Market shares for leading smartphone platforms
“… our principle competition is
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