Stable and boring Nokia?

Metaratings
05 May 2014
00:00

Nokia appointed Rajeev Suri, the former NSN CEO, as its new president and CEO. The company said that it would use most of its phone business sale cash to issue dividends, pay back old loans and buy back its own shares. It also plans to focus on networking (NSN), its map and navigation business (HERE) and managing its IPR’s (Advanced Technologies). But is it something new and can we see investments in the future?

NSN represents over 85% of the new Nokia’s revenue. HERE is small business and its results have been negative or very marginal. Advanced Technologies has solid but small operating profit. One key question regarding Advanced Technologies is, how it can create and maintain a relevant patent portfolio, as the company now has no handset unit and also the research center is much smaller than it used to be.

Nokia got over €5 billion from the handset business and its patent licenses from Microsoft. Many parties waited to see Nokia’s new strategy and how Nokia is going to use that money. Is Nokia going to start some new businesses, maybe acquire some companies, or start significant new research work? For example, wearable technology has been in some speculations, or if NSN is to acquire a competitor.

Chairman Risto Siilasmaa and CEO Rajeev Suri presented the new strategy in the last week. The main messages were that 1) NSN continues in its network business with a clear focus, 2) HERE continues with maps, location services and navigation, especially focusing on getting business from the automobile industry, and it also focuses on cloud based location services. So, nothing new there. Now that they also said that the phone business money goes to shareholders and lenders, there’s no reason to expect new leaps with acquisition and new projects.

The announcements were disappointing to those who expected Nokia could again do something new and innovative. Nokia has been a leading technology company in Europe and it has been one of the only few big consumer and communications technology providers outside the US. In that way the decline of Nokia has also had symbolic and geographical significance. US companies now also dominate the mobile ecosystems.

NSN will compete in the same series as Ericsson and Huawei. The network business has fierce competition and vendors look for better cost-efficiency all the time. And it is also a cyclical business depending on network investments. CEO Suri has been particularly strong in cutting cots and crystallizing focus.

HERE competes, for example, with Google’s and Apple’s map businesses. It is an independent supplier for mobile business, but it is hard to say, if it really helps them, when Android and iOS dominate the mobile business. It has won business in the automobile business, e.g. Toyota and some business from German manufacturers, but Google and Apple make progress in that domain and can offer more (e.g. content and other services) than HERE. Last weeks announcement about more cloud-based services is still unclear, and it doesn’t sound very new and innovative.

Nokia has re-invented itself many times during its 150-year-old history. In 1970’s and 1980’s its main businesses were rubber products, cables and paper, but it invested heavily in new areas like networks, radio technology and consumer products. After a hard time those investments started to pay back in 1990’s. Now it is hard to see that kind of future investment in the strategy. CEO Suri is a hard working numbers guy, but we don’t know yet, if he has larger visions. It looks more like Nokia is going to become a stable B2B industry company that can pay constant dividends to shareholders, but we cannot expect huge growth and game-changing innovations.

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