Nokia ‘needs change’ after profit warning

Nokia ‘needs change’ after profit warning

Nokia has to sharpen its branding, create more Lumia advocates in store and move out of the squeezed middle if it is to turn around its business, retailers have said, after the manufacturer warned of a poor first half of the year.

The Finnish company said it would invest more money in its smartphone business to drive its fightback in the sector. Nokia’s forthcoming devices include the NFC-enabled Lumia 610, which will be sold through Orange when it launches in the UK. However, the company told shareholders its first two quarters of 2012 would be poor, with operating margin for the devices and services sector expected to be -3% in the first quarter and potentially even lower in the second. Nokia received more bad news earlier this week when credit agency Moody’s downgraded its stock to one level above junk.

Retailers contacted by Mobile were broadly supportive of Nokia’s strategy but stressed it needed to increase the rate of change if it is to grab a foothold in the market. One said: ‘The Lumia devices are good products... They are very impressive bits of kit and we want them to be a success so there’s less of a duoploy market, which is what exists now.’

Another said Nokia’s problem was it was being shunted into the mid-market by the latest high-end devices. He said: ‘The problem now is that if you look at the Lumia 800 and the HTC One X, it’s a different game. Nokia has to drop that [Lumia 800]down in price but where do the other phones go? There’s an increasingly squeezed middle where Nokia is competing but you can’t sit there.’

He added: ‘The problem Nokia has is that it’s basically put out three mid-tier phones that are almost sitting in the feature phone market. There are much cheaper handsets out there and I don’t feel there is enough product differentiation as yet.’

One senior retail source sympathised with the challenge of breaking up the duopoly of Apple and Android, but said Nokia needed to do more in terms of linking its devices with Microsoft services. He said: ‘It needs to get the brand recognition back up there to break the cycle. Nokia is considered a bit old hat because it has been so successful for so long and it needs to refresh and reinvent the brand. But as well as the branding challenge, there’s also a distribution challenge in getting as many products as possible into stores and into sales people’s hands. It will be a tough challenge to get them to sell the devices onto customers rather than opt for the easier sale of an Android or Apple device.’

Speaking as he announced the downgrade, Nokia CEO Stephen Elop said: ‘Our disappointing devices and services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our devices and services business continues to be in the midst of transition. Within our smart devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success.’

Written by Mobile Today
Mobile Today

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