Yes, Nokia looks certainly much better than a year ago, but it's far from perfect. I still have doubts regarding Nokia's ability to keep its phone division. Even if at the Q4 announcement Nokia won't have any losses at its phone division we can expect any tremendous profits either. The results are going to be around -50m and 50m which is simply ridiculous for a company of Nokia's size. On the long term it is not viable and sometimes tough decisions must be taken. I think that Q4 will be the answer to most of questions and conserns. We'll see if Mr Elop is on the right way.
"We" see Apple as it is now, but emerging markets see it very differently. They didn't have access to each and every iPhone model or other Apple devices. In most countries it's a dream to own an Apple product other than an iPod. It would be an unexpected opportunity for them to purchase an "iPhone". And that's all that counts. Of course, Apple will blow up the margins by offering ridiculously low specifications, as it did for iPad mini, but the first year of the release people won't care. It's going to be the huge success in emerging markets. So phones like Lumia 620, Lumia 820, GS3 mini, Blackberry's, HTC's and even all the Chinese phone makers will certainly feel it coming. Heads are going to fall, while Apple will do what it does the best, it will make more cash. Making money is not "always" about innovation. They are taking the last big money of "iPhone" and either Job's magic is still here and they are coming with something even more spectacular, either they will simply keep coming with some upgrades. Anyhow, Apple's fall is certainly not for now. And no, I'm not long AAPL, but I'm seriously considering it.
My usual trading policy is to increase my share positions only when it makes my average share price go down. Of course, sometimes I see some extraordinary reason to increase my positions, but it's very rare. First I bought NOK at $4.04, bought back at $2.65 and I bought the highest position at $1.75 Meantime I sold most of my $1,75 shares at $3.60, which I regret. At the moment my average price is at $3.19. So unless the share goes under $3, I won't even consider adding more shares and certainly not before the Q4 announcement. I prefer to play it safe and not to take any unconsidered risks in wake of this irrational euphoria surrounding Nokia. Unfortunately I see much more signs of a downturn rather than of an upturn regarding the Q4 results. The expectations seem too high and even if Nokia beats the expectations it would be way too soon to celebrate.
Apple (AAPL) is working on a cheaper iPhone that could launch later this year, the WSJ reports. One source says the device could resemble the regular iPhone, but "with a different, less-expensive body." The cheapest iPhone currently sold (the 8GB iPhone 4) goes for $450 unlocked, putting it out of the reach of many emerging markets buyers, as well as some prepaid buyers in developed markets. The fact low-end Android phones sell for much less (sometimes less than $150 unlocked) has done wonders for Android's international share. [View news story]
I think that Apple's priority at this point is the margins, so the specifications are going to be seriously under the average. iPad might be the perfect exemple of the magins chace. Tiny hard disk, a slow processor, no retina and a "cheaper" body are going to be very likely for that phone. Is it going to sell well? Depends of the price. If the price is not unreasonable they will certainly take a large market share on the first quarters. However once again it's going to be a fight between trend and performance. Will people prefer to buy a trendy phone with lower specifications or a normal phone and probably cheaper one with higher specifications? Anyhow Samsung, Nokia, RIM and HTC are going to feel it coming...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
Please, be kind enough to answer my question and expose your qualifications and than I'll be glad to refute your claim and answer your question. I'd like to know who exactly am I talking to.
"But you forgot that NOK is running on low volume vs. production capacity (i.e. q is small), so your constant "c" is not negligible anymore at current output levels!"
By the way, thanks again for proving that you have no clue in economics theory!
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
"Maybe you're not able to do this, which could explain your kind words at the end of your message"
It seems that you didn't even get the sense of my last sentence. You can find the COGS of any company on the Internet. But it's just a number without any importance. What is important is to be able to analyse the whole costs and to be able to influence it in order to reduce it. COGS/sales is simply an informative rate that gives you an extremly restricted information. You can't analyse the company's structure, what it needs to improve and how it needs to do it without much more specific and detailed numbers. Even if you have the exact VC and FC you are still nowhere in your analysis. I'm really sorry that you don't even understand that, but somehow it doesn't even suprise me...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
It's going nowhere. You refute microenomical basis, things don't even need to be proved. These are commonly admitted facts and since you disagree with them leaves me no doubt that you've never studied economy and I'm just wasting my time talking to you. I'm not a teacher and it's hard for me to explain you such a basic things especially in English. I'll use the most simplistic economic formulas, maybe you will understand better...
