Nokia’s expanded, new risks and uncertainties for its Windows Phone strategy for 2013

According to the Nokia SEC filing for the fiscal year ended December 31, 2012 (FY12) vs. that of the Nokia SEC filing for the fiscal year ended December 31, 2011 (FY11):

As per the “Risks and Uncertainties” sections in both, there are the following expanded texts in the FY12 section vs. that of in the FY11 section (highlighted full text comparisons you can see in a PDF format downloadable from here):

[We may not be able to make Nokia products with Windows Phone a competitive choice for consumers unless the Windows Phone ecosystem becomes a competitive and profitable global ecosystem that achieves sufficient scale, value and attractiveness to relevant market participants.]

We believe that successful smartphone platforms require a successful ecosystem around them. … Today, industry participants are creating competing ecosystems of mutually beneficial partnerships to combine hardware, software, services and an application environment to create high-quality differentiated smartphones. Certain smartphone platforms and their related ecosystems have gained significant momentum and market share, specifically Google’s Android platform and Apple’s iOS platform, and are continuing apace, with Android-based smartphones continuing to gain significant market share during 2012 and also reaching lower price points.

… Although Microsoft will continue to license Windows Phone to other mobile manufacturers, we believe we can differentiate Nokia smartphones from those of our competitors that also use the Windows Phone platform as well as other platforms. The first Nokia smartphones powered by Windows Phone were launched in October 2011 under the Lumia name. We launched additional Windows Phone 7 devices and the first Windows Phone 8 Lumia devices during 2012. See Item 4B. “Business Overview—Devices & Services—Smart Devices” for a more information.

Microsoft has recently launched the Windows 8 operating system used to power personal computers and tablets, and the related Windows Phone 8 operating system is used in the latest Nokia smartphones. The success of Nokia’s Windows Phone 8 smartphones will be negatively affected if the Windows 8 platform does not achieve or retain broad or timely market acceptance or is not preferred by ecosystem participants, mobile operators and consumers.

Other competitive major smartphone ecosystems, primarily Google’s Android and Apple’s iOS, have advantages that may be difficult for the Windows Phone ecosystem to overcome, such as first-mover advantage, momentum, a larger share of the smartphone market, engagement by developers, mobile operators and consumers and brand preference, and their advantages may become greater over time.

[acknowledging that] We may not be able to develop sufficient quantities of high-quality differentiated Nokia products with Windows Phone in order to achieve the scale needed for a competitive global ecosystem in a timely manner, or at all. [vs. just “execute with speed” a year ago]

Our competitors may use various technical and commercial means to make the Windows Phone ecosystem unattractive compared to other ecosystems, including for instance hindering application development, not providing tools to allow applications to be developed to industry standard or not allowing certain applications to work or work efficiently on the Windows Phone platform.
[vs. just “Other competitive major smartphone ecosystems have advantages that may be difficult for us to overcome, such as first-mover advantage, momentum, engagement by developers, mobile operators and consumers and brand preference, and their advantages may become even greater before we complete our transition to the Windows Phone platform.” a year ago]

The Windows Phone ecosystem is relatively small, and thus it may not be compelling for hardware and software suppliers and developers, which may for instance lead to our reliance on a limited number of suppliers, later availability of the latest innovations and increased cost of components and software.

Mobile devices are increasingly used with other technical appliances, for instance speakers and car audio systems or have accessories and gadgets that can be used in conjunction with the mobile device. As the Windows Phone ecosystem is relatively small, it may not be compelling for third parties to design such technical appliances, accessories or gadgets to a similar extent as with other ecosystems.

[As the recognition of the already observable effect of the “Other competitive major smartphone ecosystems, primarily Google’s Android and Apple’s iOS, have advantages that may be difficult for the Windows Phone ecosystem to overcome, such as …” vs. just a possible risk associated with “may not be able to attract developers and other participants to the Windows Phone ecosystem” a year ago]

The frequency of Windows Phone operating system updates may be too slow and the platform may be too closed to address changing market and customer requirements in a timely manner, which may erode customer support and consumer attractiveness of the platform.

Emergence of new alternative ecosystems and platforms could make the Windows Phone ecosystem less attractive to customers and consumers.

As well as per:

[Our success in the smartphone market depends on our ability to introduce and bring to market quantities of attractive, competitively priced Nokia products with Windows Phone that are positively differentiated from our competitors’ products, both outside and within the Windows Phone ecosystem, and receive broad market acceptance.]

[despite of all the risks and uncertainties already given there is no change in the sense that]
Our strategy is to compete in the smartphone market with Nokia products with Windows Phone.

