Ina Fried

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Nokia CEO Elop Lays Groundwork for New Strategy, Hints May Be Open to OS Switch

Although Stephen Elop is waiting until a Feb. 11 investor meeting to fully outline the company’s new strategy, he offered a few tantalizing hints during Thursday’s earnings conference call.

Specifically, Elop talked about his perceptions of the company’s strengths and weaknesses and what that new strategy must accomplish for the company to turn around its fortunes, particularly at the high end of the market.

“There are clearly some gems upon we will build Nokia’s strategy,” Elop said. At the same time, he said the company must move faster than it has if it hopes to regain lost ground. In particular, Elop said the company must have a better strategy around operating systems.

“The game has changed from battle of devices to war of ecosystems,” Elop said, adding later that “Our industry has changed and we have to change faster.”

Elop hinted at a change in the company’s strategy for the high end, which has focused on the Symbian operating system with a planned shift to the mobile Linux-based MeeGo operating system. He didn’t give specifics, but did draw a distinction between the low and high ends of the markets, suggesting a dual-OS strategy may still be the plan.

At the high end, he talked about the importance of developers and services, while at the low end, he said, the key characteristics are brand, scale, price, distribution and speed. Elop also noted that because of different chipsets, it doesn’t always make sense to serve the lower end of the market with the same operating system as is used for top-end smartphones.

Although Elop didn’t name any names, he did talk about the need for the company to “build or join a competitive ecosystem,” suggesting that it might be open to shifting to a competing platform. And while he wouldn’t confirm such a move, he said that the company could pull off such a switch because of its strong brand and relationship with operators.

Among the possibilities that have been suggested are Android and Windows Phone 7. The company has also canceled or delayed plans for two U.S. smartphones, suggesting that a change may be afoot.

“We made a decision to not proceed as people thought we would proceed,” Elop said.

It has also suffered delays of its E7 smartphone, which was to ship last quarter and now isn’t expected to contribute meaningfully to the bottom line until the second quarter.

The new strategy, Elop said, must be one that can “re-open doors” in markets such as the United States, where the company is weak.

“Clearly there is a pattern of disappointments in the United States,” Elop said.

Earlier in the day, Nokia reported that December quarter profits fell 20 percent as the company “faced significant challenges” and lower margins.