When the financial collapse ravaged the world and sent most countries into a recession, there was a discussion on which banks were “too big to fail.” It was a discussion that centered on the idea that if a particular company were allowed to fail, it could send the entire economy into a tailspin.
Looking at the technology industry, Apple or Microsoft might fit that bill. But Nokia might do so in its own way. A Nokia closure wouldn’t necessarily rattle the economy, but it’s entirely possible that if the company shuttered its doors, it would send shockwaves through the industry.
In a recent study, research firm IHS iSuppli revealed that for the first time in 14 years, Nokia is no longer the world’s top handset maker. Samsung, with 29 percent market share worldwide, has been able to nab the top spot from Nokia, which was only able to must 24 percent ownership. Last year, Nokia shipped 30 percent of the world’s mobile handsets.
“The competitive reality of the cellphone market in 2012 was ‘live by the smartphone; die by the smartphone,’” Wayne Lam, senior analyst for wireless communications at HIS, said in a statement. “Smartphones represent the fastest-growing segment of the cellphone market – and will account for nearly half of all wireless handset shipments for all of 2012.”
That’s bad news for Nokia. While the company owned 16 percent of the worldwide smartphone market in 2011, according to IHS, it was only able to nab 5 percent share this year. Samsung took the top spot with 28 percent market share.
That Nokia is on the decline isn’t news. But deciding what should happen to the company if it fails is something that hasn’t been discussed nearly enough. And judging by its financials, that’s a discussion now worth having.
By the end of the third quarter, Nokia watched its revenue slide to 7.2 billion euros ($9.5 billion), a staggering decline compared to the nearly 9 billion euros it generated during the same period last year. Meanwhile, Nokia lost 969 million euros during the quarter – a far cry from the 68 million euros it lost in the third quarter of 2011.
For his part, Nokia CEO Stephen Elop has acknowledged that times are tough, but he contends that with a smartphone strategy centering on Windows Phone and improvements to operational efficiencies, things could get better.
But what if they don’t? Nokia’s market share isn’t getting any better; it’s getting worse. And as a company that supplies the world with 24 percent of its mobile phones but has a bond rating equal to junk, it might not be long before the losses mount up and it’s forced to either shutter its doors or make a drastic move.
For emerging markets, especially, that’s an issue. Nokia sells a handset line called “Asha” that are designed for areas of the world that can’t yet afford the expensive iPhone or Samsung Galaxy S III. The company’s efforts in those countries are integral to the mobile industry’s growth. If Nokia is forced to close up shop eventually, what happens to those markets?
Nokia presents a very major issue for the industry. Although it’s on the decline and it’s possible that eventually, it’ll become inconsequential in the mobile market, right now, it’s very important. And if the trouble continues, the industry will have to decide if the growth Apple and Samsung keep racking up really is in the best interests of consumers around the globe.
The answer to that might surprise some.