Nokia : Crisis and Opportunity

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Nokia is the world leader in the field of telecommunications and leading the industry of

Mobile Phone, Smart Phone, Wired and IP Network based on experienced, innovative, user- friendly and reliable solution. By adding mobility to Internet, Nokia creates the new opportunity for enterprise and enrich the people daily lives. Nokia’s stock has been one of actively traded in the global 6 major stock exchanges now.

Nokia’s success in mobile telephony industry is very surprising news. Who would have expected a pulp manufacturer springing from the barren fringes of northern Europe would come to lead the global mobile business main stream?

As compared with most industry players and direct competitors, Nokia developed very unique and creative strategic view. When everyone saw mobile phone as a luxurious gadget or professional service, Nokia’s executives saw it as consumer and fashion product. Rather than predict five or ten percent maximum penetration rate, Nokia quickly imagined that everyone in the world has their own mobile phone for personal use and that would connect each people. Not like other wired telephone company, Nokia has quickly found that wireless technology would dominate the future telephone industry and heavily supported the development of newly licensed entrepreneurial mobile service providers. As Jorma Ollila, prior Nokia’s Chairman who led the development at that time, said :

The “planetary alignment” was right, a unique combination of trends and changes created a massive opportunity, but no one else saw it, or was able to capitalized on it.

Nokia’s success in mobile telephone moved from imagination to reality through :

 An organizational flexibility that yields resource fluidity

 A combination of a global approach to business building, bypassing the conventional

wisdom of needing large national subsidiaries for international expansion

 An emphasis on globally integrated business processes that provided the

underpinnings for Nokia’s accelerated growth in the late 1990s

Despite of glorious and brilliant success since 1990, Nokia has been surrendered by multiple problem of internal and external at the same time. The former CEO, Olli-Pekka Kallasvuo resigned and Stephen Elop who was in charge of Microsoft Business Division have succeeded. Elop promptly grasp the situation that Nokia has faced is not easy and very painful to go through. Finally he has started his survival plan of Nokia as sending a internal mail to every employee. That mail’s subject is ‘Burning Platform’ in northern sea.

Today we would tell the reason why Nokia has fallen and what’s our recommendation to great mobile phone industry giant.

Company History

Once upon a time, by the Nokia river

Start-up of Nokia group is a little bit different from other general company foundation process, complicated and also didn’t start from one company. In fact, Nokia has 3 different roots. In 1865, mining engineer Fredrik Idestam founds his first wood pulp mill at the

Tammerkoski Rapids in south-western Finland. A few years later he opens a second mill on the banks of the Nokianvirta river, which inspires him to name his company Nokia Ab in

1871. It’s the beginning of the greatest communication company in history. After starting up the plant, demand of general paper and packaging cardboard in Finland and Europe underway of industrialization exploded and Nokia plant continues expansion. Of course, factory

3 workers and their families increased. Nameless town flourished as a small and villagers decided to name the town following the company name. This is similar with case that village of Toyota plant has replaced their name following Toyota company name by prosperity.

President Yideseutam turned oversea early as demand for paper has increased offshore. The product of Nokia was not exported to neighborhood Russia but also United Kingdom and

France. In 1930s, it was exported to China. In 1915, the shares of Nokia has been traded initially on the Helsinki Stock Exchange.

Finnish Rubber Works and cable company

Finnish Rubber Works(FRW) has been established in 1898 close to Helsinki. Finland has a long winter and its road is always very muddy due to heavy snow. Given the climatic conditions, FRW mainly made of rubber boots and sold to people in Finland. Two executives of FRW accidently passed by Nokia village and found the town is very beautiful town and available for the hydroelectric power. Thus they have moved the factory aside. From 1920 they decided to use ‘Nokia’ brand for their products like rubber shoes, tier, rubber band, industrial band, rain coat, rubber mats, rubber ball, toys made of rubber and increased the product line with Nokia brand.

