Wednesday, August 14, 2013

Nokia May Die, Taking Windows Phone 8 With It

Nokia is in trouble any way you look at it. Losing money, losing revenue as feature phones shrink, having to accept very low profit margins in order to gain attention for their phones [to offset the fact that they have tied themselves to Microsoft's not very popular Windows Phone 8].

Let's start with the good news. Nokia is making some very nice smartphones. According to IDC, last quarter, Nokia had 86.1% of Windows Phone 8's market share (which would be about 7.5 million phones). This was nearly twice the unit sales of the year before. So, things are going great? No.

First of all they are losing money. Over 5 billion euros in the last year [though the last 2 quarters they only lost 500 million euros].

Second, Nokia is still primarily a feature phone maker and sales are plummeting. Gartner reports sales this last quarter of 61 million phones, down from 83 million the year before, a 27% loss. Overall the mobile phone market grew about 3% year-to-year. (These numbers were for both feature and smart phones.)

Third, Nokia's bond ratings are now less than junk status.

At this point they can only hope their Lumia 1020 really takes off in a big way.
As it is $299 on AT&T contract, I'm not sure that will happen.

And finally:
Nokia's Head of Developer Relations Leaves for Gig at Amazon

UPDATE: Found a Seeking Alpha article from yesterday with a similar opinion:
Right now, Nokia is teetering upon the precipice of bankruptcy and operates with little time to lose. ... Nokia cannot "float the note" forever. 
UPDATE: Nokia is being kept afloat by a strange deal where they bought entirely a company they partially owned so that they could raid its cash. This maneuver is why their bond rating was recently downgraded.

UPDATE: this Reuters story provides a good explanation of the strange cash acquisition and Nokia's current state. The article says that Nokia could run out of cash next year.

UPDATE: a further debt downgrade, and this quote:
Nokia reported net cash of 4.1 billion euros at the end of June. The company has total debt of about 5.1 billion euros, according to data compiled by Bloomberg.
To be clear, the company is operating at a loss each quarter and has more debt, than cash.

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