Take a simple total costs function : TC = aq^2 + bq + c In this function variable costs are represented by (aq^2 + bq) and fixed costs are represent by c because fixed costs is a constant, they don't evolve with production. So here you can see that the more the production (output), represented by q rises, the less fixed costs take a dominant place in the total costs. On the long term they become completely irrelevant. It's a commonly admitted fact in the classic and modern economy.
Now why Nokia's COGS varied so much in the last quarters? Simply because they go through a long turnaround, that they've been planning for years. That's why there was a spike of costs, that are not related to the production. A normal average company sees its COGS varied strictly because of the VC. Normally they just increase of decrease their output and so they spend more or they spend less in order to produce.
If you want to show yourself even more stupid than you actually are, please be my guest and refute these simple facts. Next thing you'll know, you're going to scream that the Earth is a cube.
Seriously I'm really curious to know what did you study n in which college! I can hardly imagine that you went that far, but who knows.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
Please, stop making em laugh it's getting ridiculous. COGC is called total costs. Now I'm going to try to explain you your own definition, cause you clearly don't understand it.
Fixed costs = relatively constant, varying mainly with size of production park.
It means that if a company builds a new facility, a new office, a new factory the FC goes up. You do it in order to increase the production capacity. Did you hear that Nokia was planning to open a new factory? Their costs can only go down at this point. For an average company FC don't vary in years.
Variable costs = % of output, varying with manufacturing/supplyin... technologies/structures used.
It simply the amount of additional fees that you need to spend in order to produce x phones. Unlike for FC, you can chose how much you want to manufacture and you can forecast how much it's going to cost you. It doesn't vary a lot in time, because companies need a lot of time to be able to adjust their production and so to increase or decrease their VC. If you want to produce 100 phones you need y workers and z inputs, if you want to produce 200 phones you need 3y workers and 3z inputs.
The thing is, when you produce, say 1 billion phones a month, it costs you 30 billions a month and 360 billion a year. Compared with some 100 billions that you spend on your facilities 10 years ago, it doesn't represent a thing on the long term. The more you produce, the less your FC become relevant.
By decomposing the COGS, it is possible to: - determine the breakeven in volume of sales - determine the efficiency in the phone business of NOK vs. competitors
Thank you for that incredible definition, didn't think about it that way... Once again, you asked me why this rate varies so much from quarter to quarter. I explained you that companies like Nokia need at least a year to adjust their costs. It can take a year to adjust the VC a little bit and it can take over 5 years to adjust the FC. So the total costs change very rarely. What actually does change in the COGS/Sales rate are exclusively the sales, from one quarter to another. Once again, with the same costs, if the sales goes up, the rate decreases, if the sales go down the rate increases. It's a simple matter of profitability and there is nothing "magic" about it. You see how much Nokia needs to sell phones in order to get its spendings back and as you said you can compare Nokia to other companies exclusively by its sales and costs. It represents a "base" of discussions to figure out what the company needs to adjust in order to increase its profitability.
It's easy so say that a company needs to decrease its VC and put a number on it, but you can only argue about what you need to do in order to adjust the VC, cause the VC is an addition of hundreds of different fees. Each of then can be adjust in thousands of ways and you spend years to study the whole production process and to figure out where every fee comes from and what you need to do in order to adjust it. Don't even dare to claim, especially in wake of our discussion, that you are able to study Nokia's COGS during your free time and with the figures available on the Net. You need years of practice and multiple degrees in order to execute that job.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
It's an extremely breed vision of the industry... Comparing Apple with Nokia makes no sense. They choose two completely different business models mainly because Nokia has been in phone business much longer than Apple and so Nokia uses an older business model. In management 10 years is comparable to a century.
