Nokia's biggest profit margin killing headaches appear to be Android, China and Europe and the company doesn't have any answers.
Speaking on a conference call, Nokia CEO Stephen Elop said that the company was getting whacked in China due to "mismanagement" and high inventory levels. Simply put, Nokia can't move phones in China. The story in Europe didn't revolve around mismanagement as much as competition from Android. In either case, Nokia is taking some major body blows and can't even provide an outlook for 2011.
Regarding China, Elop said:
As it relates to competitive challenges, it is the case that certain competitive forces, particularly Android, are really gaining momentum in certain regions. For example in China, there's an indication of some very substantial movement in the growth of market share for Android, particularly in some technology areas where Nokia today with our current portfolio doesn't compete.
A good example of this is the CDMA technology in China, where that technology has seen quite an increase in market share in China. And as you know, we don't currently have CDMA products, but clearly, that's something that we'd be considering in the future. So there's some dynamics like that that we have to deal with.
And in Europe, Android was also routing Nokia. Elop noted:
In Europe, that's not the case on the management perspective. It's very much about competitive pressures. We're seeing, for example, a large volume of Android devices really coming into the market. They're largely undifferentiated from one another, which is putting pricing pressure thereupon, which in turn affects the overall ranging decisions of the operators; so there's definitely pricing pressure going on.
Meanwhile, the problems in China revolve around smartphones primarily. However, Nokia is getting whacked on feature phones too. Elop said:
Overall, it is worth noting that the impact here is both smartphone and feature phone. So this is -- even though a lot of the news has been about Symbian and so forth, we face very specific competitive pressures on the feature phone side as well, and face some of the same portfolio challenges here.
Now that being said, on the feature phone side we are just in the last couple of days beginning to ship in our dual-SIM products into emerging markets, which we have great hopes for. So there's a lot of positive things happening there, but there's definitely a situation here where it's not only the Symbian range of devices but also feature phone devices that are under competitive pressure.
Given those problems, Nokia has a rough road ahead before it gets to Windows Phone 7 devices. The big question is where Nokia's market share will sit once the Android onslaught subsides.