Nokia (NYSE: NOK) is having a stressful fall. Their Nokia Twist smartphone hasn’t performed well since its early September release. Their flagship smartphone, the Nokia N8, was delayed past its launch date and is now shipping in low quantities due to supply constraints.
Symbian^3, the N8’s operating system developed by the Nokia-funded Symbian Foundation, was expected to be the operating system of choice for mobile developers everywhere but has lost much its pre-release luster thanks to the popularity of Google Inc.‘s (NASDAQ: GOOG) Android, Research in Motion‘s (NASDAQ: RIMM) BlackBerry 6, Apple Inc.‘s (NASDAQ: AAPL) iOS, and even Microsoft‘s (NASDAQ: MSFT) impending Windows Phone 7. Nokia has also put their fate in the hands of a new CEO, former Microsoft Business Division head Stephen Elop, who is the first non-Finnish man to run the Finland-based company. Analysts are predicting Nokia to meet expectations for their third quarter in 2010, but component shortages and supply chain problems are going to hurt them going into the holiday season and end of the fiscal year. No two ways about it: Nokia’s in a tight spot.
The company is hoping that, under the leadership of Elop, they’ll be able reassert their dominance of the mobile phone market as the transition to a smartphone-centric Western market intensifies over the next two years. Elop’s background in the Microsoft Business Division has given him a wealth of experience building strong software and service businesses, which is what Nokia needs if they hope to steal away Google and Apple’s market share in the smartphone space. Nokia might be better served by having Elop focus on rehabilitating their hardware business first though. Symbian^3 might have already lost the operating system war, but Nokia’s other software and services, namely the company’s mobile application store Ovi, is doing well. Against all odds, the Ovi Store is holding its own against the Apple App Store and Google’s storefront.
Nokia revealed usage numbers for the Ovi store late last week. Over 200,000 new users sign up for Ovi Store each day. Earlier this year, it was estimated that around 1.8 million pieces of software were being downloaded off of the Ovi Store each day. Nokia now puts the figure at 2.3 million per day. Downloadable games are particularly good business through the Ovi Store, with support from major publishers like Electronic Arts (NASDAQ: ERTS). Ovi’s numbers are a far cry from Apple’s App Store, which sees close to 8.5 million downloads each day over far fewer platforms. The Ovi Store is accessible through 20 different Nokia handhelds, including both standard cellular devices and smartphones.
Still, Nokia’s seeing steady growth in addition to healthy business through the Ovi Store and they’re taking appropriate steps in keeping up the store’s momentum. The company recently announced a new contest called “Calling All Innovators” to encourage Ovi app development. Contestants compete for $4 million in cash and prizes to build apps in seventeen categories. The event is co-sponsored by AT&T (NYSE: T), who helped put up the $4 million in prize money as well as an additional $6 million to promote the contest. Nokia has also made smart moves to encourage adoption of Ovi apps in the past year. Last January, Nokia made its Ovi Maps app free on all platforms. Like Google’s Android Maps app, the free Ovi Maps offers turn-by-turn GPS directions, but its coverage is available in significantly more places around the world compared to Google’s device.
Investors may be tempted to simply write off Nokia at this point, to follow Motorola (NYSE: MOT) and Apple based on their monumental success in the smartphone market. Nokia may be down, but if the can marry the successful Ovi Store with an attractive piece of hardware, they certainly won’t be out. Shareholders should hold on, and prospective buyers should keep a close eye on the stock over the next six to eight months.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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