Have rumours of Nokia's death been greatly exaggerated?


Have rumours of Nokia's death been greatly exaggerated?

As you will probably know by now, Nokia today announced that it will close a factory in Romania and lay off over 2,000 employees, with another 1,000 jobs expected to go elsewhere in the business as a result of changes to its Location & Commerce business.

Parts of the media have been quick to paint this news as further evidence of a company in near-terminal decline. And while it is true that the mighty Finnish mobility firm has got a lot of things wrong, we may all have been too hasty in writing it off completely.

Last week MicroScope sat down with Carsten Brinkschulte, founder and chief executive officer of Synchronica, the mobility software developer that bought Nokia's operator-branded messaging business earlier this year, and discussed just this issue.

Synchronica specialises in carrier grade software that connects users to email, messaging, social media, social gaming and location apps and more, across smartphones and less sophisticated feature phones.

Its software is white-labelled across the globe by network providers and hard-wired into handsets by manufacturers. It's possible you've used it without knowing, indeed, if you have a Samsung smartphone, you almost certainly have.

It's acquisition of Nokia's messaging business has, at a stroke, more than doubled its annual sales; the $10m firm is now on course to do around $34m this year, as well as bringing it a slew of patents around mobile email, and an ongoing development and support contract for Symbian handsets worth $18.2m over 18 months.

All well and good, but what does this have to do with whether Nokia lives, dies, or is bought by Microsoft?

Well, Nokia's Romanian facility specialised in feature phones, not smartphones, which are off the menu as far as most European consumers are concerned.

However, they are still selling like hot cakes in emerging economies, and according to Nokia, it is keen to ensure "optimal proximity to suppliers and key markets ... as Nokia's high-volume Asian factories provide greater scale and proximity benefits."

Put simply, it wants to be closer to the people who are still buying feature phones.

"Yes," says Brinkschulte, "Nokia's smartphone products have not matched the competition, but in feature phones they are king and that's something that people don't like to talk about because it's no longer sexy."

"Analysts are ignoring 82% of Nokia's volume if they cut out feature phones, and in key markets like Africa and India they are certainly not losing marketshare. This is 90% of the market, and we shouldn't ignore it," he continues.

So while Nokia's smartphone business may not impress the mobility sophisticates of Europe it seems silly to write the company off. Today's decision is tragic for the affected Nokia employees, but a deeper look at the business shows its logic may just be remarkably prescient.

This was first published in September 2011

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