IT IS HARD TO GUESS what exactly Adnaan Ahmad, a senior analyst at Berenberg Bank was smoking when he urged Nokia to jump into bed with Microsoft, but it's pretty likely sold by the ounce.
Ahmad penned an open letter, published by the Financial Times, that urged Nokia CEO Stephen Elop to put Microsoft's Windows Phone 7 (WP7) onto Nokia handsets. His argument hinges around a perceived inability for Nokia to stand out if it chooses Android. He suggests that going with WP7 would allow Nokia to heavily cut its handset research and development funding, save a lot more cash by making a raft of employees redundant and save even more money by dumping the expense of continuing to develop its Meego operating system. It makes for entertaining reading, if you aren't an employee of Nokia.
There's little doubt that Nokia is heading for disaster if something doesn't change soon with its falling market share and profits as Android smartphones take over the market. But the Finnish phone maker has decided to stick by its obsolescent Symbian operating system even though it has been developing the far more impressive Linux based Meego operating system, which Ahmad claims is "the biggest joke in the tech industry right now".
Apparently Ahmad believes that Android is "a no-go for now" because Nokia might find it hard to stand out from its competitors Samsung, HTC and Sony Ericsson. He then asks, "And more significantly, how is anyone going to differentiate on Android long-term?" Given that Google has open sourced Android, it should be pretty easy to differentiate handsets if manufacturers decide to do more than just create Android skins and themes.
Ahmad also suggests that Nokia slash R&D funds by €1 billion, or 30 per cent, and "cut headcount severely in Finland" in order to improve its income statement. We're not sure if Ahmad wears a pair of red braces but he's doing a good impression of corporate raider Gordon Gekko. Even if you ignore the important human element of cutting jobs, Ahmad seems to forget that cutting R&D spending is a short-term gain, storing up problems for the future. Then again, Ahmad does work for a bank, where short-term gains have been preferred over long-term profitability and sustainability.
Elop used to work for Microsoft before he jumped over to Nokia, however should Nokia decide to take Ahmad's advice and start loading WP7 on its devices that's unlikely to turn the tide for Nokia. After all, Microsoft itself has been tight-lipped about sales figures for WP7, with the latest comments from Microsoft claiming that it has shipped two million devices in three months to its mobile network resellers, but neglecting to mention how many have been sold to consumers. If anything those figures - or rather, the lack of figures - should serve as a warning for Elop not to sign a deal with his old buddies in Redmond.
Although Ahmad's plan might be poorly conceived, the underlying point he makes is correct. Nokia needs to move away from what is clearly a failing formula, look to the success of its competitors after jumping onto Android, and spend its R&D funds wisely. µ
Tags: Microsoft
