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Nokia's survival questioned, Microsoft takeover predicted

Nokia plans to cut 19% of workforce; says current period will be worse than its disastrous March quarter - which saw revenue fall 29% and a $US1.2 billion loss. 

NBR staff
Fri, 15 Jun 2012

Nokia plans to slash 10,000 jobs - 19% of its workforce - and says current period will be worse than its disastrous March quarter, which saw revenue fall 29% and a $US1.2 billion loss. 

The Finnish company's Nasdaq-listed shares [NAS:NOK] dived 14% on the news, taking its market cap to just under $US9 billion.

Nokia has now lost around $US110 billion in value since since Apple launched its iPhone in 2007.

But CEO Stephen Elop says the real damage has been done by mid and low-cost phones running Google's Android software.

Nokia's smartphone partner, Microsoft, has more than $US50 billion in the bank and could easily buy the Finnish phone maker.

Analysts have lined up to tell The Guardian and other newspapers that Nokia might not survive the year. A Microsoft takeover is seen as the Finnish company's key to survival.

NBR ONLINE is not so sure. If Microsoft bought Nokia, it would alienate Samsung and other handset makers it wants to adopt its Windows Phone software, or at least give it a bigger push.

The sale of a struggling mobile phone maker to a software company would not be without precedent: Google recently closed its $US12 billion acquisition of Motorola's cellphone business. However, the takeover was not seen as an attempt by Google to push its Android software (Android handsets collectively outsell iPhones by a handy margin already). Rather, Google wanted the treasure trove of patents held by Motorola - the inventor of the cellphone. The patents are seen as a useful weapon in its arsenal as Google fights an intense, worldwide legal war with Apple over the design of mobile hardware, and software.

A parallel rumour has Facebook buying Nokia to push a handset dedicated to its social network.

Trouble on top of trouble
The job cuts announced today will take place by the end of next year. They follow a cull of 14,000 last year.

Nokia also announced the closure of factories in Canada, Finland and Germany, the departure of three senior executives, and the sale of its luxury phone unit, dubbed "laughable" by The Wall Street Journal.

Comeback hope
Last year, Nokia entered a multi-billion partnership with Microsoft to produce mobiles based on Windows Phone software.

Nokia shipped 2.2 million Windows-based Lumia phones during its March quarter, according to market research company IDC (that's shipments to resellers rather than actual sales).

The number pales next to the 35 million iPhones sold by Apple during its most recently reporter quarter, which in turn is some margin behind the collective sales of handset makers pushing Google Android-based mobiles.

But IDC analyst Kevin Restivo says it is too early to tell whether the Lumia line would be an abject failure or an outright success because the handsets have yet to become available on more carriers in more countries.

Various models in the Lumia line have generally got very good reviews, but so far struggled to cut through into the mainstream.

Restivo said the next two quarters would serve as a better measure of the Lumia line’s chances

NBR staff
Fri, 15 Jun 2012
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Nokia's survival questioned, Microsoft takeover predicted