It's really sad how such a monumental mistake was made by a CEO that gets paid millions of dollars while any undergraduate student in 1st year business school would have ruled against a partnership with MS, which meant 12 months of cannibalization of Symbian headsets as consumers weren't interested buying headsets on an OS that would no longer be supported. So many management mistakes, this would make a great business case study on how NOT to manage a company.
Nokia Corp. on Thursday announced major changes to its strategy and tactics going forward. Under the new strategy, Nokia will cancel a number of projects in a bid to focus on the things its management considers as "key" to Nokia; besides, the company will lay off 10 000 of employees by late 2013. A major tactical plan now is to release low-cost Windows Phone-based smartphones to grab market share from inexpensive Google Android handsets.
"We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia. We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions," said Stephen Elop, chief executive officer and president of Nokia.
Nokia Wants Price War Against Android
Sales of Nokia smartphone product line - which now consists of rapidly declining Symbian-based devices and unpopular Windows Phone-based devices - dropped even more considerably than Nokia previously expected, the company said. As a result, the firm badly needs to quickly boost sales of its Lumia devices with Windows Phone 7.5 "Mango" operating system. In particular, Nokia vitally needs to address cost-efficient segment of smartphones with a platform that has prospects for future growth.
Given the fact that at present the low-end smartphone part of the market is dominated by Google Android-based devices, Nokia needs to offer lower pricing since this is exactly what users need. Apparently, Nokia had been given "specific support to get to lower prices than Nokia had a sight to" by Microsoft. As a result, the primary task of Nokia now is to offer an aggressively-priced Lumia handset with Windows Phone operating system. The main competitive characteristic of such handsets will be price: it should be lower than that of Android-based devices.
"We need to compete with Android aggressively. The low-end price point war is an important part of that," said Mr. Elop during the conference call with investors.
In short, Nokia plans to engage itself into a price-war against such players as LG Electronics and Samsung Electronics in addition to various low-cost makers like Huawei. What is unclear is whether Nokia can now actually handle this. Financial capabilities of the company nowadays are rather weak and a price-war in the low-end can rapidly spread to higher-end models further reducing Nokia's opportunities to earn profits and will deepen its losses.
Significant Reductions of Expenses Incoming
In a bid to significantly reduce its operating expenses and return the company to profitable growth, Nokia plans to:
- Significantly reduce its Device & Services operating expenses by substantially reducing its headcount (by 10 thousand globally by late 2013) and reduce its factory footprint by consolidating certain manufacturing operations;
- Reduce/cancel certain research and development projects, resulting in the planned closure of its facilities in Ulm, Germany and Burnaby, Canada;
- Reduce non-core assets, including possible divestments;
- Broaden the price range of Lumia and continuing to differentiate its Smart Devices with the Windows Phone platform, new materials, new technologies and location-based services;
- To further develop its Series 40 and Series 30 devices, and invest in key Mobile Phones technologies like the Nokia Browser, aiming to be the world's most data efficient mobile browser;
- Streamline IT, corporate and support functions.