It's a huge back pain to close factories and companies are extremely reluctant to do so, because they always hope that tomorrow might be better and the demand my surge. It takes much less time (a question of weeks, maybe months) to readjust the production in a factory, rather than to build a new one, which takes years. The other problem is to layoff workers which might be very costly and the social responsibility is simply huge. Companies closing their factories take a giant hit on their national image. Companies that sell high scale products directly to the population, under their own brand, close their factories only when they don't have other choice. The other issue is that when a company shuts its factory down they keep it unused. Selling it would only bring about 10% of its initial cost. And by experience, I can tell that a factory that has been shut down for just 5 years needs a lot of work and money to be operational again.
Apple choose a modern business model, they sign contracts with intermediary firms that manufacture their goods. It has its positive points, but a lot of negative points too. They highly depend of their Chinese counterparts who feel that they are in power, since if they decide to break the contract, Apple will be in much worse position than them. So even though Apple is one of their biggest clients, they control Apple. The other issue is that Apple can't control what's happening in Chinese factories and they can't influence the working conditions. There is a huge marketing campaign worldwide asking to boycott Apple products because of the "situation" in Foxconn plants. And of course there is a huge lack of security on Foxconn plants and that's why we see next Apple products over 6 months before the official release. Now I read many articles saying that Apple wants to use its tremendous cash flow to open its own factories in years to come, simply because they see the limits of their business strategy.
Why does the ratio COGS/Sales varies? Certainly not because of the fixed costs. As I said before they take an insignificant part of the whole production cost. First of all, it's a rate so it's supposed to vary a lot in time. If the sales increase the rate goes down, if the sales decrease the rate goes up with the exact same costs. Nothing complicated, just math basics. The other part is the costs and it's very complicated to speculate on them. There are hundreds of factors that influence costs and I don't know why do you stick to the fixed costs so much, but it's the smallest part of every company's total costs. Once again, they only have sense in case of a company that plans to enter a market.
I can easily imagine that you've never studied economy before and it's really amazing how you stick to the COGS/Sales rate and fixed costs. It's like if you were using some basis one variable math equations to analyze the speed of molecules...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
To be honest, I'm really dissapointed... What else can I say. You can't follow a simple conversation. We were talking about margins. What costs not related to production are not sustainable for Nokia and what do they have to do with Nokia's phone margins? They sold a huge part of their real estate assets, what else to you want them to sell? Their Chines plants? Or maybe the whole business in order to reduce their "fixed costs"? Selling their assets is not what is going to increase their margins or reduce their costs. It's just one time sales that are going to raise some cash flow but it will certainly not make their financial situation any better. As any other company in trouble, what they need is a deep restructure of their phone business, plant by plant, office by office, phone model by phone model. And in order to do so, they need to hire dozens if not hundreds of consultants specialized in management, manufacture, technology, accountability and economy. And that's what they have been doing since Q4 2010 and it will last at least till Q3 2013. While you were learning what variable costs and what fixed costs are, they've been working on a new strategy. And unfortunately for them, it takes years of research to figure out what might be th best strategy to adopt for a company like Nokia.
Could you please be kind enough to share with me what kind of degree do you have and where did you study? I'm getting really curious at this point.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
I don't know where that definition comes from. It's not accountability, nor finances, nor economy... I'm not saying that it's wrong, but it's not the "official" definition. First of all, when you produce something, you aren't necessary going to sell it, so the % of sales has absolutely nothing to do in a definition of costs. It's only relevant when you study the profit, the margins and so on. Costs only regard spendings in order to produce a product. Secondly, the variable costs do vary on the middle term, that's why they are called variable. Depends of the company's ability to adjust its production line. The company is forecasting a demand, that it is going to face in the near future, so they try to fit to that demand and so they adapt their production. By doing so, they might spend more or less for the manufacture. It's all part of corporate strategy and their ability to forecast the future demand.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
Once again, are we talking economy or accountability? Define variable costs. You're mixing everything. If you take a plant, the plant by itself and the machines that it owns is considered as being fixed cost. The number of workers, their salary, social security, their working hours is considered as being variable cost. The input, all the primary material, everything that is used in order to manufacture a product is variable cost. The transport, the taxes... All of that is part of the manufacture but it's considered as being variable cost in economy.
I don't know what are the economical fixed costs at Nokia. 95% is the average for a tech company. However, the fixed costs are barely taken in account in economy on the long term. They are almost inexistent in case of companies like Nokia, we only study marginal costs and average total costs in order to find the most efficient way of working. Marginal costs don't even include fixed costs! That's the base of the industrial economy (first year of college). Either you didn't study economy, either we speak different languages (economical and accountant).
