Nokia needs to innovate ways to ensure its survival.
A version of this article originally appeared on our US site, Fool.com.
The fortunes of one-time handset king Nokia (NYSE: NOK.US) seem to be steadily sliding downward. This company's mobile phone business recently posted an operating loss for the first three months of this year, followed by a lowered outlook for the upcoming quarter, courtesy of rivals such as Apple, whose market capitalisation recently touched a breathtaking $600 billion.
Even more worrying is the fact that sales of its low-end handsets in some of the hottest emerging markets such as India, the Middle East, Africa and China fell by 32% from the comparable year-ago period to $3 billion. But that doesn't mean that Nokia isn't doing anything to remedy this.
Trimming the fat
Since the new CEO took over the reins, the company has announced plans to slash at least 10,000 jobs. Nokia has also shifted its manufacturing base from Europe to Asia in a bid to reduce the cost of production.
In fact, the losses may prompt Nokia to focus on just its smartphone division. Some analysts have suggested that they should exit the low-end phone business altogether. This may not be a bad idea after all, as Nokia's Lumia line of smartphones, powered by Microsoft's (NASDAQ: MSFT.US) Windows operating system, haven't been doing too badly of late, with the company managing to sell around two million units during the first quarter. And with Samsung probably surpassing Nokia in sales of handsets for the first three months of this year, it makes sense to focus on just the smartphone arena.
The company may also consider selling some of its intellectual property in order to raise more cash. It might opt for a patent sale deal with Microsoft, given that the two companies have bonded well during the Lumia venture. But that's not all...
The Chinese venture
Nokia also plans to extend the success of Lumia into China, which is great as the country is the world's largest mobile phone market, with the number of users totaling a mind-blowing one billion.
The company plans to sell the Lumia smartphones in partnership with China Telecom and its 126 million subscribers, then later move on to China Unicom and China Mobile.
Moreover, Nokia recently announced that it would introduce its own tablet, which would run on Microsoft's newest Windows 8 operating system by the end of the year. So, if Windows 8 can grab a respectable chunk of the tablet universe, Nokia has a better shot at reviving its fortunes.
The Foolish bottom line
With a near-junk credit rating from Moody's, Nokia sure looks to be in dire straits now. However, the company's foray into tablets and its drive to increase sales of its Lumia phones in China might be rays of hope on the horizon.
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