Quick Thoughts on Nokia as Takeover Target (Samsung, Facebook, Microsoft and others)

So its now again time to speculate. First when CEO Stephen Elop issued his Burning Platforms memo and announced the Microsoft Partnership (the Elop Effect) that collapsed Nokia sales and started the relentless dive of Nokia share price, there was so much cash in Nokia's bank balance and the company was still so big and valuable, it didn't make much sense to try to buy it.

Last summer when Nokia issued its profit warning and the share price fell dramatically more, the first rumors emerged about buyouts. This was due in large part because Nokia's share price had fallen below the level where Nokia's assets were worth more individually, than the total value of outstanding shares. This is a critical level to investment bankers, where the share price is 'too low' and will attract hostile buyout bids - often with the intention of buying the corporation for its individual parts, intending to split it apart and sell the parts.

There were buyers circling in the waters. We heard of rumors of Samsung, Sony, Google sniffing around, as well as Microsoft.  And last summer there was also a cheaper giant phone maker as a target, Motorola, with a big patents portfolio. We then learned that Google did buy, not Nokia but Motorola. Samsung did buy, not Nokia, they bought Sony's flat screen production. Sony did buy, not Nokia, but bought out Ericsson in the SonyEricsson partnership and now owns the handset unit. And we learned that Microsoft had entertained the thoughts of buying RIM together with Nokia but the two decided against it.

Now again we have a similar situation. The Nokia price has fallen further. After the latest profit warning it kept falling and was nearing the 2 Euro level (was below 2.10 Euros several time this year). In the market there is another target as well. This time it is RIM, which has already hired investment bankers to see if they can be sold or find an investor or whatever. And Nokia has had investment bankers working with them for a long while trying to sell NokiaSiemens Networks ever since Elop came to town, and for example recently looking for buyers for the Vertu luxury phones unit.

Who would want Nokia and why. This blog is a brief discussion about that. Some of the names we now hear are Facebook, Samsung and Microsoft. But if you remember when Palm was acquired, the interest from Hewlett-Packard seemed to come out of the blue and very suddenly and rapidly, and they snatched the smartphone maker. So it may be that there is another interested suitor who is under the horizon but wanting to move in. And Nokia is now very cheap, many companies can afford to buy Nokia easily.

TARGET

So lets first take quick look at Nokia as the target. You might not know exactly what is all in play. Nokia is nowhere near as damaged goods as its recent share price valuation would suggest. First, Nokia has four major business units, three big ones, one small one. The small unit is Navteq the mapping unit. That is not what people want, it is not a major revenue source nor profit engine but there might be interested parties especially in the USA who believe strongly in navigation, location-based services and maps, who might value this part. 

Then there is NSN, the NokiaSiemens Networking unit. That is the biggest employer of Nokia employees and generates roughly a third of Nokia revenues, but is rarely profitable. It was slightly profitable before Nokia's Networking and Siemens's loss-making Networking units were merged. Then they struggled for a while in that merger, until it became borderline profitable, then Motorola sold its loss-making networking unit - which NSN bought and again this unit became unprofitable. Since then it has I think been again borderline profitable a couple of times but is mostly unprofitable. NSN is by sales volume about the third biggest telecoms networking provider behind Sweden's Ericsson and China's Huawei, ahead of France's Alcatel-Lucent and China's ZTE.

Then Nokia is both smartphones and dumbphones ('featurephones'). The smartphone unit was only two years ago utterly dominating the global smartphone market, the bestselling smartphone brand on five of the six inhabited continents, only suffering in the North American market where six domestic smartphone manufacturers on five domestic smartphone OS platforms were obviously holding the majority of that market. Nokia's smartphone unit ran Symbian - an OS that many have called outdated, which yet is able to produce such superphones as the global award-winning 808 PureView. Symbian's app store (formerly called Ovi) is the world's third biggest store by downloads. Symbian apps are supported in the most languages, have most carrier-billing arrangements and Symbian/Ovi is the bestselling app store in many of the biggest mobile telecoms markets like China, India etc. Nokia has a second OS it has developed in-house called MeeGo (developed from Nokia's Maemo). Nokia sells the N9 which runs MeeGo, a highly award-winning and highly praised superphone. Nokia manufactures a second MeeGo phone, the N950 which Nokia refuses to sell. There are other manufacturers of the MeeGo OS on laptops and tablets, in Asia, such as Fujitsu of Japan. Nokia has a developer environment called Qt which allows app developers to develop to Nokia's Symbian and MeeGo smartphones, as well as Android and Blackberry smartphones, and it is being developed to also support Nokia's featurephones running on the S40 operating system.

The Nokia smartphone strategy was comprehensively mismanaged by CEO Stephen Elop, who famously issued the Burning Platforms memo - the costliest management memo of all time - that Elop now admits did hurt Nokia Symbian smartphone sales. The effect was similar to the Ratner Effect. He also selected the Microsoft Windows Phone operating system for Nokia smartphones - which now is clearly seen as a failure and unable to even support basic features that Nokia owners expect from their featurephones or older Symbian phones. Elop himself has said just a few weeks ago, that Nokia Lumia sales have been "Below expectations." This after he admitted he ruined Symbian sales with his memo. His announcement timing - not the decision but the timing of the announcement - caused an Osborne Effect to Nokia smartphones. I have called these two colossal strategic mistakes the Elop Effect which have wiped out more than 10 Billion dollars of smartphone sales out of Nokia's business in just one year. Elop has consistently illustrated incompetence in managing the disaster that is Nokia smartphones - including badmouthing the N9 and MeeGo operating system to refusing to sell the N9 in Nokia's best markets, to refusing to sell the N950 anywhere. This while the N9 is the only Nokia phone ever to receive regularly reviews calling it better than the iPhone and that every tester who has tried both, says in public that the N9 is better than any phone in the Lumia series. I have shown that Stephen Elop took Nokia's 33% market share it owned in smarpthones in 2010 when he took charge, and replaces it with 5% that Nokia will have at the end of this year.

