Sorry, Nokia, Apple Deal Doesn’t Solve Your Problems
Though terms of the deal, which include a one-time payment as well as ongoing royalties, weren’t disclosed, Nokia says they’ll have a positive impact on its recently lowered second-quarter outlook. That has led some analysts to conclude that the initial payment will fall in the range of hundreds of millions of euros and between 1 and 2 percent of the average price of each iPhone sold after that.
“I am assuming that the one-time fee is at least half a billion euros,” said MKM Partners analyst Tero Kuittinen. “The licensing fee would be probably 4 euros per iPhone.”
With Apple selling upward of 18 million iPhones per quarter, that’s a significant amout of recurring revenue for Nokia. But while it certainly improves the company’s financials, it doesn’t do much to change the long-term challenges the company’s facing, or even make them any easier to grapple with. The sad truth is that the company will continue to face market share losses as it transitions to Microsoft’s Windows Phone OS, as Morgan Stanley analyst Patrick Standaert explains.
“The patent litigation settlement with Apple gives Nokia a profit stream of ongoing royalty payments and an indirect exposure to Apple’s success,” Standaert said. “However, Nokia is a product company and we need to see success in the new smartphone strategy to become more positive in the long term. Nokia’s patent win does little for the long-term picture. Nokia still has to transition to Windows Phone 7 devices and keep some market share going forward.”
[Image credit: Someecards]