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Last Updated : Feb 07, 2011 09:17 AM IST | Source: Reuters

Nokia`s key options in smartphone race

Stephen Elop, the new chief executive of Nokia, the world's biggest cellphone maker, will unveil his plan to turn around the Finnish company's weakening position in the high end of the market next week.

Stephen Elop, the new chief executive of Nokia, the world's biggest cellphone maker, will unveil his plan to turn around the Finnish company's weakening position in the high end of the market next week.

The average forecast for Nokia's 2011 underlying earnings per share has fallen 5% since it flagged a weak first quarter last week, a Reuters poll found.

Following are key options Elop has to choose from:

No change, stronger focus 

Nokia will most likely reinforce its current software strategy -- focusing increasingly on a new MeeGo platform for high-end models, using its old Symbian workhorse for cheaper smartphones, and offering developers simultaneous access to both with its Qt toolset.

Having its own operating system gives Nokia full control over its devices rather than being beholden to a third party such as Google or Microsoft.

Apple and Blackberry maker RIM have used their own platforms to great effect, while the market is flooded with very similar smartphones running Google's Android.

Elop said on January 27 the opportunity to differentiate would be a top priority when platform decisions were made.

The unproven MeeGo platform was born early last year when Nokia and Intel unveiled a merger of Nokia's Linux Maemo software platform with Intel's Moblin, which is also based on Linux open-source software.

Nokia is yet to unveil a model running MeeGo and only a few vendors have launched or publicly supported the platform. But MeeGo is a key play for Intel, the world's largest chip maker and which is trying to stake out territory in the mobile market.

While Symbian has been the most popular software platform since the smartphone was born around a decade ago, Android overtook its No 1 position at the end of last year, according to research firm Canalys.

Nokia's Qt software glues the two platforms together, enabling application development for both platforms with one set of tools.

Small change - WP7 or Andriod 

Elop said Nokia could join "a competitive ecosystem" as a result of the strategy review, while the opportunity to reopen doors in markets such as the United States would be key.

The comment fuelled expectations Nokia would start to use Android platform or Microsoft's Windows Phone 7.

Nokia could hedge its bets at its strategy revamp next week, saying it would make a range of Windows Phone 7 or Android models for the North American market.

Choosing Android would give Nokia access to the world's leading smartphone platform, but it would take time before its Android models came to market. Smaller rils have already rolled out dozens of look-alike Android phones and it would be difficult for Nokia to differentiate.

Also, Google is Nokia's key rival in services and mapping.

Microsoft's new platform, praised in the industry, has yet to win wider support from handset makers and consumers.

However, taking into account Nokia's close relations with Microsoft, Elop's background with the US company, and the platform offering more opportunities to differentiate than Android, it could be more a likely choice for Nokia.

Full swap, becoming DELL

Many investors and analysts hope Nokia will change its software direction -- dumping unproven MeeGo and legacy Symbian platforms and joining Google or Microsoft.

"Get rid of your own proprietary high-end solution MeeGo -- it is the biggest joke in the tech industry right now and will put you even further behind Apple and Google," Adnaan Ahmad from Berenberg Bank said in an open letter to Elop.

That would mean giving control over its future offering to software vendors -- Elop was picked to run the company because of his strong background in software industry.

Choosing outside software could put Nokia, in the longer term, on a par with personal computer makers like Dell, whose shares are valued much below smartphone companies.

Nokia shares trade at 13.4 times expected 2011 earnings, below Apple's 19.3 times but ahead of Dell 9.2 multiple. At Dell's valuation, Nokia shares should be 5.61 euros, not the 8.22 euros they traded for on Friday.

Dell's gross margin is 21%, while Nokia's is 33%, with Apple at 40%.

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First Published on Feb 7, 2011 08:25 am
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