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
There is nothing wrong in abandoning the ecosystem. There are plenty of them on the market and Android, iOS, BB and WP are just the most famous of them. A company doesn't need to own an ecosystem in order to make the market. I think that the decision of abandoning Symbian only reflects they fact that Nokia is considering to sell its phone division to Microsoft in the near future. Lumia series looks to me like a test for a possible future acquisition. Nokia has been making phones for only 30 years, while its a company that existed for ceveral centuries. They surf on the market, they invest in R&D, they invest in mapping industry and in telecommunication technology. Phone division is more like the weakest link with the lower that average margins at this point. Nevertheless, many companies would like to own this link, cause once again, it's much harder to start out of scratch, rather to own an existing business network. You can't be too sentimental about a business you just need to find a way to earn cash and I suppose that Nokia is very fit to do so.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
I went too far by saying that fixed costs can't be adjusted at all. They can on a very long term, but it's very rare. For example when a company closes its plant, they do it in order to drastically reduce their variable costs, to reduce the working force, to reduce the input and everything else related to the production. They try to fit to the demand they are facing. They reduce their total costs by sparing money on their forecasted eventual variable costs. But companies rarely "sell" their factories, they just close them, so they don't get their fixed costs back, that's why they are also called "sunk costs". Fixed costs represent a way too little part of total costs in order to adjust them. They only concern companies that enter on the market and that didn't start this production yet. They enter the market, they need to build or purchase facilities and so their fixed costs represent the biggest part of their total costs. What is important for companies on the long term, are average total costs, cause that's what determine their profits. And average total costs are by ~95% dependent of the variable costs.
However I don't know what did you study in college, economics or accountability. I can assume that in accountability, fixed costs and variable costs have a marginally different meaning.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Eld,
I disagree with you completely. Fixed costs is something that the company has already paid for, it's the unadaptable part of the production line. Fixed costs is plants, offices, headquarters, production machines. It's something that the company owns and on the long term it isn't even taken in account economically because the variable costs overcast them completely. So its quiet the opposite, when a comany is going through a turnaround, they adapt their variable costs in order to achieve a better profitability! They layoff working force, they adjust their input and try to find a way to use it more efficiently, they adjust working hours, output and so on and on and on... All that is part of variable costs, while fixed costs only concern companies that enter the market! And once again:
"Forecasting correctly the demand and adjusting production park is the management's first task."
Concerns only variable costs, cause fixed costs can't be adapted at all. Take your old economics syllabi back!
There are engineers in management who work as consultants and who help companies to adjust their production line and increase the production efficiency, reduce the bureaucracy, layoff the unnecessary working force or intermediary chiefs, and so on... I'm sure that Nokia already hired hundreds of them and they already have decades of experience in adjusting their production lines.
Here To Make (Quick) Money With Nokia [View instapost]
Yes, Nokia looks certainly much better than a year ago, but it's far from perfect. I still have doubts regarding Nokia's ability to keep its phone division. Even if at the Q4 announcement Nokia won't have any losses at its phone division we can expect any tremendous profits either. The results are going to be around -50m and 50m which is simply ridiculous for a company of Nokia's size. On the long term it is not viable and sometimes tough decisions must be taken. I think that Q4 will be the answer to most of questions and conserns. We'll see if Mr Elop is on the right way.
Here To Make (Quick) Money With Nokia [View instapost]
"We" see Apple as it is now, but emerging markets see it very differently. They didn't have access to each and every iPhone model or other Apple devices. In most countries it's a dream to own an Apple product other than an iPod. It would be an unexpected opportunity for them to purchase an "iPhone". And that's all that counts. Of course, Apple will blow up the margins by offering ridiculously low specifications, as it did for iPad mini, but the first year of the release people won't care. It's going to be the huge success in emerging markets. So phones like Lumia 620, Lumia 820, GS3 mini, Blackberry's, HTC's and even all the Chinese phone makers will certainly feel it coming. Heads are going to fall, while Apple will do what it does the best, it will make more cash. Making money is not "always" about innovation. They are taking the last big money of "iPhone" and either Job's magic is still here and they are coming with something even more spectacular, either they will simply keep coming with some upgrades. Anyhow, Apple's fall is certainly not for now. And no, I'm not long AAPL, but I'm seriously considering it.
