The Next Phase for Nokia?

Right now things look pretty cloudy for Nokia. But just maybe there really is some method behind the madness

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Carina Nebula. Image source: NASA

After indulging in a little angst over the Microsoft one-two Surface-Windows 8 punch at Nokia and other hardware partners, I feel compelled to back up a bit and try a more positive fork.  For balance if nothing else.

That’s easier said than done.  As my disclaimer says below, I own a sizable chunk of Nokia stock… some collected as an optimistic former employee.  When I say sizable think quantity only.  The current value is negligible.  Still, I remain heavily invested in the company’s success.

That success doesn’t have to come as a cell phone manufacturer.  Remember, history fans, Nokia has a variegated product legacy.  Buried in its foundational strata lie tires, boots, TVs, paper and other unrelated castoffs.  Assuming the company can survive another major overhaul, it’s perfectly reasonable to consider it emerging in a new form with different purpose.

Certainly the necessary steps are underway.  Huge employee cuts?  Check.  Surprising asset kills?  Check and check.  Interesting move involving corporate IP?  Check!

Reading this CNet article about Nokia’s need to get more aggressive with its intellectual property licensing got me thinking on this (again).  The author, Erin-Michael Gill, describes his experience with Dupont, and how it slowly and deliberately evolved from base product supplier to knowledge base powerhouse.

This is the same sort of wholesale transformation that IBM underwent.  The identical type of move HP hopes to successfully manage.  And exactly what Microsoft has been working on in its effort to mirror Apple as an ecosystem owner.  It’s a natural consequence of corporate maturity, as executives watch once-elite revenue drivers rendered into commodities by nimble competitors often eschewing their own R&D.

The only thing potentially holding Nokia back is a scary cash burn rate.  Not long ago the company was flush with money; now making the next quarter looks iffy.  Gill sees Nokia ratcheting up IP licensing and lawsuits to address that.  But will they stop at just using that as a stopgap?

I don’t think so.  As for options, remember that Nokia already flirted with becoming a service-oriented “Internet Company” just a few years ago, trotting out the now-shuttered Ovi as its answer to the likes of Yahoo.  But Yahoo’s attempt to be the next AOL has gone bust, much like AOL’s own efforts, and juggernaut Facebook seems to have no serious competition.  So I don’t see Nokia retooling Ovi for another run at internet services.

Rather, I suspect Nokia will continue shedding hard (and even some soft) assets across the globe, and concentrate its focus increasingly on research and development.  Note that even as it struggles to sell phones, the Finnish stalwart continues to file patents for tomorrow’s technology– including one for this odd-looking solar cell phone.

In such a scenario, Nokia doesn’t get sold outright to Microsoft.  Instead, the Redmond steamroller buys some or all of Nokia’s product development assets.  If the Microsoft Surface turns out to have benefited significantly from Finland’s best, then that might bear me out.

I wouldn’t blame Nokia for bailing on mobile consumer products.  The device lifecycles are too short these days, and the cost to maintain the pace too high.  It will eventually catch up with Apple, too.  Performing as an at-large R&D farm could be more fulfilling and less risky for embattled Nokia.

I still have to believe there’s some strategy lurking deeply beneath Nokia’s puzzling moves.  Maybe very deeply.  I can’t accept this idea of an all-in Windows Phone gamble– especially one that appears to be backfiring when Nokia can afford it least.

And then there’s the Nokia Siemens Networks joint venture.  Suddenly it doesn’t look so bad compared to the mobile side of things.  What role will it play in the majority holder’s future?  Something to explore in a future article, certainly.

Anyway, back to the research and development scenario.  Picture Nokia perfecting and then licensing its kinetic charging technology, its Humanform phone, even the Morph.  Of course, many won’t like that image.  It conveys “patent troll” to some.  I don’t think it’s quite so simple or evil; Nokia will have simply reinvented itself as the R&D arm-for-hire of anyone interested in its frequently groundbreaking developments.  That could include Samsung… Apple… and of course, Microsoft.  And expect more purchases like that of Scalado, assuming funds are there.  No reason to reinvent what one can purchase.

