In fact, not only did phone volumes fall 21% year over year in the recent quarter, worse is the company's device operating margin, which now stands at an abysmal minus-1.5% after a 32% drop in device revenue. When Elop arrived, device margins were in the high single-digits. Elop's response regarding eroding market leverage has been to cut more costs. But when has this strategy ever worked? Companies that are competing for market share have to spend to grow -- they don't save their way into more sales.
Fixing Nokia With or Without Elop
Equally egregious is that Elop seems stubborn in the idea that Windows remains what's best for Nokia. This is while he's ignoring the winning formula laid out by Samsung which has soared to the number one spot in worldwide sales -- thanks (in part) to the global adoption of Android. Elop's resistance to change is unforgiveable. Yet, Nokia investors insist on being patient. That's all well and good. But patience has its limits.
I will excuse the notion that Elop couldn't anticipate that marrying Microsoft was going to paralyze Nokia against Apple iOS and Google's Android, which now holds more than 70% of the global mobile market share. But what's the excuse today? Clearly, Windows Mobile is not the future. Nokia should call Google today and inquire about converting a couple of its phone models to Android.
This will give Elop the latitude Nokia needs to offset weakness in Windows. Until then Nokia won't even be able to compete against BlackBerry, much less Apple and Samsung. As much credit Elop deserves for the bottom-line improvements by virtue of the cost-cutting, the top line is where it matters the most. And it's that Nokia start operating again as a tech company, and not as a company that is preparing to sell itself by fixing its books.
Also see: Long-Term Care Insurance 101 >>
Nokia bulls will likely argue that I'm being too hard on Elop. I will admit that this situation is not entirely his fault. Although he has mismanaged several critical opportunities, Nokia's board, which decided to go the "safe" route with Elop as CEO, deserves as much of the blame. Instead of a "safe pick," the board failed its investors by not making a "courageous pick" as Yahoo! demonstrated with Marissa Mayer.
In the meantime, Nokia investors have to wonder how long the company can survive given the rate at which its global market share is still eroding. Nokia's first quarter earnings report highlighted Elop's best asset -- he's a great CFO, nothing more. That's not what Nokia needs. While the company's cash flow is certainly improving, Nokia is still spiraling out of control.
As much as I've wanted to like Nokia's prospects as a good turnaround candidate, it doesn't appear as if this is a story that's going to end well unless the company finds a risk-taking CEO with a chip on its shoulder. I believe Scott Forstall is available. Don't you think he has an axe to grind with Apple?
Fixing Nokia With or Without Elop
Equally egregious is that Elop seems stubborn in the idea that Windows remains what's best for Nokia. This is while he's ignoring the winning formula laid out by Samsung which has soared to the number one spot in worldwide sales -- thanks (in part) to the global adoption of Android. Elop's resistance to change is unforgiveable. Yet, Nokia investors insist on being patient. That's all well and good. But patience has its limits.
I will excuse the notion that Elop couldn't anticipate that marrying Microsoft was going to paralyze Nokia against Apple iOS and Google's Android, which now holds more than 70% of the global mobile market share. But what's the excuse today? Clearly, Windows Mobile is not the future. Nokia should call Google today and inquire about converting a couple of its phone models to Android.
This will give Elop the latitude Nokia needs to offset weakness in Windows. Until then Nokia won't even be able to compete against BlackBerry, much less Apple and Samsung. As much credit Elop deserves for the bottom-line improvements by virtue of the cost-cutting, the top line is where it matters the most. And it's that Nokia start operating again as a tech company, and not as a company that is preparing to sell itself by fixing its books.
Also see: Long-Term Care Insurance 101 >>
Nokia bulls will likely argue that I'm being too hard on Elop. I will admit that this situation is not entirely his fault. Although he has mismanaged several critical opportunities, Nokia's board, which decided to go the "safe" route with Elop as CEO, deserves as much of the blame. Instead of a "safe pick," the board failed its investors by not making a "courageous pick" as Yahoo! demonstrated with Marissa Mayer.
In the meantime, Nokia investors have to wonder how long the company can survive given the rate at which its global market share is still eroding. Nokia's first quarter earnings report highlighted Elop's best asset -- he's a great CFO, nothing more. That's not what Nokia needs. While the company's cash flow is certainly improving, Nokia is still spiraling out of control.
As much as I've wanted to like Nokia's prospects as a good turnaround candidate, it doesn't appear as if this is a story that's going to end well unless the company finds a risk-taking CEO with a chip on its shoulder. I believe Scott Forstall is available. Don't you think he has an axe to grind with Apple?
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