In 1912, Finnish Cable Works(FCW) was established in the Helsinki city center. FCW started from small company with a few employee first but soon grew to large companies. At that time, demand for the cable was increased sharply due to dramatic boom of telegraph, telephone industry. After World War II, FCW mainly exported products to Soviet Union and to several European companies. Someone said that success of FCW is just lucky and this means Russian dynasty. Russian dynasty considered telegraph as core national strategic

4 facilities but newly emerging telephone as local communication tool. Because of Russian emperor’s policy, colonial Finnish people’s establishment of telephone company was easily accepted.

In 1930s, there were 815 telephone company that makes people who lived scattered in large country communicate each other easily. Accordingly, the telephone company of Finland learn how to harmonize the competition and cooperation early. In progress of merger and acquisition, only two companies could survive and led the industry.

Rapid diversification and Nokia in crisis at first

Share holders of FRW bought most of FCW stock and ownership of three companies Nokia,

FRW and FCW gradually passed over into hands of the same shareholders in 1922. Finally three companies in 1967 are integrated into the Nokia Group.

After the integration into Nokia Group, Nokia diversified its business very rapidly and acquired a lot of other industrial companies. As a result, Nokia became the biggest umbrella group in Finland with more than 20 subsidiaries. But Nokia expanded into unrelated areas and synergy between affiliates couldn’t be expected. Los went to snowball.

Nokia focused on communication switch manufacturing in early 1980s and eyes to abroad market due to narrow local market. It competed with large companies in Europe like Ericson,

Siemens and Alcatel and struggled. In 1988, Nokia is the biggest television manufacturer and top computer company in Scandinavia. However in late 1980s, Nokia had been bitten on the crisis.

CEO Jorma Ollila called Jack Welch in northern Europe and other executive members of board directors rescued the Nokia from severe crisis. After election of CEO, Ollila promptly

5 shut down the business that was not business No 1 or was not likely to be business top level same as Jack Welch did in GE. He abandoned rubber, paper, pulp, tire, home appliances, desktop and focused their resources on mobile devices, information technologies and infra structure business. Especially closing the paper pulp business means denying the corporate identity of Nokia that started from it.

Penetration into long-distance communications industry and digital technology

Nokia’s long-distance telecommunications sector started from creating the electronics department in cable factory of FCW in 1960. At that time, the president of FCW, Bjorn

Westlund were tapping the potential of the semiconductor technology and founded

‘Electronics Department’. And then, he appointed Kurt Wikstedt as a director and instantly began to produce the product that market demanded. He called himself ‘digitally crazed’ person.

The first products were shipped in 1962 as a radio transmitter. At that time, developed semiconductor technologies moved into the field from laboratory and all of the company in that business is almost at elementary level, without difference between first mover and follower. Thus companies such as Nokia doesn’t need to pay for the late comer’s disadvantage.

The electronic department was accounting only 3% of total Nokia in 1967 when Nokia

Group was officially born was a small business unit with 460 employees. Development of phone that transmit radio was begun in 1963 and so called ‘Radio phone’ that was used for the military, government, public sector and emergency was the main stream for professional mobile radio. In 1970s Nokia continued to grow in wire communication and micro wave

6 transmission equipment market, and exported it to neighbor Sweden, Soviet Union and then all the world. Customers are mainly gas companies, oil companies and railroad companies.

Nokia’s electronic department in 1975 was divided into 3 units and one of them was

Telecommunications. After in charge of Sakari Salminen, this unit grew very fast. Although at that time, demand for digital exchanges was not big, Nokia developed digital switching devices and this Nokia DX200 was the starting point. Based on this product, Nokia had huge success in this business. DX200 had been gradually improved and become the multiple platform and was developed to Nokia’s mobile or wired network switching device base facilities. Motorola CVP(Chief Vice President) James Cale said “The reason why Nokia has been rising is that they saw digital wave 10 years ago. At that time many companies blamed

Nokia’s rashness for abandoning the profitable wire & penetration into wireless but now they greatly regret now.”