I would consider that virtual R&D lab prospect much, much better than a slow but sure total evaporation.  After all, I have a lot of stock at stake.
Disclaimer: the conclusions in this article are largely conjecture on the author’s part and in no way reflect known Nokia plans

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  • Gary Dawes

    I would be tempted to agree with you, but Nokia appears to have been seriously reducing its R&D spend, as they used to spend masses on it,. far more than anyone else.

    Nokia’s always has had really good ideas, but their problems have been relatively poor software, and commitment.

    Nokia’s effectively killed off (Meego, Meltemi), or outsourced (Symbian, WP) it’s software development. Maemo/Meego and Symbian seemed to have massively long development cycles, and it was
    never briliiant (Maemo community has finished off what it can!). The
    software always looked like it was written by engineers and developers,
    and not designed.

    Nokia could never really commit to anything – They should have commited to Maemo a lot sooner and really ridden it hard. But never had the bottle to. That may be the large corporation committee thing, but it harmed Nokia – When the iphone emerged, Nokia should have stuck a 3g module in the 770/800 straightaway.

    Elop has absolutely bet the Farm on WP and Asha, and does not have a plan B. He seems to  actually  believe and be commited to his plan, which is commendable, and possibly blinkered and potentially ruinous to Nokia.

    All Nokia needed to do was to commit to Meego, shorten development cycles, and tidy up and prettify the rough edges. Elop’s burnt down the house, cos the kitchen needed painting.

    • Randall Arnold

      You’re correct Gary, Nokia has indeed shed significant R&D capability.. but interestingly, they’ve also added to it but in very discrete ways and areas.  Beijing and San Diego sites have seen an R&D ramp-up while entire facilities have been shut down elsewhere.

      I fear that Microsoft moves have damaged Lumia’s prospects possibly beyond repair.  That will introduce a new degree of desperation for Nokia; to survive, they need to very quickly develop a Plan B *IF* they truly haven’t had one since the Windows Phone adoption.  I see that Plan B as highly IP-driven.  What other real options do they have if hardware sales truly tank?

      No quibble with your other points… Been there, beaten those to death. ;)

  • Antoine RJ Wright

    You are paying attention to Nokia’s history, but not how they made their transformations ;)

    Next for them has bases in nanotechnology, cognitive intelligence, and personalization. Something not too far off from the networks that drove the VM/AR/VR within the Matrix trilogy.

    Whether they can get there or not is another thing entirely. But, that’s definitely characteristics of their next change. They have already lost the cognitive capacity to become an IBM (blogged about this transformation option for them a few years ago). The rest of tech and comms hasn’t kept up with the rate of shift in that respect (IMO).

    • Randall Arnold

       I think you’re right but I disagree that they can get there directly from here.  I think Nokia will have to spend some time generating revenue via the sale of existing and quickly-upcoming IP before they can get to that sort of scenario. How long?  No idea, but I think they’ve lost too much mindshare and momentum to make a direct shift to those future technologies.

      • Antoine RJ Wright

        Ovi was supposed to be the direct route, an MS that has productivity (Office, SharePoint, SQL, etc), comms (Skype, WinPhone, Link, etc), and platforming inertia is the kind if ecosystem worth jumping to to get there when the direct/first route wasn’t able to be done. Signs are still there.

        I think that was the point of the N9’s short shelf life. Can a mobile instigate a behavioral change? Or, does a mobile powered by something familiar (branding) have a better chance at creating that change. Wild would be if Human Form became a product before the end of this year? Because that running S40v2/Maemo/MeeGo would answer just that charge to transform.

        Don’t know if they can make it. But that change, whatever it is, I really would like to see Nokia make.

        • Randall Arnold

           I’m with you!

  • aka texrat

    Well, when you’re right, you’re right ;)

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