A near 20% plunge on the heels of yet another disappointing but not unexpected announcement from Nokia (OMX: NOK1V, NYSE: NOK) wasn’t instantaneous by any means, given that Nokia’s poorly worded statement made it extremely difficult to to get a handle of the current situation. True extent of Nokia’s problems should be evident upon closer review.
Nokia says it is focusing ever more on its Lumia product line running Windows operating system. This suggest that a) it is not so sure that Asha line and Series 40 and Series 30 devices can hold the fort against Android any longer and b) its projects involving Meltemi aimed at creating a lower category operating system have failed highlighted by the closure of Ulm R&D site. The company also announced its differentiating competitive advantages to be location based applications and imaging solutions hinting, if not proving, that it has nothing big coming in the pipeline. Competitors are by no means sitting idle by in these issues. It is quite unprecedented for a global giant to bet the house on one hand in such a manner and future management books are getting plenty of material to tap into.
Also management is now hinting selling some families of patents but not all of them. This suggests the desire to get some more cash to be able to finance further losses somewhat longer. Many investors have been hoping for a takeover for quite some time. Any such a patent sale should make it less likely and obviously a takeover is rather unlikely as long as competitors and other interested parties can simply wait for Nokia to weed out excess fat in the organization and watch stock market value and long-time average prices go down.
CEO Stephen Elop brought in his own marketing Chief quickly upon arrival. Now after less than two years have passed and some nice payments have been collected, a replacement is being made and Elop is saying that there is a lot to do in marketing & sales. For this one Elop cannot hide behind the numerous mistakes of the previous CEO. The remaining confidence in Elop is now quickly eroding. He said investors will understand what Nokia is doing later on. The realization that investors are coming into are certainly not positive so far. Elop also said only months ago, that Salo factory will be important for the company going forward. Such propositions do nothing to promote employee loyalty and will certainly eat into the working motivation.
While the U.S. Chief Chris Weber has shown some results and is thus justifiably taking a higher profile in upper management, the top leadership overall seems to be overly focused on the United States market as a fix all end all kind of a proposition. The company has failed to defend its brand and market share in Asia, where it by no means was starting from a disadvantage in a similar manner as in America. The harsh realization that Nokia will now especially focus on a number of geographies suggest the company is almost giving up and it even had new factories coming in ready just now adding to its now clearly too large manufacturing base, presumably warranting further cuts later on.
The ratings agencies which these days are terrified to be caught having an investment-level grade in a company that goes under, have already pushed Nokia to junk or close to junk status. If the global economy avoids a major depression, the situation should not be quite so dire so despite incoming significant debt payments, re-financing should not be impossible for Nokia for now but the battle vest no longer looks limitless.
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