The world’s largest manufacturer of mobile phones

GSM(Global System for Mobile Telecommunication) is the European standard wireless communication type. CDMA(Code Division Multiple Access) type was mainly adopted by

US and Korea, each standard competed each other targeting global standard. GSM dominated

Europe and Middle-East Asia but CDMA led the wireless industry of US, Korea and Japan.

In 1987 digital GSM was adopted as European telecommunication technology standard and then Nokia president Ollila concentrated all assets on this. As Finnish telecommunications company launched GSM service at first, Nokia could make the standard for mobile phones in

1991. That would be mostly wide spread into global mobile phone market.

In 1992, Jorma Ollila decided to concentrate group’s total asset on telecommunications business and sold the other business. At that time, Nokia communications has constituted only 8% of group total sales but they thought that paper has evolved into ‘mobile devices’ for connecting the people.

In 1997, Nokia launched the globally popular game ‘SNAKE’ and led the mobile industry.

In 1999, Nokia sold the first mobile device to access to internet and launch 3G mobile phone in 2002. In 2005, Finally Nokia sold the 1 billionth mobile phone and ever sold mobile phone number until 2005 was less than 2 billion. In 2006 legendary CEO Ollila became the chairman of the board and his friend, Olli Kallasvuo succeeded the president of Nokia. In

2008, Nokia’s stock price peaks into 35$ and Nokia faced the 2nd biggest crisis in 2011.1

Nokia Organization & Strategies

Nokia has 4 hierarchical division, 1 joint venture and 5 supporting organization.

Nokia Mobile Phones division focuses on bringing a modern and affordable mobile experience to people around the world. In particular, the team leverages its innovation and strength in growth markets to bring people affordable access to the internet and applications and – in many cases – provide them with their first ever internet experience.

Smart Devices division focuses on the creation of smart phones. They continues to deliver on Nokia’s commitments to Symbian with new models and software updates; they have launched the Nokia N9, the outcome of efforts from our MeeGo program; and they are planning to further strengthen smart phones portfolio with the launch of products on the

Windows Phone platform.

1 Refer to Exhibit 1. 10 Year Price - NOK 8

Location & Commerce division develops a new class of integrated social location products and services for consumers, as well as platform services and local commerce services for device manufacturers, application developers, internet services providers, merchants, and advertisers. This divition is behind Nokia Maps, which makes people access to world-class mapping and navigation. It’s also responsible for the development of NAVTEQ, the leading provider of comprehensive digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, internet-based mapping applications, and government and business solutions.

The Markets division is responsible for selling products, executing winning marketing and communications, creating a competitive local ecosystem, sourcing, customer care, manufacturing, IT and logistics across all Nokia products.

Nokia Siemens Networks, jointly owned by Nokia and Siemens, is one of the leading providers of telecommunications infrastructure hardware, software and professional services globally.

Nokia looks simply world largest mobile phone manufacturer but it’s not. Globally employee proportion of Nokia : R&D staff – 34%, Service 24%, Manufacturing 42% but in

Finland : R&D staff – 23%, Service 61%, Manufacturing 16%. Nokia itself is complicated and well balanced between hardware and software, has powerful resource to develop and maintain the core competencies of mobile industry.

Connecting people is the mission of Nokia and Entrepreneurship is mobile information society. As Nokia had been prosperous period, their basic strategy is very simple and clear to understand. As of now Nokia is in front of big crisis, their strategy reflects the current situations. Old strategy of Nokia is below

 Supply the best mobile product for all generation

 Lead the mobility market

And new strategy is below

 Build a new winning mobile ecosystem in partnership with Microsoft

 Bring the next billion online in developing growth markets

 Invest in next-generation disruptive technologies

 Increase our focus on speed, results and accountability

External & Internal Environments(SWOT)

Strength of Nokia

Nokia has very powerful and strong R&D assets compared with competitors like Samsung,

LG and Motorola and overall constitutes 30% of total employee. Globally 12 laboratories and huge patent barrier of GSM from these R&D facilities. Their own contents provider capability can make Nokia’s unique and independent eco chain for mobile platform.

