I’m really fed up with this ****. I’ve been pushing this (for over half a year) to face of Tomi Ahonen – that he reported himself Nokia’s market share drop Q3-Q4 2010 (he wrote about it in January 2011). Let me try to squeeze it to few captions from Tomi Ahonen himself:
“Previously, in most quarterly results, and most annual results, Nokia market share in all mobile phones, and in smartphones, was very stable. Thus Nokia’s growth numbers would be roughly in line with the industry growth number. If Nokia’s number was a little bit below the industry overall growth number – like from Q4 2009 to Q1 2010 – then of course Nokia’s market share would dip a little – one or two percentage points from one quarter to the next – and if Nokia performed better than the industry – as it did last year from Q1 to Q2 – then correspondingly Nokia’s market share would gain one or two percentage points. This is ‘normal’” [1]
“In June of 2010, after Q2, 2010, Nokia’s smartphone market share stood at 39%. In Q3 it fell dramatically to 33%. Now in Q4 it fell further to 28%. Yes. In only six months, Nokia’s market share in smartphones fell from 39% to 28% – Nokia lost more than one quarter of its total market, in just six months!” [2]
“This does not happen anywhere! When Toyota the carmaker had its global recall problems with its breaks, it did not lose one quarter of its total market in a year, far less than in six months. A car-maker will have a great year if they pick up one tenth of their market and may have a horrid year (like Toyota did) if they lose one tenth of their market in one year. When Sprint-Nextel the US telecoms carrier/operator made its famous marketing blunder of ‘firiring the Sprint 1,000 customers who complained too much’ – Sprint experienced an instant exodus of customers, but it did not lose a quarter of its customers in a year, it lost about a tenth. When Motorola experienced the iPhone effect and suddenly the Razr went from the hottest phone on the planet to the undesirable, Motorola lost one quarter of its customers – in one year, not in six months.” [2]
“This level of Nokia market share loss is pretty much unprecedented. I have been a close follower of global business for over thirty years, I honestly do not remember any such instance in any industry where any major global brand lost a quarter of its total customer base in a period of only six months. Even airlines with air crashes or devastating strikes do not suffer this badly. Cars with ‘unintended acceleration’ (ie ‘killer cars’) like Audi experiences in 1995 did not destroy a quarter of their customer base globally in six months.” [2]
All this from Tomi Ahonen in January 2011, before Nokia switched to Windows Phone. Now this is what I have been pushing against Tomi’s face for over half a year: he said himself that one or two points of percentage is “normal” and 25% drop in half a year “does not happen anywhere“. So something catastrophic happened at late 2010 and he admitted it himself too!
After Nokia switched to Windows Phone, Tomi Ahonen started writing about unit sales and telling how awesome unit sales Nokia had. Market share was forgotten (unless decline was mentioned from Q4 2010 onwards). So what is the most latest status?
“Nokia invented the smarpthone so it started with 100% market share. It is predictable that Nokia would see market share erosion, gradually, over time, as the market drew new competitors, as happens with any new market. The Nokia average rate of market share decline had been historically be about 4% or 5% per annum, and guess what it was in 2010? Exactly to form, in year 2010, Nokia market share (annually) fell from 39% to 35% ie a fall of 4% in market share points (incidentially, there was some shenanigans with that, Nokia’s previous CEO was caught buying market share ie boosting it by artificial prices that cut profits severely, an unsustainable problem which was part of why he was fired in the summer of 2010). Obviously Nokia’s annual market share erosion was so mild, it would not register in this Top 7, in fact nowhere near the Top 10 biggest falls in handsets.” [3]
Huh? I think the drop was not seen as “mild” in January 2011? I’m sure you still remember you reported it then?
Oh wait, you Tomi have also numbers to show us?
We have your numbers from January 2011, so what is it that you will use January 2013?
“NOKIA FALL IN MARKET SHARE ANNUALLY 2009-2012
YEAR 2009 – 39%
YEAR 2010 – 35%
YEAR 2011 – 16%
YEAR 2012 – 5%
Sources: Nokia quarterly data, industry analyst consensus, and TomiAhonen Consulting 2013
This table may be freely shared
NOKIA FALL IN MARKET SHARE QUARTERLY 2011-2012
Q1 2011 – 24%
Q2 2011 – 15%
Q3 2011 – 14%
Q4 2011 – 12%
Q1 2012 – 8%
Q2 2012 – 6%
Q3 2012 – 4%
Q4 2012 – 3% (est)
Sources: Nokia quarterly data, industry analyst consensus, and TomiAhonen Consulting 2013
This table may be freely shared” [3]
Nice pick, Tomi. So you decided to brush the ugly second half of 2010 under the carpet. Way to go.
But your readers remember you reported it already at late 2010/early 2011. So readers of your blog commented to you that market share dropped already in 2010 (just like you reported in 2011). That is very kind from them. And I think you did comment back for all those who wanted to correct you:
“To all in the thread
I removed several comments that were troll-like, that clearly had not read the actual blog article. I addressed Nokia’s previous decline in market share in smartphones – a natural occurance when you invent an industry and start at 100% market share. I also pointed out the natural rate of decline and showed that in year 2010, Nokia’s market share decline matched its historical average. You cannot take one quarter and compare to annual sales because of various fluctuations, the iPhone is launching only one phone per year, so it sees a huge jump with the new iPhone model and that quarter is artificially high (compared to the annual average rate) and there usually is one quarter Apple actual sales decline Quarter-on-Quarter, not to mention huge swings in its market share per quarter. As to Nokia, it saw decreases – and increases – in is market share in the quarters just before the Elop Effect.
As I clearly indicate using Nokia’s own shipment numbers, that Nokia 2009 market share was 39% and in 2010 that declined the normal level to 34%, there was no ‘collapse’ happening during 2010. But when 34% is exchanged to 16% in one year, that is a collapse. And so extreme, it is a world-record collapse in the handset industry.
