Watching the stock market right now is like watching paint dry.
Only not quite as exciting and with decidedly more side effects.
But while stocks aren’t going anywhere lately, some companies are. And it’s important to track which companies are taking steps now to make themselves stronger for the next spurt of growth in the global economy and which companies seem immobilized by current tough conditions.
I’d put Nokia (NOK) in the first group. Oh, the company hasn’t managed to solve its iPhone or Blackberry problems. Nokia’s smartphones are still the laggards in the U.S. market.
But the company does seem, finally, to understand that it’s long-term business suicide for the world’s largest cell phone company to be an afterthought in the U.S. market. Business 101 says that you don’t let competitors have a big and profitable market to themselves so they can use profits from that market to attack your core markets.
I’d call Nokia’s move ground work that builds a foundation for Nokia to play a bigger role in the U.S. market. Sometime in the future when the company has a competitive smartphone model.
Nokia’s joint venture with Siemens (SI), the joint venture is world’s second largest maker of wireless phone network equipment (not the phones themselves but the gear that runs the network), will acquire Motorola’s wireless network business. (Again, not Motorola’s phone business but the unit that builds network gear.) Nokia Siemens will pay Motorola $1.2 billion in cash.
Acquiring Motorola’s network gear business, #4 in the world, will give Nokia Siemens more scale globally to compete with Ericsson (ERIC), #1 in the world  and Huawei Technologies, roughly even with Nokia Siemens. But more importantly the deal will give Nokia Siemens a big boost in the North American market. Â
Nokia Siemens has competed at a disadvantage in North America since its network gear is based on the GSM standard used pretty much everywhere in the world except for the United States and by some East Asian carriers. Motorola sells both GSM and the CDMA gear used by such U.S. cellular operators as Verizon (VZ) and Sprint Nextel (S).
The deal will also add to Nokia Siemens’ position in fourth-generation technologies such as LTE and WiMax that are being built out by Verizon and Sprint Nextel.
As a result of the acquisition Nokia Siemens should pick up business from Verizon, Sprint Nextel, Vodafone Group (VOD), Japan’s KDDI, and China Mobile.
Ed.
Good.
BTW, I used both IBM and Apple stuff. Here is how I’d rate them. IBM makes simple things complicated. Apple makes complicated things simple!
I remember one time I had an IBM office phone which apparently could do a lot of complicated things, but I had hart time to perform some of the most common and most frequently used functions! Meanwhile, you look at all Apple’s stuff. There are probably quite complicated technology behind each of its products and yet Apple is easy to use. Being stylish and slick are like icing on the cake. (Think about how all the electronics looked like before Apple.)
Despite I am all Apple now, I don’t have Apple stocks because I missed it. I was thinking buy it when the Consumer Report hit, then I saw Steve Jobs’ even slimmer look during the conference, I got cold feet.
yx,
I did not mean to imply that you thought they should get a Steve Jobs. I was merely saying they won’t get a guy even remotely close to Jobs. Google can compete with Apple because Google management’s culture is based on innovative thinking. I am not sure the same can be said for Nokia. For your sake, I hope they prove me wrong.
Ed:
I did not mean Nokia should hire a Steve Job. Jobs is one of a kind. There is no 2nd Jobs, not even Apple can find it. Though Apple may have people who knows how Steve Jobs would do or would prefer, in case something happen to him.(It would work for a while.) On the other hand, a copy cat of Steve Jobs will not work for Nokia. Nokia has to come up with its own innovative people who can come up with their own products. Think Droid, it is not a copy cat of iPhone, but it’s in fierce competition with iPhone from the start.
Speaking of copy cat. Remember Harley-Davidson motorcycle? It’s very expensive and very popular. For many years major Japanese makers including companies like Honda and Yamaha tried to copy it. They copied just about everything that you can imagine. Their fake Harley looks and even sounded just like Harley, except they do not have a “soul”. A genuine America made Harley has soul and character. For people who loves Harley, that’s all matters. I think now the Japanese have given up of copying Harley. Copy cat is not the future for Nokia. The Korean phone makers can copy faster and better.
Back to Steve Jobs. Besides understanding computer technology which many do in the tech world, what makes Steve Jobs great is two things in my opinion. One is that he understands how consumer would want. Just compare Apple to IBM. To put it in a simple way, IBM makes things for few techies to do a lot of thing. If you are a techie, you’ll be fine with IBM stuff. If you are not, you’ll get very frustrated. Apple on the other hand makes things for the masses to easily accomplish their rather simple goals in a very simple, stylish and pleasant way! How could you not like it? Another great thing about Steve Jobs is that he is an enthusiastic! That makes him different from all the techies and CEOs. He is one of a kind. The only thing concerns me is his health. He looks extremely thin in his latest TV conference.
yx,
Good discussion on what it takes to be a CEO. One of the inherent problems any company faces in selecting a CEO is their own culture. The people picking the CEO too frequently pick someone they are comfortable with, instead of picking the best person for the job.
