SAN JOSE, Calif. – Nokia Corp.'s new president and chief executive Stephen Elop faces five challenges, according to one analyst. The company needs to become more nimble, and refocus on high-end smartphones, applications processors, its app store and its U.S. business, said Satish Menon of market watcher Forward Concepts.
Elop, former president of Microsoft's business applications group, arrives at what Nokia's chairman Jorma Ollila said in a press conference today "is a particularly difficult time." Indeed, Nokia is the cellphone market leader, but has been losing market share while Apple, Google and others re-define the smartphone.
"With the right commitment and leadership Nokia, with its broad engineering expertise, has the ability to develop cutting-edge smartphones, but the question is if it is going to be too little, too late," said Menon.
Nokia was slow to react to the trend toward touch-screen handsets with open Web browsers, said Menon. "They tend to have much longer product development cycles," he said.
The handset giant is particularly vulnerable in the high-end smartphone business, he added.
"Nokia still talks about its almost 40 percent global market share, but the cruel truth is that all its growth is coming from low-margin, low-end devices in emerging markets while the high-end market share even in its home market of western Europe is declining, " Menon said. "This has resulted is above average erosion in average selling price and declining margins," he added.
Specifically, Nokia has fallen behind in mobile processors. While competitors are fielding smartphones with ARM Cortex A8 handsets, Nokia is still releasing smartphones using the ARM11, "even in their new flagship, the N8, to be formally unveiled next week at Nokia World," Menon said.
"I can’t think of a single other major smartphone OEM whose flagship device is currently based on an ARM11 processor," he added.
Nokia also needs to bolster its Ovi Store which does not get the attention developers give the Apple App Store or Google Android Market. "The company needs to mobilize a large contingent of third party developers," said Menon, noting Nokia's Qt cross-platform development framework will be a key tool for that job.
Finally, Nokia needs to gain traction in the U.S. market, the current driver of high-end smartphone sales, Menon said.
"Hiring Elop is an indication of reinvigorated commitment to the U.S. market at the highest levels in the company," said Menon. "But Elop’s background seems more focused on business rather than consumer products where the real need is, and he does not seem to have any prior background working with operators who really control the U.S. market," he said.
Elop and Ollila declined to talk about Nokia's past mistakes or give any specifics about the company's next steps at the Helsinki press conference where Elop was introduced.
"The challenges and answers are well understood here within the walls of Nokia," Elop said. "My job is to surface them," he said.