Nokia was once the most dominant phone maker across the globe. The Finnish company had 50% of the global market share in 2007, before Google’s Android operating system and Apple’s iPhone were introduced. Shockingly, that number has now nosedived to a mere 20%. Nokia has been struggling to regain its position as the leader in the smartphone business.. However, the company is certainly not giving up without a fight! With an exclusive partnership with Microsoft, Nokia hopes that the Lumia models will help revive its plummeting fortunes. The Lumia phones are the first large-screen handsets from Nokia, a niche where Samsung and Apple have already established their supremacy. The key to Nokia’s future seems to lie in the success of the Lumia range.
The Bad News
Nokia has always relied on the sales of its regular mobile phones as a valuable source of revenue. Though they still account for more than 50% of Nokia’s revenues, the sale of feature phones has reduced over the last few years. Unfortunately, the Finnish company has not been able to offset this drop by selling the latest Lumia handsets.
Although Nokia has released different versions of the Lumia, and its sales have risen by 27% from Q4 of 2012 to Q1 of 2013, its share-prices fell by 6%. While Nokia Lumia’s sales have peaked from 4.4 million to 5.6 million in that time period, this figure was much lower than the 8.1 million units that had been predicted by a Reuters poll.
Nokia once dominated the cell phone market in India. In 2008, it owned 72% of the market share. By Q1 of 2012, this had decreased to a mere 38%. Analysts say that this may be because customers are now buying rival smartphones.
The former Finnish giant has incurred about INR 395,367,000,000 in loses, and has lain off about 16,000 employees. It has also sold off its Helsinki headquarters, and closed down many factories across Europe. For the first time in 143 years, the Finnish firm has been forced to cancel its dividend. Due to the divestment of Vertu, sales from Devices & Services business fell down to INR 12,060,640,830 in the second quarter of 2013, from INR 14,861,821,926 in Q2 of 2012.
Previously, Nokia’s phones were powered by its homegrown Symbian software. The Lumia handsets are powered by Windows, which holds only about 3% of the global smartphone market. In comparison, iOS and Android account for more than 90% of the market share. This gives rise to many questions about why Nokia chose to partner with Microsoft, instead of Google. Katyayan Gupta, research analyst with consultancy firm Forrester, says that Nokia, even with its Lumia range, will probably not be able to win back customers who have shifted to Android or iOS.
Telecommunications analyst Jeff Kagan says that in order to recreate the greatness of Nokia, the company needs to work on reinventing itself as a brand, instead of just adding new features to its products.
The Good News
Nokia’s Chief Executive Officer, Stephen Elop, is trying to compete with Apple and Samsung by launching phones that have great cameras and location based services. The Lumia 1020 has a 41MP camera, whereas the iPhone 5 comes with an 8MP, and Samsung’s Galaxy S4 has 13MP. This may help in winning over customers who would prefer to have cameras that can make calls, rather than phones that can take pictures.
The India head, P. Balaji, says that Nokia is trying to resurrect its operations in this country, and the Lumia rangeis taking them in the right direction. The company hopes that it will be able to capture all budget groups with its latest variety of handsets. Nokia is also trying hard to partner with mobile operators to increase its sales. In Q4 of 2012, Nokia improved its net cash position by INR 63,408,680,000. The total operating margin was 7.9%, and the operating margin for devices progressed to 1.3% quarter-on-quarter. In countries like France, China, Vietnam, U.S.A, Thailand, and the United Kingdom, the budget Lumia 530 is in high demand. The overall Nokia smartphone volumes have risen from 11.1 million in Q1 2013, to 11.7 million units in Q2 of the same year. As on July 11, 2013, Nokia’s stocks have risen by 9%, after following a continuous decline for five years.
Many of the Lumia phones come with wireless charging technology, as well as augmented reality apps like CityLens. In addition to enhanced cameras, these features might attract new customers, specially the youth. As per a market analysis done by IDC, the Windows Phone OS will have about 20% of the smartphone market share by 2016. It is predicted that Microsoft will overtake Apple, and the Android market share will fall to 52.9% from the current 61%.
The Lumia series has certainly brought some life back into Nokia. However, the company’s sales are nowhere close to Apple’s 47.8 million, and Android’s 136 million. Mikko Ervasti, an analyst at Evli, says that Nokia has to really pick up its pace in order to claw its way back into contention for the title of the king of phone makers. It is important for the company to realize that they need to capture customer bases that appreciate its innovative technological advancements. The Lumia series is a great way to generate good marketing material, and rebuild Nokia’s brand name.
Can Nokia Bounce Back In 2013?
As of now, it definitely can’t take down the two giants! However, with rising stock price, there is hope that one day Nokia will regain its dominance. Hopefully, the Lumia smartphones will not only stop Nokia from sinking, but will also help to resurrect the brand.