NOKIA'S surprise announcement of massive new
spending cuts and 10,000 more layoffs had observers cautioning the beleaguered
mobile phone giant is at a crossroads that will determine if it sinks or swims.
Nokia,
which only recently lost the world number one ranking it had held for 14 years,
dramatically changed its strategy a year and a half ago when the then new chief
executive, Stephen Elop, warned it was "standing on a burning
platform" and needed to immediately shift course.
But
after the company on Thursday suddenly said new big spending cuts and another
10,000 job cuts would be needed on top of the some 12,000 layoffs already
announced since the shift, some observers said the company appeared to be
slowly committing suicide.
The
Finnish company's new strategy involved phasing out its Symbian smartphones in
favour of a partnership with Microsoft.
That
alliance has produced a first line of Lumia smartphones, which Nokia is
counting on to help it survive in a rapidly changing landscape marked by stiff competition
from RiM's Blackberry, Apple's iPhone and handsets running Google's Android
platform.
"I
believe it was the wrong strategy from the beginning," Andalys Oy analyst
Ari Hakkarainen told AFP, stressing though that now that Nokia had shifted
course it was too late to turn the tanker around.
"They
have chosen this strategy and they have invested everything that Nokia has in
the new strategy. Basically, they must succeed or die," he said.
"They
are at a crossroads," agreed Pohjola Bank analyst Hannu Rauhala, adding
that it was hard to predict Nokia's future since "the visibility of the
business is very poor."
The
company, which in 2008 enjoyed more than 40 per cent of the global mobile phone
market, was already struggling to maintain its leading position when it entered
the Microsoft partnership.
Since
that deal it has been bumped by Samsung as king on the hill and reportedly has
just around 20 per cent market share.
"Nokia
took a calculated risk and they knew that (the shift) would be very painful and
that Nokia would lose market share in the short term, but in the long term of
course, they have the reasoning that Nokia will bounce back," Hakkarainen
said.
The
company's announcement Thursday that it would implement an additional 1.6
billion euros in cost cuts by the end of 2013, shutting down factories in
Germany, Canada and Finland and letting go 10,000 more employees was meanwhile
taken as a bad sign by many.
Nokia's
stock price plunged by as much as 16 per cent Thursday and on Friday, ratings
agency Moody's downgraded the company's long-term credit rating to junk status,
following in the footsteps of Fitch and Standard and Poor's.
AFP
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