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Nokia teeters on the edge

February 15, 2011

For all its conspicuous fall from grace, Nokia is a company that still sells millions of phones a day. In an age where the latest touchscreens and tablets dominate the headlines, the mass market doesn’t care much which “OS” they’re using: operating systems are simply there to make a phone work.

So when Stephen Elop, Nokia’s new chief executive, stood on a stage at London’s Intercontinental Hotel to announce that Microsoft would be Nokia’s new partner for smartphones, he was not talking to the punters in Carphone Warehouse. This was an announcement aimed directly at the stock market. Nokia’s share price plunged by 13 per cent.

In essence, Mr Elop’s decision acknowledged, however, what every interested amateur has known for two years: Nokia’s current phones are already outdated and the company was gradually getting closer to the sheer drop of obscurity. In a quickening technology cycle, a company’s lifespan is getting ever shorter, and constant reinvention is a essential.

Mr Elop said that the company had held extensive talks with Google, the other candidate for a deal, but that there was insufficient opportunity for Nokia to differentiate its products from others such as those Google-only smartphone manufacturers like Motorola, HTC or Samsung. There was also, with Google’s strength in mapping, little chance for Nokia to get much out of its own strength in maps.

So Mr Elop acknowledged that Google didn’t need Nokia, and that Nokia could not add much to Google. Looking at Windows Phone 7, however, Nokia can offer Microsoft’s offering a much needed focus on hardware, he said, and it can also enhance the mapping powers of Microsoft’s Bing search engine. Although Nokia will have to pay Microsoft a licence fee, it will also have new access to potential revenue streams, such as advertising.

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