Nokia at crisis point, warns new boss Stephen Elop

[Herer]

Nokia's new head has sent an outspoken and frank memo to his staff that suggests the phone giant is in crisis.

 

Stephen Elop describes the company as standing on a "burning platform" surrounded by innovative competitors who are grabbing its market share.

 

In particular, he said, the firm had been caught off guard by the success of Google's Android operating system and Apple's iPhone.

 

BBC News has verified that the memo is genuine.

 

"The first iPhone shipped in 2007, and we still don't have a product that is close to their experience," chief executive Mr Elop wrote in the note that was distributed to the Finnish company's staff and was first published by technology website Engadget.

 

"Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable."

 

Although Nokia leads the global smartphone market in terms of handset sales, its overall share has been gradually declining.

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“Start Quote

 

Now that the American CEO has lobbed a hand grenade into the quiet, understated culture of Finland's mobile giant, all bets are off”

 

End Quote Rory Cellan-Jones Technology correspondent

 

* Read Rory's thoughts in full

 

According to research firm IDC, Nokia's share fell from 38% in 2009 to 28% by the end of 2010.

 

Meanwhile its rivals, including Apple and HTC have seen their share increase, or remain constant.

 

Ben Wood, an analyst at research firm CCS insight, said the memo showed that Mr Elop has a "deep understanding of the severe structural problems Nokia is facing".

 

"I think it shows that he has inherited an organisation that is in much worse shape than he anticipated and the work that will be required to get it back on track should not be underestimated," he told BBC News.

 

Mr Elop's leaked memo also suggests that Nokia is also being squeezed at the lower, non-smartphone end of the market by Chinese manufacturers.

 

"They are fast, they are cheap, and they are challenging us," he wrote.

 

Nokia is expected to publicly address its future strategy at a media event this Friday.

 

Mr Wood said that he thought Mr Elop would use the briefing as a chance to issue a "mea culpa".

 

"He will use it to say 'we are not in a good position, we have been outgunned and if we are to recover we are going to have to take some drastic decisions'."

 

Mr Wood said this could involve using Android or Microsoft's Windows Phone 7 operating systems.

 

"No options will be ruled out," he said.

[Herer]

Nokia and Microsoft form partnership

 

Nokia has joined forces with Microsoft in an attempt to regain ground lost to the iPhone and Android-based devices.

 

The deal will see Nokia use the Windows phone operating system for its smartphones, the company said.

 

It means that Nokia's existing operating systems will be sidelined.

 

Speaking at the launch of the partnership, Nokia's chief executive Stephen Elop revealed that there would be "substantial" job losses as a result of the tie-up.

 

Nokia will remain "first and foremost...a Finnish company. Finland is our home and will remain our home," he said.

 

But job losses around the world, including in Finland, will be inevitable, he added.

 

Windows first

 

Speaking about the new partnership with Microsoft, Mr Elop said that "the game has changed from a battle of devices to a war of ecosystems".

 

"An ecosystem with Microsoft and Nokia has unrivalled scale around the globe," he said.

 

Microsoft's chief executive Steve Ballmer was also present at the launch, underlining the importance of the deal to the computing giant.

 

"Nokia and Microsoft working together can drive innovation that is at the boundary of hardware, software and services," he said.

 

Microsoft's Bing will power Nokia's search services, while Nokia Maps would be a core part of Microsoft's mapping services.

 

The new strategy means Nokia's existing smartphone operating systems will be gradually sidelined.

 

Symbian, which runs on most of the company's current devices will become a "franchise platform", although the company expects to sell approximately 150 million more Symbian devices in future.

 

"It is a transition from Symbian to Windows phone as our primary smartphone platform," said Mr Elop.

 

Windows may not be the exclusive operating system for Nokia tablets though.

 

"We reserve the right to introduce tablets using other platforms, including ones we may be working on internally," he said.

 

There was no specific announcement about when the first Windows-powered Nokia phone will be available.

 

Mr Elop revealed that the firm did consider a tie-up with Google's Android operating system.

 

"We spent time with our colleagues at Google and explored the Google ecosystem but we felt we would have difficulty differentiating within that ecosystem," he said.

 

It was also revealed that talks with Microsoft only began in November, illustrating how quickly the deal has been pushed through.

 

Future clashes

 

The move away from Symbian is a brave decision for Nokia, according to experts.

 

"This is a clear admission that Nokia's own-platform strategy has faltered," said Ben Wood, an analyst with research firm CCS: Insight.

 

"Microsoft is the big winner in this deal, but there are no silver bullets for either company given the strength of iPhone and Google's Android," he added.

 

Nokia's share of the smartphone market fell from 38% to 28% in 2010, according to monitoring firm IDC.

 

Nokia's upcoming Meego operating system will also be sidelined.

 

According to the company statement: "MeeGo will place increased emphasis on longer-term market exploration of next-generation devices."

 

The MeeGo platform was expected to form the core of Nokia's future smartphone and tablet strategy.

 

The company says it still plans to ship one Meego device by the end of 2011.

 

For Magnus Rehle, the Nordic managing director of research firm Greenwich Consulting, Nokia may have difficulty juggling its three operating systems: Windows, Symbian and MeeGo.

 

"Three platforms is a lot to work with. I'm not sure there is room for so many platforms," he said.

 

And, as with any tie-up, there could be clashes between the two firms, he said.

 

Earlier this week Nokia chief executive Stephen Elop sent a memo to staff warning that the company was in crisis.