Globally 9 factories are manufacturing the products using extremely credible and efficient

SCM system that allows each manager easily know the inventory status globally. Based on this firm SCM, they can manage the various product line from low-end to high-end covering global mobile market. Thus they can have a very firm relationship with global outsourcing company who provides part. Because of these characteristics, Nokia has very powerful cost competitiveness using outsourcing and GSM patents.

As they have wide arrange of products globally, they need to have very stable and sensitive distribution channel covering not only fast growing emerging country but also advanaced country. Thus Nokia has very good relationships with each country’s telecom company for stable products supplying.

Based on global No 1 market share of mobile industry, Nokia has tremendously big brand recognition and brand loyalty through the world2.

Weakness of Nokia

Compared with major competitors like Apple, Samsung Nokia traditionally has focused on low, mid tier market and this results in vulnerability of high end market. In the end, Nokia can’t enter high-end, high value market easily and can’t make money in this fast growing market. Due to global logistics and distribution channel, Nokia supply chain is very complicated and provides very poor A/S service. It causes Asian market penetration failure like Korea, Japan.

Independent mobile OS platform of Nokia, Symbian doesn’t support on high end application like multi media, game and social network service(SNS) and another platform

MeeGo development/new product launching has been delayed. Compared with continuous and fast new product launching and upgrade of Apple’s i-OS and Google’s Android OS, this repetitive overdue of new OS development process is a critical weakness to compete in fast changing industry.

Despite of agility in 1990s, these days Nokia has so complicated and slow product development process that can’t absorb fast changing customer needs and requirements. Some to this comes from their decision making that doesn’t care U.S. and Far East market like

Korea and Japan where mobile innovation has begun like i-Phone and follows the current IT trend like Android mobile phone. Already mobile phone becomes the platform to deliver various service and contents like i-tunes and Android market but Nokia has lately started their own eco system with old fashioned mobile OS Symbian.

2 Please refer to Exhibit 2, Brand recognition 11

Nokia’s design is very passionate and popular in Europe and East Asia but not popular in other market. So much outsourcing and global SCM is an obstacle to innovative product development, because agreements and discussion with outsourcing company take too much time to encounter customer needs and competitor’s aggressive product launching efficiently.

Opportunities of Nokia

Customers always needs new products and want something different from i-phone and

Android. Currently needs for high-end mobile phone in Europe has grown up tremendously and this can be a another opportunity to Nokia to change their line-up focusing on lower and mid tier products.

Smart phone demands in China, East Asia and Easter Europe has risen up and Nokia can easily leverage their existing line-up and use cost competitiveness for cheaper and more attractive smart phone with multiple function but much lower than Apple, Samsung and HTC.

This can be an emergency exists of Nokia

To encounter crisis efficiently, Nokia has a strategic alliance with Microsoft and existing

CEO Stephen Elope is former division head of MS. MS needs manufacturer to adopt

Windows Phone 7.5 as a main platform and Nokia requires time and money to save their own mobile platform and company implementing Windows OS and eco system. Industry specialist estimates future market share of Windows phone OS would be more than 15% of total mobile device market.

Threatens of Nokia

Feature phone market that Nokia has dominated past 10 years has become saturated and red ocean market at high speed. As Chinese company like Huawei, ZTE has aggressively

12 launched new products much faster than Nokia and stole the market share of Nokia in emerging market3. Already Elope has mentioned their speed, agility, cost competitiveness and fast growing in developing country in spite of a little bit lower quality. Although most major competitors like Samsung has focused on high-end products and smart phone, Nokia is still tied up with old way and get the direct impact due to Chinese cheap feature phone invasion specifically China market.

Nokia is like a sandwich to be attacked from Chinese low & cheap products at the bottom and get the pressure from high technology company like Apple, Samsung, Motorola with innovative platform and independent eco system.

