Nokia software choice in focus as Elop takes stage

HELSINKI Tue Feb 8, 2011 8:44am EST

A man talks on his mobile phone as he walks past an advertisment for the new Nokia N8 on Oxford Street in London, September 30, 2010. EUTERS/Luke MacGregor

A man talks on his mobile phone as he walks past an advertisment for the new Nokia N8 on Oxford Street in London, September 30, 2010. EUTERS/Luke MacGregor

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HELSINKI (Reuters) - Expectations are high when Nokia's new Chief Executive Stephen Elop takes stage on Friday at an investor event in London.

The world's biggest cellphone maker warned on January 27 of a grim start to 2011, but its shares quickly recovered steep losses after Elop flagged possible change of software strategy.

The stock is up 17 percent from the lows of January 27.

Nokia has rapidly lost share in the higher-margin smartphone market to new entrants like Apple, and it lost No. 1 spot on the market to Google's Android last quarter, just two years after Google entered the market.

Its answer to the new high-end competition, MeeGo platform, is yet unproven, and its workhorse Symbian software -- used across its smartphones -- has lost attraction among developers.

"Any change from current strategy would be positive for the share price ... Investors think Nokia should at least try out another platform. Nokia stock would rise 30 percent," said Canaccord analyst Michael Walkley.

After limiting its financial forecasts on January 27 to just first quarter, Elop is also set to unveil longer-term forecasts on Friday.

On average analysts expect phone business to bottom out in January-March, with underlying operating profit margin starting to improve already in the April-June quarter.

However, if Elop will revamp company's software strategy, investors likely have to wait until 2012 for first results as rolling out new models takes several quarters.

Elop could unveil on Friday also a major management shakeup, laying off half of the executive board -- including long-time Finnish leaders Kai Oistamo, Niklas Savander and Tero Ojanpera -- a German magazine report said.

ANDROID, WINDOWS OR MEEGO?

After Elop flashed the possibility of a change in smartphone software many market followers expect Nokia to adopt either Google's hugely popular Android software or go for Microsoft's Windows Phone 7.

However, the focus will likely stay on its MeeGo software -- the result of a merger of Nokia's Linux Maemo software platform with Intel's Moblin -- something which could disappoint the market.

"Nokia CEO has now raised expectations for a dramatic change in software strategy - markets may not be satisfied with a compromise solution," said analyst Tero Kuittinen from MKM Partners. "When the seventh veil drops, the audience wants to see a lot more than a flash of thigh."

Nokia's problem so far -- mobile software developers are not very keen to work on its software platforms.

Developers remain fixated on Apple and on Google's Android as the prime targets of their toil, with also Microsoft and Research In Motion making gaining popularity, a survey of more than 2,2000 developers showed last month.

Nokia's MeeGo offering attracts 6 percent of developers.

"I am seeing far more appetite for Android, I see increasing interest in Blackberry, I see very little people looking at developing for Nokia," said Carl Uminski, chief operating officer at Somo Ltd, mobile advertising agency.

The solution to change it could be tapping into wide base of Microsoft developers, creating the third ecosystem in addition to Apple and Google, said Canaccord's Walkley.

However, others were more cautious on the likelihood.

"If Nokia and Microsoft come together it could have an air of desperation about it -- it's like two middle-aged people left in the nightclub after all the cool kids have left for the after-parties in Cupertino and Mountain View," said Ben Wood, head of research at British consultancy CCS Insight.

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Comments (4)
ulludapattha wrote:
“Elop could unveil on Friday also a major management shakeup, laying off half of the executive board — including long-time Finnish leaders Kai Oistamo, Niklas Savander and Tero Ojanpera — a German magazine report said.”

Sorry Tarmo, Elop has had to retract in his plans of a “major management shakeup”. The latest news broadcast by Finnish state-owned radio Yleisradio( Finnish Broadcasting Corporation) says at 1400 hrs GMT today 8th Feb: “Management shakeup at Nokia top management may at most mean sacking of only one or two members of the Nokia executive board…. It may not necessarily effect the long-time Finnish members at all…”

Ex-Microsoft executive Stephen Elop is the very first non-Finn CEO of this 145- year old Finnish conglomerate with its roots deep in Finland’s industrial history and the Finnish establishment.

Is it time for Stephen Elop to learn more about Finnish national sentiments and the feelings of Finns towards this brightest jewel in Finland’s crown? Although management and structural changes are obviously necessary to bring about a turnaround at Nokia, Elop cannot ignore the realities on the ground in Finland, the homeland of Nokia.

Feb 08, 2011 9:53am EST  --  Report as abuse
Dmcg wrote:
Adopting WP7 or Android would be close disastrous for Nokia at this point I think. They would be competing with HTC, Samsung, Motorolo, etc…all of whom have proven that they can move faster than Nokia at getting compelling handsets into customer hands. As you mention in the article this would add in yet more delays to getting a good phone to market. And what are they going to do in the meantime? Will they bring a Meego device to market that would be orphaned before it even started selling (the same tactic that didn’t work out well for the N900 and Maemo 5)?

Nokia doesn’t need a change of strategy, they need to execute better (and faster) on their strategy.

1) Meego needs to be a top notch mobile computing platform first. This shouldn’t be too hard as Maemo is already ahead of the competition in many areas. It needs polish and better hardware, but not any kind of fundamental rethinking.

2) They need some kind of Meego product ready and selling yesterday. Meego was announced a year ago now, yet no products have even been announced yet. They need to introduce a Meego product like the N9 and have it ready to sell to global markets as close to immediately as possible. Announcing a product and taking 6+ months to get it into consumer hands is suicidal. The product is outdated months before it goes on sale.

3) They need to do whatever it takes to get back in to the U.S. market in a big way. Preferably doing a Samsung and launching a flagship phone on all carriers at the same time.

Feb 08, 2011 10:06am EST  --  Report as abuse
khf wrote:
Only Americans can dream of a future of Nokia and Microsoft – as long as MS has not bothered to implement the full TCP/IP, and the software is ridden with errors more or less made with full intentions.

What I have seen of MeeGo works fine, but has a problem with battery life. Their choice of Linux with KDE is a choice you should discuss, and ask if it would not been easier with plain vanilla GNOME or GTK. QT development on the top, ensures that software can be developed for both Symbian (6 and 3), and MeeGo.

It is very easy to compare e.g. the N900 with iPhone 4 or Android phones. With full MS Exchange support, full OpenOffice and all of Linux applications, full Skype integration the others “suck”. I just sync’ed with my Yahoo, and downloaded 1861 emails. Had some problems loading 4096 contacts, but it is another league.

The open platform will enable the operators to make applications that will increase their revenues, and afterall, most of the mobile handsets are sold by the operators/carriers. Nokia knows how to increase ARPU and decrease “churn”. Apple and Google does not have a clue, and definitely not Microsoft. So, their time in the spotlight is about to end.

Feb 08, 2011 1:57pm EST  --  Report as abuse
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