Anyone who wants to come here post comments talking about Nokia collapse started prior to year 2011, has to address THIS BLOG ARTICLE AND FACTS IN IT, not post nonsense about irrelevant factors such as what happened with Symbian or some given quarter or some given rival. Nokia faced its totally normal rate of decline in annual numbers, from 2009 to 2010, in market share – the historical average decline that is normal for the market leader who invented a new industry 14 years earlier. Exact average in fact and suddenly in 2011, the bottom fell out of Nokia smartphones. The market share collapsed – in year 2011, not in 2010.
Tomi Ahonen 
” [4]
I.
Am.
Speechless.
Let me put that in a more descriptive form:
Sources: TomiAhonen Consulting 2010-2011
Nokia 2009 market share was 39% and in 2010 that declined the normal level to 34%, there was no ‘collapse’ happening during 2010.
–Tomi Ahonen, January 2013.
So what do we have in that graph?
- The solid lines (to bitter end of Q4 2010) are Symbian Market Share, Android Market Share and Nokia market share, all as reported by Tomi Ahonen in his blog for Q1-Q4 2010.
- Then we have dashed lines going to Q1 2011. Tomi Ahonen claims that there was consensus of leading analyst houses at end of 2010 saying “either Symbian or Nokia will continue as the world’s biggest smartphone OS/maker into the future, from a minimum to the end of 2011 for Nokia to as far as end of 2015 for Symbian.” [5]
- Therefore dashed line of Symbian Market Share is projected towards end of 2015 and lined to close (but still differ by 0.1%) the dashed line of Android Market Share at end of that year.
- Dashed line of Nokia Market Share is result of Tomi’s statement that Nokia was heading towards market share of 28% in Q1 2011. [5]
Realistic looking, huh?
And I do know Tomi says every now and then that Symbian lost market share in 2010 since other manufacturers abandoned it. That naturally means that Nokia’s percentage of Symbian sales increases towards the point those two lines meet. Tell me if you see any mentionable movement to that direction. This is full year, you know?
YES, Q2 2011 DOES LARGER DROP THAN ANY OTHER QUARTER DUE TO ELOP EFFECT, but it sure as hell did not start it! (Yes, Tomi Ahonen, we know you delete all comments that try to tell you this. That is why this blog exists.)
And Tomi, you can’t blame iPhone about the quarterly fluctuations as you wrote it yourself very clearly about 2010 market share collapse (the one “so mild” that you “honestly do not remember any such instance in any industry“) cannot be due to it:
“The Apple loyalist have been waiting to yell out – obviously, the timing issue for June 2010 is the iPhone 4! The most celebrated and most anticipated new phone of the year. This is perfect cause and effect. Q2 of 2010 had only a couple of days of iPhone 4 sales in the USA, the iPhone 4 had its first real quarter of sales in Q3, and the iPhone market share explosion mirrors Nokia’s crash in Q3. Almost perfect parallel. This must be the reason! Apple market share shot up 4% from 14% in Q2 to 18% in Q3, while Nokia market share fell from 39% to 33%. Yes, Apple grew 4 market share points and Nokia fell six points, but at least the vast majority of the reason for Nokia’s crash is Apple. Has to be!
That makes very compelling sense, for one quarter only. Now the theory breaks down in Q4. Apple market share declined from 18% to 16% – and Nokia further declined from 33% to 28%. If the two were linked, if in Q3, the sudden drop by Nokia was caused by Apple’s iPhone 4, then now that the iPhone market share has declined a little, then Nokia would have to have recovered roughly as much for Q4! It cannot be the reason. Yes, probably the iPhone 4 did take some Nokia sales but it also probably took some sales from Motorola and RIM and HTC etc in Q3. Because the pattern breaks down in Q4, we know it cannot be the reason. Nokia did not crash only one quarter, it crashed for two quarters straight – and in Q4, also Apple lost market share. The cause cannot be the iPhone 4 either.” [2]
Calling it FUD, twisting of numbers, intentional hiding of facts, falsifying the truth, you name it.
Liar, liar, pants on fire.
I’m speechless. He does not even bother to make sense anymore.
Tomi is such a liar, have to admit it.
I guess that since February 2011 Tomi’s intention has been to help Nokia by convincing everybody that Nokia should change its CEO. It is funny to see how the tone of his views has changed after February 2011.
My opinion on this subject is that it was already very clear in late 2010 that Symbian didn’t have any future as a high end SW platform. Thus Nokia made the right decision to abandon Symbian as the SW platform for high end devices
However, Symbian could have kept Symbian as “a milking cow” for mid and low category smartphones still for some time. So it was a mistake to abandon Symbian for those categories especially as it was known that WP was not ready to serve well lower smart phone categories. Or if the purpose was not to abandon Symbian, the communication from Elop was totally underrating regarding the status of Symbian in February 2011 announcement. He should have said “Symbian is a great success story in the first generation of smartphones and we will keep using this great HW resource optimized OS for mid- and low smartphone categories. At the same time we will improve our capability to address the requirements for the 2nd generation smartphone devices with a partnership with Microsoft”
So definitely Elop/BOD caused significant, unnecessary damage to Symbian phone sales either because of the bad strategy or bad communication, but in either case it is justified to criticize him/BOD for that mistake.
At the same time I think that claiming that Nokia should have just stayed with the old Symbian/Meego strategy is non-sense (Nokia could have kept Meego alive but it was much too risky to rely only on that as the future smartphone platform when Android came around). A root cause for all Nokia’s problems was that it was hanging for too long time with its Symbian/Meego strategy, while all other smartphones vendors, especially Samsung, switched to Android much earlier, and Nokia got late from that train. Imagine what the situation would be if Nokia had started to do Android phones at the same time as Samsung. Do you think in that scenario Samsung would have 10x bigger market share than Nokia today?
Don’t know if you have seen this yet, but good numbers:
http://www.kantarworldpanel.com/dwl.php?sn=news_downloads&id=113
Wasn’t it Microsoft who decided they wanted Nokia to exclusively opt for them?
How come MeeGo is considered risky by you, but WP not?
I never understood why Nokia didn’t have some kind of Android product line. Did they ever try internally?
@Fn0
Wasn’t it Microsoft who decided they wanted Nokia to exclusively opt for them?
Yes and they paid them a lot of cash for it.