[but there are new warnings that]
The Microsoft Windows Phone platform … may limit our ability to … bring certain hardware capabilities at the higher price points.

we may not be able to introduce functionalities such as advanced imaging and sensor technology

[as well as more intensive warnings by saying that there is]
lack of proper training of sales personnel, insufficient marketing support and experience
[vs. using just theinadequate attribute a year ago]
still relatively unfamiliar Windows Phone platform in an otherwise highly competitive market.
[vs. new and used a year ago]

[Regarding “Microsoft may not be able to provide the software innovations and features we rely on for the Windows Phone operating system in a timely manner, if at all” it is now added that]
Additionally, we are dependent on Microsoft for timely error corrections for customer and country variants as well as generic software releases.

Other manufacturers also produce competing mobile products which are based on the Windows Phone operating system. We may face increased competition from other manufacturers, including Microsoft, who already produce or may produce competing Windows Phone based products. Increased competition within the Windows Phone ecosystem could result for instance in lower sales of our devices or lower potential for a profitable business model.

We are aiming to expand our Windows Phone-based products to lower price points. The availability of Windows Phone-based products that we or our competitors offer at lower price points may have a negative effect on the sales of our higher priced Windows Phone-based products.

With all that it is the case that

[Our partnership with Microsoft is subject to risks and uncertainties.]

In addition to the factors outlined above in connection with the Windows Phone ecosystem and sales of Nokia products with Windows Phone …

[i.e. as the result of the above added risks there is an enhanced warning that]
A further change in smartphone strategy either by Microsoft or Nokia could be costly and further adversely affect our market share, competitiveness and profitability.
[vs. without that “either by Microsoft or Nokia” stated a year ago, meaning that on either side there is an increased risk in that regard vs. that of a year ago]
[as well as adding now that]
Microsoft could provide better support to another device manufacturer which produces devices that run on the Windows Phone platform

We license from Microsoft the Windows Phone operating system as our primary smartphone platform. Microsoft may act independently of us with respect to decisions and communications on that operating system which may have a negative effect on us. Moreover, if Microsoft reduces investment in that operating system or discontinues it, our smartphone strategy would be directly negatively affected by such acts.

Microsoft may make strategic decisions or changes that may be detrimental to us. For example, in addition to the Surface tablet, Microsoft may broaden its strategy to sell other mobile devices under its own brand, including smartphones. This could lead Microsoft to focus more on their own devices and less on mobile devices of other manufacturers that operate on the Windows Phone platform, including Nokia.

We may not be able to sufficiently influence Microsoft in bringing the features or functionalities for the Windows Phone platform that we deem most important, or Microsoft may otherwise focus on other areas of its business leading to reduced resources devoted to the Windows Phone platform or failures to implement features or functionalities. This may be heightened if our position in the partnership deteriorates, for instance through other companies using leverage to influence Microsoft, or if Microsoft chooses to develop its own mobile devices, including smartphones, or if Microsoft otherwise develops interests that are contrary to ours.

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About Nacsa Sándor

Lazure Kft. • infokommunikációs felhő szakértés • high-tech marketing • elérhetőség: snacsa@live.com Okleveles villamos és automatizálási mérnök (1971) Munkahelyek: Microsoft, EMC, Compaq és Digital veterán. Korábban magyar cégek (GDS Szoftver, Computrend, SzáMOK, OLAJTERV). Jelenleg Lazure Kft. Amire szakmailag büszke vagyok (időrendben visszafelé): – Microsoft .NET 1.0 … .NET 3.5 és Visual Studio Team System bevezetések Magyarországon (2000 — 2008) – Digital Alpha technológia vezető adatközponti és vállalati szerver platformmá tétele (másokkal együttes csapat tagjaként) Magyarországon (1993 — 1998) – Koncepcionális modellezés (ma használatos elnevezéssel: domain-driven design) az objektum-orientált programozással kombinált módon (1985 — 1993) – Poszt-graduális képzés a miniszámítógépes szoftverfejlesztés, konkurrens (párhuzamos) programozás és más témákban (1973 — 1984) Az utóbbi időben általam művelt területek: ld. lazure2.wordpress.com (Experiencing the Cloud) – Predictive strategies based on the cyclical nature of the ICT development (also based on my previous findings during the period of 1978 — 1990) – User Experience Design for the Cloud – Marketing Communications based on the Cloud
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2 Responses to Nokia’s expanded, new risks and uncertainties for its Windows Phone strategy for 2013

  1. Pingback: A fogyasztói informatika újabb 3 éve szoftver szempontból–I. rész | Szoftver aktualitások

  2. Pingback: With Android and forked Android smartphones as the industry standard Nokia relegated to a niche market status while Apple should radically alter its previous premium strategy for long term | Experiencing the Cloud

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