In addition to excessive competition, customer demands for mobile device is not easy to predict and needs more and complicated services. Before Apple’s i-phone launching in 2007, mobile devices main feature is to call and send a text message. At that time, accessibility to internet is the limited function and very few feature phone has provided the application to synchronize the information of devices with desktop and laptop. Seriously after appearing of

Android phone alternative to i-Phone, customers easily can get the better and faster Android phone that can be easily bought through everywhere. Thus customers ask more and complicated role to mobile devices like SNS and mobile game. Innovative and fast changing customer demands, past emperor Nokia’s highly standard and organized platform can’t support at high speed.4

At the day when Nokia released strategic alliance with MS, each company’s stock price had fallen. It means that alliance with MS would not solve all problem of Nokia. So Windows

Phone platform is not exclusive to Nokia and available to mobile manufacturer like Samsung,

3 Current Market Share of Mobile Phone Industry. Refer to Exhibit 3 4 Current Market Share of Mobile Platform. Refer to Exhibit 4

LG and HTC. Despite alliance, Windows OS platform adoption can’t be a guarantee of survival.

Competitor Analysis & Issues

(Value Chain, 5 Forces)5

Firm Infrastructure : Nokia has been funding the small company that has unique idea and cooperating. Basic approach of ‘One platform, multi-product’ is very convenient way to produce various products by changing specifications but it can takes time, money and critical risk in sudden environmental changes. So accurate prediction is essential to use this resources efficiently.

HRM : Nokia is very famous of horizontal organization that allows flat, networked process emphasizing speed and flexibility in decision making. Nokia way is very unique culture of their own. Customer satisfaction, respect for the individual, achievement and continuous learning is what they seek.

Technological Development : 1/3 of total employee is R&D resource and 15% of net sales has been invested to R&D sector. To bridge cultures, environments across diverse geographies, Nokia has managed the global Nokia Research Center and collaborates with academy in local.

Procurement : Nokia has invested to procurement division more than R&D and give more salary benefit to procurement staffs. These staffs keep close relationship between R&D.

Strategic sourcing, solid subcontractor network guarantee long-term cooperation and they value stable procurement more.

5 You can see the more visual chart at Exhibit 5 14

Inbound logistics : Nokia traditionally is very famous of strict product quality management and severe cost administration using global purchasing system and CQTM.

Operations : Nokia has manufacturing system by orders based on rapid responding. Nokia easily can decrease inventory & cost using highly advanced SCM that shares information, real-time stock management and auto supplement system. Nokia designs the product for recycling by using 65% ~ 85% of recyclable materials. They standardize the components that can be used multiple products and achieve economies of scale.

Outbound logistics : Nokia has dominant position due to huge transaction especially in emerging market and uses active sourcing globally.

Marketing & Sales : Nokia has consistently built ‘Brand Identity’ and keeps customizing various products with wide range of price to meet local tastes.

Services : Nokia owned Ovi service and integrates it to Nokia Service in May 2011. This would be integrated and strong brand image for SW in Windows Phone 7.5

Analysis of Porter’s 5 forces model

Threats of new entrants : To enter this business requires huge capital and economies of scale is applied. Preoccupancy effects has limited access to distribution channel and product differentiation is low.

Bargaining power of suppliers : By diversifying suppliers with outsourcing based on solid networks with their subcontractors, Nokia can maintain the dominant power of distributions.

Bargaining power of buyers : Increasing sophisticated customers and telecom companies need differentiated products needs and they can get the more information from internet.

Rivalry among existing firms : Numbers of competitors are getting bigger and rate of industry growth is high. Product and service characteristics is differentiated.

Signals of crisis and results

In 2010, new CEO had been elected and then he sent a mail to every single employee to explain the situation of Nokia exactly. The subject of memo is ‘Burning Platform’ and this reflects exact situation that Nokia faces the crisis and this is very critical.