How come MeeGo is considered risky by you, but WP not?
Because WP’s OS is being developed by the largest software company in the world with a long history of writing and selling OSes. Nokia MeeGo was an OS with deep conflicts between groups from a company that had several failures and was rapidly running out of money.
I never understood why Nokia didn’t have some kind of Android product line. Did they ever try internally?
The reason they didn’t do an Android was Google wasn’t going to give them any kind of exclusive differentiator. Things were going excellent for Google, they didn’t want to rock the boat to get Nokia onboard. Microsoft conversely offered a company that was burning money fast, a large cash incentive.
I am quite sure for example Samsung is just following the trend in the smart phone OS battle and focuses on the OS that is currently selling the best. If the trend was changing towards WP, Samsung would immediately shift their focus to WP devices. For Nokia, as long as they were still using their own in-house OSs it was somewhat understandable that they wanted to stay with them (Symbian and Meego) even when the trend started to move quickly towards Android (and iOS as well but that is not available for licensing). But as soon as they decided to use external OSs, it is an unnecessary risk to use only one OS that is not very trendy today and maybe will never become trendy. Another way to put this is that Nokia had all the capabilities to make competitive Android devices and all the channels to sell a lot of them, but now when they are using WP they are riskifying their entire business if it just happens that Nokia and Microsoft cannot change the trend and people don’t want to buy WP devices. I think that is a stupid risk no matter how much Microsoft has paid to Nokia to take that risk.
There is no reason to conclude that Nokia would have been the dominant Android manufacturer had they gone down that route. In 2009, Symbian devices made by Samsung and Sony-Eriksson were far superior to those made by Nokia.
I don’t know whether keeping Symbian alive would have kept Nokia in a much better shape.
Consider, the thing that kept developer’s interested was the Qt promise. But with MeeGo gone and WP the new high-end platform, there would have been no transition path for Symbian C++ code. All people’s plans with Qt would be moot as the amount of earn-back time would be severely limited.
As a result, there would not have been a massive developer uptake of Qt on Symbian, and no possibility of using available app numbers as a marketing tool.
Worse, the money for developers is not in cheap devices.
It is possible that Nokia would sell a bit more Symbian phones, but given the onslaught of cheap Android ones, I seriously doubt that.
Symbian was already irrelevant, the Memo made it obvious to everybody, but the market had already decided.
@Platform
Another way to put this is that Nokia had all the capabilities to make competitive Android devices and all the channels to sell a lot of them,
Nokia’s management disagrees with you on this. They didn’t believe they had the capabilities to be competitive, because they can’t get their component and manufacturing costs below or even in range with the Asian manufacturers. And they would have run out of money before they solved those problems.
but now when they are using WP they are riskifying their entire business if it just happens that Nokia and Microsoft cannot change the trend and people don’t want to buy WP devices. I think that is a stupid risk no matter how much Microsoft has paid to Nokia to take that risk.
You are thinking about a healthy business taking a huge risk. That wasn’t the situation. Nokia was in a tailspin. Without the cash they likely go broke. If you face an 80% chance of bankruptcy, a plan that cuts it to 30% is decreasing not increasing risk.
If Android wins, if ultimately the way people build phones is to: use generic integrated parts, manufacture them in standard ways and throw on Google’s generic OS then how exactly is Nokia supposed to compete? Under the Android scenario there is nothing Nokia can do, they lose.
I have a theory about them going up market, but Nokia itself has never seen itself in that light. Elop and other people in senior management have given great interviews about this. They considered the other obvious choices and picked the best.
“Yes and they paid them a lot of cash for it.”
At the cost of a possible gigantic market share loss due to Osbourne and Ratner effects. Was it worth it? That’s the question we should see answered.
“Because WP’s OS is being developed by the largest software company in the world with a long history of writing and selling OSes.”
Largest doesn’t mean shit. Long history doesn’t mean shit either. I can come up with such fallacies as well.
I can give you examples of partnerships from Microsoft where their partner signed an exclusive deal and the company went south. Ever heard of Rick Belluzzo?
I can also just fine copy that reasoning of yours, but I’m trying to think outside of the box here.
“Nokia MeeGo was an OS with deep conflicts between groups from a company that had several failures and was rapidly running out of money.”
Yes, yes. I read that story with internal details. But this doesn’t justify the decision. What if they went for Android and MeeGo instead of WP?
“The reason they didn’t do an Android was Google wasn’t going to give them any kind of exclusive differentiator.”
Yeah, I heard that one too, yet Samsung is differentiating themselves just fine, and selling their smartphones like hot cake, profitable. If its about profit and market share, where are we now? 5% is differentiating yourself? My point here is I really don’t see why Nokia couldn’t have come out with a product such as the Samsung Galaxy S series.
My hope was the population on this blog would show some unique light on the situation. Unfortunately with this type of thinking its just drones with the mantra from the proponents of Nokia’s current strategy. Lets try to think outside of the boxes.
At the cost of a possible gigantic market share loss due to Osbourne and Ratner effects.
There are two arguments
a) Should Nokia have stuck with the MeeGo strategy
b) If not should Nokia have gone for a multi platform strategy.
c) If not should Nokia have picked Android either instead or in addition to WP
The Osbourne / Ratner issue only applies equally to a switch to Android or a switch to WP. Once Nokia was going to abandon MeeGo and Symbian Elop had to move an entire company that was strongly emotionally invested in these platforms off these platforms. He would have had to use the same sorts of powerful language. And he would have had the same kind of blow back.
Look years later you still have intelligent people arguing the MeeGo was the right choice or the situation was desperate even though tons of credible people have been very explicit as to how MeeGo had gone off the rails.
I can also just fine copy that reasoning of yours, but I’m trying to think outside of the box here.
Android is outside the box?
My point here is I really don’t see why Nokia couldn’t have come out with a product such as the Samsung Galaxy S series.
Because Nokia does not have a top notch parts business. Nokia has to pay more for parts, borrow at higher interest rates and pay more for labor and manufacturing than Samsung. An equally good phone without some edge comes in higher priced. Samsung can be profitable selling phones at Nokia’s cost. Go up directly against Samsung with differentiators and they lose. Try and build differentiators on top of Android and they are going up against Google in programming and cloud services.
