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What could possible go wrong with the Nokia - Microsoft partneship

8 March 2013 by
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From the forum:
The mobile platform competition is hard. Especially for underdogs like Windows Phone and companies such as Nokia which is entirely dependent on the success of Microsoft

Nokia logo 

Nokia has issued its annual report on form 20-F 2012 to the US Securities and Exchange Commission. 20-F is a financial statement which must be submitted to SEC by foreign some foreign companies operating in the US. The document provides information, forward-looking statements and risks about Nokia business strategy.

Nokia has listed several things which has to do with the fact that the Finnish company are tied to the deal with Microsoft Windows Phone.

  • The Windows Phone platform may not achieve or retain broad or timely market acceptance or be preferred by ecosystem participants, mobile operators and consumers.
  • Microsoft has recently launched the Windows 8 operating system used to power personal computers and tablets, and the related Windows Phone 8 operating system is used in the latest Nokia smartphones. The success of Nokia's Windows Phone 8 smartphones will be negatively affected if the Windows 8 platform does not achieve or retain broad or timely market acceptance or is not preferred by ecosystem participants, mobile operators and consumers.
  • If we are not successful in our partnership with Microsoft or the benefits of that partnership do not materialize as expected, we may have limited our options to build a competitive smartphone ecosystem with another partner or join another competitive smartphone ecosystem in a timely or economically profitable manner.
  • Other competitive major smartphone ecosystems, primarily Google's Android and Apple's iOS, have advantages that may be difficult for the Windows Phone ecosystem to overcome, such as first-mover advantage, momentum, a larger share of the smartphone market, engagement by developers, mobile operators and consumers and brand preference, and their advantages may become greater over time.
  • We may not be able to develop sufficient quantities of high-quality differentiated Nokia products with Windows Phone in order to achieve the scale needed for a competitive global ecosystem in a timely manner, or at all.
  • Applicable developer tools for the Windows Phone platform may not gain needed traction or acceptance in the market, may be introduced late, or when introduced, may not offer technologies that developers are willing to use.
  • We may not be able to provide sufficient opportunities to innovate and customize on the Windows Phone platform in order to attract developers and other ecosystem participants seeking to differentiate their offerings on our smartphones from those of our competitors.
  • Our competitors may use various technical and commercial means to make the Windows Phone ecosystem unattractive compared to other ecosystems, including for instance hindering application development, not providing tools to allow applications to be developed to industry standard or not allowing certain applications to work or work efficiently on the Windows Phone platform.
  • We may not succeed in rapidly expanding the Windows Phone platform and related ecosystem to more affordable smartphones, limiting the expansion of this ecosystem.
  • The global ecosystem for the Windows Phone platform may not be flexible enough to allow local ecosystems to develop around and in connection with it. For instance, Microsoft, us and other participants in the Windows Phone ecosystem may not succeed in innovating and developing sufficiently locally relevant services, applications and content in a speedy and cost-efficient manner to attract and retain consumers in multiple markets with divergent local needs and preferences.
  • The Windows Phone ecosystem is relatively small, and thus it may not be compelling for hardware and software suppliers and developers, which may for instance lead to our reliance on a limited number of suppliers, later availability of the latest innovations and increased cost of components and software.
  • Mobile devices are increasingly used with other technical appliances, for instance speakers and car audio systems or have accessories and gadgets that can be used in conjunction with the mobile device. As the Windows Phone ecosystem is relatively small, it may not be compelling for third parties to design such technical appliances, accessories or gadgets to a similar extent as with other ecosystems.
  • We may not succeed in creating business models that provide value to other participants in the Windows Phone ecosystem, including ourselves.
  • We may not be able to change our mode of working or culture sufficiently to collaborate effectively and efficiently both internally and externally with a large community of partners.
  • Consumers may be reluctant to provide personal data to us as a result of our partnership with Microsoft, which would hamper the success of the Windows Phone ecosystem.
  • The frequency of Windows Phone operating system updates may be too slow and the platform may be too closed to address changing market and customer requirements in a timely manner, which may erode customer support and consumer attractiveness of the platform.
  • Emergence of new alternative ecosystems and platforms could make the Windows Phone ecosystem less attractive to customers and consumers
Many of the points listed above are of course valid for other smartphone manufactures tided to other platforms.

Another interesting paragraph in the F-20 form is about the financial deal with Microsoft. The agreement includes platform support payment from Microsoft to Nokia and royalty payment from Nokia to Microsoft. Nokia has to pay Microsoft USD 250 million per quarter for the deal. The royalty will increase over time but currently, Nokia pays Microsoft less than Microsoft pays Nokia. In 2013 this will change, and the platform support payments is expected to slightly exceed the total amount of the software royalty commitment payments.