Nokia’s market share of mobile phone sales is 24.2% in 2Q11’ from 33.8% in 2Q10’ by 20.3% decreased6. Lost share of smart phone was captured by Apple and Samsung and Chinese company like Huawei, ZTE has stolen fast growing market low-end products share. At the same time Nokia’s smart phone OS Symbian has lost their market share very fast. Their market share of smart phone OS has fallen 16.9% in 3Q11’ from 36.3% in 3Q10’ and most of this was captured by Android OS.7

In 2Q11’, Nokia released the quarterly financial report and this was shock itself. Nokia had operating loss from overall division including Mobile phones, Smart devices, Service ever in current 15 years. This means Nokia has lost not only high-end market like Europe, U.S.,

Japan but also low-end market in emerging market. In addition to this, in a battle of smart phone OS against i-OS and Android Nokia has been defeated by competitors.

So Stephen Elop has to find a way to solve this complicated and difficult situation immediately. Unfortunately # of options that he can consider is very limited and would be

6 Refer to Exhibit 6 to understand the current market share 7 Refer to Exhibit 7 to view the current OS market status 16 smaller as time goes by. Can he relieve sunk Nokia and become another Lou Gerstner of

Nokia. Or he would be drowned with Nokia by critical attacks of rival companies?

Options, Suggestions and Reason

Option #1 : Multiple OS Strategy

Nokia can adopt multiple OS strategy like Samsung and HTC to save the time and make money to survive in this industry. And then they don’t need to give up their own OS, Symbian any more. Still Symbian is still cheap, very stable and doesn’t need higher capacity of hardware to run. Currently Nokia has run the campaign ‘I Do A Lot More’ in India targeting newly increasing smart phone demands in developing country paid much less money. At the same time they can replace the low end feature phone with Symbian implemented phone in a developing country.

Nokia would enter the Android and Windows Phone OS alliance and work closely with their strategic partner Google, MS. They can easily absorb the technology and high-end hardware format. By adopting well developed multiple OS implementing phones, they can make money and save time for developing their next generation OS platform MeeGo.

Currently Nokia has decided to shut down manufacturing facility in Romania and are looking for another target to reengineer to reduce cost and expense for survival. By reducing the budget for manufacturing, they can rearrange the resource and funds to redesign their hardware and optimizing the OS to hardware.

Ultimately this can loose the relationship with Microsoft and Nokia can avoid the conflicts and interference with MS. In contrast to close and results oriented MS culture and direction,

Nokia’s culture is a little bit moderate and has basis to respect each other. And then their R&

D staff has believed the value of open source like Symbian and Linux. This is contrary to MS culture and has potential to conflict with MS.

Still Nokia has enough time and money to adopt multiple OS platform strategy. First of all,

Nokia has faced anger of share holders who saw sharp declining stock price from 35$ to 5$ in

2 years and they strongly would keep asking immediate performance return. But adopting multiple OS needs time to adapt to new OS and tune existing technology and scale to new platform.

Nokia’s main stream is not high-end hardware but Android & other platform needs much better hardware performance. It means that Nokia manufacturing facility didn’t have those products and takes time to prepare and reengineer outsourcing channel. This is not the simple problem to solve by Nokia itself. Nokia has very complicated and well-organized outsourcing and supply chain model optimized for low and mid tier product line. So they need to change those complex supply chain to adapt to new product lien. This can be a big deal to Nokia.

Option #2 : Keep Close relationship with Microsoft and keep independent Smartphone

OS – MeeGo

Symbian OS is too old fashioned and needs much money and R&D resource to maintain. So

Nokia would release the closure of this OS and keep supporting until 2016. Nokia would save the resource for Symbian and focus on developments and new product launching of MeeGo

OS and Windows Phone platform. They can reinforce and upgrade the MeeGo especially on game, video and SNS performance to reflect current popular in other devices. Old symbian couldn’t support well current customer and telecom companies’ complicated and heavy burden application.

This would requires closer relationship with MS for selling Windows Phone based phone before upgrading independent platform. By using this, Nokia can access to more important and core function of Windows phone than any other competitors like Samsung, HTC and LG.

This can not guarantee beautiful future of Nokia. Abandoning Symbian OS means the restructuring of existing R&D resources and facilities to focus on that and needs layoff and manufacturing facility shutdown. To adapt to close culture’s MS OS, Nokia’s R&D resources and engineer must drop their beliefs and trust to open source. This is against to Nokia way and the core to succeed in their way.