Microsoft was offering advantages, Google wasn’t.
Largest doesn’t mean shit. Long history doesn’t mean shit either.
Under that argument Nokia isn’t holding any cards. Of course largest is important. Microsoft can throw tremendous money at OS development, and can get levels of developer attention that Nokia can’t touch.
Microsoft sell about $75b a year right now, at a 36% operating margin. Starting in about 2002 Nokia’s revenues were growing but only at the expense of flat to slightly down margin. Microsoft’s through an entire year’s profits at Nokia day one as a signing bonus, and that’s not even including the cost of developing the OS.
I can give you examples of partnerships from Microsoft where their partner signed an exclusive deal and the company went south. Ever heard of Rick Belluzzo?
If you mean SGI, they never had an exclusive. None of the other Unix vendors made it either, except IBM and they run the AIX for the consulting deals. Linux and Microsoft killed the server business, Apple and NT took the workstation business.
But I’m not going to defend Microsoft as a great partner. Microsoft stabs their partners in the back all the time. I’m not saying Microsoft is perfect, what I am saying is Elop made the best of a very bad situation. And failing to realize that it was a very bad situation is why people don’t understand Nokia’s position.
@CD-Host
Of course if it very difficult to change the strategy now but do you think Nokia’s management with its great wisdom had chosen the current strategy if they had known how it is actuall going to work (Tomi’s picture shows the current state quite clearly):
It is hard for me to understand how Nokia can produce more competitive devices using WP than using Android. It is quickly loosing the economics of scale when the volumes are going down as a result of WP’s low popularity.
We have now seen for two years how the current strategy is working. My question is: that is the differentiation that Nokia has achieved with WP that it could not have been achieved with Android? It it definitely not the great camera feature. If it is the Maps application, I am very doubtful if it even makes sense to try to compete against Google in the maps area. After you have the maps data in place the Maps application is all about searching data from the net and map
it to the location, which can accessed from the Maps application. And that is the area where Google dominates. To my understanding the areas where Nokia can differentiate (e.g. camera, industrial design, mechanical quality, brand,
look and feel of the device) are all achieveable using Android as well as WP.
I don’t think that Nokia was doing a healthy business before changing its strategy. The main problem of the company was that its SW development capability was not competitive against Apple and Google. Another big problem was that
Nokia was using obsolete chipsets in its devides. I think it was the right decision
to start using external platforms on Nokia’s devices. But instead of dumping Symbian and Meego and making an exclusive deal with Microsoft Nokia should have:
- Let different SW platforms to battle with each other and start using those platforms (either internal or external) on Nokia’s devices, which consumers want to buy and the channels want to sell in different market segments
- Down-size Symbian and Meego organizations (read: take the fat away) but let them live and give them a chance to show how they can survive in the platform wars
I don’t think that in the new era of smartphone business in any circumstances Nokia could have kept its peak 29% market share, but it should have got much better than its current 3% market share.
Regarding components and prices, yes I admit that it is challenging to be competitive against Asian manufactures. On the other hand Nokia have also moved almost all of its HW integration and manufacturing to China and Taiwan,
which should be cost-wise competitive with Korea. Nokia is currently using standard off-the-shelf chipsets from Qualcomm in its WP devices and it could do the same with Android devices (or alternatively use chipsets from other vendors
like Samsung LSI or NVidia). But again, what is the advantage that WP gives to the cost effectiveness compared to Android?
@Platform
but do you think Nokia’s management with its great wisdom had chosen the current strategy if they had known how it is actuall going to work
That’s not an easy question. But the first thing is Tomi’s analysis of how it has worked is ridiculous. A lot of Nokia / Symbian’s sales were near, at or below cost. Those are to customers for whom the market has gotten even more competitive because of the introduction of low end Android. It is quite likely that Nokia jacked up gross margins on their Symbian business and that’s why they have been bleeding units. Combine that with shutting down most R&D cost for Symbian and they turned Symbian into decreasing cash cow. They might very well have generated more money from Symbian in the 2011-2015 then they had during those years of high shares and unit growth.
Nokia’s earning reports are still filled with restructuring charges and Nokia, like most of the players likes to keep meaningful numbers close to the vest. But that being said, I think Nokia is doing a lot better than it was, not a lot worse. I think the obsession with market share on both the pro and anti-Tomi boards is really misplaced. Most of Nokia’s marketshare as their performance from 2002 onwards shows was worthless. Turning worthless marketshare into a cash cow that funding their restructuring might have been the right decision. I’d need more honest numbers to know that.
But fact is, I’d much rather be selling 1m phones make $100 each than 100m phones making $1 each.
I’ll address more in next post.
It is hard for me to understand how Nokia can produce more competitive devices using WP than using Android. It is quickly loosing the economics of scale when the volumes are going down as a result of WP’s low popularity.
Nokia doesn’t make many of their own parts, they are buying mostly Android parts. They have the same economics of scale they’d have in an Android phone. There scale is fine for good shipping, and they don’t offer services. The only thing that might be going up based on reduces share is manufacture / assembly cost and not that by much because it is quite low.
In terms of how they can produce more competitive devices using Windows Phone.
1) They have the differentiator of a different OS. Which means that people don’t directly compare specs but rather they pick up new sets of advantages and disadvantages. Right now the 920/820 are only competing with the HTC 8X (excluding the Samsung and HTC 8S). And Nokia is winning there on AT&T.
2) They have Steve Balmer negotiating on their behalf who carries a lot more weight than Stephen Elop. For example the last quarter they likely had a higher subsidy on AT&T and Amazon than Apple, and a pretty good one for the 822 on Verizon. That worked out to probably an extra $150 / phone. The result is that in the USA they have been supply not demand constrained.
3) They are picking up licensing deals for technology. Some of the technology in the HTC 8X is Nokia’s and licensed. Getting to own part of the WP OS means they have revenue streams even if Nokia’s phones themselves fail. Nokia pulls in about $8 for every Apple phone sold based on previous licensing deals, which has likely been one of things that kept them afloat.
