Spillikins №175. Samsung To Purchase Nokia?

Sporadic holidays in Russia take me out of the rhythm and I am yet only planning a vacation. I almost missed Computex that had plenty of Windows 8 RT tablet prototypes on ARM. The biggest step ahead is that Windows tablets no longer need fans so they don't make any noise and the battery life has been improved significantly. But it is too early to review those tablets as by the fall when some of them are released there will be many improvements.
Before getting to the topics I have selected I want to recommend this article on IDC market forecasts. The authors took the time to analyze a number of IDC speculations on the future of the mobile market and explain why predicting the future of smartphones is no different than predicting the future looking at chicken entrails:
I came across a funny benchmark of heat efficiency of Qualcomm processors. The authors put butter on phones and compared the time it took the butter to melt:

Samsung To Purchase Nokia – Nokia Stock and Desperation Go Up

When logic is helpless, the mind creates myths that live for some time and then pass into oblivion. An example of such a myth is the latest rumor around Nokia that Samsung is willing to buy the Finnish manufacturer for $15 billion that is higher than the current Nokia capitalization. Both sides refused to comment on the rumors but Reuters referred to a source close to one of the companies. This rumor caused the Nokia stock go up 6% but, unfortunately, this won't last and will be back on its way down in no time. Moreover, it is quite obvious that the mysterious source is Nokia themselves who are now ready to do just about anything to stop their stock from plummeting any further.
I can remember a few similar sales games aimed solely to impress the stock market. For example, in 2008 and 2009 there were lots of rumors about the sale of the Motorola mobile phone division and they all turned to be fake and there were no negotiations going on with the any companies. Many investors use rumors and speculations to make money on the stock market. Some parties might be driving the companies to such a decision but nonetheless the goals are immediate and many other market players fail to assess the situation adequately which makes such foul play possible.
Here I will try to explain why buying Nokia is pointless for Samsung:

1. Social responsibility. Purchasing a company means that you take on all the responsibilities the previous owner had to his employees including salary, pensions and so on. It is a huge burden that can finish even a large company. When Nokia was getting rid og its Symbian division they could not simply push their former employees out of the door. They had to employ them in a company called Accenture that did not have any standing obligations to the former Nokia staff. Nokia saw new labor contracts through that would secure minimum payments from Nokia. The current Nokia staff is too big for this shrinking company and its 90% duplicates the functions of the Samsung staff. So why would Samsung pay for doubling its staff without getting any more productivity from the personnel? Some say that Samsung might do this because buying off a rival and shutting it down for good would be cheaper than to continue to compete with it. They certainly forget about all the load of social responsibilities Samsung would have to acquire then.
2. Buying off a market share. Very often one company acquires its smaller rival to increase the market share it controls. When undertaking such grand enterprises management often forgets about certain market repercussions of mergers and acquisitions. A textbook example is the Compaq and HP merger that led to HP losing its number one status on the PC market to Dell. The merger was followed by massive lay-offs in Compaq and a mess in product ranges the new company was offering. Anyway, in the Nokia/Samsung case Samsung is already number one on the mobile phone and smartphone market and does not need to improve its market positions. Buying off Nokia would not only do any good for Samsung but would shrink Samsung's market share in the long run like the merger did to HP and Samsung management ain't that stupid.
3. Patents. Something that is very important for Samsung as the popular belief suggests. Nokia was one of the companies that pioneered the mobile phone market and some believe that this gives Nokia some sacred knowledge about the development and production that Samsung longs for. Only Samsung is producing mind-blowing products right now while Nokia cannot keep up with the rivals. What does that tell you? Does Nokia really have any special knowledge in the form of a patent? Once I was giving a speech before a group of students and quoted a short story by Bormor about the search of the ultimate weapon. Legend had it that on a desolate island there is hidden the ultimate weapon and when it is actually found it turns out to be a stone axe which is by the standards of cavemen was truly the ultimate weapon. What I mean is Nokia is still playing checkers while Samsung is already mastering chess. But, of course, by the standards of 1980-s Nokia is indeed the 'ultimate' manufacturer. However, from the point of view of 2010-s Nokia is years behind the market. Anyway, today Samsung has got the second biggest portfolio of patents on the market and they might only get interested in Nokia patent pack for the sake of the art of collection and there is no pragmatic interest for Samsung in Nokia's patents. Well, that's not 100% true and Nokia indeed has a few very interesting patents but it would be a lot cheaper for Samsung to develop alternatives than to pay huge money for the whole patent pack.

