- Nokia announced recently in its investors meet in
Amsterdamthat Mobiledevices convergence with Internet as next big growth opportunity and would like to transform itself as Internet Company.
- Yahoo in 2006 has not performed well to the expectation of investors and also compared to competitors .which has lead to not only changes in yahoo management team but speculation that it is up for sale .Speculation about Microsoft buying a stake in Yahoo was one such news .
Above 2 points are facts combining them lead to the speculative topic for this posting.
Nokia as you all know is the no1 mobile phone manufacturer with around 34% market share. It has around 90 billion $ market capitalization with more than 10 billion $ cash reserves in spite of nearly 3 billion $ annually it spends in share buyback programs. So pure numbers terms it looks like a great company to invest in .But unfortunately the share prices is showing no signs of growth in spite both top line and bottom line for the company is growing quite decently, compared to other players in its industry, of course it pales compared to growth shown by Google .But the basic reason being simple that they are in totally different industries. Google ,Yahoo and MSN are in what is called as xSP or internet based services be it search,e-mail etc segment which are growing at average more than 30% with nearly 50-60 % margins.Were as Mobile phone business though growing at 15% worldwide but much of the growth is coming from low margin business in developing nations so basically dragging down the overall margins even for industry leaders like Nokia infact that is the reason for bad performance of Nokia's share .But if you look further down the line at some point most of the internet services are going to be accessed by mobile devices as both mobile networks speed and device capabilities improves which presents huge opportunity for growth .But it not only provides existing internet big players like Google, Yahoo and Man’s to extend their services to mobile but also provides opportunity for new players to enter and capture market same way as Google and yahoo entered the market .It is this big opportunity that Nokia was talking about in Amsterdam and that it would like to take a big pie of that market .Accessing Gail through mobile phones, Uploading pictures taken by mobile phone directly to photo sharing websites like Flicker are just few example of services that are available in few high end handsets that would be common services in all majority of mobile devices.Nokia's N series high end devices already come with preinstalled software to all the above listed services and many more .Presently Nokia is partnering with Yahoo, Google,eBay to provide those services but in future as it rolls out similar services across all its portfolio it would definitely would like to have those pre installed services to be its own so that it can capture more value in the chain .The reason why it is not launching rival services but partnering with existing players is simple
- Existing players have great brand name already for those services
- Nokia doesn’t have expertise in those service area and it takes time and effort before it has those expertise in house
- Most importantly today’s mobile internet service market size is not big enough to provide pure mobile internet services it has to be in conjunction with regular pc internet services.
So big question is what will Nokia do in future, definitely Nokia don’t want to miss out next big mobile internet service opportunity but just partnering with existing xSP players .so option is either build its own services which is expensive and risky or just buy existing player though its expensive .So my bet is that it might take the acquisition route .so next question is which one, among the big players who have complete portfolio of services namely Google,MSN and Yahoo only Yahoo is potentially up for sale. And more importantly among the big three only Yahoo has community based services at core which fits quite well with mobile internet services where media and other content sharing is at heart and search is one service unlike PC internet services where search is heart and the key .