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Hard times ahead for Elop, says analyst

Posted: 15 Sep 2010 ?? ?Print Version ?Bookmark and Share

Keywords:smart phones? application processors? cellphone?

Nokia Corp. is hoping for better days ahead with the appointment of Stephen Elop as president and CEO. However, Satish Menon, analyst, Forward Concepts, says that Elop faces five challenges; the company needs to become more nimble, and refocus on high-end smart phones, applications processors, its app store and its U.S. business.

Elop arrives at Nokia from the business applications group of Microsoft, in what Jorma Ollila, chairman, Nokia, describes as a "particularly difficult time." Nokia, while remaining as the cellphone market leader, has been losing market share while Apple, Google and others companies redefine the smart phone.

Menon notes that "with the right commitment and leadership Nokia, with its broad engineering expertise, has the ability to develop cutting-edge smart phones, but the question is if it is going to be too little, too late." He explained that Nokia was slow to react to the trend toward touch-screen handsets with open Web browsers, and that the company tends "to have much longer product development cycles."

The handset giant is particularly vulnerable in the high-end smart phone business, he added. "Nokia still talks about its almost 40 percent global market share, but the cruel truth is that all its growth is coming from low-margin, low-end devices in emerging markets while the high-end market share even in its home market of western Europe is declining, " Menon said. "This has resulted is above average erosion in average selling price and declining margins," he added.

Specifically, Nokia has fallen behind in mobile processors. As competitors release smart phones with ARM Cortex A8 handsets, Nokia is still coming out with smart phones using the ARM11. "I can't think of a single other major smart phone OEM whose flagship device is currently based on an ARM11 processor," he added, talking about the N8.

Nokia also needs to bolster its Ovi Store which does not get the attention developers give the Apple App Store or Google Android Market. "The company needs to mobilize a large contingent of third party developers," said Menon, noting Nokia's Qt cross-platform development framework will be a key tool for that job.

Finally, Nokia needs to gain traction in the U.S. market, the current driver of high-end smart phone sales, Menon said, noting that "Hiring Elop is an indication of reinvigorated commitment to the U.S. market at the highest levels in the company." But he adds that "Elop's background seems more focused on business rather than consumer products where the real need is, and he does not seem to have any prior background working with operators who really control the U.S. market."

At a press conference where he was introduced, Elop stated that "The challenges and answers are well understood here within the walls of Nokia. My job is to surface them."

- Rick Merritt
EE Times

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