Analyst insists Nokia must build a WP7 future

While Microsoft and their platform are slowly expanding grounds, Nokia is continuing to travel down a negative path with sales plummeting and revenue decreasing. Compared to the glory days when the company’s brand was used to describe mobile phones as much as the term mobile, at present a radical change is required for them to continue within this competitive market. Analysts know this, consumers know this, and more importantly so does Nokia.

Along with countless reports and articles covering a potential join of the hands between Nokia and Microsoft, an investment analyst, who has sent a memo to the CEO of both companies urging them to work together and create Windows Phone 7 handsets, has provided a huge push in a positive direction.

The analyst, Adnaan Ahmad of Berenberg Bank, doesn’t hold back in his note with covering WP7’s (and – to an extent - Nokia’s) competitors and pointing out that he knows both Steve Ballmer and Stephen Elop must be “both sick and tired of hearing how great and innovative Apple and Android (Google) ecosystems are”. Moving onto say that “they have hundreds of thousands of applications, growing revenue at 50%+ per annum and gaining market share globally,” and he is absolutely correct in his referencing – but Microsoft already know this, they are in it for the long haul.

Directing at Nokia, Adnaan continues, “I remember the days when Nokia (with Jorma Olilla at the helm) ruled the roost, European market share was above 50% and US market share was in the 35% range.” While quoting what Stephen said in his recent Q4 earnings release, “Nokia faces some significant challenges in our competitiveness and our execution. In short, the industry changed, and now it’s time for Nokia to change faster,” he agrees that now is the right time for Nokia to change (perhaps from Symbian altogether?) and with WP7 readily available in it’s infant stage, now could prove to be the only time for action.

Moving on from Adnaan’s critical analysis of the current situation Nokia has found itself stuck in, he throws a right-hand punch to follow the left-hand jab he threw above:

1. Android a no-go for now. This may have been a good idea one to two years ago, but it is not today. You will never be able to catch up with Samsung, which should rule the Android show midterm given its economies of scale, product breadth (TVs, PCs, phones and tablets), as well as its captive component base. And that market is going to get even more crowded with China Inc (ZTE, Huawei et al) joining Sony Ericsson, HTC, Motorola and PC vendors. And more significantly, how is anyone going to differentiate on Android long-term?

2. Announce an EXCLUSIVE deal with your ex-colleague, Steve: you get access to their WP7 intellectual property (IPR) scot-free and access to the US market where your share has dived to the low single-digit level, and in so doing cut your bloated handset business R&D budget by at least €1bn, or 30%, which should add 300bps to your operating margin. Get rid of your own proprietary high-end solution (MEEGO) – it’s the biggest joke in the tech industry right now and will put you even further behind Apple and Google. Focus your high-end portfolio around WP7, and over time you can take the cost down (that’s Steve’s job and cost base) to get this into the mid-range market. Push your Symbian solutions into the low-to-mid-range smartphone market as quickly as possible to defend market share versus Android’s upcoming lowered cost ecosystem.

3. You are going to have to cut headcount severely in Finland, where Nokia accounts for around 7-8% of GDP and employment (including ecosystem), but I am sure the Government will be more amenable to restructuring with your share price down 70% since the introduction of the iPhone in 2007. It could obviously get worse if you wait. And the best time to announce it is now.

4. Tell the market by what time you expect the initial products from your exclusive deal with Steve to be released. 

What makes both Adnaan’s points coming to reality and Nokia turning around for the better more likely is due to who is now CEO of Nokia. Stephen Elop, a previous Microsoft employee. Should any deal manage to be successful and a plan be drawn together at Nokia as to how they will tackle re-entering the market as a competitive and worthy opponent to other manufacturers, it should prove to be more effective with an ex-employee of Microsoft at the helm with a vision of change.

We look forward to any progress that can be made with Nokia heading towards the Windows Phone 7 platform, as it really does make sense. What are your opinions on how Nokia can survive, and do you believe WP7 is the way forward for the company?

Source: WinRumors; Thanks Marc O., for the tip


Reader comments

Analyst insists Nokia must build a WP7 future


I would welcome Nokia making WP7 handsets. I think Nokia has had pretty solid hardware for quite some time and would greatly benefit from WP7. That is to say, I would buy a Nokia WP7 device if they ever made one for Sprint (but I doubt they'd ever go CDMA). Anyways, more choices the better!

hopefully they make android ones. ive had my wp7 focus now for 2 months or so, and my friend just got that captivate, we flashed it with another rom, and it just made my wp7 look like a joke. The android phone did like everything, super fast, browser was just a tiny bit slower, skype, any messenger i wanted. The google maps / 3d features with accelerometer are also really awesome.it just seems like wp7 has a long way to go before anything like that

Android is a world of hurt. First month or so it seems so awesome and customizable but then it starts sending Messages to the wrong people, slowing down and soon the new versions leave it behind and the new apps don't work for it either.I went through two Android devices and still have one and I use my Windows Phone 7 device as my primary.

"it just seems like wp7 has a long way to go before anything like that." Well yeah, everyone knows it has a long way before it reaches that maturity. If you wanted a smartphone that did everything and was just as great as your friend's, you probably should've gotten an Android phone. But unlike Android's beginning, WP7 is already starting out very mature and will grow faster into a real competitor as long as MS plays their cards right.

I would welcome it for sure. None of the Windows Phone 7 devices have very good cameras so far, and Nokia has made some wonderful camera phones.

Yeah I really think Nokia has some of the best cameras for their high-end phones and if they made a WP7 with at least 8 or 10 MP they would probably make the other manufacturers looks like a joke.

Honestly, besides their ego Nokia wouldn't have much to lose if they made at least one WP7 device and see how it fared. They already have excellent hardware and everyone knows that really is Nokia's defining quality. So if they were to focus solely on the hardware side of the device and let MS handle most of the software, I think they would have a low-risk high-reward chance to test things out. The same thing applies to Sony Ericsson.

Some pretty good manufacturers already for WP7. Just get the software right and all else will fall into place. Who care what happens to Nokia.

I guess that Microsoft and Nokia would both benefit from this. I bought a Samsung Omnia 7 a week ago and i'm loving the experience out of the box, great phone, great software. A little more customization on the Maps and Internet Explorer would make it even better. If Nokia can push Microsoft to refine it even further and with good timing to fight the competetion, it will be perfect.

Its not going to happen -- ever!Nokia will not abandon Ovi and its developers mostly in the EU.MeeGo is Linux based, if the do decide, they will go Android and develop their own skins. This another case of analysts who have no clue.They are stuck with MeeGo or they will go Android. Nokia's big mistake was believing they were a software company. When the iPhone launched if they had partnered with Microsoft at that time, both MS and Nokia would be better off. Its too late now.Better story is herehttp://www.informationweek.com/news/mobility/smart_phones/showArticle.jh...