Investor Patience Wearing Thin: Will Low-Cost Phones Save Nokia?
Company CEO Stephen Elop faced criticism on all fronts, as investors failed to see merit in his oversight of company strategy. Under Elop Nokia adopted a Windows operating system produced by Microsoft (NASDAQ: MSFT), which accompanied the launch of its Lumia line of phones. However, this strategy has failed to net Nokia any gains in market share, as it still looks for a way to compete with Apple (NASDAQ: APPL) and Samsung (OTC: SSNLF) for smartphone users.
Analysts and consultants are suggesting Nokia look towards emerging markets, where lower-priced phones have a chance to keep the ailing company competitive. Even in the U.S., cheaper priced alternatives to Android and Apple phones offer Nokia a chance to drive a wedge into the market, as it has begun selling the Lumia 521 in Walmart (NYSE: WMT) stores nationwide. Early results are promising as well, as Walmart’s website was sold out over the weekend. This would seem to reinforce Elop’s confidence in low priced mobile devices as the hallmark of future strategy.
However, investor patience is wearing thin. While some investors are admitting to hanging on for sentimental reasons, larger institutional holders are not following suit, with Finnish pension fund Ilmarinen selling 27 percent of its stake in the company. Similarly, these same holders of Nokia stock are worried that management is lacking a vision, with a senior portfolio manager at Dankse Capital (and a holder of Nokia stock) stating, “They don’t have new ideas now. Their fate is all in Windows Phones.” This sentiment was shared, as investors at in Helsinki called for the abandonment of the Windows platform and a return to Nokia’s own Symbian system.
The sales of the Lumia 521 may have bought Elop a bit of breathing room, though. If sales like the ones being experienced throughout Walmart continue into emerging markets where Samsung and Apple also are revisiting strategy, the embattled chief executive may have found himself a winning plan. It has also been rumored for a while now that Apple is experiencing production issues in rolling out not only its new iPhone 5S, but its lower-cost iPhone as well. If, indeed, product delays do continue to plague Apple, Nokia may be able to find a competitive foothold in these markets.
Still though, patience with Elop is clearly at its breaking point, as investors have seen shares fall from 65 euros per share to 2.72 over the last 12 years. Some shareholders have eschewed the idea of Windows and Symbian both, suggesting that Nokia swallow its pride and approach Google (NASDAQ: GOOG) about launching Android-powered Nokia phones, leaving Elop’s former employer, Microsoft, behind. The meeting offered support for low cost phones as company strategy, but unfortunately for Elop, he has little time left to convert that strategy to marketshare.