4) It gives them entrance to the 1st world business market which is hostile to Android. For mostly the same reason it gives them a better play in China. Right now Chinese Android phones are sold without the Google services, I suspect that’s going to be true lots of other countries too.
etc..
Let different SW platforms to battle with each other and start using those platforms (either internal or external) on Nokia’s devices, which consumers want to buy and the channels want to sell in different market segments
Well in general the last thing in the world I think Nokia needs is less focus and direction. Nokia does not have unlimited resources for marketing and PR. In terms of the channel wants to sell, I don’t think there is any doubt the channel (at least in the USA) is thrilled to have a viable Windows Phone and is working with Nokia impressively to make this happen. Since they are supply constrained I assume that’s happening other places to.
As far as what customers want to buy. Consumers don’t care about OSes. They care about features and usability. Moreover, Android has terrible customer satisfaction numbers, next to Apple. They are just awful and they are going to stay awful because of the open nature of the platform. Android does well because
1) Google’s services
2) the other OSes like Palm, RIM and WP6 died
Nokia isn’t strong in cloud services, so I’m not sure how they build a better Android phone in that respect either. The company that is set to make money on Android is Google, based on advertising revenue not the handset manufacturers.
But more importantly, Android customers and Apple customers aren’t the same customers. There’s comment now that I think sums it up nicely. Apple does 11% of the unit volume, 40% of the revenue and about 90% of the profits from the handset industry. Socio-economically Apple customers are older and wealthier, and thus less price sensitive. That’s the customer base Windows phone is going for.
The other 89% prefer cheap mostly. Now that 11% is growing and might become 20% with time. The most likely way that grows is corporate accounts. Nokia / Microsoft are excellent positioned to take that market.
Down-size Symbian and Meego organizations (read: take the fat away) but let them live and give them a chance to show how they can survive in the platform wars
I don’t think MeeGo could have been downsized. Apple and Google both spend a fortune on OS development and eco system support. Microsoft is willing to spend that money. Without spending a lot of money MeeGo isn’t viable as a mainstream OS (Note: I’m not saying Jolla isn’t viable, Jolla can go after niche markets in a way Nokia can’t). You either play or you don’t play.
Now in terms of should they have stuck with the MeeGo strategy. I think that’s a more sensible than going to Android. But the real problem with MeeGo was the MeeGo team and the Symbian team were pursuing opposite and irreconcilable strategies when it came to MeeGo. Symbian’s product team did not agree with the Qt / TrollTech philosophy of software development. Which means that by the time Elop inherited the company there was no viable MeeGo strategy. It is possible that if he spent his time focusing on MeeGo and forcing the needed compromises he could have made it in time before Nokia’s huge burn rate kills the company.
But if he did that, there would have been no time for any missteps. A restructuring, what you are calling trim the fat, is incredibly distracting to employees. You aren’t going to get better and more work from a workforce that distracted. I can see the argument for sticking with MeeGo but I think if I had been on the board I would have voted to kill it.
____
In terms of Symbian they did let it live, it does live and it is generating money for them. If by live you mean another generation of the Symbian OS, they did that the Symbian^3. That being said, Symbian was clearly already in deep trouble when Elop arrived.
Down market even further, evidently series 40 (Java ME) phones are doing quite well and generating some nice profits. That’s an OS that might be worth continuing development on.
Wow.
I was going to bed but checked here for comments. Lots of text from CD-Host (good one, as usual). I tweeted about that since it would be a shame if this get only read by me. One point to add (about the graph from Tomi):
@PlatformWarrior:
I usually counteract that specific graph by using the one from @Asymco. You are totally correct on Nokia having lost huge amount of sales (unit-wise less in high end than the massive loss in low end). However, if we look at Asymco’s graph, it opens one question regarding Symbian:
RIM here had equally increasing sales to the end of February 2011 and their sales collapsed identically while they pushed their own platform (compare to Nokia using Symbian/MeeGo solely).
And HTC went for your proposal, they have done both Android and Windows Phone. Still their unit sales have plummeted as like Nokia’s and RIM’s.
Samsung exists as so different from ANY other player in the field that it is better to question what Samsung has done than what Nokia, HTC, RIM or whoever else should have done.
P.S. PlatformWarrior, if you wish I can edit your comment to have image embedded too.
Thanks for the recommend anon
Samsung exists as so different from ANY other player in the field that it is better to question what Samsung has done than what Nokia, HTC, RIM or whoever else should have done.
Well that’s easy. Samsung was primarily focused on a parts business. The handset business existed mainly to move parts inventory. So Samsung could sell some parts at a profit and where they couldn’t move the rest at cost through their handset business. This meant they could run a handset business at break even and still effectively make a ton of money.
I don’t see how HTC or Nokia completes with that.
was symbian great yes it was till N95, what killed it Nokia itself how could they have released something called s60 version 5;every single s60v5 in market destroyed Nokia’s and Symbian’s perception as brand. Whe n8 came out people were scared of symbian, and correctly so symbian still had some basic flaws. With symbian 3 Nokia again lost the plot they sud have belle features since day 1; and though they claimed for 250 improvements the browser was shiit, stability issues were still there. This brinbs me to an interesting observation that no matter how good symbian was it has huge stability problems …even n95 or the nokia 3230 used to hang freeze restart, so that was symbian’s legacy btw.
Another great point is every product has its time… Symbian was developed for an era where u had meagre HW, 320 Mhz CPU and 16 MB free RAM and it provided desktop like features on mobile ‘LIKE’.
But now your smartphone has dualcore CPU and 1 Gb RAM just like ur laptop or PC they are same in terms of hardware think about it any smart phone is just a miniature PC or Laptop and so are these new smartphone OSes, they provide you desktop class experience on mobile ‘desktop class’…look at safari in iOS, IE in WP or chrome In android….the app integration, cloud services where are they leading us.
Symbian fueled an era of early smartphones that complemented PCs but now these generation of smartphones fuelled by WP and iOS will replace them.
So change is good it’s interesting its exciting.
