTE at the high-volume, lower-profit end. It’s trying to win back mindshare at the high level after years of inaction handed the baton to its rivals, while propping itself up at the other. That’s a tough set of priorities to juggle, even before you start thinking about software and services.

But each quarter the pressure ratchets up a little more and the urgency becomes even greater. Just look at the past two years, where Nokia’s share price has dropped by around 75 percent.

The market says Nokia’s got to get its turnaround going faster, smarter, bigger — but whatever Elop does, it doesn’t seem to have the velocity or gravity to stop that rot. And with losses mounting, the company’s cash reserves — it has currently nearly €5 billion in the bank — really need protecting.

Will shareholders be calling the strategy and execution into doubt? Will it make a difference?

14 Responses to “Elop promises ‘urgency’ as Nokia takes a $1.8bn beating”

  1. Very good comments here: resume
    1 add Android like Samsung has WP, revive Megoo line
    2 aggressive middle Market phones
    3 aggressive lower end.
    Nokia can do and needs to do all.

  2. Next year at this time, there MAY NOT BE a Nokia. If the ex-Microshaft guy and the current Microshaft guy continue to push Nokia down the path toward Smurf phones and Winders as a platform….. That giant sucking sound you hear coming from Espoo today may be be one of the last gasps of time from Nokia….

    • unfortunately this Titanic is leaking water BIG time. And the captain is telling everyone that the ship is on fire (when there is no fire) & advising everyone to jump into the freezing water

  3. I think, Nokia Lumia’s hardware is better than Samsung Galaxy and will sell more than 2 millions – only if Nokia chose Android instead of Windows.

    • Exactly. I wonder if Nokia has signed any binding agreements with MS that keeps it from adopting Android. If not, it should adopt Android on at least a couple of its handsets ASAP. It could start turning this situation around in 6 months flat. Just imagine, if Nokia had adopted Android, it could have been rivaling Samsung now as the largest smartphone seller in the world.

    • u sure lumia hardware is better than samsung galaxy? given its popularity, the MILLIONS of galaxy customers disagree with u. lumia 900 hardware can be one of top IF it is still 2010!!

      btw lumia 900 hardware probably isn’t good enough to run wp8. how can it be top? pls read abive comment by Sally F

  4. I think the biggest challenge for Nokia now is to choose only ONE market out of those two, you have mentioned in your post, Bobbie.

    Nokia is trapped by the mixed desire.
    From one hand to continue to dominate low cost mobile phones, as it has always been.
    From the other hand to compete equally with Apple iPhone and variety of Android vendors.

    I believe, Elop’s strategy will never get competitive execution speed to compare with Apple, until they really drop out vast part of their low cost mobile phone business.
    But it is hard decision.

    • Sally F

      The problem isn’t feature phones. The problem is Windows Phone.


      Its carcass, my friend, is blowing in the wind. Venerable names like Samsung and HTC tried at Windows Phone and failed. It’s being going since 2010, and still has less than 2% of the smartphone market.

      Elop knew this before he committed to it.

      Elop put the knife into Symbian, alarming existing and potential Symbian consumers and developers, effectively killing the platform. Then he put the knife into MeeGo.

      Now that Windows Phone 7 has failed, Microsoft CEO Ballmer will do what he always does after a failure. Perform a platform reset, and develop a whole knew OS, which Windows Phone 8 will be.

      Will WP8 win more phone users? No. Just the opposite. It has little that’s enticing. Just like Elop’s burning platform announcement killed Symbian, the WP8 announcement will kill potential WP7 customer.

      The fiasco rolls on, yet shareholders of both companies seem content to just sit there and watch it all collapse around them.

      • Although, I never touched WP devices, I tend to agree with you re WP future. Which is none.

        If WP future was depending on Nokia, it could probably fly.
        But it depends on Microsoft, which is commanded by the greedy sales guy.

    • I don’t see what would prevent them from doing both. Sammy does ok. Nokia has internally separated the two. This way they at least have some income from lower end and they can utilize parts like Navteq in both.