Nokia in 2012: a luminous end of a glorious past?

Recently I walked into a local cellular phone shop and asked for a not too inexpensive but sturdy phone set. The salesman asked me if I am looking for a smartphone. I said that I have nothing particularly against smartphone as long as it is stable and inexpensive. Fact is I have personal allergy to all these marketing terms especially when everyone knows that there is nothing smart in a smartphone. The salesman gave me too sets, one Samsung 'Guru' that cost around Rs 1800 and another Samsung Galaxy SII, that costs around Rs 17000. Being a majorly Nokia user so far, I was a little hesitant. "No Nokia set?", I asked.
He said, "Sir, we do have Nokia set but my honest advise is that you do not buy Nokia. The Nokia phones are not like those in past, quality dropped drastically."
"Even for the basic sets?"
"Yes, Sir, even for the basic sets, we get so many complaints every month these days that we warn customers upfront; after that, of course it is their choice if they still like to buy Nokia set".

Yesterday, a friend of mine called me and told that he needed to replace his old handset with a new one and asked me if I had any suggestion for him. I told him, quite unconsciously that he should consider samsung or Sony-Erisson or blackberry models but not Nokia.
But I am sure I was not the exception. Nokia clearly lost its customer loyalty drastically in last few months. It is said that problems do not visit alone. If the customers and shoppers complain about detoriating quality of Nokia phones, the market is exceptionally pessimistic about Nokia's future. Rating agencies like Moody, S&P have downgraded Nokia's credit rating to junk status.
For last one year, we have been witnessing the impact of Nokia's CEO's landmark direction change and one does not need to go too far to sense how well Nokia is doing. Internet is abuzz with reports about how Lumia turned out to be a dud, how Nokia lost 52% of market share in just few months, how Mr. Elop, the ex-Microsoft Nokia CEO has wasted billions of dollar (e.g. in Lumia campaign) and made Nokia taste loss in last quarter by taking successive wrong decisions. Now it is debatable if Nokia would have fared better had Mr. Elop not taken those bold decisions. Fact is symbian was a dying elephant albeit 57% Phones in the market had symbian OS when Mr. Elop took over. People blame that, between 2003 and 2008, 'rather than spend its resources on building a next-generation software ecosystem—an OS that depended on novel interfaces and sensors, that allowed for outside development, that offered a brilliant user experience—the company “managed down” its cash by paying huge dividends and buying back its shares." During that period, Nokia spent 27 billion euros in dividend and share buy-back - a clear sign of organization trading long term engineering future with short-term stock appreciation. Were Mr. Elop's manoeuvre successful, Nokia could truly turn around and challenge iPhone dominance riding high on Lumia and Microsoft WP7.

Summary of the present situation

1. Nokia wanted to cannibalise Symbian with Microsoft OS but market cannibalised Nokia smartphones with Samsung and others. Android proved to be much stronger market force than WP7.
2. Nokia's deteriorating engineering focus had its toll in the low-end basic phone category too; customers are moving to alternatives to Nokia sets. People expect mobile phones to be lot sturdier than PC. Call-drops due to poor quality of handset cost customers money and fact is Samsung low-end phones are lot more stable compared to present Nokia models.
3. While Apple, Samsung, HTC have successfully established themselves in the tablet space, Nokia missed the bus altogether.
4. Nokia's network division, once a very strong market force is also struggling against Chinese competition from Huawei and ZTE, even after merging with Siemens Network.

It is interesting that all the present predicament of Nokia are hinged on single failure: its successive unsuccessful attempts to secure its platform strategy.

Is this the end of  a Glorious past?

Many argue that from where Nokia stands today, it is very difficult for it to get itself out of the mud and only viable option left is buyout by Microsoft. Although Nokia's past and stack of IP would be valuable asset for Microsoft, it is very likely that a direct buyout would bring the combined net worth further down, effectively eroding the value of Nokia to zero. A better path would be if Microsoft lets Nokia find its survival path rather than direct buy-out.
But then Nokia needs to change in many front. It must figure out its strategy for low-end phones where stability and robustness count higher than features. On the high-end segment, it has to open itself for multi-platform strategy like HTC and Samsung rather than firing all guns on Lumia. That should help Nokia to find its competitiveness against Samsung and HTC.  But above all, Nokia must find one software that its engineering should focus wholeheartedly.  Something like a platform-independent Nokia mobile software that can work seemlessly on both Android and Microsoft Windows. Alongwith that a great developer SDK could be a game changer. It could help Nokia to capture large unorganised app ecosystem making the Nokia Mobile software the de-facto platform for mobile app development. That would help Nokia to integrate tablets into its product portfolio like Apple and Samsung. On the technology front, using its strength in wireless technologies, Nokia could focus to bring the first stable 4G (LTE) smartphone that can seemlessly transition from 3G and 2G networks.
But then that would take time and lot of patience from the market. Question is if Nokia has so much time!
 Last year we witnessed Motorola going down the same trajectory ending with Google's buyout. Will 2012 witness fall of another hero of Telecom yesteryear? Negativity brings more negativity but gratification of 'I told you so' is too pale to such a loss if that happens.
A company that in its more than 150 years of history changed its core business 17 times to remain relevant and successful, if turns itself to such an end, it is not only painful, it is demeaning too.

Google is now Mobile handset maker

The 64th Independence Day of India also will be considered a red-letter day in the history of Google though for a different reason. Google announced that it bought Motorola's mobile phone unit for $12.5B in cash [Read the report at Techcrunch] With this, Google is making direct foray in mobile handset market which means they will now compete with Apple, Nokia and RIM for supremacy of this market. Mobile Handset particularly smartphone market is a big market as is evident from Gartner's latest news report.

The same report [see the table] also says that Android has moved up to become the top Mobile OS as was predicted in an earlier post. 

Incidentally Larry Page said two things : 1. This will help Google to protect and advance Android and 2. Android will continue to remain "Open". It probably will remain open for some more time, since openness actually benefits Google in the long run and secondly Google is not going to make the same mistake that Sun did with Java.
Forbes' blog argues that Google bought it because of Motorola's 14600 patents and another 6000 pending patents in the related industry and will help Google to fight lawsuits from Apple and others in future. From that perspective, this looks more like Google's corrective move after they failed to acquire Nortel's patents earlier this year. Their $900M bid failed when NORTEL board decided to sell the full company to Google's competition [consortium Microsoft, Apple, RIM, Sony, EMC] at $4.5B. How this will change the future of mobile handset market in north america, though is a very interesting question, is more an area of speculative expet opinions and better to be left for the experts. Significance of this announcement, however is both in future and in the past.
1. It marks the end of an era, an era of domination of North American telecom players. Nortel and Motorola are both history now.
2. Since this will deplete Google's cash reserve significantly, this also means that Google will direct all its salvos to get the full ROI of this acquisition. In other words Mobile Handset ecosystem is going to become Google's one of the primary business focus in a very near future. In fact if one considers another less advertised purchase, the announcement of Google buying Admob for $750M, it becomes quite apparent that Google is very serious about winning the last frontier of internet advertising i.e. mobile internet. Having the depth of handset technology from Motorola, reach of Android OS and Google's supreme leadership in internet-search and advertising, Google hass got all its cards laid out. To be seen is how Google deals with the sticky privacy issue that keeps coming up in the context of Android and consumer location tracking. However, given the huge potential the mobile internet market has, it is only predicatble that this market will continue to shape Google's future strategy in a big way. It would be interesting to watch how Apple and Microsoft answer to this challenge.