4. Factories. Nokia has got more factories than any other phone manufacturer and it is about to close many of them. Some say that Samsung could buy them out as it needs more and more production capacity every year. This one is just plain ridiculous as instead of adapting outdated Nokia factories to their needs it is a lot cheaper and more effective for Samsung to build new one with the state of the art assembly lines.
5. Any other argument. This one is any argument at all people come up with when they try to justify a company merger. The last one is usually the most pointless and hard to debate, as it has nothing to do with reality.

Another story that can explain why Samsung won't buy Nokia. Back in the day when Siemens was selling Siemens Mobile to BenQ, Siemens paid BenQ €300 million to get rid of the dying division so BenQ got Siemens Mobile for free with a cash bonus. Siemens Mobile was only a small division of Siemens. Unfortunately, for Nokia mobile phones is their main business and the death of their mobile division will automatically mean the death of the whole company.
The only way to survive for Nokia in 2012-2013 will be selling off small divisions one by one and right now Nokia's management is working on this. Once they form small division, Microsoft might be interested in buying off some of the staff and patents they need for their mobile program. But as of now I see no way Nokia can survive and retain all their assets. If this plan does not work, as it didn't for Motorola then there is only utter financial oblivion for Nokia.
I can offer another piece in this puzzle called Nokia Lumia sales. 10% of the world Lumia sales fall on the Russian market. Russian stores are nothing but flooded with these phones with Nokia’s latest massive promo campaign and quite possibly the last one too. Here are the results of such a PR exploit:

Source: @Kendr17

Let us now have a look at the IDC data that has been published recently in the New York Times. According to the report, Nokia shipped 2.2 million Lumia handsets in Q1 2012. The figure is not at all impressive – compare the 37 million sold iPhones in the same period. i suppose the figures speak for themselves.

Touchscreen Nokia Asha: Better Late Than Never

About three years ago, the touchscreen boom reached the mid-range phones. Some companies like Samsung with its Star and Corby made a ton of money on it. The Finnish manufacturer failed to deliver an adequate response to that and had to cut the prices for Symbian phones. Right now Nokia 5228 cost less than €100. Nokia attempted to enter that market with S40 Touch&Type phones, which had small touchscreens and hard key pads, but this endeavor failed – people did not like those hybrids.
So, three years late Nokia finally comes up with budget touchscreens. Nokia had been also ignoring the dual SIM market just like that until, at last, noticing it but failed to take any significant share of that market.
Anyway, Nokia announced three phones within the Asha series aimed primarily at the Russian and the Indian markets. I want to begin with Nokia Asha 305 and 306. The 305 has a second SIM card slot but simultaneous SIM work is not supported and the user has to switch between the two SIMs so it is basically a phone with a spare SIM holder. The 306 features Wi-Fi and as for the rest the two are identical.
It is the first time I can remember when Nokia did not reveal all the specs. The told us they have 3” screens but did not say anything about the resolution. That’s probably because 240x400 is not a good matter for boasting. Nonetheless, it is not also something to be shy about and such resolution is acceptable for budget phones. Why suddenly play games with specs? Are they afraid of turning buyers away? This must be the new thing for Nokia as all their last announcements lacked some of the specs we are used to hearing about and I now have to browse developers websites to get the necessary info.
Other specs are quite ordinary: a 2MPix camera with no autofocus, a microSD slot, a music player, FM radio and a variety of body colors. Nokia thought that the phone was still not attractive enough so they added a pack of 40 Electronic Arts games with every purchase. Evidently, this trick is aimed at the developing markets where smartphones are still rare.
Asha 311 features a 3.2 MPix camera, the same screen and 3G and the rest is same.
Now the most important stuff: the release date and the prices. Asha 305 will be released in July for €63($85, tax not included). The official press release claims the sales are to begin in Q2 but judging by Nokia price lists the shipments will begin in late June so the sales will being in July at best. The other two models are to be released in Q3 that is somewhere in August or later. Unfortunately, there is not much anticipation for these phones on the market as the prices of €68 and €92 made them less attractive as compared to more affordable rivals. I have no idea why it took Nokia three years to make these phones but at last the mountain gave birth to a mouse. I don’t expect these three to have any impact on the future of the company and save the day. Those are decent but still mediocre phones and Nokia know it. Unfortunately, they don’t have the power anymore to do anything about it.