Nokia’s Elop still optimistic despite gloomy Q3 results

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Defiant CEO says partnership with Microsoft also in good shape ahead of Windows Phone 8 launch

Nokia says it is more interested in competing with Android and Apple than worrying about what its rivals are doing with the Windows Phone operating system.

These comments were made by Nokia CEO Stephen Elop (pictured), who was responding to questions from analysts during the company’s Q3 financial results conference call last week (see boxout below).

Recent reports in the press have suggested Nokia’s close relationship with Microsoft has weakened in recent months, particularly after it was announced Microsoft’s new Windows Phone 8 platform would not be compatible with any of the manufacturer’s current handsets.

This has been coupled with Microsoft’s clear support for other manufacturers such as HTC, Huawei and Samsung in recent months, who have all committed to driving Windows Phone 8 handsets and services.

But Elop said the partnership with Microsoft, which began in February 2011, is improving “with every step” and said he is unconcerned by what his rivals are doing with the Windows Phone 8 OS.

He claimed Nokia is focusing on offering its customers unique content, such as its PureView imaging technology, business location app City Lens and wireless charging, to enhance the user experience, while its rivals will only have the “standard version”.

Elop also said unlike some manufacturers – such as HTC with its Windows Phone 8X and 8S handsets – Nokia is not tempted to name its devices after the new operating system – instead preferring to stay loyal to its Lumia product name.

Elop said: “The relationship with Microsoft is going very well and the planning process is already under way on a subsequent version of Windows Phone.

“Certain manufacturers have named their devices ‘Windows Phone’. We chose to continue to use the Nokia brand and Lumia product name to highlight that. Unlike others that are delivering the standard Windows Phone 8 experience on the standard platform, we stand for something more as we have more innovation and unique differentiation.”

Elop even went as far as to say Microsoft has “critical dependency” on Nokia for its mapping services, which will be built in to Windows Phone and subsequently made available on all Windows Phone handsets.

He said: “Microsoft has a critical dependency on us for location-based services, which highlights the importance of this relationship working well in both directions.

“That means we are their development partner with the current release of Windows Phone – our engineers are working daily with what’s going to be in Windows Phone and you see that in the products being introduced. That close relationship with Microsoft translates into advantages in the ecosystem.”

Operator support
Despite the early optimism from Nokia, which even included VP of Western Europe Conor Pierce stating it aimed to topple Apple, the manufacturer’s sales have continued to fall.

Its Q3 results showed sales fell 37 per cent from the previous quarter and were down 56 per cent year on year to £792 million.

The manufacturer shipped 6.3 million smartphones in Q3, down 38 per cent sequentially and 63 per cent year on year, and sales of its Lumia smartphone range fell from four million in Q2 to
2.9 million.

But Elop remains positive, claiming operators are now seeking opportunities to break the monopoly held by Android and iOS which, according to analysts Gartner, amounts to around an 82.9 per cent share of the global OS market – Android holds 64.1 per cent of the market and Apple iOS 18.8 per cent.

Android’s share has been buoyed by the fact its OS is being used on devices which touch all ends of the market, from the top end, on devices such as the Samsung Galaxy S III, to sub-£35 network-branded devices.

Nokia has already introduced an entry-level Windows Phone smartphone with the Nokia Lumia 610 in June, which costs as little as £100 through some UK retailers.

Elop said: “There’s a dynamic that we’re seeing and hearing about and that is increasing concern with operators about the concentration of power that is landing with two particular
ecosystems.

“You’re going to see a similar trend that operators begin to say: ‘We need a third ecosystem to happen and we need to cause that to happen.’

“They are seeing innovations in our services, a broadening of price points with particular operators to give them advantages. We have to get this third ecosystem going with the full effort of Nokia now being visible.”

Awareness drive
On the back of this, a defiant Elop said steps are now being taken to ensure Nokia’s new Windows Phone 8 device receives the right level of marketing and brand awareness to be successful.

He said together with Microsoft and its operator partners, more money is being invested for bigger marketing campaigns, more devices in retail stores and more training for sales staff to educate them on the handsets and the platform.

Nokia will also look at lowering the prices of the new Lumia 820 and 920 handsets in order to make them more accessible to consumers.

Elop said: “Our decision to talk a lot about the Lumia 920 and 820 early in September was a very deliberate decision to ensure we were in the conversation as it relates to the devices that are going to be available from our competitors.

Operators, retailers and consumers are showing strong interest in the new experiences Lumia will bring.

“We are training more retail staff than with Windows Phone 7 and will have more live Lumia devices in retail environments than before. We are driving marketing campaigns and demos tailored for both general retail stores and operator-specific stores.

“We expect Q4 to continue the transition as we begin to ramp up sales on the Lumia 820 and 920. We are delivering a deliberate roll-out where we focus our sales and marketing to select markets and key operator partnerships.

“We will broaden our array of products across various price points and markets during 2013.”

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