Last cuts kill off its innovation
Moves by the former rubber boot maker Nokia to slash a third of its workforce could speed up the outfit's death. Nokia's chief executive Stephen Elop announced he was cutting a third of the workforce. But amongst those he is letting go is the company's main source of innovating its way out of its current mess, Nokia's research and development team.
Some analysts said that getting rid of that many people will strain the company's cash position and achieve little in turning around what many see as its biggest problem. Its biggest problem is that it is suffering from slow sales of its new Windows-based handsets, mostly because these are waiting for Windows 8.
John Strand, founder of Danish industry consultancy Strand Consult told Reuters that Elop is cutting costs and hoping for a miracle, but it looks like Nokia is staying on death row. Meanwhile Nokia is losing share in the markets for cheaper, more basic phones. Lumia phones won some good reviews, but has had relatively little success among consumers. Part of the problem is that they have come out just before Windows 8 is expected to do something interesting to the Mobile market.
Nokia needs a new, more revolutionary product to turn heads and it might get one when Windows 8 comes out. However that is a huge gamble. Nokia does have some cudos in the mobile market. As a brand people still think that it is reliable. At the moment though they have to admit that its software is behind Android and Apple. At the end of the March Nokia had 4.9 billion euros of net cash and already before factoring in charges from the latest round of restructuring some analysts had said the company could run out of cash next year.
It has a huge cash flow problem and with all the cuts it could spiral down to nothing very quickly.