Why You Should Avoid Investing in Nokia Now
Investing in Nokia, the once powerhouse of the mobile phone market, is likely not a good decision given the current landscape. Here are several compelling reasons why you should consider other options.
Nokia's Future Stakes
The recent announcements by Nokia have triggered speculation that the company might be positioning itself too heavily on Windows Phone 7 (WP7), a platform that hasn't performed well. Here are a few points that highlight Nokia's risky strategy:
Obsolescence of Current Smartphone Offerings: Nokia's recent announcements have indicated that they will be making their current smartphone offerings obsolete, suggesting a dramatic shift in strategy. However, there’s no sign of a major breakthrough or new product line on the horizon. The company aims to enter the Windows Phone 7 (WP7) market, but it remains to be seen if this will truly change the game. Third-Party App Developers: Nokia is reportedly phasing out support for their Symbian products, meaning third-party app developers are also likely to abandon their Symbian applications. This leaves Nokia in a weak position as the ecosystem is critical for the success of any smartphone company.WP7: A Fragile Platform
The move to WP7 is risky for several reasons, primarily because of the platform's weak market presence. Here's a closer look:
WP7 Market Share and Importance: In the fourth quarter of 2010, there were only 15 devices from three makers supporting WP7, and total sales were mere 2 million devices. Given that Microsoft could abandon WP7 with minor impact, would you consider investing in a platform that’s so small and potentially expendable?
Microsoft’s Prioritization: Stephen Elop, CEO of Nokia and now president of Microsoft, does not own any Nokia stock, a fact that might impact investor confidence. His ownership of Microsoft stock, however, does not fully address this concern. If a major player in the industry is not investing in their own strategy, it might be wise to rethink your investment.
Management and Strategy Concerns
The current leadership at Nokia raises further questions about the company's future:
New Management Lacks Relevant Experience: Nokia's new North America chief has no mobile experience nor mass-market consumer product background. He previously held a position in Microsoft's server products, a largely business-to-business (B2B) business. This lack of relevant experience in consumer electronics could be a red flag. No Respect for Partners and Shareholders: Nokia’s recent management decisions have shown a lack of transparency and respect for its partners and shareholders. For instance, Nokia did not inform its development partner, Intel, about its intentions to abandon MeeGo and adopt WP7. These actions have eroded trust and signal potential future problems.Conclusion
Given the current risks and uncertainties, investing in Nokia is not advisable. While the company still dominates the non-smartphone market, the potential pitfalls of relying on WP7 and the concerns about management make this a volatile company to invest in. As the market continues to evolve, it's prudent to look for more stable and innovative players in the smartphone industry.