Let’s face it: Guys like Steve Jobs, Bill Gates, and Sam Walton would NEVER be selected as CEO’s for 99.99% of companies today. They just are not “executive-friendly”. Guys who make great CEO’s are guys who can think outside the box, and there is no CEO selection committee that will hire a guy like that. You are more likely to get a lawyer or an MBA as CEO than you will get a truly creative thinker.
If you think Nokia will hire a Steve Jobs as their next CEO, the odds are against you.
Europe should have some highly skilled tech people some where. (There are at least several tech hot spots and tech companies there that I heard of.) Europe is big and should have a decent pool of talents. It doesn’t have to be a Finnish, but good pay should lure some to considering living in Finland. Particularly considering what the company is already paying to the current CEO (for almost doing nothing. I don’t know what he has accomplished since he took over.)
For those who haven’t heard of, the current CEO is a lawyer and accountant and spent most his professional life in the same company. He might be a great lawyer or accountant, but to compete with people like Steve Jobs in the tech world, he just does not have the right stuff! He was promoted to CEO by his boss, the current chairman of NOK. I think that giving the top job to a life time insider and protege of the chairman despite of lacking of right experience showed NOK is quite narrow minded in a way. That’s not going to work in today fast changing tech world. Nokia needs to get out the small hole in Finland. (Think the Korea and Japanese car makers. They put their car design centers in US from the beginning. Now they even shifted production here.) The news of searching a new CEO is a sign that the company probably felt the pain, not only in smart phone market but also its regular phone market share is threatened. It’s risking to be a “have beens”.
Think about what are the possible out some. An engineer or a marketing person or a former CEO or operating officer of another company? I’ll pick any of them over a lawyer or an accountant to compete with people like Steve Jobs.
Josola – Nokia’s stock has been a lousy performer for a decade, but their global position for handsets is more like Toyota v GM/Ford (with Apple representing the hot, groundbreaking model that “changes everything” – just as Razr was five years ago, and Treo almost eight years ago).
I’d compare them with Cisco, Intel, and other one-time “hot” names that struggled for a decade but now seem just about ripe.
tostoryteller. . Though the US market is mature and you won’t see dougle digit growth anymore, it is still important for Nokia to grab an important share in the US. What you indicated is valid, simple calls and simple messages in other markets dwarf the US perspectives. However, Nokia and competitors have been in a almost price war in the basic phones areas and in several quarters NOK (and Samsung, the almost gone ERICSSON-SONY, LG and so on) have warned of lower profits because of this. So, a cell phone manufacturer faces a very dark future by just having basic phones with almost not profit. Motorola failed because of it did not see the smartphone market coming. (yeahh,yeahh some can say that Motorola is reviving but be honest, they just want to sell the cell phone business completely)
To avoid a certain death, NOK has to protect its leadership in the smartphone market by increasing its US market participation. The US smartphone market is growing and not being there is …. Smartphones have higher margins (eventually they’ll be another commodity but that won’t happen in the near future). TELCO businesses usually link network gear with cell phones handsets and by buying the network business from Motorola, NOK better positions itself in the American market.
Now, changing a CEO is worrisome for every company, and as someone indicated you don’t know what you get. It can take painful months, or years, to have a working CEO. But given the actual situation I also agree that it can’t get worse.
STL,
It would depend on how quickly NOK could hit $11. That is still a 22% return.
Re: this point:
“Nokia’s smartphones are still the laggards in the U.S. market. But the company does seem, finally, to understand that it’s long-term business suicide for the world’s largest cell phone company to be an afterthought in the U.S. market.”
Why is it suicide? Taking demographics, the Apple cult, and the size of the US market why not be an afterthought and go for the bigger pie? Simple calls, text messaging, and simple phones plays to a much bigger market. If you have distributions channels and loyalty in countries where the prime attainable luxury is a cell phone – doesn’t that make for a viable long term business model?
I’m not invested in NOK nor do I plan to — just questioning the logic.
t1151jf…
Correct me if I’m wrong here folks, but I wouldn’t consider NOK a strong buy trading at around 9.00 with a low end target price of 11.00.
yx,
And if they hire a lawyer or accountant? That is the inherent problem with a CEO search: You don’t know what you’ve got until you get it. While there are a few “superstar” CEO’s out there, one of the things the article pointed out was Nokia is having a hard time finding a CEO who wants to live in Finland. Go figure…
NOK’s search for a new CEO does not worry me at all. In fact I think it’s overdue. Think about who could be worse? Can you rely on a lawyer and accountant to come up with a better product to compete with Steve Jobs or so?
Off topic.
India’s luxury market is LESS than 1/10 of China’s.
http://www.bloomberg.com/news/2010-07-20/new-delhi-misses-luxury-boom-as-millionaires-go-to-london-for-gucci-zegna.html
Jim,
The fact that Nokia is looking for a new CEO doesn’t worry you just a little?
http://www.marketwatch.com/story/nokia-rebounds-as-group-reportedly-seeks-new-ceo-2010-07-20?siteid=yhoof
Jim
So, is NOK a buy? It’s down 42% in your Picks 50.