The Nokia smartphone unit is not terminally ill. It has been grossly mismanaged by Stephen Elop, who has desperately pursued a dead-end strategy of Windows Phone. Now Elop himself admits (admitted to the Nokia shareholders meeting in May) that many of Nokia regular long-standing customers - the carrier community - actually have refused to buy any Lumia at all. China Mobile the world's biggest mobile operator - in the world's biggest market, China - refused Lumia and forced Nokia to produce a new Symbian based smartphone of roughly similar touch screen form factor instead (the 801T). European carriers too the early Microsoft money and then complained that Lumia is not fit to sell. Latest channel checks by MKM just a few days ago found that after the early market launch buzz, the retail channel is cooling off on Lumia. Their words: Lumia have "Fallen out of favor". And we know why. Elop admitted to the Nokia shareholders that all Windows Phone handsets are globally disliked by the carriers - Elop's words add "of course" to illustrate how well this is known inside the industry - and that all Windows Phone providers suffer. His reason why? Because Microsoft bought Skype. Carriers hate Skype because it kills operator revenues as Elop told the shareholders. Skype not only kills voice call revenues but also videocall revenues and text messaging revenues. Skype is far more dangerous than any other 'OTT provider' like Whatsapp or iMessage or Facebook even, to the operators/carriers.

I am not suggesting Nokia's smartphone unit is healthy and being strangled by its CEO - although the CEO himself admits to having caused unnecessary damage to the Symbian sales. Nokia has since been firing a lot of competent staff and eliminated units and businesses around the smartphones and software business. But it is clear to anyone who examines Nokia with a fair mind, that it is being totally mismanaged in its smartphone unit. The Windows Phone world is a dead end now for Nokia - look at all the partners in the Windows world who have quit this ecosystem already like Motorola and Dell and LG and Sony. And look at how strongly HTC and Samsung the two traditionally biggest Windows smartphone providers are shifting away from Windows Phone now. The efforts by Nokia to force its loyal custoemrs to shift to the highly hated Windows Phone system - causes the biggest return rates that Nokia has ever seen on any phones. This is because of the so-called 101 failures of the Windows Phone OS to explicitly Nokia smartphone owners (note, some of the items in that original list are disputed, but by far the most are relevant)

So Nokia's smartphone unit is sick yes. It is suffering yes. It was once a profit-generating powerhouse for Nokia but immediately after the Elop Effect it started to generate increasing losses to Nokia. It is not because suddenly February of last year Nokia's rivals launched superphones like the iPhone 7 with time travel of Samsung Galaxy S5 with teleportation. Nor is it because Nokia had some production defect like exploding batteries or antennagate. No. The unprecedented global collapse of world-record level was because of mismanagement by Elop. Anyone with a normal business degree and sense can recover the smartphone unit back to reasonable success and profits, by abandoning the silly Windows Phone path. I am not saying Nokia go back to Symbian, obvously. But does the solution mean shifting to Android or resurrecting MeeGo, would depend on who buys Nokia. But they'd immediately fire Elop obviously for gross negligence and mismanagement. The Smartphone unit is in deep trouble, but is not terminally ill. It can be recovered to profits in less than a year by abandoning the Windows Phone path.

To prove my point? After Windows Phone Lumia series launched, Nokia has exchanged 6.9 million loyal Nokia smartphone owners using Symbian for 2 million new owners of Lumia phones - the exchange rate is not 1 to 1. Its not even 2 to 1. Nokia loses 2.5 loyal existing smartphone customers for every 1 it manages to convince to take the Lumia - the exchange rate is yes. 3.5 to 1. That is certain road to death and tells us the Lumia Windows Phone path is certain death to Nokia. If Nokia pursued this path to the end of all Symbian customers, today's 11.9 million smartphone customers per quarter shrinks to 4.8 million by Q4 of 2012. Nokia's market share that is 8% today, would fall to 2% by year-end. Anyone with a basic high school education sees this is certain ruin and any new owner of Nokia will immediately terminate the suicidal Windows Phone path. Can Nokia recover from 8% market share now to 10% or 12% or even 15% would depend on how well the smartphone unit is managed and partly who buys Nokia, but if the mismanagement is ended, this unit will perform better.

And if someone buys Nokia who wants to sell it in parts, note Nokia has three very distinct smartphone units. The Lumia Windows Phone unit is moderately successful in North America and desperately needed by Microsoft. So sell that unit to Microsoft. The Symbian unit can do good phones, has mass market appeal, is desired by Europeans, Chinese etc and if Nokia released new phones on it like the 808 PureView, it can live by itself (but should soon migrate to Android or MeeGo). And there is the premium smartphones unit MeeGo which could fight against top-end smarpthones and be instantly profitable as a stand-alone unit.

