Mar­ket shares for lead­ing smart­phone plat­forms

Finweek English Edition - - COVERSTORY -

“… our prin­ci­ple competition is

An­droid”

This view is echoed by Gold­man Sachs, which changed its out­look on Nokia re­cently, shift­ing its cov­er­age view to neu­tral. A Gold­man Sachs re­search pa­per re­ported: “We be­lieve Nokia is now in a pe­riod of max­i­mum un­cer­tainty, cre­at­ing a long-term op­por­tu­nity for value in­vestors. In our view the new CEO’s de­ci­sion to take Nokia back to its hard­ware-ori­en­tated roots as the in­dus­try rapidly com­modi­tises is ap­pro­pri­ate and cre­ates the po­ten­tial for €1bn or more in cost re­duc­tion. Vis­i­bil­ity is low on Nokia’s

mar­ket share po­ten­tial with Microsoft, but we es­ti­mate the stock is pric­ing in a near halv­ing of hand­set value mar­ket share to 10% and only 3% long-term EBIT mar­gins, which ap­pears ex­ces­sive. We think there’s a floor to Nokia’s share de­clines and ex­pect high sin­gle-digit ‘re­cov­ery’ hand­set EBIT mar­gins, cre­at­ing a turn­around op­por­tu­nity.”

At the core of Nokia’s cur­rent woes is the re­al­ity that it’s lost rel­e­vance, as has Microsoft. Win­dows on mo­bile phones oc­cu­pies less than 5% of the mar­ket and Win­dows Phone 7 hasn’t en­joyed much up­take since fi­nally launch­ing late last year.

So Microsoft and Nokia are in sim­i­lar boats. Both were mar­ket lead­ers be­fore fall­ing be­hind in new seg­ments. Both need a way to take the fight to the new kids on the block. And they might have found the an­swer in each other.

But not ev­ery­one be­lieves so. The day be­fore the Nokia an­nounce­ment, Google se­nior vice-pres­i­dent Vic Gun­do­tra posted this on Twit­ter: “Two tur­keys don’t make an ea­gle.”

Nokia had also spo­ken to Google but had sided with Microsoft.

Stephen Elop, @selop on Twit­ter, re­sponded with: “Or this: ‘Two bi­cy­cle mak­ers from Day­ton, Ohio, one day de­cided to fly’.” In ref­er­ence to the Wright brothers: Elop is a pilot.

I met the new Nokia CEO in Dubai in March to dis­cuss his turn­around strat­egy. An elo­quent and con­fi­dent Elop ex­plained the battle against mo­bile ecosys­tems that threaten Microsoft would take prece­dence over Nokia’s fight against ri­val hand­set man­u­fac­tur­ers as such, over the short term any­way.

“First of all, the high­est or­der point of dif­fer­en­ti­a­tion we need to fo­cus on is Win­dows Phone ver­sus An­droid ver­sus Ap­ple,” he said. “So our num­ber one com­peti­tor isn’t a Sam­sung or an HTC or what­ever – it’s An­droid.”

Elop is fo­cus­ing Nokia’s re­sources on strength­en­ing Win­dows Phone, which in­cludes con­tribut­ing ser­vices such as Nokia’s Ovi Maps and con­tent store to the Microsoft plat­form in a move that will

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