Wish the best for Nokia they are incredible great champions genius and adorable innovative brand but don’t lament for Symbian it had it’s days of glory. So symbian R.I.P and most importantly dont get influenced by Tomi
@CD-Host
Thank you for your comprehensive answers although no matter how much I would like
to agree with you and believe in Nokia’s current strategy, I can’t.
The fact is that between different OSes, Android’s market share is roughly 20x bigger
than WP’s market share (I am sure Tomi will tell the exact numbers soon for 2012).
Nokia has had great brand for years in many market segments (although I admit that they badly ruined
their brand with several Symbian products, e.g. N97). Nokia has had great HW integration
capability, Nokia has had great channels to sell, Nokia has had great mechanical design, great
industrial design, great camera, and lots of other assets to be competitive in Android market.
If WP’s market share is 3% and Android’s market share is 60% (just as an example),
why on Earth Nokia stays voluntarily out from that 60% part of the total smartphone business, and shines only
in that tiny 3% market? A question to you: how small WP’s market share would have to be compared
to Android’s market share before you would admit that this strategy doesn’t make sense?
Or how long would WP’s market share have stay as low as 3% before you would admit that the current strategy doesn’t make sense?
And I am not saying that Nokia should dump WP, I am saying that they should try how big portion they can get
from that huge Android market. Another question to you: if a consumer goes to a smartphone store, and
there are Samsung and Nokia products on the shelf side by side, which one he/she would buy if they both
have the same Android version, Samsung has probably slightly more powerful CPU/GPU inside, but Nokia’s device
has better industrial design, better mechanics quality, better camera, and for many consumers – better brand?
You said that consumers don’t care about OSes. Maybe many consumers don’t care about OSes directly, but indirectly yes, because
they care what applications are available for their smartphones, and the applications developers who create
those applications care a lot about OSes. But again, no matter what those reasons are why consumers are favoring
Android over WP, the fact is that Android’s market share is about 20x bigger than WP’s market share and I think
Nokia should be in that market now when that market is hot (in the future it can be some other OS that is
dominating the smartphone market and Nokia should follow the trend).
Regarding my comment “Let different SW platforms to battle with each other and start using those platforms
(either internal or external) on Nokia’s devices, which consumers want to buy and the channels want to sell
in different market segments”: I didn’t mean that Nokia needs is less focus and direction, I meant that
Nokia should decouple it’s decision making for platform strategy and device strategy because Nokia is pretty much
out from the platform game now. Nokia has always got most of it’s revenues from device sales and that is what
should drive their decision making.
@anonymousexnokian
You used HTC as a bad example for the alternative strategy for Nokia. I think the problem with HTC is that
they haven’t manage to create products that are attractive enough compared to Samsung’s products.
But that doesn’t mean that Nokia would automatically have the same problem as HTC, because Nokia has several assets
that HTC doesn’t have as I described earlier.
And yes, you can edit my previous comment as you suggested, thank you for your help!
@Platform –
If WP’s market share is 3% and Android’s market share is 60% (just as an example), why on Earth Nokia stays voluntarily out from that 60% part of the total smartphone business, and shines only in that tiny 3% market?
2009 (before there was any Elop) Nokia did €40.9b in sales and earned €1.2b in profits on those sales, a 2.9% margin. If WP has a good 3%, of a 1b hone / yr market say Nokia has 75% of that Windows market and Nokia is earning 30% margins on WP with an average sale price of €400, you get double that what they earned during that good year. And that’s assuming 0% of low end phones.
But Nokia didn’t go into Windows phone to get 3%. BTW back in 2009 WP has 18% of the US market. The dive in Windows phone is because they fell behind.
because they [end purchasers] care what applications are available for their smartphones
The one thing we know for sure is Android smartphone users don’t care much about applications. We know this because Android, even while being 3-5x larger than Apple’s marketshare has ranged between 1/20th and 1/7th as large in app sales… i.e. about 70::1 ratio on a per customer basis. Further Android is popular in places like China where you can’t even get most applications.
Now my argument is that Android customers are drawn in by cheap hardware, the same strategy that Microsoft uses in desktops and laptops. And if that is the case Nokia can’t make money, because they can’t match much less beat the Asian competitors when it come to churning out so/so phones cheaply.
The US is a weird market because of the subsidy issue. So lets pick China. In the most recent quarter, for example, an Android handset costs 1393 Yuan (US $223.36) on average. The average price for an iPhone is 4523 Yuan (US $725.25), or roughly three times the cost.
Remember my comment from the last post about Apple:
11% of the marketshare
40% of the revenues
90% of the profits
That’s the market Nokia wants to be in. Nokia would be thrilled to have 1/5th of Apple’s profits. The Android market is precisely the sort of thin margin high volume market that Nokia is trying to escape. You may not like the fact that this huge chunk of the market is closed off but that doesn’t change the yucky situation they face.
You mentioned a few other advantages.
Nokia has had great HW integration capability
Maybe, but I haven’t seen this. Nokia is having trouble getting their phones to work on various LTE networks with CDMA support. They just got their ass beat by HTC in that regard, and Samsung is far better than HTC.
I don’t see the HW integration advantages.
Nokia has had great channels to sell
I have no idea about Nokia’s international channels. And right now Nokia is supply constrained so it doesn’t matter. But last year they were heavily demand constrained. If their channel was so good why couldn’t they move WP7 phones?
I’ll talk through the Samsung example in the next post.
if a consumer goes to a smartphone store, and
there are Samsung and Nokia products on the shelf side by side, which one he/she would buy if they both have the same Android version, Samsung has probably slightly more powerful CPU/GPU inside, but Nokia’s device has better industrial design, better mechanics quality, better camera, and for many consumers – better brand?
I’ll even give you the CPU, Samsung is happy to sell Exynos chips including to Nokia. Let’s assume the BOM of $200 and Samsung is making all the parts on their phone. So Nokia is paying $20 extra for the parts, about $5 extra on assembly, $5 extra for interest and say the camera is an extra $10. $40 in manufacturing costs.
So, just for manufacture Samsung can make the phone $220 while Nokia is at $260.
