Nokia's week of hell ends on a positive note, but the future remains hazy

Over the years my job as a telecoms journalist and editor has taken me across the world to destinations near and far, allowing me to visit operators and vendors in their native environment as they roll out their latest service or product, or talk strategy for a few days.

Trips to Helsinki to visit Nokia's impressive headquarters--a glass building overlooking a usually frozen lake in Espoo--were always a favourite. It was mildly sad to see that Nokia sold (and leased back) its building to Exilion Capital for €170 million last December, and started a long-term lease to enable it to remain in the building.

Such moves clearly make sense in the current market environment, and Nokia said at the time that owning real estate is "not part of Nokia's core business."

Nevertheless, the fact that the Finnish handset maker was forced to make this move is generally reflective of the dire situation in which the company continues to find itself. This was put into sharp relief this week when Nokia's shareholders, tired of its flagging efforts to catch up with leading smartphone manufacturers Apple and Samsung Electronics, finally lost patience and pretty much told CEO Stephen Elop that the company was "on the road to hell" if it persevered with a Windows Phone-only strategy.

In a now much-quoted comment, one shareholder, Hannu Virtanen, told Elop that he's "a nice guy," and that investors recognised the management was doing its best. He then added: "Are you aware that results are what matter? The road to hell is paved with good intentions. Please switch to another road."

Nokia is fortunate it has such loyal shareholders who really seem to care: the same article from Reuters noted that shareholders are sentimental about a company that started off pulping wood and became the world's largest manufacturer of mobile phones with the formerly most dominant operating system for smartphones, Symbian. It's clear that Nokia's fate goes deep with the Finns, and they are not going to let go of their shares unless they really have no other choice.

Sounding increasingly like a stuck record (for those of you old enough to remember those), Elop has nonetheless reiterated that Nokia will stick with the Windows Phone operating system, and he continues to stress the value of a third ecosystem for smartphones.

Is he making a mistake? Many believe he is, and some wonder if Elop has closed too many doors to allow Nokia to change course now.

One glimmer of hope might be the vendor's new Asha range, which fits in with Nokia's strategy of also targeting the lower end of the market with cheaper devices. Analysts have suggested that rather than trying to compete head on with Apple, Nokia would be better off selling smartphones for $300 or less, to meet a growing appetite for smartphones in developing markets where an iPhone, for example, is simply beyond the means of many consumers. This could also play well into the growing reluctance of operators to subsidise devices and pay huge upfront costs to have exclusivity for a few months. Attractive smartphones with a lower price tag would help democratise the market further.

Indeed, Nokia has just unveiled a new Asha-based smartphone, the Asha 501, which will retail for less than $100 (€77). The company also said it has overhauled the Asha platform to create a more open environment for the creation of apps targeted at consumers in emerging markets.

To be sure, sales of the high-end Lumia devices have shown more promising signs of late, reaching 5.6 million in the first quarter. However, Samsung and Apple sales far exceeded this number, and the gap is looking increasingly difficult to bridge. Perhaps a mix of Lumia and Asha devices will help Nokia retrieve its market share, but the vendor has its work cut out in the months ahead, if it is to appease its increasingly frustrated shareholders.

The jury is still out on the future of the company. Nokia still has a lot of support in its home market from domestic investors and that will be crucial in the months ahead, but patience is clearly running out.--Anne

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