Microsoft rides to rescue Nokia as it struggles to crash smartphone party

For decades, Nokia was in the enviable and near-unassailable position of global cellphone maker. Its domination was near total; market presence, volume of handsets shipped, marketshare, user-friendliness and user loyalty. And the vital statistics bore testament too. In 2008, it was ranked 8th largest/most valuable by Brandirectory with an equity of $33,116m.

Today, 4 years later, the Brandirectory report card makes for a grim read. Nokia is ranked 94th. And valued at $9658m; a fall of 71 per cent.

Pick any measure and it attests to the slide from the dizzying heights. The share price has halved and the latest round of culling swept 4,000 staff. In Q4 of 2011, from net sales of EUR 10,005bn, losses hit EUR 954m. By contrast Samsung banked £3bn profits.

The new entrants, notably Apple and Samsung – snapped up Nokia’s marketshare; from 40 per cent in 2009 it stands at 25per cent today, the lowest for 13 years. Though Nokia leads in global shipment volumes – low-end Symbian phones that only fetch a fraction of the price of a smartphone; a market in which it ranked 3rd in Q2 2011 with 16.7m behind Apple at 20.3m and Samsung with 19.2m.

It is running a genuine risk of playing also-ran, as the two swap leader and runners-up in the smartphone market whilst ZTE, HTC and LG make strides and threaten its now unfamiliar no.3 position. Back to the brand league, Apple has filled Nokia’s 8th position and Samsung has risen 18th from 23th.

Where once it enjoyed a virtual monopoly and dictated the pace and nature of change, Nokia now operates in an unfamiliar market landscape whose only constant is ever evolving innovation in short sharp product cycles driven by new competitors.Nokia has become a follower.

The Nokia Lumia, its most serious match yet to the iPhone and Galaxy, was launched in late 2011. By then pioneers had leapt to second generation smartphones; Apple with the iPhone 4, and 4S, and Samsung boasted its portfolio of Galaxy Ace S, SII; quick upgrades to preserve their pole positions. The frontier was further reconfigured as they shifted battle to the tablet market. Besides the technology lag, Nokia had an impregnable brand loyalty to claw back.

At critical points Nokia was found wanting. This was the import of the new CEO’s infamous burning platform memo. While the game changed, its then CEO was accused of being asleep at the helm, failing to adjudge threat posed by competitors as they rolled out the smartphones with gusto. Yet it was not for lack of innovation; it felt aggrieved and sued Apple for patent violation over voice recognition, wireless and encryption. Instead, it was inertia and tardiness in translating concepts into prototypes and compelling products in record time. Case in point, it was 3 years late in launching dual-sim handsets; long after rivals had been there, done that.

While the market leaders took a software-centric model and pitched in two camps; Google’s Android and IOS from Apple, Nokia was isolated with its in-house limited and inferior software Symbian. Worse is the apparent indecision over a preferred operating system? Nokia has cavorted between Symbian, Meego, Microsoft Windows and lately has acquired Meltemi. The Apple and Android hold will be difficult to breach.

While Nokia’s users’ vocabulary was limited to talk and text, smartphone lexicon was littered with apps, tether, pinch, tap, browse, download, touch screen, HD, slide – all vogue functions unfamiliar to Nokia. Competitors grasped early on that a successful future was in handheld connectivity by way of a rich ecosystem. This is the interdependence of technology gadgets and content specific to a brand to give users a ‘fuller’ experience.

A famous cowboy quote warns of the risks of changing riders midstream. But with looming challenges, the Nokia horse needed a new rider and a new course; exit Olli-PekkaKallasvuo enter Stephen Elop – ex Microsoft and fabled for instigating change. The appointment was symbolic. As Nokia’s first non-Finnish CEO, was Nokia now outward looking and refocusing on software not handsets? Could Microsoft be Nokia’s knight? Could the appointment be a precursor to eventual Nokia-Microsoft nuptials? Given that Elop at Macromedia drove forth Adobe flash’s tie-up with Nokia.

The mooted partnership seems to make synergy sense; Nokia with its cellphone market experience married with Microsoft’s widely used and available software. At a stroke, Nokia would have a ready-made ecosystem sans the requisite high costs of building one. At its disposal would be access to Microsoft bouquet of applications, Microsoft Windows, Internet explorer browser, XBox, Kinetic and Zune.

The natural progression into the tablet arena must be a serious consideration. Nokia may not develop an ipad-killer, but a Nokia tablet may appeal to users while adding another node in its new ecosystem. With its books in the red, Nokia could rest easy with Microsoft’s deep pockets now available should the need arise.

The new Lumia has hardly dented the iPhone and Samsung marketshare. It may be a question of time until Symbian is shed as sales of Symbian products are declining faster than sales of Windows-driven gadgets. Taking a pessimistic stance, the last such partnership, Sony Ericsson, spanned 10 years and was rocky. Its professed aim of blending Sony’s brand with Ericsson’s technology, failed to pay dividends. Sales fell and Sony, sensing a raw deal, reportedly lined up a severance offer of $1.7bn to Ericsson.

The web offers two variations as to the origin of the word Nokia; soot and unbreakable. Both translations underline targets for Nokia – strong books and brand.