It's Not Too Late to Save Nokia

When former Microsoft (Nasdaq: MSFT  ) tech guru Stephen Elop took the reins of floundering telecom giant Nokia (NYSE: NOK  ) , you'd think the changeover would have presented the perfect excuse to take Nokia in a new direction. Sorry, folks -- it ain't happening.

High-ranking Nokia managers are still pounding home the message that its MeeGo and Symbian platforms are the way forward, with MeeGo hitting the sweet spot for high-end phones and Symbian for low-cost models. There will be no Nokia phones based on Google's (Nasdaq: GOOG  ) popular Android platform, and that's final.

While I can see the sense in protecting Nokia's pet projects and the substantial investments the Finns have made in them, it's never too late to admit that you're wrong and change tactics. MeeGo may or may not be the next megahit, but Android is already halfway there, and both platforms are fundamentally based on the same Linux technology. Never mind that we have yet to see the first actual product with MeeGo preinstalled, while Android is busy eating the global market-share lead Symbian built in the early days of smartphonery.

The mobile software market is getting crowded, and while I do appreciate any attempt to advance the state of the art, I don't think that direction will pay off for Nokia or its investors. It would be one thing if the company could claim wider profit margins from its software stakes, but that's not the case. If Nokia's slim margins are already more in line with a hardware company than a software one, why not just act more like a hardware company?

There's no reason why Nokia couldn't refocus on excellent hardware innovation and throw its lot in with a proven and progressive software platform. Well, except for corporate pride, of course. That's a lousy basis for this kind of major business decision, though.

Seven years ago, Nokia could have bought Apple (Nasdaq: AAPL  ) with nothing but the cash on its balance sheet. But that was before the iPad, the iPhone, and at the very start of the iPod phenomenon. Now Apple could buy Nokia, if only to extinguish a rival. The company is getting marginalized almost as rapidly as BlackBerry builder Research In Motion (Nasdaq: RIMM  ) -- but with the futures of a 25% bigger market cap and nearly 10 times as many employees at stake.

If Stephen Elop wants to take this sinking boat home, he needs to make some radical changes. Can you convince your underlings to go with Android, Steve? If not, I think you're doomed.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Google and Microsoft are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (6) | Recommend This Article (3)

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  • Report this Comment On November 18, 2010, at 4:03 PM, barilro wrote:

    I agree that Nokia is heading in the wrong direction. Having working a Finnish company myself for 17 years, I know they can be stuborn...With market share and no margin, your company is as good as dead anyway...As for your comment about RIM, I feel this is a bit simplistic since RIM is only focused in Smart phone. Its margins are high and their sales are increasing every quarter. They had a bid of a hick up earlier this year but now its seems like they are getting back on track with QNX and the Playbook. This will only solidify their business position and will open the door for the for the consumer. All they will need is a nice looking piece of hardware that looks something like the iphone. They will survive since they have a strong position to build from.

  • Report this Comment On November 18, 2010, at 5:13 PM, ramaus wrote:

    Better take a second closer look at Nokia. They sell more cellphones than their next three nearest competitors combined and lead in smart phones. They own the low end also. How arrogant of you to think they don't know what they're doing and should adopt an OS of a competitor. I think you will be surprised this next year. Go long!

  • Report this Comment On November 19, 2010, at 2:04 AM, mijomar wrote:

    how bout the next company that gets smart and produces a very reliable phone, with a local directory, personal directory,very easy access camera and messege register for missed calls and last calls made and unheard/stored messages?...keep it clean and simple...for fifty bucks. Seems like most folks buy the most elaborate phones and only learn to use or care to use 10% or less of whats available anyway!??

  • Report this Comment On November 19, 2010, at 2:42 AM, stoli89 wrote:

    Your analysis misses the key point to Nokia's strategy, which is MUCH MORE agnostic when it comes to the OS. It's all about Qt, the framework Nokia now uses internally and externally for the development of its User Interface (on both Meego and Symbian), and for third party applications. Qt allows Nokia to deliver a CROSS platform AND forward compatability commitment to developers and users. Sorry, to discuss OS's ad nauseum without understanding how much influence the Qt framework has in addressing historic problems (non competitive UI, harder to code for Symbian) is a BIG MISS. Elop was correct to recognize how powerful this framework will be to Nokia's software strategy. By using Qt and Qt Quick for its UI development, he has also avoided the legacy break issue presented by Symbian^4 and its Orbit UI. Elop has now created a much higher degree of internal and external synergy around a very user friendly, flexible, adaptable and easy to learn/use set of programming tools.

    IMO, Symbian has been hobbled by S60/AVKON and a failed UI vision from past Nokia management. If you separate the UI layer from the Core OS, how does this impact your opinion of Symbian? Are you suggesting that a move from S60/AVKON to Qt/Qt Quick is irrelevant to the user experience? Are you suggesting that investors would respond well to Nokia writing off some of its investments in NAVTEQ, Symbian, OVI services, etc. in order to benefit short term from a marginally superior Android UX?

    Regarding Android, I do think AVJ could've used a better metaphor than a Finnish boy doing "number 1" in his pants to stay warm. However, if Nokia were to ditch Symbian for Android, it would put long-term profitability in danger because its ability to differentiate would be reduced to...."number 2". Why is Samsung pushing forward with Bada?...because being "number 2" stinks.

    Lastly, here's a quote from Motorola's co-CEO, Sanjay Jha, from earlier this year: "I’ve always felt that owning your OS is important, provided you have an ecosystem, you have all the services and you have an ability and the scale to execute on keeping that OS at the leading edge. And I continue to believe that at some point, if we have all of those attributes, that owning our own OS will be a very important thing."

  • Report this Comment On November 19, 2010, at 9:49 AM, RichardBoyle wrote:

    Here is my question: What about the fact that NOK is the best placed phone company in emerging 3rd world markets? Won't this established status come to pay off rather well as India and Africa "buy up" and expand? NOK phones are better placed than competitors in price break for these poorer (but tech savvy) economies with exploding populations. Responses from Fools???

  • Report this Comment On November 19, 2010, at 11:53 AM, Viking66 wrote:

    I think thats all nonsense

    Android is a "plow" for mobile phones.

    MeeGo is a complete "Traktor system" for commputers. And mobiles will go to computers.

    It takes longer to develop a traktor than a simple plow.

    In half a year Nokia can throw good devices to the market with MeeGo. And they have a future safe OS then

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