Nokia job cuts may hasten, not stop, death spiral

Monday, 18 June 2012 00:00 - - {{hitsCtrl.values.hits}}

Reuters: With the latest round of job cuts announced Nokia’s chief executive Stephen Elop could be hastening rather than arresting the once dominant Finnish phone maker’s decline.

The company has cut a third of the workforce in its phone business during the 21 months Elop has been in charge and the latest 10,000 lay-offs will now include its main source of innovation, the research and development team.

Analysts also worry that the restructuring costs will further strain the company’s cash position and achieve little in turning around what many see as its biggest problem: slow sales of its new Microsoft Windows-based handsets.

“Elop is cutting costs and hoping for a miracle, but it looks like Nokia is staying on death row,” said John Strand, founder of Danish industry consultancy Strand Consult.

Once the world’s dominant mobile phone provider, Nokia is now struggling to compete with Apple, Samsung and Google in smartphones while it is also losing share in the markets for cheaper, more basic phones.

Under Elop’s current strategy, which places all its bets on smartphones running on software developed by Elop’s former employer Microsoft the company has only one way out - coming up with a killer product that makes the Nokia brand fashionable again.

The current range of Lumia phones won some good reviews, but has had relatively little success among consumers.

Analysts and brand specialists say Nokia needs a new, more revolutionary product to turn heads.

“People want Nokia to succeed, people love the brand, but they need an excuse to do that and the excuse is that product,” said Peter Walshe, a director at Millward Brown whose Brandz study last month saw Nokia falling out of top 100 most valuable global brands.

Some analysts, however, said bigger wasn’t necessarily better and that the focus on Windows Phones may actually help.

Even with massive research and development and a strong set of intellectual property patents, Nokia struggled to produce the right goods and last hit model, the N95, was sold before the iPhone entered the market.

However, Elop has been credited with speeding up the product launch process and some analysts still expect him to turn the company around.