Nokia (NOK), Microsoft (MSFT) Deal All of Nothing?

Nokia (NYSE:NOK) filed a 273-page annual report that includes a number of details about the expected risks and possible benefits of its decision to adopt Microsoft's (Nasdaq:MSFT) Windows Phone 7 as its primary smartphone platform.

Some think it's an all-or-nothing bet, and Nokia could easily be devastated, "if only one of 69 domino pieces falls," as Motley Fools says. Windows Phone 7 also depends on Nokia, as Microsoft's commitment is unlikely to encourage any other companies to compete with Nokia. Competing against Nokia with a WP7 phone would be business suicide, added the writer.

Here are some of the risks Nokia listed in the report:


•"In choosing to adopt Windows Phone as our primary smartphone platform, we may forgo more competitive alternatives achieving greater and faster acceptance in the smartphone market. If we fail to finalize our partnership with Microsoft or the benefits of that partnership do not materialize as expected, we will have limited our options and more competitive alternatives may not be available to us in a timely manner, or at all."

•"The Windows Phone platform is a very recent, largely unproven addition to the market focused solely on high-end smartphones with currently very low adoption and consumer awareness relative to the Android and Apple platforms, and the proposed Microsoft partnership may not succeed in developing it into a sufficiently broad competitive smartphone platform."

•"The Microsoft partnership may not achieve in a timely manner the necessary scale, product breadth, geographical reach, and localization to be sufficiently competitive in the smartphone market."

•"We do not currently have tablets in our mobile product portfolio, which may result in our inability to compete effectively in that market segment in the future or forgoing that potential growth opportunity in the mobile market."

There are also rewards, as Nokia said the deal will drop Symbian over time but should still be able to sell about 150 million more Symbian phones in the years to come. It is hopeful that it can transition 200 million current Nokia users to a Windows smartphone. This year and next are expected to be transitional years for Nokia: "During this transition, we believe that our Devices & Services business will be subject to significant risks and uncertainties," Nokia states. "Those uncertainties, among others, include consumer demand for our Symbian devices and potential market share losses as competitors endeavor to capitalize on our platform and product transition. Therefore, we believe that it is not appropriate to provide annual targets for 2011 at the present time."

Nokia closed at Friday at $8.49, up $0.09, or 1.07 percent. Microsoft closed at $25.68, up $0.27, or 1.06 percent.




Source