Bright Future or Beginning of the End for Nokia?

There were a number of presentations today by Nokia, some including Steve Ballmer from Microsoft, where they announced officially what was already expected through rumour. A few other tidbits came out of the various presentations and Q&A sessions (Engadget has pretty good coverage here, here and here). The major points I’ve seen so far:

  • Yes, Nokia is going to phase out Symbian and eventually move to Windows Phone 7
  • Nokia is going to have “substantial reductions in employment”
  • They are not moving to the Silicon Valley. At least not yet.
  • Elop doesn’t understand that smartphone OS’s are commodities, and the only differentiation is through your hardware. It is a numbers game, pure and simple.
  • Meego is a muddled mess, with no real direction or commitment (despite the platitude)

Basically, Nokia has realized that trying to recover any moment for Symbian is going to be very hard and very expensive. I don’t think they realize, or want to admit, that they are now in a commodity business, and being with one of the 2 more popular mobile operating systems would be good and not bad for their long-term survival. Instead, they’ve chosen a platform that hasn’t exactly stormed out of the gate, and is heading into the teeth of a storm dominated by 2 rapidly rising platforms. Having the Nokia name behind it will help Windows Phone 7 somewhat, but I don’t know if it will matter as much as Nokia and Microsoft seem to think.

Nokia is also trying to cut their way to prosperity, and I’m not convinced you can do that. Yes, sometimes you have to downsize to fit a more natural size for your company (major car manufacturers like Ford and GM found that out, when they finally realized they had more people, plants and dealers than they needed to meet customer demand). But if you look at Home Depot, they too tried to cut their way to prosperity and growth under Nardelli, and it was a major step backward. They didn’t cut excess, they cut core staff and services, and that hurt their business, giving up business to Lowe’s as a result. Nardelli tried the same thing with Chrysler under Cerberus, and it was nearly the death of the company. MySpace, AOL and Yahoo! are all trying the same approach, but it all appears to be too little, too late. Now, maybe Nokia is over-staffed, and given the traditional difficulty of shedding excess staff in Scandinavian countries, it is certainly possible. But I’m not convinced they can afford to cut as much as it is rumoured they will.

Is Nokia’s switching operating systems good in general? Sure it is. There comes a time where you realize you are beating a dead horse, and it is time to move on to be able to move up. Apple recognized this with the switch to a UNIX-based operating system, and with the switch to Intel as the CPU. IBM’s increased push toward Linux and away from AIX is another example. I’m just not sure Nokia has picked the right horse, and I’m afraid they’ve switched one soon-to-be marginal system for a might-stay-marginal system. Sure, you become “one of the crowd” with Android, but if Windows Phone 7 does actually take off, they’re in the same boat anyways, because it would be as much of a commodity as Android is. Nokia needs certainty, and I don’t see that in Windows Phone 7.

Should they have moved to California? It wouldn’t have been the worst idea in the world. It would get them closer to the talent pool they need to continue to innovate and grow. It would bring them closer to investors with money to put into this space. Yes, it would be a blow to Finland, there is no question. But Nokia the company needs to ask itself what is more important: staying in Espoo continue to decline, or move and perhaps re-energize and re-vitalize the company to increase their chances of future success.

In the end, too much of what was announced today doesn’t look like a Bright Future to me. It looks a bit too much like rearranging deck chairs. Nokia has all sorts of potential, and could continue to be a major player in the mobile handset market. It is worth pointing out that handsets aren’t all of Nokia’s business. They have a significant presence in mobile location and mapping technology with Navteq and provide infrastructure with Nokia Siemens Networks. But Nokia’s name still carries a lot of weight, at least outside North America, and it is a well recognized brand. I just think that Nokia has bet too much on Microsoft, and would have had more influence being part of Android.