Now warranty, marketing, markups, fees to Microsoft…. lets assume add another 50%. So we are at: $330 for the Samsung and $390 for the Nokia. both of them selling break even.
Lets through a little margin in. Samsung doesn’t care much, they are making the money on their parts business, so they are happy at say 15% and they sell the phone for just about $390.
Now you pick. How much is the customer willing to pay for that Nokia sticker and the better camera? $10, $20, $100? Let’s be generous and say $100 so Nokia sells the phone for $490 and makes 20% hardware margins. So the best that Nokia can possibly hope for selling Android is to make so/so money.
And we can make this situation worse easily.
Samsung doesn’t need the hardware margin. They make their money from parts. So let’s say Samsung decides to drive Nokia out of the market and prices the phone at $330, customers are still willing to pay 25% extra for the better camera and Nokia sticker so now Nokia can sell at $412.50 and we’re back to the 2% margins from 2009.
or…
customers don’t think a Nokia sticker and a better camera is worth $100. Maybe they think it is worth $20. Then Samsung is at $390 and Nokia at $410 making a 3% margin.
or …
combine the two and Nokia can only sell the phone for a loss.
Nokia cannot beat Samsung selling a similar product
Nokia cannot beat Samsung selling a similar product
Nokia cannot beat Samsung selling a similar product
If Nokia had their own high end hardware, it would be
_____
And BTW all this applies equally to Windows Phone too.
Now lets talk Nokia’s real advantages
1) Nokia has a close relationship with the OS vendor and is their flagship product which is a position Samsung can’t get because of their close ties to Android. Microsoft gets them primo deals like huge subsidies from AT&T and Verizon. While does allow them to compete.
2) Microsoft has all sorts of server support business and Nokia starts landing contracts based on Dynamics, SharePoint, mobile BI applications… which cannot or will not ever be ported to Android.
3) Nokia is Europeans. Europeans products are hip in a way Asian products aren’t. Nokia stops competing for the bottom of the market and goes after Europhiles who don’t like the fact that their mom also uses iPhone.
These customers allow Nokia to sell the phone at Apple’s prices, say $650, which gives plenty of room for better parts and lots of margin.
etc…
So now….
how small WP’s market share would have to be compared to Android’s market share before you would admit that this strategy doesn’t make sense?
I don’t think it matters. It may very well be the case that Nokia can’t make money in handsets, the gig is up. But it is certainly the case that they likely can’t make money in Android handsets. If Windows phone fails, then Nokia, if they are still in business or in the handset business has to try something else. But Android, once Google made their decision not to support Nokia is not an option.
@CD-Host
Yes, I admit that Android market is a low profit market but the same is true for the dump phone market where Nokia is now struggling against cheap Android devices. Following your logic why do Nokia want stay in the dump phone market but not enter the Android market, especially when those two markets are actually being merged together? Nokia has been traditionally present in all price categories and that has made its brand strong and volumes high in order to get benefit from the ecomics of scale also for the high-end market segment. Now you are saying that Nokia should voluntarily give up the high volumes – low profits -business and try to become like Apple focusing only on the high margin product categories. I don’t believe that Nokia can do it. Nokia is not like Apple which has ability to differentiate and be competitive using in-house SW and HW development. Using WP is not really a differentiator from consumer’s point of view as Microsoft will surely welcome other OEMs than Nokia to use WP as well. Microsoft is currently lacking support from OEMs and they are forced to start making WP devices themselves (they already launched a tablet device and it is expected that they will soon release a smart phone device as well).
Regarding competitiveness against Samsung, before Android was introduced Nokia and Samsung were both using Symbian and Nokia was quite competitive against Samsung when using the same OS. Can you describe what has changed so much that Nokia is now totally incompetitive against Samsung when using the same OS (so incompetitive that it is not worth even trying to compete against Samsung in the Android market)?
@platform
but the same is true for the dump phone market where Nokia is now struggling against cheap Android devices. Following your logic why do Nokia want stay in the dump phone market but not enter the Android market
They don’t want to stay in the dumb phone market. What they are doing is profitable shrinkage, that is trading their user base for cash. They are charging above market prices for the phones, that is getting a decent margin, at the expense of losing customers. That’s a good exit strategy and one that makes sense.
Moreover, in the case of the dumb phone market Nokia’s position is closer to Samsung’s, they have parts. Dumb phone parts are made in factories that are far cheaper than smartphone parts. There are no $2b factories being used to make parts for $50 phones.
Regarding competitiveness against Samsung, before Android was introduced Nokia and Samsung were both using Symbian and Nokia was quite competitive against Samsung when using the same OS. Can you describe what has changed so much that Nokia is now totally incompetitive against Samsung when using the same OS (so incompetitive that it is not worth even trying to compete against Samsung in the Android market)?
The complexity of the parts in particular the cost of the factories that make the chips. Nokia does not make their own chips, Samsung does. Conversely 10 years ago if anything the situation was reversed. Nokia cannot catch up in fabrications and chip design this decade.
Now you are saying that Nokia should voluntarily give up the high volumes – low profits -business and try to become like Apple focusing only on the high margin product categories. I don’t believe that Nokia can do it. Nokia is not like Apple which has ability to differentiate and be competitive using in-house SW and HW development.
I first off think that Nokia, to some extent, can do in house SW and HW development. But in terms of SW development obviously Microsoft can moreover can deploy far more developers that Apple or Google can come close to in complex vertical applications. At least for now Nokia is strongly identified with WP, so that Microsoft’s success is Nokia’s success. Now obviously Microsoft’s long term goal once they are successful would be to reduce Nokia to just another Microsoft OEM, Nokia’s goal is going to be to avoid that fate. It would be bad for Nokia to go through the hard years for Windows Phone and just as the gravy is about to hit: Samsung, Sony-Erickson, HTC, LG… all pile into the mix. But this is a different issue. I wanted to kill the Android alternative first.
I think Nokia’s strategy here is to have rights to crucial components and make money from licensing. Which is very similar to what Nokia did in the dumb phone market with the FRAND strategy for hardware. There may also be other incentives, for example Nokia might have a long term lower OS cost and this gives them a competitive advantage. As Microsoft jacks up the OEM cost of WP11 say, Nokia is still paying $10 and everyone else is paying $60.
