Analyst calls for Nokia to adopt Windows Phone 7

By Tom Warren, on 2nd Feb 11 6:28 pm with 8 Comments

An investment analyst has written to Microsoft and Nokia urging them to partner for Windows Phone 7 handsets.

Berenberg Bank’s Adnaan Ahmad issued the note with his recommendations for Microsoft. Ahmad gets straight to the point in his memo to Nokia CEO Stephen Elop and Microsoft CEO Steve Ballmer. “Times are-a-changin” says Ahmad before reminiscing Nokia’s former glory days. “I remember the days when Nokia (with Jorma Olilla at the helm) ruled the roost, European market share was above 50% and US market share was in the 35% range. Well, those days are long gone, and as you so sweetly put it, Stephen, in your recent Q4 earnings release: Nokia faces some significant challenges in our competitiveness and our execution,” says Ahmad. The investment analyst pulls no punches and outlines what Microsoft and Nokia should do (Full PDF at FT.com):

1. Android a no-go for now. This may have been a good idea one to two years ago, but it is not today. You will never be able to catch up with Samsung, which should rule the Android show midterm given its economies of scale, product breadth (TVs, PCs, phones and tablets), as well as its captive component base. And that market is going to get even more crowded with China Inc (ZTE, Huawei et al) joining Sony Ericsson, HTC, Motorola and PC vendors. And more significantly, how is anyone going to differentiate on Android long-term?

2. Announce an EXCLUSIVE deal with your ex-colleague, Steve: you get access to their WP7 intellectual property (IPR) scot-free and access to the US market where your share has dived to the low single-digit level, and in so doing cut your bloated handset business R&D budget by at least €1bn, or 30%, which should add 300bps to your operating margin. Get rid of your own proprietary high-end solution (MEEGO) – it’s the biggest joke in the tech industry right now and will put you even further behind Apple and Google. Focus your high-end portfolio around WP7, and over time you can take the cost down (that’s Steve’s job and cost base) to get this into the mid-range market. Push your Symbian solutions into the low-to-mid-range smartphone market as quickly as possible to defend market share versus Android’s upcoming lowered cost ecosystem.

3. You are going to have to cut headcount severely in Finland, where Nokia accounts for around 7-8% of GDP and employment (including ecosystem), but I am sure the Government will be more amenable to restructuring with your share price down 70% since the introduction of the iPhone in 2007. It could obviously get worse if you wait. And the best time to announce it is now.

4. Tell the market by what time you expect the initial products from your exclusive deal with Steve to be released.

Nokia is reportedly in talks with Microsoft to look at offering Windows Phone 7 devices. The talks were kick started by Nokia’s new management. Stephen Elop, ex-Microsoft employee, joined Nokia last year as the company’s CEO. Elop admitted, during an earnings call last week, that Nokia needed to join a competitive ecosystem. “In addition to great device experiences, we must build, capitalize and/or join a competitive ecosystem,” said Elop.

Speculation over Windows Phone Nokia devices has been rife since his departure from Microsoft to Nokia. Ahmad’s memo adds more fuel to the fire on the Windows Phone 7 debate.

Mock-up of possible Nokia Windows Phone 7 device

  • GP007

    The way Nokia is losing marketshare shows that they need to change something, my mom got a new N6 around 2 months ago and it’s a mess to use IMO. Compared to my LG Optimus 7 the choice in simplicity and user friendliness is clear cut.

    It’s also a win-win for both MS and Nokia, It’s simple. Nokia needs a in into the US market it just doesn’t have right now, WP7 and the MS marketing could be that foot in the door. Likewise MS needs a big strong EU and Middle-East brand like Nokia to boost WP7 sales. I just see this as a good idea in the end. I don’t get why Nokia wants to waste time and money on stuff like Meego or trying to get Symbian^3 going.

  • Anonymous

    This would be a very very potent combo, Nokia makes excellent hardware and WP7 is a great OS. I sure hope this goes through soon.

  • http://jeftek.com Jef

    This is interesting….can nokia save WP7 or is it WP7 giving Nokia a lifeline?

    The only thing odd here is that WP7 designs are very cookie cutter, which Nokia has been one to stretch what we consider normal hardware design. Will WP7s sepcs stifle any value Nokia has to offer other than a name?

    MWC will tell us of hardware vendors have been able to innovate with WP7 since its recent launch.

  • http://twitter.com/GordonBeeming Gordon Beeming

    don’t think this would work, also the Nokia mock-up above wouldn’t work as it has the wrong Hardware buttons, but I guess that’s what Nokia would try do, make the phone more about them then the great OS

  • kimck99

    This will be a great partnership. What WP7 lacks right now is a clear flagship device. Let’s face it, the Dell Venue Pro could have been it but with all the bugs, it’s a mess. The other devices are in my opinion, just standard smartphones – in terms of specs. I was surprised at how LG, Samsung, and HTC just brought to market standard spec’d devices. Not one of them created a real top notch flagship device. It’s clear to me that these handset makers are putting their money into Android devices. The Galaxy S for example.

    The partnership with Nokia will bring to market a very high-end, completely different device than the ho-hum crap that the current device makers have. Granted by WMC, things may change but I fear that we might be disappointed with what will be announce.

    Microsoft, Nokia, get ‘er done! We need a top notch device and Nokia can bring a great handset to market that will separate itself from the half-assed effort by HTC, Samsung, and LG – I’ll leave poor Dell out of this as they have too many issues.

  • Manish

    I have been delaying my purchase of N8 in anticipation of N8 with WP7

  • Crypto

    If Nokia gets WP7, i’m moving back to Blackberry. WP sucks balls

  • http://www.facebook.com/people/Nick-Calamia/1148080279 Nick Calamia

    This would be great period. Nokia makes awesome hardware, Windows 7 is an awesome os, the two together is a very very good idea. At this point Nokia dosnt have very much more to loose, go hard or go home. Sack up or pack up.