Nokia software choice in focus as Elop takes stage

Nokia software choice in focus as Elop takes stage

Helsinki: Nokia Oyj’s new chief executive Stephen Elop will take the stage amid high expectations on Friday at an investor event in London.

The world’s biggest cellphone maker warned on 27 January of a grim start to 2011, but its shares quickly recovered their subsequent steep losses after Elop flagged a possible change of software strategy.

Yet he faces formidable challenges.

Nokia has rapidly lost share in the higher-margin smartphone market to new entrants such as Apple Inc and it lost its No. 1 spot in the segment to products based on Google Inc’s Android platform last quarter.

Its answer to the high-end competition, the MeeGo platform, is unproven and its workhorse Symbian software has lost its appeal to developers.

“Any change from current strategy would be positive for the share price ... Investors think Nokia should at least try out another platform. Nokia stock would rise 30%," said Canaccord analyst Michael Walkley.

After limiting its financial forecasts on 27 January to just the first quarter, Elop is also set to unveil longer-term forecasts on Friday.

On average analysts expect the phone business to bottom out in January-March, with the underlying operating profit margin starting to improve in the April-June quarter.

However, if Elop revamps the company’s software strategy, investors will likely have to wait until 2012 for the first results as rolling out new models takes several quarters.

Elop could also unveil a major management shakeup, laying off half of the executive board -- including long-time Finnish leaders Kai Oistamo, Niklas Savander and Tero Ojanpera -- a German magazine report has said.

Android, Windows or Meego?

After Elop raised the possibility of a change in smartphone software, many market followers expect Nokia to adopt either Google’s Android or go for Microsoft’s Windows Phone 7.

However, the focus will likely stay on its MeeGo software, which could prove a disappointment.

“Nokia CEO has now raised expectations for a dramatic change in software strategy -- markets may not be satisfied with a compromise solution," said analyst Tero Kuittinen at MKM Partners. “When the seventh veil drops, the audience wants to see a lot more than a flash of thigh."

Nokia’s problem is that mobile software developers are not keen to work on its software platforms.

Developers remain fixated on Apple and Android as the prime targets of their toil, while Microsoft and Research In Motion have gained in popularity, a survey of more than 2,2000 developers showed last month.

MeeGo attracts only 6% of developers.

“I am seeing far more appetite for Android, I see increasing interest in Blackberry, I see very few people looking at developing for Nokia," said Carl Uminski, chief operating officer at Somo Ltd, a mobile advertising agency.

The solution could involve tapping into the wide base of Microsoft developers, creating a third “ecosystem" in addition to Apple and Google, said Canaccord’s Walkley.

However, others were cautious on the chances of this happening.

“If Nokia and Microsoft come together it could have an air of desperation about it," said Ben Wood, head of research at British consultancy CCS Insight. “It’s like two middle-aged people left in the nightclub after all the cool kids have left for the after-parties in Cupertino and Mountain View."