Here To Make (Quick) Money With Nokia [View instapost]
Apple (AAPL) is working on a cheaper iPhone that could launch later this year, the WSJ reports. One source says the device could resemble the regular iPhone, but "with a different, less-expensive body." The cheapest iPhone currently sold (the 8GB iPhone 4) goes for $450 unlocked, putting it out of the reach of many emerging markets buyers, as well as some prepaid buyers in developed markets. The fact low-end Android phones sell for much less (sometimes less than $150 unlocked) has done wonders for Android's international share. [View news story]
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Please, be kind enough to answer my question and expose your qualifications and than I'll be glad to refute your claim and answer your question. I'd like to know who exactly am I talking to.
"But you forgot that NOK is running on low volume vs. production capacity (i.e. q is small), so your constant "c" is not negligible anymore at current output levels!"
By the way, thanks again for proving that you have no clue in economics theory!
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
It seems that you didn't even get the sense of my last sentence. You can find the COGS of any company on the Internet. But it's just a number without any importance. What is important is to be able to analyse the whole costs and to be able to influence it in order to reduce it. COGS/sales is simply an informative rate that gives you an extremly restricted information. You can't analyse the company's structure, what it needs to improve and how it needs to do it without much more specific and detailed numbers. Even if you have the exact VC and FC you are still nowhere in your analysis. I'm really sorry that you don't even understand that, but somehow it doesn't even suprise me...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
It's going nowhere. You refute microenomical basis, things don't even need to be proved. These are commonly admitted facts and since you disagree with them leaves me no doubt that you've never studied economy and I'm just wasting my time talking to you. I'm not a teacher and it's hard for me to explain you such a basic things especially in English. I'll use the most simplistic economic formulas, maybe you will understand better...
Take a simple total costs function : TC = aq^2 + bq + c
In this function variable costs are represented by (aq^2 + bq) and fixed costs are represent by c because fixed costs is a constant, they don't evolve with production.
So here you can see that the more the production (output), represented by q rises, the less fixed costs take a dominant place in the total costs. On the long term they become completely irrelevant. It's a commonly admitted fact in the classic and modern economy.
Now why Nokia's COGS varied so much in the last quarters? Simply because they go through a long turnaround, that they've been planning for years. That's why there was a spike of costs, that are not related to the production. A normal average company sees its COGS varied strictly because of the VC. Normally they just increase of decrease their output and so they spend more or they spend less in order to produce.
If you want to show yourself even more stupid than you actually are, please be my guest and refute these simple facts. Next thing you'll know, you're going to scream that the Earth is a cube.
Seriously I'm really curious to know what did you study n in which college! I can hardly imagine that you went that far, but who knows.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Please, stop making em laugh it's getting ridiculous. COGC is called total costs. Now I'm going to try to explain you your own definition, cause you clearly don't understand it.
Fixed costs = relatively constant, varying mainly with size of production park.
It means that if a company builds a new facility, a new office, a new factory the FC goes up. You do it in order to increase the production capacity. Did you hear that Nokia was planning to open a new factory? Their costs can only go down at this point. For an average company FC don't vary in years.
Variable costs = % of output, varying with manufacturing/supplyin... technologies/structures used.
It simply the amount of additional fees that you need to spend in order to produce x phones. Unlike for FC, you can chose how much you want to manufacture and you can forecast how much it's going to cost you. It doesn't vary a lot in time, because companies need a lot of time to be able to adjust their production and so to increase or decrease their VC. If you want to produce 100 phones you need y workers and z inputs, if you want to produce 200 phones you need 3y workers and 3z inputs.
The thing is, when you produce, say 1 billion phones a month, it costs you 30 billions a month and 360 billion a year. Compared with some 100 billions that you spend on your facilities 10 years ago, it doesn't represent a thing on the long term. The more you produce, the less your FC become relevant.
