Nokia’s Troubles Add to Finland’s Economic Woes

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Nokia's Troubles Add to Finland's Economic Woes

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) is in big trouble according to most analysts. The company is continuously going downhill, both in terms of stock price, and revenue. Additionally, Nokia’s cash reserve is depleting faster than expected. For the past five years, the company already spent €2.1 billion. Some analysts speculate that Nokia will use up all of its €4.9 billion in cash next year.

Analysts project that the company’s net cash will decline from €4.9 billion to €3.7 billion by the end of the second quarter. It will dive deeper by the end of the third quarter to €3.2 billion. Some analysts models show Nokia running out of cash within two years.

Stephen Elop, Chief Executive Officer of Nokia Corporation admits that the company failed to keep up with the rapid technological changes in the mobile industry. He regrets the fact that the company was unable to take the necessary steps to change things around. Elop says, “We had moments in the past year and a half when we could have done some things differently had we known that the industry was changing so rapidly.” He also explained that the company did not anticipate the rapid price decrease of Android phones in China. According to him, “It happened so fast that Nokia’s situation has now become difficult.” Elop gave assurances that the company will keep improving its strategy.

Based on Elop’s statement, it is appropriate to say that Nokia fell into a very deep sleep. It was already late when it woke up. The company was behind its rivals in terms of developing a more competitive mobile device. At present, its Lumia phones are less competitive than Apple Inc. (NASDAQ:AAPL) iPhones and Google Inc (NASDAQ:GOOG) Android phones. The company lost its identify as the world largest mobile phone manufacturer.

The current stock value of Nokia is too cheap at $1.90 per share. It went down as low as $1.77 during the 52 week period.The company is losing money as it struggles to boost its sales. In June, the company announced that it will lay off as much as 10,000 employees. In addition, Moody’s, Fitch Ratings and Standard & Poor’s downgraded Nokia’s credit rating to junk.

According to a report last year from The Wall Street Journal, Nokia Corporation (NYSE:NOK) (BIT:NOK1V)’s weakening position in the mobile phone sector is hurting Finland‘s economy.  The company is a major player, being the largest employer. In 2009, Nokia contributed 14% of exports and 1.6% of the country’s GDP.  Its tax revenue contribution declined to as low as €100 million (estimate), it is far lower than its tax revenue payment of approximate €1.86 billion in 2007. The numbers have dropped since 2009, but Finland with GDP growth of 1.4% in the first quarter of 2012, and 1.7% in the second quarter, would essentially be flat with Nokia gone.

According to Elop, the relationship between Nokia, the Finnish government and its people is very special, and he believes that the best thing for the country is for the company to regain its financial strength and stability. However, many people in Finland expressed their worries regarding the possibility that the company will focus its business in North America if the company recovers. Elop’s decision to replace its own Symbian operating system in favor of Microsoft Corporation (NASDAQ:MSFT)’s Windows 8 operating system triggered such worries. Additionally, there is worry about the company altogether surviving.

Nokia is expected to introduce a new model of mobile phone with the Window 8 operating system in September, just in time for the holiday season. The company hopes to lift its sales performance with the new mobile phone.  Analysts expressed pessimism that the new model will really help the company.

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