John Paczkowski

Recent Posts by John Paczkowski

Nokia’s Turnaround Fouled by Feature Phone Fail

nokia_microsoft_lifesaverTwo years after leaping from its burning platform, Nokia continues to swim against powerful currents. While the company’s smartphone business shows continued signs of improvement, uncertainties emerging around its feature phone business are raising questions about its ability to pull off a promised turnaround.

In its first quarter, Nokia shipped 5.6 million Lumia smartphones, 27 percent more than it shipped the quarter prior. The company expects to sell some seven million in its second quarter. That’s respectable sales acceleration in a market that’s 90 percent controlled by the Apple-Google duopoly. So, good news.

Sadly for Nokia, there’s some bad news to go along with it. The company suffered a decline in feature phone sales during the first quarter — a contraction so nasty that there was no way rising Lumia sales could offset it. Nokia sold 55.8 million feature phones in the quarter, down from 70.8 million a year earlier, putting them at their lowest level in at least a decade.

A brutal drop, and one that presents quite a conundrum for the struggling Nokia. The company’s turnaround hinges not just on the success of its high-end Lumia smartphone line, but on the continued success of an old cash cow — its feature phone business.

That business is essential to competing in the emerging markets that will be key to its future growth. As Nokia CEO Stephen Elop said during the company’s Thursday earnings call, “Our mobile phones business faces a difficult competitive environment, and we are taking tactical actions and bringing new innovation to market to address our challenges.”

Better sooner than later. If this erosion of feature phone sales continues, it will threaten the progress Nokia’s making with its smartphone business.

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