By decomposing the COGS, it is possible to:
- determine the breakeven in volume of sales
- determine the efficiency in the phone business of NOK vs. competitors
Thank you for that incredible definition, didn't think about it that way... Once again, you asked me why this rate varies so much from quarter to quarter. I explained you that companies like Nokia need at least a year to adjust their costs. It can take a year to adjust the VC a little bit and it can take over 5 years to adjust the FC. So the total costs change very rarely. What actually does change in the COGS/Sales rate are exclusively the sales, from one quarter to another. Once again, with the same costs, if the sales goes up, the rate decreases, if the sales go down the rate increases. It's a simple matter of profitability and there is nothing "magic" about it. You see how much Nokia needs to sell phones in order to get its spendings back and as you said you can compare Nokia to other companies exclusively by its sales and costs. It represents a "base" of discussions to figure out what the company needs to adjust in order to increase its profitability.
It's easy so say that a company needs to decrease its VC and put a number on it, but you can only argue about what you need to do in order to adjust the VC, cause the VC is an addition of hundreds of different fees. Each of then can be adjust in thousands of ways and you spend years to study the whole production process and to figure out where every fee comes from and what you need to do in order to adjust it. Don't even dare to claim, especially in wake of our discussion, that you are able to study Nokia's COGS during your free time and with the figures available on the Net. You need years of practice and multiple degrees in order to execute that job.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
It's an extremely breed vision of the industry... Comparing Apple with Nokia makes no sense. They choose two completely different business models mainly because Nokia has been in phone business much longer than Apple and so Nokia uses an older business model. In management 10 years is comparable to a century.
It's a huge back pain to close factories and companies are extremely reluctant to do so, because they always hope that tomorrow might be better and the demand my surge. It takes much less time (a question of weeks, maybe months) to readjust the production in a factory, rather than to build a new one, which takes years. The other problem is to layoff workers which might be very costly and the social responsibility is simply huge. Companies closing their factories take a giant hit on their national image. Companies that sell high scale products directly to the population, under their own brand, close their factories only when they don't have other choice. The other issue is that when a company shuts its factory down they keep it unused. Selling it would only bring about 10% of its initial cost. And by experience, I can tell that a factory that has been shut down for just 5 years needs a lot of work and money to be operational again.
Apple choose a modern business model, they sign contracts with intermediary firms that manufacture their goods. It has its positive points, but a lot of negative points too. They highly depend of their Chinese counterparts who feel that they are in power, since if they decide to break the contract, Apple will be in much worse position than them. So even though Apple is one of their biggest clients, they control Apple. The other issue is that Apple can't control what's happening in Chinese factories and they can't influence the working conditions. There is a huge marketing campaign worldwide asking to boycott Apple products because of the "situation" in Foxconn plants. And of course there is a huge lack of security on Foxconn plants and that's why we see next Apple products over 6 months before the official release. Now I read many articles saying that Apple wants to use its tremendous cash flow to open its own factories in years to come, simply because they see the limits of their business strategy.
Why does the ratio COGS/Sales varies? Certainly not because of the fixed costs. As I said before they take an insignificant part of the whole production cost. First of all, it's a rate so it's supposed to vary a lot in time. If the sales increase the rate goes down, if the sales decrease the rate goes up with the exact same costs. Nothing complicated, just math basics. The other part is the costs and it's very complicated to speculate on them. There are hundreds of factors that influence costs and I don't know why do you stick to the fixed costs so much, but it's the smallest part of every company's total costs. Once again, they only have sense in case of a company that plans to enter a market.
I can easily imagine that you've never studied economy before and it's really amazing how you stick to the COGS/Sales rate and fixed costs.
It's like if you were using some basis one variable math equations to analyze the speed of molecules...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
To be honest, I'm really dissapointed... What else can I say. You can't follow a simple conversation. We were talking about margins. What costs not related to production are not sustainable for Nokia and what do they have to do with Nokia's phone margins? They sold a huge part of their real estate assets, what else to you want them to sell? Their Chines plants? Or maybe the whole business in order to reduce their "fixed costs"? Selling their assets is not what is going to increase their margins or reduce their costs. It's just one time sales that are going to raise some cash flow but it will certainly not make their financial situation any better. As any other company in trouble, what they need is a deep restructure of their phone business, plant by plant, office by office, phone model by phone model. And in order to do so, they need to hire dozens if not hundreds of consultants specialized in management, manufacture, technology, accountability and economy. And that's what they have been doing since Q4 2010 and it will last at least till Q3 2013. While you were learning what variable costs and what fixed costs are, they've been working on a new strategy. And unfortunately for them, it takes years of research to figure out what might be th best strategy to adopt for a company like Nokia.