Lastly there is the dumbphones unit (featurephones). Nokia's main revenue and profit generator now that the smartphones unit is so unprofitable, is the dumbphones unit. They have just released a set of new touch screen featurephones that work like low-cost smartphones. They do full internet, they have a big apps store, including Angry Birds of course. These include the Asha series of low cost phones designed for the Emerging World markets and many of Nokia's dumbphones have dual SIM slots etc that are highly desired features in this market segment. Samsung has just passed Nokia as the biggest overall handset maker when we also include smartphones, but in dumbphones Nokia is still the biggest and has a quarter of this market. To be clear, the Nokia dumbphone unit is the biggest seller of dumbphones in Asia where half of the planet's phones are sold, plus in Africa (bigger than Americas combined) and in Latin America (more phones sold than North America). Nokia is second to only Samsung in Europe. So this featurephone unit has a big share of the global handset market and is highly successful in most parts where the market is still growing strongly from Russia to Brazil. This unit faces pressure from the top end by low-cost smartphones like Samsung's bada series and low-cost Androids from China. And the unit faces pressure from the low end by many local low-cost handset providers like Spice in India and Mi-Fone in Africa. But this unit is very competitive and dominates its main markets. And there is an internal project to migrate the dumbphones unit to a Linux based smartphone platform home-grown by Nokia and Linux based (and thus a sister to Android and MeeGo) called Meltemi. That is not yet ready for phones to launch but first phones are expected in about a year, so this unit is not a dinosaur either, it has life in it.

That is what we are looking at. Nokia also owns a big patents portfolio. It was once the biggest in the industry, but Elop has been selling parts of it to various patent trolls where usually Nokia retains a contractual right to use the patents for its own uses forever (the patent troll cannot attack Nokia) but sells the rights otherwise to the troll who then attacks rivals like Apple, Google, etc. Elop has also extended bizarrely Nokia's proprietary patent protection to Microsoft who did not invent those patents, in these deals with the patent trolls. Thousands of patent families have been already sold to such third party companies. We don't know how many patents Nokia still holds. But to show how powerful this was, Nokia was able to negotiate that Apple pays Nokia for every iPhone sold and Nokia pays nothing to Apple. Meanwhile Apple has been suing rivals like Samsung and HTC quite successfully blocking their sales in some regions etc. Nokia's patent portfolio was very strong once, and even now, if someone like Samsung were to acquire Nokia, it should then gain at least the patent protection Nokia had - if not always the ability to actually sue rivals as those rights have now been often sold by Elop to the patent trolls.

Other assets. Nokia has cash in the bank. Nokia has plenty of huge highly modern and efficient factories often in the markets where the big growth is happening like China, India, Brazil etc. Nokia has a reputation for the best sourcing and components partnerships (they have suffered recently under Elop's mismanagement) and used to have the best carrier relationships by far of any handset maker (which have been strongly poisoned by Elop recently. He admits to the Nokia shareholders that there are problems in the carrier channel - or to use Elop's words in the Q1 results - "the actual sales results have been mixed" ). The Nokia brand used to be one of the most valuable brands on the planet (was in the top 10). While the Nokia brand has been severely damaged since the Elop Effect, still in especially the Emerging World markets, Nokia still is seen as synonymous with mobile phone and has a sterling reputation. The Nokia brand could be sold separately from some business, such as if Microsoft bought Nokia, and kept the Lumia unit, Microsoft would not need 'Nokia' as the brand, it would keep Microsoft Lumia and could sell Nokia the brand to some growing company like say ZTE or G'Five or some other Chinese brand much how Lenovo bought the IBM PC business.

NOW SUITORS - WHY SAMSUNG?

Ok. Samsung knows Nokia the best. Samsung now knows Nokia better than Elop's management team. Samsung has had a strategy in all of its businesses, to study the market leader and mimick its activities meticulously, never question the logic but copy every action - and do it faster. This way the global leader spends lots of resources studying the market, and experimenting with dead-end projects, but the fast follower makes constant gains just copying the activities. That is the way Samsung has taken over all other industries where it has become global number 1. And now Samsung has just become both the worlds' biggest smartphone maker, and overall biggest handset maker. Those were held by Nokia for almost all of the past 14 years (until, obviously, the Elop Effect). So. Samsung KNOWS. They know better than I do and readers on this blog. They know better in Seoul than Nokia's Board knows, what Nokia has done right and wrong in the past few years. They have seen every single strategic mis-step and tactical mistake that Nokia management did even before Elop, under Kallasvuo, and especially in the past year or so. They know.

Samsung top management know exactly every point I talk about in this blog. Nothing new for them. They know also, that Nokia is not broken, Nokia has been mismanaged. Samsung doesn't need or want the NSN unit but could take it and make a business out of it - Sammy is big enough and there is a lot of engineering talent there and big global customers. But most of all, Samsung could immediately take over the total Nokia handset operation, and almost overnight, turn it back into growth, revenues, profits and strong customer loyalty. Why? Because Samsung have seen, and meticulously catalogued all Nokia mistakes - to the point, that Samsung has regularly capitalized on every Elop mistake - like abandoning MeeGo - it was Samsung who jumped in with Intel - and then cleverly renamed the project to Tizen, so its now Samsung's and Intel's thing, no longer the old Nokia MeeGo thing. And did you notice Nokia lost 43 exclusive Nokia handset dealership stores in Russia. Samsung took them over. And the distributor for Nokia exclusively for Africa? Is now Samsung exclusively. That kind of moves. Samsung has studied Nokia in deep detail and can instantly chronicle every mistake (and not undo some things that Nokia has done well, like dual SIM phones for example - something Samsung did first and Nokia copied by the way).

