Nokia Recovery Hits a Tough Spot

With the completion of the Nokia deal pushed back by a full month - to end of April -due to regulatory hurdles in Asian markets including India, we may just have to wait to find out: what exactly is its new owner Microsoft's mobile strategy? Will it still be Windows vs Android? Or will it now be Windows and Andriod for Microsoft, given that a "desperate for growth" Nokia had already made its android foray with Nokia X.

The device was showcased recently at the Mobile World Congress in Barcelona.

Soon after the Microsoft-Nokia deal was announced last September and India's tax authorities swooped on it, Nokia's Sriperumbudur plant near Chennai, the capital of southern state Tamil Nadu, has been in the eye of the storm.

Its 8,000 employees have been staging demonstrations for a smooth transfer to Microsoft. Earlier in March, this year, the Supreme Court of India upheld the verdict of the lower court (Delhi High Court) in the tax dispute case by Nokia ordering the company to pay a Rs 3,500-crore guarantee and deposit Rs 2,250 crore in an escrow account to enable it to transfer the Sriperumbudur plant to Microsoft while it fights the claim in the court.

Nokia is considering its options. It has the option of running the plant by itself as a contractor to Microsoft. It can choose to close down the operations and bring down the overall deal size. Or it can operate as a third party manufacturer for other brands? Meanwhile, the production at the factory is said to have fallen in recent months. The number of shifts has also been brought down to two from the earlier three.

Can Nokia Regain Lost Ground?

Nokia's recent foray in the android OS when almost every other handset maker has "been there and done that" surprised industry analysts.

According to Girish Trivedi, Director, Monk Consultancy, Nokia which has been betting on the windows platform for the last two years and now has taken this sudden sharp turn to android OS, a platform where every second-tier, third-tier device manufacturer operates and is going nowhere with its approach. "How does it differentiate its product? I don't see any path-breaking changes in the device itself. It is not any different from rivals such as Samsung or Apple," he raises a question.

Hardly a few years back, Nokia used to be the undisputed leader in the mobile handset market. At that point, Samsung was still striving to carve out its niche in the market. In India particularly, Apple was nowhere in the picture, and LG and Sony were still chalking out right strategies for leveraging the opportunity. Today, Apple has gained momentum with its own hardware, software, comprising OS, and other applications, and Samsung is the market leader.

In 2009, when just about every handset maker had ventured into the android platform launching smartphones with android OS, Nokia was still testing the Symbian OS and as a result Nokia lagged behind in the race.

"This is what happens when a company remains behind disruption and doesn't move with the changing times. Users preferences change," says Trivedi.

 

So half hearted was its move to android that instead of joining hands with Google or going strong on android Nokia continued to showcase its allegiance to Microsoft and its Windows operating system. While its rivals were up and running with their operating systems - both Windows and Android.

The company didn't accept the need for dual-SIM cards either, while all other handset makers were cashing-in on the opportunity. The result is there for all to see. In 2013, Samsung overtook Nokia to take on the #1 position in the market, in terms of value and volume.

According to market analysts, Nokia's distribution chain is strong and it can still leverage the android opportunity. And that must have been the reason of its interest and entry in the android OS market. "It's an iconic brand and trusted by the market to deliver on its promise. It can recover lost ground," says Pankaj Mahendroo, President, Indian Cellular Association.

However, Nokia will have to struggle hard to get back on track. The road ahead is going to be bumpy for the company. Tax dispute is just one of the blocks. More important is the direction it will take with respect to its equation with Microsoft. A lot is still expected from the much-loved brand -Nokia.