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razec5 years, 2 months ago
I only know one thing, Windows Phone will not die, just as how Windows CE/PocketPC/Mobile existed/continue to exist during the peak years of Palm and Symbian. Though I'm completely clueless about Nokia's success/survival should Windows Phone repeats the same fate as its predecessors.
Bonovox5 years, 2 months ago
In a good key market in the last quarter Nokia has sold 2 million Lumia handsets. It's getting better and Nokia is really pushing it and there is signs of growth. Although not at the rate of Android it's still a decent improvement since last year. Microsoft can survive without Windows Phone but can Nokia?? How long is this contract with MS?? If it goes wrong can Nokia make a fast transition to Android??
hihihans5 years, 2 months ago
Nokia and Android? Not likely. If this really fails Nokia can make IOS phones.
Tsepz_GP5 years, 2 months ago
iOS as in Apple??? Apple don't license iOS out. There's a greater chance of pigs flying than Apple licensing out its precious!
If WP does fails I'd say Nokia shareholders will most def. force them to go Android, it won't be a choice, or MAYBE go the Ubuntu or Firefox route, but I doubt they'd take another chance with a new kid on the block.
Supa_Fly5 years, 2 months ago
Razec, CE/PocketPC/Mobile are all pretty much dead; Windows CE is only barely still relevant in POS systems and a few other imbedded systems, not much lately. Good take though because so many here do not know of Microsoft's power in the past ... I'm still perplexed at their blatant laziness to be honest.
Sean,
after 12mths ... 2 million phones is NOT enough. We'll see March 28th of Blackberry's sales numbers (for less than 1 month recorded) and if they exceed then nokia is in SERIOUS trouble! Nokia needs to refine their strategy or exit the mobile industry and once again re-invent themselves (like they did when leaving the textile industry).
Ranjith5 years, 2 months ago
Would be really sad to see NOKIA get the raw end of the deal.NOKIA is making absolutely great HW...i doubt there is anything more a HW maker can do..if anything is stopping WP sales,its Windows.NOKIA has bee really pushing it too and Windows is getting popular.NOKIA might need to think of making Android soon if this is the case
Tsepz_GP5 years, 2 months ago
I've been seeing a lot of Nokia Lumia adverts recently, their ads play just as much as the GS3 and Note2 ads combined as of what ive seen this week, so Nokia are working hard, but just as I predicted, MS are really holding them back with their restrictions in WP.
Nokia are not some small company you dictate to, they are the sort of company you work with as an equal partner, they have a lot to give.
Bonovox5 years, 2 months ago
@Hardened,no Nokia sold 2 million Lumia phones in the last quarter in China not the last 12 months. That's positive start in an important market like China. Nokia Lumia is a fantastic brand with great quality and design. MS are holding back Nokia. Since before Nokia began the partnership Windows was nothing in the market. I also see the adverts on tv everywhere and also they sponsored a number of TV dramas over here.

_________________
Material things don't matter,but Rock n Roll does!!!!

Nokia Lumia 620
AKA,Bonovox
[ This Message was edited by: Sean72 on 2013-03-09 16:23 ]
Supa_Fly5 years, 2 months ago

On 2013-03-09 13:20:53, Tsepz_GP wrote:
Nokia are not some small company you dictate to, they are the sort of company you work with as an equal partner, they have a lot to give.

Nokia is no longer the 500lb guerilla it once was in the cellular industry ... in fact their more the 5/50lb monkey:
Selling 3 headquarters in Helsinki, another 2 globally. Laying off 5000 staff with another 2000 shortly (this has been recently delayed), and now this financial F-20 report! This is NOT good news and more a warning that just standard simply stating lower expected revenue/sales for the upcoming quarter.
Comparing Nokia vs BlackBerry (on Bloomberg US)
http://www.bloomberg.com/quote/NOK:US
30 Day Average Volume 46,280,088
Est. EPS (EUR) (12/2013) 0.0400
Market Cap (M USD) 13,781.44
Shares Outstanding (M) 3,744.96
Last Dividend 05/06/2013
5 Year Dividend Growth -12.67%
Next Earnings Announcement 04/18/2013
1-Yr Rtn: -21.44%
52wk Range: 1.6300 - 5.5700