This is what Sammy would do. They would fire Elop immediately and his Microsoft Mafia. Samsung would bring in their top handset sales talent from Seoul to take over Espoo. Then they would categorically undo essentially every decision that Elop made that can be undone. As Nokia has been firing tons of staff, Samsung would gain a relatively lean organization but huge factory capacity - to help build Galaxies - and the biggest distributor channel and the strongest handset brand of Africa, Asia and Latin America. Meanwhile who is the strongest handset brand of North America and Europe? Samsung! Even in Japan, a market where almost no Western brands succeed (and Nokia tried and failed) - Samsung is a strong brand. So Samsung would create Nokia as its lower cost brand like in cars, like Volkswagen Group has Audi as a luxury premium brand - like Samsung would be - and VW is the mass market brand as Nokia would become. In American terms, think GM with Cadillac (Samsung) and Chevrolet (Nokia). In Japanese terms, Toyota (Nokia brand) and Lexus (Samsung brand). 

Samsung would keep most parts. They are perfectly capable of supporting multiple platforms - they sold Symbian smartphones till 2010 and sell Windows Phone smarpthones still now. Plus they sell Android and bada now, and will introduce Tizen smartphones later. What would they do with smartphones? First, rush the two MeeGo phones N9 and N950 to every market. Then create the next upgrade to the MeeGo path to merge with Tizen of course. Resurrect any past Nokia MeeGo projects but shift them to Tizen. Then take the Symbian family and form a gradual migration path for them to bada and Tizen. Then take the Nokia dumbphone unit and prepare migration path to bada. And the Qt developer tools? Woudl be renamed something Samsung-ish and become the Samsung developer environment supporting all Samsung handsets of the future including Tizen, bada (Symbian, MeeGo, S40 etc).

The Nokia brand would be used to build Samsung's reputation in Nokia-strong markets like India, Africa, Brazil, China etc. Samsung's brand in Samsung-strong markets like USA, Europe would help boost Nokia as the lower-cost Samsung 'entry-level' brand.

Ok. Why? Because Samsung plus Nokia would give Samsung about half of all phones sold in the world. Not smartphones - all phones. Samsung plus Nokia would soon (after Samsung fixes some Elop mistakes) sell 2 million phones per day - 700 million phones per year ! There has never ever EVER been anything nearly as dominant on the planet. In just two years, Samsung would hit 1.4 Billion pockets ie 20% of all humans alive. Nokia at its peak had 1.3 Billion users worldwide as the most used brand ever seen in humankind - yes more than Levis jeans or Coca Cola or Sony or Timex or anything. And increasingly those would be smartphones! Just before the Elop Effect, Nokia was ahead of the curve migrating its total customer base from dumbphones to smartphones (Nokia's market share in smartphones was bigger than its market share in dumbphones. Samsung achieved that level now in Q1). If you thought that Microsoft Windows had a huge dominating position globally on a Billion desktops, Samsung would utterly dwarf that by buying Nokia.

Plus Sammy would get the protection of the patents portfolio which it needs to open markets against Apple. And Samsung woudl have a powerful tool to figth low-cost Chinese providers like ZTE and Huawei and others who manufacture in Shenzhen and ship globally - because Nokia's massive factories exist closer to the customers in the major markets. And Samsung more than any other suitor, would appreciate the value of Nokia customer insights - the deepest longest most thorough customer studies across 100,000s of consumers of mobile phones worldwide over more than a decade. Samsung would just cut off the deadwood of the Microsoft Mafia and in a matter of weeks, Nokia would turn to the mend, with Samsung bosses coming in and restoring sanity to Nokia. What Samsung would likely also do, is to recruit as many departed senior Nokia staff to join in a Nokia advisory board to help recover the damage done by Elop. Many would cherish that opportunity on a part-time highly compensated basis. Most are so loyal, they would not do this for anyone else like a direct competitor to Nokia. But to help restore Nokia back to what it was - they'd be happy to do that. And Samsung again knows, the insights that were destroyed with the Nokia senior management exodus - has been a horrid waste by Elop.

FACEBOOK

Then what of Facebook? Why? Well. FB knows that the future of the internet is mobile. The future of social networking is mobile. The future of computing is mobile. The future of Facebook itself is mobile. The way to make money in the IT business is increasingly through.. mobile. Facebook has 900 million users. Nokia sits in 1.2 Billion pockets. Most Nokia featurephones have full internet browsers nowadays and can very easily be adapted to have a Facebook button and go directly to FB. Nokia is one of only a few major smartphone makers who also has Blackberry-style QWERTY keyboard handsets for mass markets, so they would be particularly well suited for FB use by those who send tons of messages and like to write a lot of commentary. 

Facebook would have no need of NSN. They probably would keep the Navteq unit, why not. They would look at the crazy Elop strategy with Microsoft, talk to a few major Nokia customers, and fire Elop and end his silly Windows misadventure. Then, they would study that strange beast that USA has not seen, MeeGo - and see it is the perfect platform for Facebook Mobile. Nokia's whole smartphone unit can be migrated to MeeGo. It is Linux based, so there is ample programming skill. It is conveniently close to Android so many Android apps run natively, but Nokia's Qt tool is particularly useful as FB would recruit its own developer community. Facebook would have enough money to take the time to run this for a while but with the early love that all users and reviewers had of MeeGo, it would give FB a powerful step into offering a radical new cool and 'better' Facebook mobile experience than what other smartphone users have. They could legitimately claim that Facebook smartphone was better than the iPhone... Not bad.

