Daily: The Nokia story gets worse by the day

Daily commentary

Nokia is finished in my view. It was clear before they switched to the Windows Mobile platform that their existing platform was not going to survive the onslaught from smart phones with Apple iOS and Android operating systems. However, the switch to Windows Mobile gives them some hope of salvaging the company as a handset manufacturer.

The latest news out of Nokia is that they are to fire 10,000 staff by the end of 2013 and the stock has been hit hard on the news. The latest results from Nokia have been horrible with losses for each of the last five quarters I believe. The company has now been cut to junk. What next?

I think network effects in the mobile space revolve around platform Apps and each platform’s cloud computing stickiness. Put simply, there are really few switching costs in the mobile space except sunk costs from App purchases and platform inertia. This is not Windows vs. Mac where your data simply could not port or you simply could not link in to existing networks. Today, data has become a lot more platform independent. You would think this favours Nokia’s eventual success given it’s existing sales channels. But I don’t think there is room for any more than two platforms given the weak network effects that do exist.

For me, that says RIM and Nokia are toast. At least Nokia can be bought out by Microsoft. RIM is flying solo and will crash and burn.

That’s it. Here are the links.

Link commentary

Most of the links are on Europe but there are a few other threads. I would highlight the following, especially with the foreign-language links.

Spanish banks are borrowing a record amount from the ECB, demonstrating that they have been shut out of the inter-bank market. The thinking behind the Spanish bank bailout was that giving them more capital would solve this problem. But the thinking was extremely short-sighted because it has put Spanish sovereign debt at risk. A German article below blames the German government for this blunder. Merkel blames the whole thing on an "irresponsible decade" in Spain in her most pointed display of moralism that I’ve seen.

Another thread that I think is important is the one from De Standaard in Belgium telling us that US President Obama has been calling European leaders to voice concern at their dithering approach. He is clearly worried about the impact on the US and his electoral chances. Will his efforts matter in the end though? Van Rompuy belt met Obama over eurocrisis – De Standaard

India continues to be a concern. May inflation came in at 7.55% and that puts India in financial repression territory with China and most of the developed economies. Inflation adjusted rates in all the se places are negative. I still don’t see why the market monetarists think the fed is being ‘tight’. Governments around the world are being paid to borrow money. It makes no sense. India’s May inflation picks up ahead of expected rate cut | Reuters

Also note that Marc Faber is saying what I have said about the relative value of European equities. Obviously, if we get a disorderly situation, equities are going to take it on the chin even so. Why Marc Faber the "Gloom and Doom" Man Is BUYING European Stocks :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

Nokia cuts 10,000 more jobs as losses deepen | Reuters