http://www.bloomberg.com/quote/BBRY:US
30 Day Average Volume 67,972,960 (looks more volatile; currently is as emotions/perceptions r all over the map)
Est. EPS (USD) (02/2013) (doesn't include Z10 or current supplychain overhaul until 3/28/2013)
Market Cap (M USD) 6,845.53 (just half of what Nokia has, if equal EPS and a dividend may have been offered).
Shares Outstanding (M) 524.16
Last Dividend (blank)
5 Year Dividend Growth (blank)
Next Earnings Announcement 03/28/2013
1-Yr Rtn: -3.83% (and the news is hating on BB more than Nokia?!! Appalling with this alone; BB is delivering!)
52wk Range: 6.2200 - 18.3200
RIM has no ... absolutely NO debt (not in financing loans or anything else), and has a better proposition at a new business - Machine-2-Machine Business and its a virtical business a new frontier.
Bonovox5 years, 2 months ago
I love Windows phone 8 and Nokia. But.
Nokia’s hardware would have run beautifully with the Android ecosystem. They would have been competing with Samsung and HTC on their hardware and design strengths instead of competing with them on the ecosystem front, where they are extremely weak. There are enough Nokia fans out there who will go back to buying a Nokia phone. Make a few Android phones, dammit! You folks at Nokia can be at par with Samsung once buyers get over the blunders of the past two years seeing a few sweet looking Lumias sporting the little green robot.
carkitter5 years, 2 months ago
I'd say Nokia are in big trouble. That disclosure statement shows there's only 17 things that can go wrong with Nokia's strategy. I'd be starting work on several Android models RIGHT NOW but I bet the signed agreement prevents that.
If Windows Phone fails then Microsoft will have to either give up on mobile or build their own devices. Customers will likely base their confidence in Microsoft's phones on the success of the Surface tablets. I'm not convinced the Surface is really making waves. Firstly the RT has a reputation of being irrelevant and limited. Second the devices don't seem to have enough memory left after the OS requirements, especially when you consider the advertised memory size. Third, they are expensive for the privilege of having to learn a new OS and deal with missing functionality.
Microsoft needs Nokia to succeed with Windows Phone. Failure could eventually take down Microsoft if customer acceptance of Microsoft's software and services doesn't reach the perceived requirements to create the critical mass which has powered Microsoft's success of the past.
Tsepz_GP5 years, 2 months ago

On 2013-03-10 03:26:32, Hardened wrote:

On 2013-03-09 13:20:53, Tsepz_GP wrote:
Nokia are not some small company you dictate to, they are the sort of company you work with as an equal partner, they have a lot to give.

Nokia is no longer the 500lb guerilla it once was in the cellular industry ... in fact their more the 5/50lb monkey:
Selling 3 headquarters in Helsinki, another 2 globally. Laying off 5000 staff with another 2000 shortly (this has been recently delayed), and now this financial F-20 report! This is NOT good news and more a warning that just standard simply stating lower expected revenue/sales for the upcoming quarter.
Comparing Nokia vs BlackBerry (on Bloomberg US)
http://www.bloomberg.com/quote/NOK:US
30 Day Average Volume 46,280,088
Est. EPS (EUR) (12/2013) 0.0400
Market Cap (M USD) 13,781.44
Shares Outstanding (M) 3,744.96
Last Dividend 05/06/2013
5 Year Dividend Growth -12.67%
Next Earnings Announcement 04/18/2013
1-Yr Rtn: -21.44%
52wk Range: 1.6300 - 5.5700

http://www.bloomberg.com/quote/BBRY:US
30 Day Average Volume 67,972,960 (looks more volatile; currently is as emotions/perceptions r all over the map)
Est. EPS (USD) (02/2013) (doesn't include Z10 or current supplychain overhaul until 3/28/2013)
Market Cap (M USD) 6,845.53 (just half of what Nokia has, if equal EPS and a dividend may have been offered).
Shares Outstanding (M) 524.16
Last Dividend (blank)
5 Year Dividend Growth (blank)
Next Earnings Announcement 03/28/2013
1-Yr Rtn: -3.83% (and the news is hating on BB more than Nokia?!! Appalling with this alone; BB is delivering!)
52wk Range: 6.2200 - 18.3200
RIM has no ... absolutely NO debt (not in financing loans or anything else), and has a better proposition at a new business - Machine-2-Machine Business and its a virtical business a new frontier.

I've personally always said that I believe Rim/Blackberry have a better chance of survival, there was a topic about it around here somewhere, and you have certainly confirmed my thoughts with the above, but I had no idea Nokia were in that sort of bad hole, they are literally in a shithouse full of debt by the looks of things, one has to wonder what Elop and the rest of the board are doing to stop this, it's beginning to look like Elop is making the ship sink faster.
I'm not even bothered about BB, they seem to have a solid thing going with BB10, I read that an unknown client has ordered around 1million Z10s, so already that means the Z10 in it's short amount of time in the market has probably already almost caught up with the Nokia Lumia920 sales.
Bonovox5 years, 2 months ago
MS Surface has so far 1.5 million sales which is a drop in the ocean compared to the rest of the tablet world

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