How much longer can Nokia go on like this?
Its share price plummeted 18 percent on Thursday after a slew of mostly bad, if necessary announcements highlighted yet again the critical plight of this once great telco.
In a statement, the Finland-based company said “competitive industry dynamics” are negatively affecting the Smart Devices business unit “to a somewhat greater extent than previously expected” in Q2, while the same dynamics are expected to “negatively impact” Devices & Services in Q3.
This builds on dreadful Q1 figures, which showed Nokia’s overall revenues fell 29 percent year-on-year.
Surely it is only a matter of time before someone makes a takeover offer and potential suitors will be digesting the latest news that is headlined by further job cuts.
Nokia said it was cutting up to 10,000 jobs and closing facilities in Finland, Germany and Canada as it targets €1.6 billion of additional cost reductions by the end of 2013.
"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," commented president and CEO Stephen Elop.
“We must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions.”
Informa analyst Julian Jest said the cuts would help Nokia to “buy itself more time” but it remained a “prime target” for a takeover bid.
Three senior execs are also stepping down as Nokia shakes up its leadership team.
Luxury phone maker Vertu has been sold to a private equity group although Nokia will retain a minority 10 percent shareholding.
Financial details of the deal were not disclosed but Nokia should have got a decent price for a company that has been delivering double-digit growth for the past few years.
“Nokia is stepping up its efforts to turn around what Elop referred to as ‘a burning platform’ 15 months ago,” KPMG Telecoms, Media and Technology partner Milan Sallaba told European Communications.
“Continuing market share losses particularly to lower-cost, Android-based device manufacturers and Apple are forcing decisive steps to focus on core activities.”
Nokia said it intends to focus on three specific areas: Lumia devices, feature phone innovation and location-based services.
The company backed up its promise to invest in “products and experiences that make Lumia smartphones stand out” with the purchase of imaging specialist Scalado.
The Sweden-based company, whose software helps to catch, view, edit and share images on more than one billion devices, already licences its products to the top five tier one mobile phone manufacturers.
Commented Sallaba: “The acquisition of Scalado is an astute bet to build relevance in imaging, and the move adds skilled resources, IP and technology capabilities in a promising area that may contribute much needed growth.”
At Mobile World Congress in February, Nokia showed its intention to push an imaging-led smartphone with the launch of its 808 PureView device.
On feature phones, the main play seems to be based around its mobile internet browser, which the company said it wanted to make the most data efficient in the world.
However, perhaps the most cause for optimism can be found around location-based services.
Nokia’s location and commerce was the only business unit to show growth in Q1 – revenues were up 19 percent to €277 million.
The company said it planned to invest in this area to differentiate Lumia smartphones with services including navigation and visual search applications such as Nokia City Lens.
“For some time now Nokia has believed that its location capabilities could be an important differentiator, but the question is whether mobile phone users or the developer community also see this as a major advantage that Nokia has over its competition,” said Informa’s chief research officer Mark Newman.
Nokia also said it plans to extend its mapping technology to multiple industries.
“[Nokia] has struggled for a long time with its enterprise strategy but it looks as if its new thrust is going to involve more of a push into the M2M sector and developing a revenue stream outside of the sale of devices,” added Newman.
While laudable, all three of these “good news stories” will have little impact in the short term and it remains a question of if, not when, a suitor such as Microsoft puts its cards on the table.