Nokia Could Recover Ground From Apple And Samsung

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Nokia Could Recover Ground From Apple And Samsung

Despite adverse conditions, Nokia Corporation (NYSE:NOK) is still the world’s second largest mobile phone maker, with a bulk of the market share from its long standing dominance in the cheaper feature phone category. The Finnish company has been trying hard to take more of the smartphone market, but the overall market share has been dropping. Nokia was the world’s largest cell phone manufacturer and had been for 14 very long years. And its in-house platform was the most popular mobile operating system, until the likes of Android came and took the market by storm.

Current Plight

Nokia Corporation (NYSE:NOK) posted the 3rd Quarter net loss of 969 million euros (US$ 1.27 billion) compared to losses of 68 million Euros for the 3rd quarter last year. The net sales of the company were down by 19% from 8980 million euros in 2011 Q3 to 7239 million euros in 2012 Q3. The sale figures were however more than the market expectation of average 6.9 billion euros, which resulted in a 9% gain for the company’s shares. Nokia-Siemens network registered higher numbers during the third quarter of 2012, backed by high sales of Infrastructure Equipment, and slightly higher sales of services. Nokia-Siemens registered 3.5 million euros in net sales in Q3 2012, compared to 3.4 million euros in Q3 2011.

Between 2010 and 2011 the company’s market share dropped more than 22%. On Competitor side Nokia is facing strong challenges from Apple and Android Based Phones such as Samsung Electronics Co., Ltd. (LON:BC94) and HTC Corp (TPE:2498). With the exponential rate of smartphone adoption, Nokia market share continues to fall farther behind the competition as it struggles to gain with its Windows based smartphones. Making matters worse for Nokia, is the sheer size and competitive moat that Google’s (NASDAQ:GOOG) Android OS now enjoys (75% market share). The Revenue of Nokia Corporation (NYSE:NOK) stood at 41.61 billion; much behind its two competitors, Apple which had revenue of 156.51 Billion and Samsung showed revenue of 104.61 billion. The Net Income of Nokia showed Negative at -5.67 Billion, whereas Apple Inc. (NASDAQ:AAPL) and Samsung not only showed positive Numbers, but they were much ahead of Nokia with 41.73 Billion and 8.65 Billion respectively.

Turnaround Quest

Nokia Corporation (NYSE:NOK), once the market leader in Mobile phones, is said to be going through a major restructuring phase for more than a year. The handset maker is leaving no stone unturned, in its quest to win back the lost market shares. The company decided to cut 10,000 jobs by the end of 2013 to cut on costs and also plans to implement an additional 1.6 billion Euros in cost reduction by the end of next year. Nokia Corporation (NYSE:NOK) would close facilities in Ulm,Germany; Burnaby, Canada; and its manufacturing plant in Salo, Finland. However its Salo R&D plant will stay open. At the same time, following a recent global decision to shift core manufacturing lines to Asian factories, to help cut costs and enhance the company’s competitive edge in growth market, Nokia plans to invest $50 million in its largest mobile phone production facility in Chennai, India.  Nokia sold the luxury brand Vertu to private equity group EQT VI in a deal leaving just 10 percent of it in Nokia’s hands. As a part of its restructuring strategy and also in an effort to return to profitability, the company will take a charge of 1 billion Euros ($1.3 billion) by the end of 2013.

In November of this year, Nokia acquired Earthmine, whose reality capture and processing technologies will be part of the 3D map making capabilities of ‘HERE’- mapping software developed by Nokia. AT&T Inc. (NYSE:T) announced that it will Sell Nokia Smartphones working on Microsoft’s Windows phone software hoping that it would give them a chance to break Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG)’s hold on the U.S. Smartphone Market. Nokia inked a deal with Oracle to include its location service platforms with Oracles’ business software. Nokia also entered into a partnership with BMW, Mercedez, Volkswagon, and Hyundai to integrate Navteq data, an in- vehicle navigation system. The Company also entered into agreements with Consumer electronics manufacturer Pioneer and Satellite navigation firm Garmin.

Nokia’s restructuring is not only limited to its operations, but also to its senior leadership. The Lumia maker have restructured or replaced most of its top executives, to boost fresh ideas. The company appointed Juha Putkiranta as executive vice president of Operations; Timo Toikkanen as executive vice president of Mobile Phones; Chris Weber as executive vice president of Sales and Marketing; Tuula Rytila as senior vice president of Marketing and Chief Marketing Officer; and Susan Sheehan as senior vice president of Communications.  DeVard steps down as chief marketing officer; Mary McDowell steps down as executive vice president of Mobile Phones; and Niklas Savander steps down as executive vice president of Markets.

What To Expect?

Despite the setbacks and intense competition from the players like Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94), a recent report from Barclay’s, reveals the demand for new Nokia Corporation (NYSE:NOK) devices is encouraging and its cash position also looks ‘modestly better’. Also, a report from Yahoo China claims that the initial response for Lumia 920 is encouraging and the brand has already received 2.5 million orders for the device.  Many analysts have also started believing in the turnaround of Nokia’s fortune. The analysts expect the company to reach the break even point in the third quarter of 2013 and become profitable by the fourth quarter.

For the third quarter, Nokia Corporation (NYSE:NOK) sold 82.3 million phones during the last quarter; 23.55 million more than Apple. The handset maker’s balance sheet also looks sound, with $12 billion cash and $6.75 billion total debt. According to the experts, company has enough finances to carry it through the changes in the marketplace and to develop smartphones that will get the company back to profitability.

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