Facebook would also gain a huge mess in damaged carrier relationships - which could be partially resolved by firing Elop and ending the Windows Phone startegy - but carriers do not want Facebook to replace Skype. This is where this strategy falls apart. The handset market is dependent on the support of the carriers/operators and they would not want to replace Nokia, the 'gentle giant' who knew its place and didn't try to take their operator business, with Facebook who wants to become the new internet.

So in a traditional cellular telecoms way of looking at mobile industry, Facebook to me would fail as Nokia's owner. The carriers would make sure it never succeeded. The total collapse of Nokia's market share would continue and no matter how much money Facebook would pump into this project, it would end up a dead donkey. But.. There would be the tech gadget angle otherwise - Facebook could definitely think of several revolutionary ways to try to make a go at it. WiFi networks, WiMax networks, perhaps MVNO business (like Virgin Mobile). None of those would succeed in the long run, but am sure there are plenty of consultants who'd sell these kinds of dreams to the Facebook management.

So to me, Facebook and Nokia is potentially a highly promising business opportunity but it would be seen as far too dangerous by the operators/carriers who would destroy it in the mid-term. That though, doesnt' mean Facebook wouldn't try. They could quickly dispense with some assets - they wouldn't have any need of NSN, so they'd sell that. They would not need the Nokia brand so they could take the low-cost handsets and bundle the Nokia brand with it, and sell to someone like ZTE or Huawei of China. Facebook would keep the smartphone unit but might even sell the Lumia unit to Microsoft to recover some of their investment, especially if Microsoft committed to some kind of Facebook support for some years - which of course like almost anything with Microsoft would then end up in the courts haha..

MICROSOFT NEEDS NOKIA

Microsoft then? Microsoft is hoping to have Nokia survive, so they can have their cake without paying for it. They also hope that Elop can sell off as many assets as possible, so that if Microsoft has to buy Nokia, they buy as little of the 'garbage' that Microsoft doesn't want - like NSN for example. Microsoft won't make a bid for Nokia - if Nokia is deeply in trouble, Microsoft will be able to provide loans and investments into Nokia but don't want to buy it, if Nokia can survive as an independent entity, at least in its smartphone unit - which Microsoft wants to go fully Lumia and Windows Phone / Windows 8.

But Ballmer is not stupid and he knows that Nokia's Lumia line is on life-support. Ballmer himself said in September that Windows Phone was not performing to his expectations, when he said Windows Phone sales were "below expectation". This was before Nokia launched Lumia, but after a year of Windows Phone sales. And yes, Windows Mobile once had 12% market share in smartphones. Windows Phone had managed 1% when Ballmer said that. Now with 6 months of Nokia sales, Windows Phone is up to.. 2% (and now its Elop who echoes almost exactly what Ballmer said, when Elop rates Lumia sales as "below expectations"). Hardly the Third Ecosystem haha.

So Ballmer knows that if anyone else buys Nokia, they will immediately discontinue the Lumia project as the ultimate waste of resources and a strategic dead-end. It is only a vanity project for Elop and Microsoft. So if there is a 'real' buyer emerging for Nokia, Microsoft has to step in and bid, so that Ballmer can keep the Lumia project alive. But I am very sure, that Elop would give Ballmer every kind of unfair insider advantage of what bids are coming in, who is bidding etc. This won't be a fair fight (nothing ever is with Microsoft haha).

But Ballmer doesn't want NSN or dumbphones or Symbian or MeeGo or even Navteq (actually MS would like Navteq, thanks to reader Tomifan for pointing this out with Bing maps). He also has no need for the Nokia brand. So Ballmer would very soon try to strike a deal with whoever is shopping for Nokia, to split the Lumia unit without Nokia branding, and sell that to Microsoft for some set price. Almost any buyer would also see the use in this, as the Lumia unit is not a profit-generator and any quick analysis says it is an endless sink of sucking resources into loss-making.

I think its most likely that if Nokia is sold, whoever buys Nokia won't be Microsoft but will almost immediately sell the Lumia unit (with Elop in charge) to Microsoft. If this happens, then we know it was conducted behind the scenes and a deal was done in the early bidding race when Microsoft pulls out. But if a hostile buyer - who doesn't like/trust Microsoft - buys Nokia (like say, Apple or Intel or Google), they could simply terminate the Windows Phone Lumia project - quite loudly and visibly of course - for the humiliation and damage to rival Microsoft, and not sell the unit. If this kind of rival is in the bidding, Microsoft will have to stay in the bidding wars as long as they think they can afford to.

If Microsoft buys Nokia, they would of course sell the NSN unit and the low cost handsets. They would escallate the end of Symbian and MeeGo projects. The Lumia unit would become a division of Microsoft with Elop in charge. The Nokia brand would be sold, being totally unnecessary in the Microsoft world. The carrier hostility towards Microsoft would only grow over time, the Lumia sales would linger in very tiny market shares (think Palm, not Blackberry) kept artificially alive by Microsoft for a couple of years, after which the unit would go the way of the Kin and Zune.

