Analyst says that Nokia should adopt Android before it’s too late

July 2, 2013
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samsung galaxy s4 vs nokia lumia 928 aa 928 tiles

The Android, Windows, Nokia discussion is a bit of an old one, but there has been a resurgence of interest in Nokia’s operating system of choice recently. Fresh data is suggesting that Nokia is really starting to feel the pressure after tying itself into Microsoft’s platform – the company even recently lost out to Samsung on its home turf.

Nokia’s share price has already dropped by 2.6 percent amid concerns that the company is starting to struggle with the underperforming Windows platform.

Analysts are also starting to weigh in their opinions on the company’s future. Pierre Ferragu, of Bernstein Research, recently suggested that Nokia needs to “take the pill before one cannot afford to do so anymore” and begin producing mobiles that use Google’s Android operating system.

Ferragu points out that Nokia’s balance sheet is “in a rather tight net cash position”, and that the company’s finances are at risk of being pushed to the limit due to Nokia’s specific exposure to the feature phone market and the slow adoption rates for Windows Phones.

(Nokia) is facing two structural challenges: its exposure to the disappearing feature phone market and the lack of traction of Windows Phones.

In other words, Ferragu suggests that the company is facing problems with both its premium and budget product lines. Firefox OS, and similarly cheap smartphones, are set to replace Nokia’s feature phones in the coming years, and the company’s high end Lumia products simply don’t appear to be as popular as iPhone, Galaxy, or other high-end smartphone products.

Both could cost Nokia a lot of cash in the near term, in restructuring, marketing/distribution support, and operational losses, which means it could be too late to address the problem in a couple of years.

I tend to agree with much of what’s said above, after all, Windows isn’t really growing as a platform in the mobile market, and it has been stuck with somewhere around a 3-5% share of the market since last year. In fact, the most recent figures point out that Microsoft’s operating system accounts for just 3 percent of the entire US smartphone market. There’s no way to say this nicely, that’s a pretty dire performance.

US platform results May

Microsoft’s US smartphone market share even falls behind the struggling BlackBerry brand, and has failed to show any growth so far this year.

Regardless of how good Nokia’s handsets are, Windows is an ailing platform in the mobile market, which simply doesn’t interest as many consumers as Android or Apple, and that is certain to hurt Nokia’s bottom line. But the real question is, would Nokia be better served by making the switch over to Android, where there is arguably a lot more competition at the premium handset level? Even big names like HTC and LG are struggling to obtain a decent share of the Android market, when compared with the dominance of Samsung. Perhaps there’s more money to be made in the low end Android market, Pierre Ferragu seems to think so:

I wouldn't be surprised to see Nokia adopting Android as its new low-end platform by year end.

The key issue seems to be whether or not Nokia will be better off being the big player in the smaller Windows platform, or just another competitor in the massive Android market. Looking at the way Window is going, I’d be inclined to say that switching to Android would be the smart thing to do, not to mention that I’d like to lay my hands on an Android powered high quality Nokia handset. But any switch will obviously depend on existing contracts with Microsoft as much as it will on Nokia’s willingness to change its platform.

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