Nokia shares have lost almost half their value since April, as the company’s shareholders have figured out that Nokia still has no credible response to Apple’s iPhone and Google Android, the smartphone newcomers that have taken all of the industry’s momentum.
Now shareholders want blood, calling for CEO Olli-Pekka Kallasvuo’s departure. This after the company slashed Q2 guidance last month, warning that it’s getting its butt kicked at the high end of the market — i.e. smartphones.
The reason Kallasvuo deserves to get fired is that he had an opportunity to solve his smartphone problem earlier this year by buying Palm. But he ignored it, and instead an industry newcomer, HP, wound up acquiring it. (Nokia’s rivals RIM, Apple, and even Google were involved in the discussions, too, we reported exclusively yesterday.)
Why might Palm have been a good fit for Nokia?
Because Nokia’s biggest smartphone problem is a technical one: Its main platform, Symbian, is obsolete compared to Apple’s iOS and Android.
Nokia had the chance to replace it by buying Palm’s WebOS, which is a technically impressive platform that failed not because of its engineering but because of Palm’s poor sales and marketing efforts.
Nokia could have solved Palm’s sales and distribution problems with its massive global channels. Palm could have finally given Nokia a strong presence in Silicon Valley and the North American market. And then Nokia would have had a credible smartphone competitor to iOS and Android for the small price of around $1 billion.
But after speaking to a source familiar with the matter, we have learned that Nokia was nowhere in sight in the Palm bake-off — never involved in the process.
Instead, Nokia seemed content to figure something out from within the handful of (outdated) platforms it already has. “They thought they have six platforms and one of them is going to work,” our source says. “If I were a shareholder, I would fire the entire management team.”
Nokia’s decision could go down as one of the dumbest in handset history. It now has to struggle to come up with a plan, while Apple and Android continue to get stronger. Because unless Nokia wants to wind up at the bottom of the pile, mostly selling low-margin phones in emerging markets, what it’s doing now isn’t going to cut it.
Smartphones are crucially important to Nokia (and other handset makers) because while they represent lower shipment volumes than “dumb” phones, they represent a disproportionate percentage of revenue and profits.
That’s exactly how Apple has managed to humiliate the mobile stalwarts in just three years by quickly claiming the majority of the industry’s profit despite a very small unit sales share.
After watching once-great Nokia start to lose it over the last several years, we are not confident that CEO Kallasvuo understands the company’s problems. And he clearly hasn’t done anything right to fix them. So it’s probably time to go.