DEFENSIVE PLAYS

The two obvious defensive plays in the race for Nokia would be Apple and Google. Neither would have strong obvious gains from the purchase but might make it just so Microsoft or Samsung or Facebook or whoever, doesn't get Nokia. For both, the patents would be useful. Apple especially would love to be able to add Nokia patents to its pressure on Samsung - and stop the payments it now is doing on royalties to Nokia. Apple could use Navteq and make some use of Nokia's premium smartphones at top end Symbian (808 PureView) and N9/N950 MeeGo. What could be used would be folded into some future iPhone but never using Nokia branding. The one play Apple could do is to take the E-Series business/enterprise sales organization and perhaps some QWERTY competence to create a strong enterprise sales unit for the iPhone. Other than that, I think Apple would have no use for most of Nokia's smartphones and definitely none of its dumbphones. I doubt Apple would even want to take over the best smartphone factories, they would rather outsource all iPhone production to Foxconn/HonHai.

On Google's side it would be a conundrum. If Google adds Nokia to its Motorola purchase, it would break Android's support. Google would have to calculate would they rather own about 30% of the smartphone market making the handsets too (Motorola and Nokia) or own about 60% of the market making mostly only the operating system. Google would in any case terminate the Windows Phone, Symbian and MeeGo projects and migrate Nokia's smartphones to Android. Google would have no real use for the dumbphones unit nor NSN unit. Google could theoretically sell parts of Nokia including the branding, and hold onto the factories, and make the Nokia factories a kind of Foxconn/HonHai for Android family, to have various Android partners manufacture phones at Google's factories. Am not sure the profit margins of this kind of business would be really attractive to Google management though. Not really worth their while haha..

WHO ELSE

Who else might be in the hunt? If we think Samsung, then also LG is a dark horse, they could want Nokia to get back to about par with Samsung in handsets and reset the playing field and fight as equals. LG would not want the NSN unit but all handsets stuff yes. They'd consider the MeeGo platform and if not that, they'd go fully Android.

Sony might truly be serious about its mobile plans and decide they want to be big in mobile and buy Nokia for that. They would get the baggage of the featurephones unit that Sony has just been able to get rid of mostly in its own handsets, so they probably would sell the featurephones. They'd unload the Nokia brand too in that sale. I don't see value for Sony to keep NSN. But the Nokia global reseller channel would be a fast way for Sony to climb back, because it was part that they abandoned a few years ago when SonyEricsson was making perennial losses.

Intel might want to jump into the handsets for real. They really got close to it all, with many years of work with Nokia ever closer on the MeeGo project and must still be fuming inside how Microsoft ruined their clever MeeGo play with Nokia. Why not snatch Nokia from under Microsoft's nose - the end the Windows Phone project, push MeeGo at full power now, and migrate to Tizen. Intel would not need the featurephone unit - but - but - Intel could redesign Nokia basic phones to run on Intel chips - and redesign Intel chips to also support low cost phones. Might make sense. Then also sell those chips to other handset makers of course. Intel would have no need for NSN. They probably would keep the Nokia brand.

HP, Dell have tried mobile and retreated. Is there remorse? Nokia could be the way back once again. I doubt it. 

ZTE, Huawei would be in the hunt with rapid growth in mind, much like how Lenovo bought IBM's PC business. They could use NSN directly and all Nokia's handset parts including the brand. If they have visions of global play - the MeeGo platform and Qt (and ex-Ovi store) even offers a chance to have a platform to do an eco-system play. 

HTC - is so much currently in trouble, I don't see it. Same of RIM, can't see them considering buying another struggling handset maker haha. 

Panasonic, Sharp, Acer, Lenovo, Toshiba, Nintendo, Philips etc - there are other tech brands in consumer electronics and PCs who might have a secret desire to be big in smartphones - imagine if the CEO of Strategy Director had once had a plan to take the world with smartphones but his/her Board rejected the plan etc. But now Nokia would offer a chance to recapture it. Take someone like Nintendo - this company will go the way of Kodak and Polaroid if they dont' get into mobile phones soon. Or Panasonic, who once was a big handset maker, decided its not worth it, but recently have said they are coming back to the global race.

Or maybe a management buyout or maybe some consortium of clever outsiders (ex Nokia execs). If management buyout, would be middle-management revolt to kick out Elop and the Microsoft Mafia (ie total mutiny) or what of ex Nokia owners or some other perhaps wealthy Nokia shareholders, who are now fed up with the Elop madness and put in an investor package with some investment bankers, buy Nokia with some leveraged buy-out, and with the intention of pruning Nokia down but focusing on its core business and returning to the MeeGo (and Meltemi) based plan.

Thats whats on my mind today late Friday night as I think about Nokia as a possible takeover target. To any buyer - the company is not as damaged as it seems. The fundamentals are not bad. Nokia has been mismanaged. It can be nurtured to health in relatively short time, to be a valuable part of your business. But obviously in almost every case, the buyer would not want all of Nokia as it exists today.

PS to see what the recent situation has been in smartphones by the major brands including Nokia, Samsung, Microsoft Windows, Google Android, Apple etc - please see Smartphone Market in Six Graphs.

Comments

[Derp]

Symbian is dead, there will be no resurrection, the engineers are now Accenture employees and the offices where the technical work was done are being wound down. All that's happening now is 'knowledge transfer' where decades of experience is being 'copied and pasted' into the mind of developers in low-cost countries. There will be no more innovation on this platform because the skills are no longer in the company. Also, I don't see anyone wanting to work for Nokia again because the wages are poor, the workplace is unbelievably bureaucratic and if you wish to advance your career, or have your opinion count, you need to be based in Finland. Not an attractive proposition for most people.

