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How Big is the Nokia Brand Damage Caused by Microsoft?

How Big is the Nokia Brand Damage Caused by Microsoft?
 
 

Analysts were widely expecting Nokia to sell 10 M smartphones in 4Q 2013. The company ended selling 8.2 M units, down from 8.8 M in the previous quarter. It’s a massive miss considering the strong sequential volume growth Nokia had delivered during the spring and autumn periods.

This IDC comment from last month reflects industry expectations pretty accurately: “Nokia: The Lumia range of devices continued to show a growth trajectory in 3Q2013 and garnered close to 5% market share – the trend is expected to continue with greater support from Microsoft in the coming quarters. The third quarter of 2013 saw a few notable launches like the Lumia 625 and Lumia 925 which have been able to generate positive interest from consumers and developers alike.”

Nokia had real smartphone volume traction in the autumn and it was expected to continue – yet after the September announcement of Microsoft acquisition, device sales actually started to decline. For Europeans, the explanation is obvious: consumer backlash as Microsoft association started tarnishing the Nokia brand. Yet for Microsoft executives, this may come as a complete shock. From the West Coast perspective, Nokia has been a fading phone brand for twelve years. The deep emotional connection many European and Asian consumers have with the Nokia brand is not obvious for American tech executives. And this is why many transcontinental mergers fail: executives have real trouble gauging brand essence across continents. Nokia used to inspire Apple-like loyalty in consumers as recently as around 2005-2007. A residue of that affection buoyed its Lumia sales drive in first three quarters of 2013.

Redmond decision makers probably never stopped to seriously consider the scale of damage that Microsoft ownership of Nokia could do. But many high-end Nokia device consumers outside North America have also a strong affinity to another Finnish brand: Linux. There has always been a strong undercurrent of anti-Microsoft sentiment running through the Nokia fan community in Europe and Asia. That is why Nokia’s move towards Linux variants like Maemo and Meego was such an exciting development for Nokia’s customers a few years ago. Many Nokia users were frustrated by Symbian, but excited about the leap to Linux. Microsoft ownership of Nokia is the last straw to many who clung on to their loyalty even after Nokia’s Windows adoption in 2011.

The scale of that backlash is hard to gauge – but 4Q 2013 seems like a genuinely ominous sign for the future. Nokia was expected to deliver 11-13% sequential smartphone volume growth. It delivered -7% decline – an abrupt reversal that blindsided both Wall Street and industry analysts. Something in the European and Asian attitudes towards the Microsoft purchase of Nokia has eluded American tech experts.

Source: Forbes

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Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

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