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Fins’ focus on product sales rather than end-to-end solutions
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Why is Nokia zigging when everyone else is zagging?
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Rumor mill: Nokia to spin out division/s to PE firm
Telcos are in a tricky spot: still making decent revenue from their old business models, but worried that unless they successfully monetize cloud-based technologies soon they could be superseded by shinier, newer competitors. The world’s leading vendors want to help, announcing highly integrated smart cloud solutions designed to migrate their telco customers into a new and profitable cloud future.
But not Nokia (NYSE: NOK). It’s charting the opposite course.
In October last year the Finnish incumbent reorganized its business into four separate business units, moving away from the solution model.
The goal of Nokia’s new set up is to drive revenue and save money, the company said. But there’s another possible explanation for the re-org: The rumor doing the rounds at last week’s MWC show in Barcelona — uncorroborated at press time — is that the company is talking to at least one PE firm to divest one or more of its four business units.
We reached out to Nokia about the rumor, but a spokesperson said the company does not comment on speculation.
During last week’s Mobile World Congress in Barcelona, I asked Tommi Uitto, president of Mobile Networks at Nokia, if Nokia is considering spinning out his business into a standalone company.
“That’s not the point of this change,” Uitto said, noting that the reorganization was driven by a wish to better reflect the way in which Nokia’s customers plan and buy their networks.
“Most [telcos] are still organized into different groups,” Uitto said, adding that Nokia can still deliver end-to-end solutions if customers want them.
Keep your Pekka up
2023 was a grim year for Nokia, and it’s not getting any help from the market in ‘24.
“The telco capex situation at the moment means Nokia — and others — have no choice but to examine every aspect of their business to work out how to adjust for a future CSP market that is itself going through dramatic change,” said Jeremiah Caron, global head of research and analysis at GlobalData Technology.
Nokia’s new divide-and-conquer strategy is being reinforced at its sales meetings, according to an attendee at one such get together this year, with reps being urged to laser-focus on selling point products.
That push should obviously deliver to Nokia’s bottom line, but the marketing optics are wildly out of whack with the direction being taken by its competitors, including Cisco (NASDAQ: CSCO), Ericsson (NASDAQ: ERIC), HPE/Juniper, Huawei and IBM (NYSE: IBM). They’re all pushing solutions that provide a platform for new services and applications by integrating AI, automation, orchestration and APIs all over cloud-native infrastructure.
“They’ve taken a different path,” Per Narvinger, senior vice president, Business Area Cloud Software and Services at Ericsson, told me last month, with just a dab of Swedish understatement.
Ericsson announced its smart cloud solution last month.
Until the start of this decade Nokia was actually one of the telecom industry’s biggest boosters of end-to-end solutions, claiming that it delivered “the industry's only end-to-end portfolio of network equipment, software, services and licensing that is available globally,” and boasting that it was their biggest driver of new business.
That all changed with the arrival of its current CEO, Pekka Lundmark. So, who knows? Maybe Lundmark and Nokia know something about telcos’ actual appetite for integrated cloud solutions that everyone else doesn’t.