[NoNameRequired]

Samsung and Apple are not likely take-over candidates, since their massive dominance in the industry would trigger regulatory antitrust issues. Google probably has the same problem now after the Motorola acquisition.

As many have mentioned, it seems that Nokia is now full of poison pills for any take-over candidate. For that reason, many are probably watching the class action lawsuit and Google's antitrust lawsuit very closely, to see what comes out from discoveries in these lawsuits. Once they are known, the true cost-benefit of a hostile take-over can be estimated.

My best bet is that either a private equity firm will buy it, split it up and offer all the interesting parts to whoever wants them, or Microsoft will do it.

[pharazon]

How about the anti-trust legislation of Nokia-Samsung merger? I think a such monopoly would need approval from the EU (not US though).

Similarly Apple-Nokia merger would probably hit anti-trust procedures.

Tomi fantasises about ex-Nokia Managers taking over, I can't see that happening (they are too poor :)

Actually the original reason of Nokia's downfall started already 12 years ago when they grew too big and started to manage the company like a factory (or maybe they have always done that). Unfortunately it's not the way how a software company should be run. It worked well for NSN and dumb phones when they were mostly hardware, but since 2007 the phones have been about software. Nokia is not a software company. Thus there is low value in the organization & skill left inhouse. The Nokia management has never knewn how to run a software company up to this date.

Read the manage from above. The bloated 100 000 employee Nokia organization model is having 25 managers for 1 employee. There is a lot of efficiency in that :) Nokia has outsources all other competences except management and architecture. They are in the business of management (should move in selling management consultancy to other bloated corporations). The excess management layer leads into a political organization - and thus ex-Nokia managers who have lost in the politics game, and are thus wrathful.

Tomi has a point in the value of the hardware business. I can't see any future in Nokia's software, what ever the platform. Thus the most probable buyer will be a big investment banker who can accumulate 10B$. In the days of financial crisis, I can't see anybody but the Chinese to have sufficient funds to reward the risk.

The (bidding) game is on!

[SamKB]

Tomi, thank you for mentioning my 101 Shortcomings of Windows Phone. The list has been updated with 20 bonus shortcomings to make a total of 121. All disputed items have been resolved and the list is to the best of my knowledge accurate. The original list had some disputes because some manufacturers made special provisions, there were updates which corrected some of the flaws and some were not written clearly. The list can be accessed here:

http://my-symbian.com/forum/viewtopic.php?p=392155#392155

[LeeBase]

Samsung bailed on the loser Symbian OS along with the rest of the world. Only you are left selling that pipe dream that Symbian has any value. Samsung already has Meego, and STILL it's not ready to be shipped.

The Lumia decision was a bet the company decision. There is no going back, not for Nokia nor any who would buy Nokia.

The only company that has an interest in Nokia would be Msft. Like I said long ago, Msft will invest in Nokia to keep it alive, not buy Nokia outright.

Nokia hasn't been able to sell NSN for years now. Nokia's phone business isn't worth buying. Navteq will have to go for a fire sale price. Nokia's price will have to fall below what those two businesses could be sold at fire sale prices before a banker will buy Nokia to break it up.

Lee

[eduard0]

Anybody know how much cash Nokia has, and how fast it is burning it?

[Dared]

@LeBase,

Tizen has taken so long as MeeGo's app environment is based on Qt, whereas Tizen is HTML5 - so the code needed to be rewritten

Also, Nokia made all it's money from its Symbian based phones. Not just that, but it's new Pureview tech runs on Symbian, not WP. If they were still using Symbian they could get that tech out a lot faster, rather than spend the time to make WP compatible with it

[Tomifan]

@SamKB
thanks for reminding. I added a comment to your original list posting. I'm sure you will find my list is 100% accurate and can be easily used to strengthen your list what comes to superiority of Symbian as OS. And yes, I included your bonus 20 in my list.

[RobDK]

I have read several articles mentioning unfinanced pension commitments in Nokia's pension fund, and that the money owed here is larger than the current cash reserves. Hence the junk status on Nokia's debt papers. Does anyone have any better knowledge?

If there is a pension problem, then that would explain the lack of interest in taking over, or liquidating Nokia....

[Kenny]

The Pureview 808 has gone on sale but in a very low key manner. Its price is set higher than Lumia 800. Nokia is only selling in limited quantities and it does not want to promote this phone for fear it will compete with Lumia. Never has a company acted with such fear towards its own product. If the Lumia is truly a good product why not let it compete on a level playing field with N9 and Pureview? Or does Nokia think it can shaft an inferior product down consumers' throats?

[Rosita S. Kirk]

Nokia has really fallen into trouble nowadays, due to its reluctance to change. They forget the idea that the world keeps change all the time. Hope they could learn a lot through this failure.

[TheOneThatGotAway]

Tommy misses one important aspect on Intel.
Intel owns Infineon whose chipsets have for years been in by far the largest part of Nokia's dumb phones.
By letting Nokia slip to other suitors, Intel risks loosing a lot of business.
Before Elop, the relationship between Intel and Nokia were very close/strategic.

Nokia's footprint has been so large, that disentangling old supplier relations due to a collaps of Nokia, essentially disrupts alot of the component supplier business as well.

