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« Another Death in the Bloodbath: Google Buys Motorola Mobility | Main | Why Microsoft Cannot Afford to Let Nokia Fall Into Hands of Any Rival »

August 15, 2011

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Tomi T Ahonen

Am starting responses, doing in small sets

Hi Eurofan, Peter, peter, rob and SoVatar

Eurofan - yes totally agree

Peter - thanks I added a few of those after your comment

peter - haha, thanks but no thanks. I'm not the CEO type but if the next CEO would like to have some advice, I'd be happy to provide :-)

rob - good points but remember, most of the featurephones you disparage, are actually sold to very modest-income users in the Emerging World countries, where Nokia's market share used to be typically over 60% - and Nokia is the ultimate sign of affluence. They don't even know the Apple brand but a Nokia cameraphone or musicphone is good as gold. Don't use our Western mindset when analyzing those markets, you really have to go visit there to see it and believe it. Nokia is the biggest brand - of ANY industry - in many African countries for example

SoVatar - good point I added it after your comment

Thanks all, more comments coming

Tomi Ahonen :-)

Hyoun Park

I would love to see Huawei or Oracle make a play for Nokia in the next few months. Huawei could use the branding and could take advantage of every part of Nokia's current operations.

Oracle could use Nokia to continue its journey in providing integrated hardware and software solutions to the mobile world while gaining greater influence in the telco world.

If either of them waits until next year, though, they'll have to deal with both the demise of Symbian and Meego as well as the loss of the full ecosystem, which makes Nokia a more interesting target for current handset providers, but a much less strategic acquisition.

Eurofan

@ Hyoun Park: I'm sure Nokians would love for Huawei to make the play, either now or next year, versus continuing down the WP-miracle-is-going-to-happen one of these WP iterations path of Elop and his Leadership Team. Huawei has the technical know-how to assess who should lead Nokia and how to support the profit potential of Nokia programs and IP. There is so much value in Nokia just the way it is now to be exploited by qualified IT management. I'm sure the first thing they'd do is remove the false leadership and promote leadership from within or perhaps tempt Rick Simonson to move over from the NSN Board to take up the reins of a company he knows very well, Nokia. I disagree that Symbian and Meego will be dead at the end of next year. They'll still be there, selling, slowly developing, and some Nokians will remember who knows what about each program. Nokia is too big to kill in two and a half years, I hope. It will take a strong culture and a big set of balls to take on a take over of Nokia, though, things Elop didn't have, so it could be Huawei in 8 months time when Nokia is selling for $ 4.25 on weak WP sales in NA and Europe.

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and I would love also to see IBM, ebay and probably Amazon to join as buyers. But in hard times, Nokia will probably agree even with Starbucks or McDonald.

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This is an enlightning post with sharp responses, as usual.
It feels a bit like Arabian Nights though, complete with "rich poetry and poetic speeches, chants, songs, lamentations, hymns, beseeching, praising, pleading, riddles and annotations" [http://goo.gl/pm1G2].
I find it fascinating that whatever the initial theme, the story seems to always come back to Nokia..

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Nokia worth trusting.

Tomi T Ahonen

Now second set of replies (am on Aug 16 comments)

Hi Eurofan, KPOM, eduardo, Earendil and Baron

Eurofan - haha yeah. That Nokia option is the least likely I think.. But in this year of weird tech news in smartphones, who knows what will happen still

KPOM - haha, yeah.. I am sure some at RIM are thinking they should have taken those meetings with Nokia back in November-December of last year. But at that time RIM still looked solid for growth, not decline and they felt they'd do it alone. Now they are also on the ropes.

eduardo - Wow yeah, rough request. But yeah... I think it won't be happening now or any time when the share price is on an upward trend. Microsoft would prefer to get Nokia partnership without buying it. Others won't want to move if Nokia is 'too expensive' and the share price will likely jump once the gossip comes out that there are suitors after Nokia, just like right after the Motorola purchase, Nokia share price has turned to growth with the speculation that it will be sold.

