Nokia teams up with Microsoft to beat competition

Nokia, the world’s largest mobile phone maker, said Friday it was slashing jobs and joining forces with US giant Microsoft in a major strategy shake-up that left investors disappointed.

In an effort to radically change course and fight off encroaching competition from RIM, Apple and Google, chief executive Stephen Elop said that Windows Phone would now serve as the company’s primary smartphone platform.

Elop — a former Microsoft executive who in September became the first non-Finn to lead Nokia — also announced changes to Nokia’s executive board and “substantial” job cuts.
“Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward,” Elop said.

“There will be substantial reductions in employment in various locations around the world,” he told a press briefing in London, without giving further details.

The announcements were met with sharp disappointment on the stock market, with investors expecting more and in more detail than they got. Nokia tumbled more than nine percent and the Helsinki Stock Exchange was down 0.56 percent.

The biggest change by far for Nokia is its tacit admission that its Symbian operating platform has failed to become competitive, illustrated by its bold move to take on Microsoft’s mobile platform for its smartphones.

“I think there was a recognition that for something to effectively compete and ultimately win against Android and iPhone, it would require some big muscle,” Elop said at a joint news conference with Microsoft CEO Steven Ballmer.

The choice to adopt Microsoft Phone is a controversial one as the platform has also not done so well against Google’s Android or the iPhone.

Espirito Santo Investment Bank said the Windows’ operating system had “failed to gain traction” and that a partnership with Google — whose successful Android operating system had also been pegged as an option for Nokia — would have been a better choice.
But Handelsbanken analyst Martin Nilsson told AFP that adopting Android could have been too big of a change for Nokia.

“I think Nokia feels that with Microsoft, they have better ability to put some input into the situation and development,” he said.

Nokia itself said the bold gamble would take some time before it pays off, warning in a separate statement on Friday that 2011 and 2012 will be “transition years” as the company gets the strategy up and running.

“There are so many big questions still unanswered — what’s the timetable, for instance? Nokia is starting from pretty much zero … I still wonder how quickly they can get the new strategy moving,” Pohjola Bank analyst Hannu Rauhala told AFP.

With Microsoft Phone as the primary smartphone platform, the Symbian system will become a “franchise platform” as the company attempts to transition its 200 million users to the new system.

Nokia has over the past two years seen increasing competition in the lucrative smartphone sector from Apple’s iPhone, Research in Motion’s Blackberry and by Android-operated phones.

Technology research firm Gartner said Wednesday Nokia’s global market share had tumbled to 28.9 percent in 2010 from 36.4 percent in 2009, having one topped 40 percent.

In a memo to staff that emerged Wednesday, Elop warned Nokia was standing on a burning platform,” surrounded by a “blazing fire” of competition and that it needed to take radical action if it was to survive.

The company announced 1,800 job cuts in October out of its workforce of more than 132,000 around the world, of which half are in the phone operations.

AFP, Yahoo.