February 11, 2011 / 7:56 AM / in 7 years

Instant view: Nokia teams up with Microsoft, sets new targets

STOCKHOLM (Reuters) - Nokia said on Friday it was teaming up with Microsoft to take on Google and Apple in the fast-growing smartphone market and set financial targets for the group.

Nokia said it would use Windows Phone as the software platform for its smartphones as part of new chief executive Stephen Elop’s overhaul of the world’s biggest cellphone maker.

Following is a selection of comments regarding the news.

JARI HONKO, SWEDBANK

“I don’t think that what Elop is offering to investors is even close enough.”

“It is a big strategic step, but they don’t say anything about cost cuts or set any targets. Another thing they didn’t say was that they didn’t promise margin improvements.”

“In addition, they ask to wait for a year or two, until the new strategy bears fruit. This will be not enough for investors.”

“There is a big risk that Nokia will become a forgotten stock for some time.”

GREGER JOHANSSON, REDEYE

“I‘m pretty doubtful about the idea of joining up two large players that have not been very successful and hoping that something great will come out of it.”

“It is obvious that the new CEO is trying to do something dramatic, making big changes in all areas such as management, structure, reporting lines.”

“It is obvious that 2011 and above all 2012 will be very uncertain for the phones segment.”

“The coming period will be quite difficult in terms of earnings and with a lot of restructuring and so on, but I still think it is positive that they are trying to do something dramatic.”

RICHARD WINDSOR, GLOBAL TECHNOLOGY SPECIALIST, NOMURA

“We are somewhat confused. They’ve announced a big tie-up with Microsoft but at the same time they haven’t cut R&D. Given that the people who were positive on the stock were looking for mid-teens devices margins by 2012, we can see some cuts to estimates.”

ON WHETHER IT WILL BE AN EFFECTIVE PARTNERSHIP

“It’s possible. It’s much too early to tell.”

“Given that both of them are struggling in mobile at the moment, it should be a win-win. But we don’t know if Nokia is going to pay Microsoft for its operating system.”

JOHN STRAND, CEO STRAND CONSULT

“This means massive layoffs in Nokia. It looks very much like Nokia wants to become the Dell of the mobile industry. They are admitting their service strategy has been a failure.”

“Nokia says they have made a lot of mistakes, but it had no consequences on the top management team ... We expected a deal on services, but we are surprised they go so far on the smartphone path -- that’s a big step.”

NICOLAS VON STACKELBERG, MACQUARIE RESEARCH

“As we expected they are announcing a wide ranging alliance with Microsoft and they will be adopting Windows Mobile 7 as their primary operating system.”

“They are saying that they will continue to sell Symbian phones which indicates that they won’t stop it immediately but rather a phasing out over the coming years.”

“What is possibly negative is that they are saying that 2011 and 2012 will be transitional years, so there is probably downside to people’s estimates. That might be taken as a negative.”

“On NSN they are guiding essentially in line with what people where looking for.”

“There is no change to the Q1 outlook, which I think is to be expected.”

“I think the real question is do people give Nokia’s new leadership the benefit of doubt, or don’t they? Frankly, that depends on how well they present the case today.”

INGE HEYDORN, SENTAT ASSET MANAGEMENT

“It was as expected and nothing odd, just as we were expecting internally. I think it is absolutely the right step, but it will be a tough couple of years. It will take time to reshape things and take time to get the new software into phones.”

SAMI SARKAMIES, NORDEA

“This is a bold move from such a big company. There is nothing left of the old strategy.”

“The transition period terrifies me. How well can they sell old products when there is uncertainty about their future support?”

“This is a much needed change, but the impact during the transition period will be quite negative on the sales and profitability also this year.”

“However, this explains the cautious Q1 guidance.”

ROBERT JAKOBSEN, JYSKE BANK

“I‘m not surprised that they made this deal. The surprise factor was not that high. Currently, it is unclear whether this is some kind of exclusive deal -- do they get some kind of marketing support and so on? Also, it is unclear how much this will reduce Nokia’s R&D costs. I was hoping for 2011 guidance so it was a little disappointing that that didn’t happen but also understandable.”

JUSSI HYOTY, HEAD OF STRATEGY, FRONT CAPITAL

“Here we have two companies with enormous resources. If they are allocated well, and they are able to reach the same agility than Apple and Google, there are fairly good chances for them. An Android partnership would have been more difficult to build for Nokia.”

GEOFF BLABER, CCS INSIGHT

“This is a partnership born out of both party’s fear of marginalization at the hands of Apple and Google but there is no silver bullet.”

“This is a very frank admission that Nokia’s platform strategy has failed and underlines the seriousness of Nokia’s position. Such a move would have been unthinkable just 12 months ago.”

FRANK MEEHAN, CEO OF PHONE MAKER INQ MOBILE

“It’s a good move for Nokia. With Nokia’s muscle and distribution power behind WP7 this could work. However, a new rebranding for consumers would help. Windows/Nokia needs something more sexy.”

“Also operators will want to see a Nokia/WP7 tie-up as it keeps competition high in the industry and avoids a duopoly.”

“However, consumers decide, not operators, what to buy and if Nokia does this they should try and rebrand the whole OS - give consumers a new thing to get excited about.”

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