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Elop claims Microsoft has a 'critical dependency' on Nokia

Puts faith in mapping
Thu Oct 18 2012, 16:41
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FINNISH PHONE MAKER Nokia said Microsoft has a "critical dependency" on it for mapping data and that rival Windows Phone device makers are delivering only "the standard Windows Phone 8 experience".

As Nokia's CEO Stephen Elop and his CFO Timo Ihamuotila had to explain away a third quarter net loss of $1.27bn, the two went on the offensive by claiming that its relationship with Microsoft offers unique selling points. Elop claimed that Microsoft needs Nokia for its mapping data and that other Windows Phone 8 device makers are offering just "the standard Windows Phone 8 experience".

Elop said, "Any OEM has the opportunity to call their devices Windows Phone if that is the name they choose. In our case we chose to continue to use [the] Nokia brand and the Lumia product name to highlight the fact that unlike the others that are delivering the standard Windows Phone 8 experience on the standard platform, we actually stand for something more and we have more innovation and unique differentiation."

Elop also claimed that mobile operators do not want the Android and IOS ecosystems to get even more powerful and are pushing for a third ecosystem, which he is banking will become Windows Phone. As for Nokia's relationship with Microsoft, should the software developer decide to go into the smartphone game in the same way that it has with its Surface RT tablet, Elop said that such a move would be a "stimulant to the ecosystem" but added that it would nevertheless be a competitor.

While Elop acknowledged that a Microsoft branded device would pose a threat to Nokia's bottom line, he said Microsoft needs Nokia and the fact that "Microsoft has a critical dependency on us for location based services highlights the importance of this relationship working well in both directions. It's a relationship that is very high volume, very intense, very connected."

Elop and Ihamuotila didn't hide the fact that its handset sales were down, but an analyst told The INQUIRER that while Lumia sales figures were not surprising, the drop in Symbian device sales was steeper than expected. Nokia had been hoping the decline would be slower giving its volumes of Windows Phone devices a little bit more time to ramp up.

The analyst, who has intimate knowledge of the smartphone industry, told us that smartphones accounted for only seven percent of Nokia's total product shipments. Obviously for firms such as Apple and Research in Motion that figure is 100 percent, but he said that even Samsung, which has an extensive feature phone lineup, is now pushing 50 percent smartphone penetration in its product portfolio.

Ihamuotila said that operating margins were lower because Nokia was selling more low margin products, essentially its souped-up Asha feature phones. Nokia's cash pile is still strong enough to sustain a few more poor quarters like this, but unless the first quarter of 2013 shows some rebound in Lumia sales, Elop might not get to see all of them. µ


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