Already Elop has very painful fighting with Nokia’s tradition and value to implement fast and effective decision making process. But outlooks is not good for him to persuade staffs who experiences prosperous periods by using their own ‘Nokia Way’ to accept the reality and the change in front of them.

Even though Nokia has a strategic relationship with Microsoft, Windows Phone OS is not exclusive to Nokia and would be released to other competitors. Most of them has an experience to work closely with MS and they know very well how to optimize their hardware to implement MS mobile OS. Considering Nokia’s capability to develop the high-end hardware, this is not their best area to maximize their exiting strength.

Option #3 : Acquisition by other company

Frankly, Nokia doesn’t have capability and time to solve current problem by itself without external help. Still there are so many rumors that Microsoft would acquire Nokia to secure exclusive mobile device manufacturer like Google that bought Motorola. But as times goes by, value of Nokia has been decreased and it looks reasonable to wait while value of Nokia

19 has fallen. Finally there are other rumors that Samsung would buy Nokia to gain various patents of GSM technology and independent OS developing technology while they have already their own close platform ‘Bada’. Maybe selling the Nokia is most easy way to solve those current problems but actually buyer is not clear.

Actually Nokia is a little bit different from other competitors and pours their assets to R&D and software development. After M&A, Nokia doesn’t need to maintain their own software development resources any more and can focus their assets on developing hardware. So they can recover core competencies and use MS eco system and OS platform efficiently, effectively. Adopting single OS platform, Nokia can slim the product line with MS mobile

OS and simplify the manufacturing process and facilities.

M&A means that Nokia is not Nokia any more. Nokia is the biggest company in Finland and government would not allows foreign company acquire and restructure the organization.

And then M&A always involves severe lay-off and rearrangement of Head Quarter organization and factory shut-down. In global economic recession, Finland government would not give up their nation trade mark company like Nokia.

In spite of M&A, MS would still have good relationship with other competitors like

Samsung, HTC and LG and it means Nokia would compete with them. MS can leverage

Nokia as casting board to negotiate with other alliances. Last year HP acquires the Palm and their WebOS but they soon give up WebOS as soon as former CEO has resigned. Nokia can be easily removed from MS portfolio when they didn’t survive well like Palm. Although MS has kept hardware business like X-Box, they didn’t have any experience to manage and administrate global telecommunications device manufacturer like Nokia.

Recommendations and why

Our recommendation is ‘Keep Close relationship with Microsoft and keep independent

Smartphone OS – MeeGo’.

Supporting multiple OS platform is very complicated and difficult to deliver. There are a lot of mobile phone manufacturer but only few leading companies like Samsung and HTC can achieve successfully. Multiple OS platform needs more resources to optimize hardware to adapt to OS standard but Nokia doesn’t have proper resources. Nokia’s R&D structure is totally different from Samsung that has big Development of R&D but Nokia has big Research of R&D.

Nokia can survive as a division of Microsoft but it can’t be Nokia. This M&A can’t assure the future of Nokia and survival in extremely competitive business. And attractiveness of

Nokia is getting worse and worse. It looks that Nokia has fallen into swamp and potential buyers has enjoyed this situation.

We believed in Nokia’s potential to recover and shift back market share of mobile industry.

They had imagined that someday mobile phone would be the consumer products and they make it come true. And they have very effective and well organized supply chain management system. Thus they still keep very close relationship with telecommunications company globally. If they can save the time and money by selling Windows Mobile phone for survival, they would soon enhance their own independent OS MeeGo platform phone.

[Exhibit 1] Nokia stock price trend in current 10 years

[Exhibit 2] Nokia brand recognition

[Exhibit 3] Sales trend by manufacturer

[Exhibit 4] Sales proportion trend by smart phone OS

[Exhibit 5] Value chain of Nokia

[Exhibit 6] Market share of mobile phone

[Exhibit 7] Market share of mobile OS