In any downturn, there is a dilemma. Cut, cut and cut again until there is nothing left to cut? Or invest in new stuff and go for it…only to increase the risk, cash burn and probably shorten the time to collapse? Or give up, accept defeat and any offer of salvation going.
I began to have a twinge of sadness towards the once mighty Nokia who had to report yet again this morning another massive 24% drop in revenues. Of course, this sent their shares down another 5%. Nokia shares have fallen 90% since 2008.
As we all know, Stephen Elop (of the burning platform) bet the company back in 2011 on Microsoft. Sure, sales of their flagship Lumia phones were up 32% qoq. But, at 7.4m, that wasn’t by any stretch enough to compensate for the decline in sales of their dumbphones – down from 73.2m to 53.7m yoy. The FT calculates that is the lowest unit shipments for 8 years - when the market was just 40% of the size it is now. Wow, what a decline.
Elop said in his famous burning platforms speech that “the decision now is akin to a man torn between burning alive or drowning in icy waters”. The icy waters choice points more and more to a rescue in a Microsoft lifeboat.