Is Microsoft axing the ‘Nokia brand’?

When Microsoft acquired Nokia‘s handset business in April last year in a $7.2 bn deal, one thing was palpable that the software firm was eyeing to strengthen its windows platform and position itself as a hardware maker.

Nokia was the most preferable choice as its windows phones were the fastest-growing phones in the smartphone market, and it accounted for 87% of all windows phone handset sales.

The move into hardware was a significant challenge for Microsoft as its Surface tablets were already witnessing disappointing sales, resulting in $900 mn write-off.

Over one year into this tie up with Nokia, Microsoft has announced major organizational changes with the end of Nokia X series, the Nokia Asha 40 series smartphones, Nokia McLaren and other budget phones, besides the
company is laying off 18,000 employees, the biggest job cut in its history, with over 50% of the layoffs taking place in Nokia’s handset business only.

So, is this an indication that the software firm’s core focus area still remains enterprise and software only and not hardware? What repercussions it would have on Nokia?

The killing of Nokia X series, the Nokia Asha 40 series smartphones, Nokia McLaren is like killing the brand Nokia brand itself, which once enjoyed significant market share on the back of huge demand for its handsets. Analysts believe
Microsoft’s shifting focus to software may prove a big setback for Nokia.

“There are similarities in the fate of Motorola and Nokia. Google brought Motorola, but sold it off after a while as it realized that its core area is not hardware.
Microsoft’s core business area is again not hardware and that is where the whole change of plan might have taken place,” said Girish Trivedi, co-founder and director, Monk consulting.

Even, Microsoft chief executive Satya Nadella on a conference call with analysts recently outlined its investment plans in the ‘core areas’ like the windows operating system and its software.

Microsoft acquired Nokia keeping in mind the fact that Nokia was the only vendor for windows phones and taking the company into their own fold would strengthen its windows platform and help in newer areas. But one thing is clear now that Microsoft’s core focus remains the same and as a result, non-core area business of Nokia will be affected, added Trivedi.

“The way software firm works is very different from how a hardware firm works and vice versa, when a software firm ends up acquiring a hardware-oriented firm there would always be a mismatch around people, mindset, and always be an overlapse. Microsoft is now going back to what it was doing best and focusing on enterprise business, it is doing what it is best at, having said that it’s not a good sign for Nokia and its future is really under a question mark,” said research firm Greyhound Research CEO Sanchit Vir Gogia.

Analysts are of the view that the Nokia’s whole ecosystem will be disrupted with the move and it might impact the relationship with OEMs and other partners. “The move would have a ripple impact,” added Gogia. “OEMs who are supplying equipment to Nokia will be affected as well as other partners who are involved in the ecosystem.”

Commenting on the Indian market specifically, CyberMedia Research telecom analyst Tarun Pathak said, “The move is a very big setback for Nokia. Microsoft’s Nokia was gaining ground in India smartphone market in the past quarter
primarily due to stronger sales of Nokia X devices which were outselling Nokia Lumia series. Now since Microsoft has discontinued its Nokia X devices, it has shifted the entire focus on Windows based Lumia devices which are not much familiar among the Android dominated Indian smartphone market as of now.”

So, is this the end of brand Nokia? Or there still remains some silver lining for the handset major.

Analysts believe that Microsoft will not let Nokia die, they might shrink the business but Nokia will continue as a Micosoft’s company. The android strategy around Nokia may die and Microsoft may use the phone maker’s ability
to make it more enterprise focus.

 

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