Osborne Takes Over Nokia!

As most of us would have known, Adam Osborne was the first to make a portable computer called ‘Osborne 1’ in April 1981. It weighed around 12kg and was sold for US$1795. It sold 10,000 units in the very first month which then, was a phenomenally large number. One would expect him to be known for this outstanding feat but this was not the case. In 1983, Adam Osborne bragged about two advanced new computers his company was developing. In anticipation of something better, people opted to wait for the launch. The number of orders declined drastically and before Adam could release the new versions, he ran out of cash and had to file for a bankruptcy. This phenomenon was referred to as ‘The Osborne Effect’.

In 2011, exactly 30yrs from the launch of ‘Osborne 1’, we see a similar occurrence. This time with Nokia, a company which once ruthlessly dominated the handset industry. Nokia, the Finnish giant, founded by Fredrik Idestam and Leo Mechelin, has over 132,000 employees in 120 countries, sales in more than 150 countries and global annual revenue of over €42 billion and operating profit of €2 billion as of 2010. To name one of it’s several achievements, the Nokia brand, valued at $29.5 billion, was listed as the eighth most valuable global brand in the Interbrand/BusinessWeek Best Global Brands list of 2010. However, owing to the growing competition, in July 2010, Nokia announced that their profits had dropped 40%. In Feb 2011, Nokia announced a partnership with Microsoft, the last viable option they could see to bring back the lost pride.

One would expect this move to bring a glee on the faces of its investors. The Nokia-Microsoft deal appeared as one of the most ‘perfect deals’ by analysts. However, something that nobody had thought of happened and one witnessed Adam Osborne take-over Nokia. This is when the Osborne effect started giving nightmares to Stephen Elop (Nokia CEO).

In the excitement of Nokia signing the dotted line with Microsoft, they seemed to over-look the fear Nokia lovers would have. The fear that Nokia would probably abandon Symbian, their OS which took them to new heights. Initially, this fear resulted in a drastic decline in Nokia sales which was when Nokia made a formal announcement that Nokia will continue to support Symbian atleast for the next 3 years. They also promised to launch 20 Symbian-based handsets in 2011. This somehow was not convincing enough for the smartphone users and Nokia sales further declined. In this period, Nokia lovers decided to wait for the Windows based Nokia phone instead of buying the existing Symbian based handsets. To add to the problems, Nokia realized that their first phone with Windows would come to light only by the end of 2011.

Till now, Nokia dominated the emerging markets like India and China, but, the local players in both these countries started eating-up Nokia’s market share. Meanwhile, with the reducing number of Nokia users, the trend-setting OVI store seemed unviable to them and so was terminated in many parts of the world.

Recently, Nokia  announced that their forecasted sales for the next quarter would not be met owing to the changing market trends. This announcement took Nokia shares to a 13yr low with investors willing to exit the company. There are now rumors in the market about Nokia facing a major cash crunch and that Microsoft might take-over the handset manufacturing company.

The company seems to be in great trouble with sustainability issues seem looming over it. A technology enthusiast like me can only hope that Nokia would somehow survive till the launch of their ‘W’ series phones and come back with a bang in the race to become the leading handset manufacturer.