When then? I think there is a profit warning coming shortly (am honestly expecting it every day when I go to Google, or every day I turn on Bloomberg on TV, to see the news headline that Nokia issued a profit warning haha). I am 100% certain that on its 'real' business operations, the NokiaSiemens Networks unit (made loss in Q2) cannot turn a profit. Navteq made a loss too (cannot make profit). The smartphones unit made a big loss (cannot make profit) and the featurephones ie dumbphones unit made a loss in Q2, cannot make a profit now. And at the start of Q3, Nokia had across-the-board price cuts as big as 15% - so when you make losses and cut prices, it means you make BIGGER losses. Yet Elop boldly promised in Q2 results, that Nokia expects to break even in Q3. I can't see that happening, especially as we hear of all the bad news trickling in.

So.. I am expecting a profit warning. But its possible Elop doesn't issue one, and rather claims at Q3 results that the losses were a late surprise (and might face some reprimands by the NYSE and HEX and Stockholm stock exchange). Or - there may be some contractual Microsoft marketing payment coming in worth hundreds of millions to help launch WP7, that just might be an extraordinary revenue element that could technically turn Nokia into roughly neutral results for Q3 even as the operations report hundreds of millions of losses. I don't know obviously.

But I expect a profit warning. I belive, that if the profit warning comes, a second in two quarters, it would be a huge shock for the investors who have been buying Nokia and the current hoarding would quicly turn to sell-off. So I expect a return to severe decline in Nokia share prices within days or weeks. And then, as Q3 results come out, there should be more bad news from every division - as we hear the disasterous results from Europe and China, Nokia's biggest markets generating most of its business. That should push the share price lower still.. So I think the first 'sign' of a possible suitor expressing a real interest to buy Nokia could come when the profit warning is issued, and the timing probably a few days after Nokia's share price reaches a new low for this year. Then I think it would be a matter of days. I don't think it would take unit Q3 results come out, but if there is no profit warning, it might take until after Q3 results.

Please note, EVERY time I have made any predictions about share prices in public, I have been wrong haha.. So take it with that grain of salt, I am not a financial analyst (even though I have an international finance MBA and did work on Wall Street investment banking at one point early in my career) and this blog is not stock market advice haha..

Earendil - thanks! I agree, Microsoft does kind of 'own' Nokia now with Elop in charge and yes, its Elop's mission to sell the undesirable parts. He does not want to be CEO of Nokia, Elop wants to succeed Ballmer at Microsoft with Nokia as one division of Microsoft haha.. If the share price had not fallen, that scenario would stand but now the Nokia price is so low, and with 40,000 patents in 10,000 patent families, Nokia's patent portfolio alone is a prize worth having for many of the suitors I listed in the above.

And I agree, Microsoft loves what Elop did to Nokia. If Microsoft ends up buying Nokia, Elop is the hero and first in line to take over after Ballmer. But if Elop 'loses' Nokia to some hostile takeover suitor, then he will be fired instantly when the new owner takes over.

Good point about MeeGo, but because MeeGo is Linux based and Windows is not, and Microsoft really doesn't 'need' more software programmers haha, I do think they'd get better value from just selling the MeeGo competence. But yeah, could keep it too, incorporate into WP7 ie next version WP8 etc..

Baron - I agree, Motorola was lean and trimmed to be easier to sell. But you risk now the rule of 'not having read the blog' - I said clearly that this was the movie Wall Street scenario, where specifically a bloated company is bought, exactly because its parts are worth more than the whole. Tsk-tsk-tsk. You know better Baron.. I should really delete that comment :-) But I'm back from vacation with plenty of good will, I'll let it stay.

I do agree with you, that the suitors are likely waiting, expecting Nokia value to still sink further, ie to get Nokia for less.

Thank you all, will return with more replies

Tomi Ahonen :-)

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