Several years ago, Nokia was the undisputed heavyweight champion of the world when it came to making phones.
Now, the company is frantically cutting costs and downsizing in a desperate bid to survive.
The iPhone happened.
In the five years since Apple (AAPL) released its first iPhone, Nokia has lost a staggering 90% of its market value.
Worse, the company has gone from coining money to burning it. And the situation has gotten so bad that Nokia announced yesterday that it plans to fire another 10,000 employees.
Nokia’s problem is that the cell-phone market has become a “platform” market, in which third-party developers build apps that run on top of cell phones. Platform markets tend to standardize around one or two winners. And the smartphone market is already standardising around Apple’s iPhone and Google’s Android.
Nokia recognised this market shift last year. Its new CEO wrote a bold memo likening the company’s predicament to being stuck on a “burning oil platform” in the middle of the ocean. He then radically changed Nokia’s strategy and bet the company’s future on Microsoft’s forthcoming entry into the mobile platform market–a new version of Windows.
Because Microsoft (MSFT) and Nokia are now in bed together, moreover, Nokia’s problems have become Microsoft’s problems. Microsoft is desperate to regain some of the ground it has lost to Apple and Google in smartphones. But its one major global partner, Nokia, is now drowning. So that puts Microsoft back at square one again.
Perhaps that’s why Microsoft may shock the tech world next week by announcing that it plans to build its own integrated tablet. Microsoft is just as far behind in tablets as it is in smartphones, and perhaps the company doesn’t want to repeat the mistake of depending on a dying partner like Nokia.
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