[pingpong]

NSN is 50/50 co-owned bei Nokia and Siemens: Any buyer of Nokia would have to settle with Siemens about NSN- and a settlement would not be about cash alone, as Siemens cannot risk another Benq disaster. So I bet NSN is the reason why no one has tried to buy Nokia so far.

[anobserver]

I believe that the smartphone unit is the _least_ interesting for a potential buyer -- except for very few choice pickings like camera technology and Pureview patents. Not even Microsoft will bother about it.

This is because of
a) the turmoil and demoralization during the Elop epoch;
b) the disorganization brought by constant changes in strategy and the associated internal fiefdoms (Maemo, Meego, S90, Symbian, WP);
c) the loss of corporate know-how (in particular, but not only, of Symbian developers to Accenture);
d) the stranglehold imposed by arrangements with Microsoft.

The smartphone unit is in complete disarray; in contrast, the feature phone division is comparatively in good shape, has its factories churning out products, and could be reorientated by a clever and decided acquirer. Navteq is interesting in itself, and NSN reorganized (with lots of streamlining and pruning) by a Huawei, ZTE, or Cisco.

[J.O. Aho]

@Dared:
I don't think Nokia has the possibility to make WP compatible with their hardware, but it's the other way around that Nokia has to make the hardware WP compatible.
If I don't mistake, MS was talking about getting the PureViews camera supported sometime in 2013.
The specs of WP phones are always the same, it's not like with Android that you will see a lot different hardware for the same version of Android.

[John]

I dont know how it will go with Nokia. But are Windows Phone bad? If look at the app development it seems to work very fine:
http://allaboutwindowsphone.com/news/item/14960_100000_apps_published_to_Windo.php

Can Nokia last to Windows Phone Apollo, they will compete with the hardware to:
http://www.concept-phones.com/nokia/nokia-lumia-evolution-runs-windows-phone-apollo-pretty/
http://www.gsmarena.com/microsoft_to_unveil_windows_phone_apollo_on_june_20-news-4339.php

Would Microsoft give up the smartphone market if it get more important than the PC?
http://bizmology.hoovers.com/2012/03/29/smartphone-shipments-grow-may-outpace-windows-pc-sales-by-2016/

Well, maybe I am wrong but I dont think so. If Microsoft abandon Nokia who else will the make a deal with?

[eduardo]

The Register claims Microsoft looked at buying Nokia, but decided not to, at least for now

http://www.theregister.co.uk/2012/06/11/microsoft_nokia_merger/

[Sturmmann]

Samsung is also a telecommunication network equipment manufacturer. I think that NSN would be useful for Samsung.

[anobserver]

All those speculations are a bit overblown -- and already stale, as Samsung officially denied interest in acquiring Nokia:

http://in.reuters.com/article/2012/06/11/us-samsung-nokia-idINBRE85A0AN20120611

[Earendil Star]

John, thanks from everybody in this forum for the MS ads.

Yet, looking beyond marketing (it reminds me of the leaked photos of the would-be-called Lumias in February 2011), it is fun to see that the great enhancements of WP8 aka Apollo are:

1) multi core support (Wow! That's a breakthrough!)
2) HD display (Wow again! How many years after Apple and Android?)
3) Support for legacy apps (Wow wow wow! Really? That's amazing! But will they run smoothly? In emulation?)

Come on? Is this a joke or what? A closed ecosystem with few "supported" apps? Two years behind the competition?

By the way, apparently, current Lumias won't support Apollo.

And being Apollo sporting a new kernel and new technology, as usual, it will be laden with bugs (typical MS).

Also curious to know when these phones will actually ship.
It is typical MS/Nokia to announce months in advance, just to have comparisons with current phones on the market and ultimately more favourable reviews for WP. Just compare with what Apple does: announcement made, products readily available.

Yes, I know. We will have to wait for WP9 to see the REAL thing. Lol.

[Loyalist]

The local Nokia guys, Perttu and Timo and Marko have been already taken the Pension Plan B here in OULU and are now retiring. They take the usual route with a retreat to Abroad, Thailand, Australia and so on... the guys being of mediocre vocational institute grads I think Nokia's Take-Overist will be more than happy to get rid of them. I guess Nokia will be here in the Oulu no more soon.

I find it unlikely the guys will find another work soon in the same wage class as they have ridden the wave of Nokia success all way from the vocational institute to their current +5k EUR /mth salary.

Guys, its time to stop running your mouths and start collecting Statutory Welfare!

[Matti]

Both Meltemi and Qt seem to be cancelled as well. Not mentioned in the press release, but so many key Qt and Meltemi people are tweeting about losing or leaving their jobs that I can't see any other explanation. Plus one the key Qt persons just tweeted that the future is in Java.

Thats the two last Microsoft independent pieces killed. Surely Nokia is now lean enough for Microsoft buyout.

[basket jordan 10]

Böyle yararlı bir blog yazabilmek için tebrikler. Blogunuz çok bilgilendirici değil, aynı zamanda son derece sanatsal değil sadece. Genellikle bu yaratıcı kadar kolay değil makaleler yazabilirsiniz bireylerin çok çift vardır. Güzel yazma tutun! Hey! Benim yeni iPhone blogunuza gezerek iş yerinde değilim! Sadece blogunuza aracılığıyla okuma sevdiğini söylüyorsun bütün mesajlara bekliyoruz istedim! Süper iş!