Nokia Corporation (ADR) (NYSE:NOK), the czar of cellphone industry a decade ago, is now struggling to find its way back to the top. They released their latest quarterly report which did not meet expectations. The result was quite visible, as the share price dipped around 13% following the results.
The worse than expected results can be attributed to the decline in the sales of its entry-level phone, Asha, which fell 46%. The decrease has not just been in volume, but also in average selling prices, which is a real cause of concern. Though, the good news is that they have managed to sell 5.6 million Lumia phones, an increase of 27% over the previous quarter.
What led to the downfall of Nokia Corporation (ADR) (NYSE:NOK) couple of years ago was that it failed to notice the changing dynamics of the tech world, and was reluctant to shift from the age old ‘Symbian’ to a more advanced mobile operating system. The result was obvious and visible to all. This rattled Nokia’s base and the stock dropped 70% over the last two years. Almost everyone lost hope of its survival. However, Nokia Corporation (ADR) (NYSE:NOK) bounced back with its new series of windows phone, the Lumia series.
Lumia devices today are one of the best in terms of its hardware, and are counted among the best smartphones available in the market, especially the Lumia 920. This, along with Microsoft Corporation (NASDAQ:MSFT)’s Windows 8, provides a unique factor to attract customers. This has helped Nokia Corporation (ADR) (NYSE:NOK) in regaining its market share, though by a very small percentage.
In the first quarter of 2013, Apple posted revenue of $43.6 billion and net quarterly profit of $9.5 billion, or $10.09 per diluted share. If we analyze this report closely, we will observe that this boost in revenue can be primarily attributed to the growing sales of the iPad and the iPad mini. Most importantly, iPhone sales showed a flat curve year-on-year. This is something that has been a constant worry factor for Apple Inc. (NASDAQ:AAPL) with the growing competition from Nokia Corporation (ADR) (NYSE:NOK) and Samsung.
Samsung, along with the help of Google Inc (NASDAQ:GOOG)’s Android, has become the dominant player in the smartphone industry. They have a simple strategy to be a part of all the sectors, be it the high margin low volume phones or the low margin high volume category. This has been driven by the popularity of Android and its various applications.
Google Inc (NASDAQ:GOOG) introduced the new flavor of Jelly Bean, Android 4.2, few days back which introduces a completely new camera experience and other features. Google Inc (NASDAQ:GOOG) has been constantly upgrading its operating system, providing updates and tweaks to live up to the expectation of the fast moving tech world.
Why do I call Nokia a silent killer?
Nokia Corporation (ADR) (NYSE:NOK) has played it very smart if we look at its strategy in the last one year. They first introduced Asha phones to capture the emerging markets where they were losing their grip because of Samsung and other small players. This also ensured that they do not run out of business and there is a constant inflow of money.
Nokia then introduced the Lumia 920 and 820, its high end smartphones to compete with Apple’s iPhone and Samsung’s Galaxy Note and S series. They were criticized for making a late entry into this market. But, one of the reasons for its delay was to make it available with Windows 8 as it had the best software to support its premium hardware.
Now, they have introduced the other versions of Lumia, namely the Lumia 720, 620, and 520. These are in sight with Samsung and other low end smartphones. Nokia is one of the oldest players in this game, which gives them an edge over the others in bringing the best possible hardware at the most affordable prices.
The best part of all, they have maintained their brand image of durability by bringing devices which are tough to compete with. This is how they are attacking all the other players silently and trying to get a stronger grip on the smartphone industry.
Nokia’s current strategy is to launch two new devices every quarter. This will allow them to compete with the likes of Samsung, HTC, etc. These devices will be targeting different segment of consumers each time. Nokia is also working along with Microsoft Corporation (NASDAQ:MSFT) in developing Windows Phone 9, which might be christened Windows Blue. They are working at deploying XAP/APPX from the Windows store to Windows Phone 9.
The buzz surrounding Windows 8 has helped, both Nokia and Microsoft, in succeeding. Similarly, Windows Blue has already created a buzz in the market, which should boost sales of Nokia if they are able to launch it at the right time along with Microsoft Corporation (NASDAQ:MSFT). The interesting point to note here is that the rumor surrounding the testing of Windows Phone 9 with the OEMs does not include Samsung.
Microsoft, while launching Windows 8, had made their strategy quite clear. They wanted to reach out to the maximum population by partnering with all the possible OEMs just like Google. But, the exclusion of Samsung might help Nokia, if Microsoft Corporation (NASDAQ:MSFT) actually does that in the near future.
Nokia has sold over 20 million Lumia devices in the past few months. This is just the beginning and it is expected that they might come back to the era of their dominance. However, it is too early to make such a prediction as the other players will try and outplay Nokia with newer and better products.
The question is – Is Nokia prepared to take on these challenges? Will they continue their role of observing silently and then making the changes? Or will they move ahead aggressively and come out with more innovations and better products? It may also be possible that they succumb to the immense pressure from other platforms and decline again. Only time would tell what would happen. Till then, it would make sense to wait and watch.
The article Is Nokia a Silent Killer? originally appeared on Fool.com is written by Jyoti Patodia.
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