On September 5, 2012, shares of Nokia (NOK) plunged 11% before noon, despite the fact that many technology and Wall Street reviewers gave positive feedback about Nokia's latest smartphone device. A few years ago, when Apple (AAPL) and Google (GOOG) were knocking Nokia and Blackberry (RIMM) phones out of the ring, Nokia's problem was not a weak brand. At that time, its main problem was a weak product.
Nokia released its new smartphone ahead of Apple's iPhone 5 -- a decision that was probably more of a Hail Mary pass than a strategic one.
Unfortunately, without a good product for a long time, Nokia has lost its brand appeal, and therefore, even if Nokia's Lumia series of phones could be a good entrant in the smartphones space, customers may be more than hesitant to try to switch their favorite mobile platforms to a now 'untested' brand.
Problems for Nokia
- Lack of a popular product for too long has substantially tarnished the Nokia brand. It is no longer cool to have a Nokia phone. Rather, the consumer's perception of owning a Nokia device could be tagged as "cheap," quite the opposite of Apple's "elite" or Samsung's "cool" tags.
- Nokia spent years behind its Symbian platform, partnering with a multitude of companies for a supposedly cutting edge mobile platform. Unfortunately, it failed to focus on user experience. Nokia found itself totally out of place technology-wise, when Apple announced its first iPhone. Worst, the Android platform from Google knocked out any goodwill that was left in the consumers' minds. Nokia spent way too much time, money and effort behind Symbian, probably enough to get itself lost in the wrong world.
- So after spending years behind Symbian, Nokia had no other choice but to abandon its flagship platform and partner with another 'loser' in the marketplace -- Microsoft -- which entered the smartphone market years ago, and has not yet been able to develop a stable footing.
Nokia's Windows 8 smartphone may be providing more productivity than the iPhone or an Android smartphone because of some outstanding Windows 8 collaborative features, but they will not be able to offer the mobile apps that the consumers have become so much used to and even dependent on (at least not soon enough).
- An iPhone user is more likely to switch to an Android smartphone and vice versa rather than any other phone, simply because most app developers today tend to develop apps in at least iOS and Android platforms. A smartphone's usability is equally attached to apps as it is attached to vanities like Apple's Siri.
- Even after the first iPhone, Nokia did pretty well initially, simply because it focused on catering to the low-cost phone markets in emerging countries. But now low-cost smart phones are a commodity, and Nokia's strategy of being the low-cost smartphone guy is no longer working.
- With the abandonment of its Symbian platform, existing sales could plummet further as current Nokia users who are set with Symbian (for whatever reason) could begin to switch to other platforms. Users who have adapted to Symbian may have been using Nokia because of its Symbian interface and corresponding apps, and now as it sunsets, there is no guarantee whether those users will stick to Nokia for a Windows phone or switch to Apple or an Android based smartphone.
If Nokia's mere existence continues to depend on Hail Mary passes like this one, the company will continue to see further sales declines. Already revenues have fallen 9% in 2011, and Symbian smartphone sales declined by 18%.
Nokia's decision to unravel its latest smartphone (that it has so generously boasted about in recent press releases) ahead of Apple's iPhone 5 ended like a small sideways distraction as the world continues to wait and watch upwards for the real thing next week.
Unfortunately for Nokia, when the brand had appeal, its product was going out of favor, and now that it has gotten itself a potentially good smartphone, the company seems to have lost its brand appeal. If Windows based smartphones do not work for Nokia, it will be stuck between the devil and the deep sea during its Symbian-to-Windows transition, with a deep cliff right below it.
Shareholders, get a parachute or something.
Note: My opinion on Nokia's shares at the current price of $2.50 is Sell.