Nokia depends significantly on its partnership with Microsoft, a position that offers some kind of financial support today, but in the long-term it leaves the company exposed to some risks. Microsoft gives Nokia approximately $1 billion each year from for Windows platform support, the money helping to amortize the blow caused by the significant decline in Nokia’s market share.
The firm’s phones’ sales have been reduced by more than a half during the last two years, a particularly heavy hit being taken by the smartphone segment. With the margins in the phone business reduced, Nokia lost money during 2012 as it has raced to restructure its business impacted by a lower level of sales. The switch to Windows has not been totally completed yet and the success of the platform is dependent the consumer response to Windows 8.
The weak initial adoption could led developers to flee, which will eliminate a crucial support of the ecosystem. In addition, the success of Windows alone won’t ensure a sound future for Nokia, since the company also has to show that it can stand apart from other Windows phones manufacturers.
Since the end of the quarter, Nokia gained an additional 750 million euro through convertible notes, and another EUR 170 million through the sale of its headquarters building. Moreover, the stabilization of Nokia Siemens joint venture, together with the disposal of other non-core assets also improved the situation with liquidity. Nevertheles, Nokia might quickly burn through its cash, in case its plan with increasing Windows Phone’ market share fails.
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