Could you please be kind enough to share with me what kind of degree do you have and where did you study? I'm getting really curious at this point.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
I don't know where that definition comes from. It's not accountability, nor finances, nor economy... I'm not saying that it's wrong, but it's not the "official" definition. First of all, when you produce something, you aren't necessary going to sell it, so the % of sales has absolutely nothing to do in a definition of costs. It's only relevant when you study the profit, the margins and so on. Costs only regard spendings in order to produce a product. Secondly, the variable costs do vary on the middle term, that's why they are called variable. Depends of the company's ability to adjust its production line. The company is forecasting a demand, that it is going to face in the near future, so they try to fit to that demand and so they adapt their production. By doing so, they might spend more or less for the manufacture. It's all part of corporate strategy and their ability to forecast the future demand.
Here's a link to the economical definition and a basic explanation : http://bit.ly/TGOIhM
http://bit.ly/UDkMSG
I'm very curious to know where did you find that definition. I simply have no idea where it comes from and what it actually defines...
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
Once again, are we talking economy or accountability? Define variable costs. You're mixing everything. If you take a plant, the plant by itself and the machines that it owns is considered as being fixed cost. The number of workers, their salary, social security, their working hours is considered as being variable cost. The input, all the primary material, everything that is used in order to manufacture a product is variable cost. The transport, the taxes... All of that is part of the manufacture but it's considered as being variable cost in economy.
I don't know what are the economical fixed costs at Nokia. 95% is the average for a tech company. However, the fixed costs are barely taken in account in economy on the long term. They are almost inexistent in case of companies like Nokia, we only study marginal costs and average total costs in order to find the most efficient way of working. Marginal costs don't even include fixed costs! That's the base of the industrial economy (first year of college). Either you didn't study economy, either we speak different languages (economical and accountant).
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
There is nothing wrong in abandoning the ecosystem. There are plenty of them on the market and Android, iOS, BB and WP are just the most famous of them. A company doesn't need to own an ecosystem in order to make the market. I think that the decision of abandoning Symbian only reflects they fact that Nokia is considering to sell its phone division to Microsoft in the near future. Lumia series looks to me like a test for a possible future acquisition. Nokia has been making phones for only 30 years, while its a company that existed for ceveral centuries. They surf on the market, they invest in R&D, they invest in mapping industry and in telecommunication technology. Phone division is more like the weakest link with the lower that average margins at this point. Nevertheless, many companies would like to own this link, cause once again, it's much harder to start out of scratch, rather to own an existing business network. You can't be too sentimental about a business you just need to find a way to earn cash and I suppose that Nokia is very fit to do so.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
However I don't know what did you study in college, economics or accountability. I can assume that in accountability, fixed costs and variable costs have a marginally different meaning.
Why Nokia's (NOK) Phone Division Is At Risk [View instapost]
I disagree with you completely. Fixed costs is something that the company has already paid for, it's the unadaptable part of the production line. Fixed costs is plants, offices, headquarters, production machines. It's something that the company owns and on the long term it isn't even taken in account economically because the variable costs overcast them completely. So its quiet the opposite, when a comany is going through a turnaround, they adapt their variable costs in order to achieve a better profitability! They layoff working force, they adjust their input and try to find a way to use it more efficiently, they adjust working hours, output and so on and on and on... All that is part of variable costs, while fixed costs only concern companies that enter the market! And once again:
"Forecasting correctly the demand and adjusting production park is the management's first task."
Concerns only variable costs, cause fixed costs can't be adapted at all. Take your old economics syllabi back!
There are engineers in management who work as consultants and who help companies to adjust their production line and increase the production efficiency, reduce the bureaucracy, layoff the unnecessary working force or intermediary chiefs, and so on... I'm sure that Nokia already hired hundreds of them and they already have decades of experience in adjusting their production lines.