Nokia: More Phones, Fewer Workers

Nokia (NYSE: NOK) launched two new smartphones based on the aged Symbian operating system. Symbian has been rejected by the developer market to the extent that Nokia will phase out its use when its partnership with Microsoft (NASDAQ: MSFT) allows it to create a new generation of smartphones.  This new generation might allow it to compete with Apple (NASDAQ: AAPL) iPhone and the army of handsets sold by several manufacturers based on Google’s (NASDAQ: GOOG) Android OS.

Nokia must not think much of the success of the new E6 and the X7 models. Bloomberg reports that the firm plans it largest layoff in 20 years. Nokia’s sales have been stalled although it is still the largest handset maker in the world with 35% of the global market. It has had little success at the high-end of its industry–smartphones. This is the sector which is growing most quickly and supposedly is the most profitable.

The markets will certainly view the job cuts as a way for new Nokia CEO Steve Elop to buy time. He can cut staff to improve margins while he awaits the results of his joint venture with Microsoft. But, job cuts are not much of a way out. The decision says a great deal about how Elop views the future of his firm even with a powerful new partner. Maybe he thinks Nokia will not need as many workers if Microsoft will shoulder the software development load.

Many companies are forced to build and market “bridge” products as they await the ones that are meant to truly drive up sales. The phenomenon happens often in the auto business. It rarely works in a competitive market. The companies with the best cars win. Consumers do not want products until something better comes along.  They do not like to be kept waiting.

Nokia’s new phones may work well, or not. No one believes they represent a solution to the companies problems which makes them a trick which will not fool many people either on Wall St. or in cellular stores.

Douglas A. McIntyre