Nokia’s Secret Plan ‘B’

Nokia's Secret Plan 'B'

Concerns abound that Nokia Corporation (NYSE:NOK) bartered away its future by replacing the Symbian operating system in its phone with Windows Phone – according to critics, Nokia is now helplessly bound to follow Microsoft Corporation (NASDAQ:MSFT) diktat. In contrast Research in Motion Limited (NADAQ:RIMM) is reported to have rebuffed Ballmer’s overtures to incorporate Windows Phone in Blackberry phones.

But fears for Nokia may not have been out of place judging from Microsoft’s announcement June 20 that its highly-anticipated Windows Phone 8 system will not run on existing Windows Phone devices, including the Lumia range from Nokia. This could obviously place a drag on the sale of these phones given that an all-new o.s., due out the coming holiday season, would not apply to these devices. Again, what if the Windows Phone 8 failed to take off in the market? Where would that leave Nokia?

Nokia Corporation (ADR) (NYSE:NOK) Chairman Risto Siilasmaa, recently talking on a Finnish show, sought to allay these fears by indicating that the company actually had a secret Plan ‘B,’ a contingency plan so to say, in case Windows Phone 9 flopped or if problems surfaced in the deal with Microsoft.

Though no details were available about this plan, during the talk Siilasmaa praised the Windows Phone 8 platform saying that it was a technological breakthrough “providing users with a seamless user experience across multiple platforms, from PCs to tablets and smartphones.”

Yet, there may not be proof in Nokia’s performance so far to indicate any great benefits from the tie-up with Microsoft. In fact Nokia has been hauled into a class action suit that alleges “Nokia’s shift to the Windows Phone platform has not halted its sliding position in the global smartphone market, as the company promised it would.”

Here is an extract from the suit:

“The complaint alleges that during the Class Period, defendants told investors that Nokia’s conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not. This became apparent on April 11, 2012, when Nokia disclosed that its first quarter performance would be worse than expected. Nokia expected its first quarter 2012 non-IFRS Devices & Services operating margin to fall by 3%, and projected first quarter 2012 Devices & Services net sales of €4.2 billion.”

Though Nokia has said the suit is without merit, and that it will defend itself, the matter certainly raises a red flag on whether the partnership with Microsoft will, in the ultimate analysis, generate any significant value for a struggling and desperate Nokia.