And then, with all the force of a soulless corporate act, a beloved brand was all but killed off. Having obtained competition approval, Microsoft’s $7.2bn purchase of Nokia went through this month, swiftly followed by the need to “right-size” and “ramp down”. In normal English that’s job cuts, a whopping 18 000 jobs, an estimated 12 500 of which are from the Nokiadivision. RIP Nokia.
Having spurned the unprofitable low-end market and the mid-market Asha range, Microsoft has backed its own Windows Phone software, which has just 3% of global market share.
By killing of Asha – which runs the last instance of the Symbian operating system that Nokia clung to until CEO Stephen Elop ditched it in September 2011, rightly referring to it as a burning platform – it kills off the last remnants of the old Nokiathat Elop’s drastic slash-and-burn strategy tried to save.
But Elop is not to blame for Nokia’s demise. He was foolish enough to take the helm of a ship already half sunk. He just had the balls to say it was taking on water, when the previous leadership kept banging the same investor-pleasing line that everything was all right. Talking about the band played on.
No Elop proved to an adept manager in a losing market, where cellphones are in a rush to the bottom.
The only immune company appears to be Apple, but it has been immune to market dynamics seemingly for most of its golden years since Steve Jobs returned to “dehypnotise the press” with his reality distortion field. Its attempt at a cheaper iPhone (the 5C) have been less than stellar.
Even Samsung, which accounted for a third of profit in the smartphone sector (to Apple’s two-third’s), has seen revenue declining for the last three quarters, as fewer people buy their Android-running Galaxy phones and tablets.
The greatest victim won’t be Nokia, but Samsung. Chinese manufacturers are already breathing down its neck, because the growth areas for mobile phone sales (and certainly not high-end smartphones like the Galaxy S5 or the iPhone 5S) are the emerging markets. Companies like Huawei, Lenovo, ZTE and Xiaomi are making Android phones cheaper and appealing to these emerging consumers more, not least because so many of them are in China itself.
With Nokia’s market-dominating brand removed from the bottom and mid-range markets, there will be a vacuum for another manufacturer to fill. Despite Samsung’s brilliant Africa efforts (kitchen white goods have extra surge protection against erratic power supplies; and two replacements of broken screen on its top-end phones over a two-year period) the cheap Chinese manufacturers are still cheaper.
Nokia had an estimated 40% market share in Africa and 70% of mobile web views came from Symbian devices, the operating system that Microsoft will now finally kill off.
Looking at this mass culling of a previous generation of cellphones from Microsoft’s perspective, it’s a wise move, given that Microsoft is increasingly becoming the underdog in a world where its desktop dominance isn’t being translated to mobile. Last year, according to Gartner, Microsoft only sold 14% of all devices. The age of the desktop and laptop is over, even if 90% these computers still run Windows. Meanwhile, Microsoft’s Azure cloud platform saw its revenue grow more than 150% year-on-year.
Nokia’s low-end devices are basic feature phones that are second-generation text and voice gadgets; whereas the superb Asha range are a blend of smartphone functionality in a mostly feature phone market.
But the brains trust at Microsoft are notorious for not understanding the value of a good brand. They killed off MSN when it was a vastly better known brand outside of the United States, and renamed the service multiple times, from Messenger MSN Messenger Service, to NET Messenger Service, finally to Windows Live Messenger Service. And now it’s been killed off entirely in favour of Skype, for which it paid $1.3bn more ($8.5bn, or 32 times Skype’s operating profit at the time) which was dubbed by one newspaper “a costly case of verb envy”.
Time will tell is Microsoft survives. In the meantime, it’s an ignominious end to a once-great company.