___
Now in terms of hardware differentiation I think they can. You’ve already mentioned the camera. I think the case is also a place where they’ve already shown a huge impact. Northern Europe has a modern style which is associated in America, and I assume many other places outside Northern Europe, with higher end goods. For example, the most popular high end furniture store in my town is called Design Within Reach which sells this aesthetic to Americans at sane prices, but considerably higher prices than they pay for French or American style furniture. America in cell phones is finally moving past the basics, where just getting stuff to work is the driving issue to where phone fashion can matter a lot more to customers. The Northern European aesthetic is a huge edge for Nokia. And we know this is true because Nokia’s innovation of offering multiple colors was a huge selling point for the phones, stupid as that may sound. Microsoft BTW is going for a Northern European aesthetic in WP to rave reviews. The Android and iOS look and feel is already being beat.
But to my mind that’s still selling hardware. In general I don’t think Nokia should be focusing on being a hardware vendor but rather being a solutions vendor. They should up market. Sell a business solution of which hardware is just a component.
@PlatformWarrior
Edited.
I wish I had time to comment more on this subject. I took the time to read all that has gone through here and there are many points to make. But one thing I want to respond to:
before Android was introduced Nokia and Samsung were both using Symbian and Nokia was quite competitive against Samsung when using the same OS. Can you describe what has changed so much that Nokia is now totally incompetitive against Samsung when using the same OS (so incompetitive that it is not worth even trying to compete against Samsung in the Android market)?
First of all, Nokia was seen equal to Symbian. At 2010 it held 90% of Symbian sales. Anyone entering the stage looks like they are copying Nokia. No other manufacturer made significant dent with Symbian and Nokia’s largest rivals (in 2010, based on unit sales) were RIM (using BB OS) and Apple (iOS). Samsung started to grow when they adopted Android, but before that HTC (first in Android camp) was larger than Samsung.
So what next? As we saw in Asymco’s graph, Samsung sells 60M devices / quarter, Apple sells 25+M devices and everyone else (Android manufacturers included) sell single-digits. Table has turned. Othe Android manufacturers do not do all that well, Nokia would face same challenges.
Now let’s acknowledge that Chinese manufacturers make their way in China as they have domestic advantage. Windows Phone was probably most sold smartphone OS in Finland in Q4 – same thing except that China is HUGE and its population count for 19% of total world population. China Mobile alone has subscribers worth 10% of world population. Huawei and Lenovo will make noticeable sales for long time towards the future.
But now for rest of the market, app offering would have been THE reason for selecting Android. Competition-wise it would have been a nightmare. Nokia has always sucked in advertising. Apple commercial shows how you can remove red eyes from a photo, crop it and share it to Twitter “since it’s an iPhone“. At same time Nokia N8 could do all that same and send the photo to Twitter, Facebook, Picasa and Flickr “since Nokia never remembers to advertise“. Benedict Evans made excellent comment on Twitter recently: Samsung spends over $30 of advertising money per smartphone or tablet sold. Apple spends little over $3. I hope this is the source for his data as I have been also wondering if Nokia will ever understand how much better marketing they need. Currently Samsung Galaxy S III looks awesome as it can take a group photo where people’s smiles are smartly combined and then you have that same image shared through cloud service. Nokia camera extras + Skydrive even on Lumia 610 does the same. Do we see any of that on TV? Of course not.
Samsung spent incomprehesible $3 billion on advertising and over $4 billion in sales promotion in 2011. Asymco’s estimate was that they have increased budget by 25% for 2012. (In comparison, Apple spent about $1 billion in advertising 2012.)
From this starting point, imagine Nokia entering Android camp. It would be at least as challenging – if not even more challenging than their current uphill battle with Windows Phone. I say their choice was left pretty much between MeeGo and WP when it became clear they will get no special promotion form Google.
I don’t see why Nokia couldn’t compete within android sphere. There is no separate “Android sphere” and “WP sphere”. In the phone shop, there is just a smartphone sphere. Nokia is already competing with Samsung, just with an OS that doesn’t have momentum. The whole idea by using WP, Nokia is not competing against Samsung androids is delusional.
I believe there is a lot of people who like Lumia hardware but give up when they notice that selected applications – instragram, flipboard, bad piggies, temple run.. etc are missing. Microsoft and Nokia can throw money at developers to get “top 20″ apps ported, but when the port has been done, the top 20 has already changed to a different selection of apps. Worse, if they really get cut of Google mail, calendar and contacts.
Fundamentally all nokia needs to do is an android phone with less bugs and crashes than what the samsung androids have B)
With 3% of smartphone market share left and all in-house OS development gone, Nokia needs to stop pretending it can influence the OS market. It needs to build products with the most successful operating systems available.
@happosai
I completely agree with you and I don’t understand why Nokia has become a company that is suddenly fearing the competition so much that they want to voluntarily give up the market. I don’t think companies like Samsung, HTC and Huawei are unbeatable, all the companies have their own strengths and weaknesses. The current strategy looks like Nokia is expecting Microsoft to be a savior of otherwise so weak company that it cannot manage the competition alone. And we all know how loyal Microsoft has been to their partner companies in the past.
I think one of the most important things Nokia needs to achieve is to make them again attractive as a possible employer for talented, energic and ambitions people. If they will not succeed in that I am afraid they will never become successful again. I hope I am wrong but I am afraid that sticking with unpopular WP can give “a looser’s reputation” to the company, which talented people want to avoid.
BTW, another Finnish company Rovio is a good example of a company that doesn’t seem to fear the competition. Nobody could ever imagine the success that they have made with their simple game and associated products in a very competitive market.
@anon
Agree with what you wrote.
I don’t want to end up in moderation jail so I can’t fully link.
But I thought I’d mentioned that Microsoft is stepping up a little with the advertising.
Verizon web advertising is rather prominent: http://solutions.vzwshop.com/windowsphone/ and I’ve really liked Microsoft’s challenge:
http://www.windowsphone.com/en-us/meet-your-match-challenge
And there are some new celebrity commercials as well. I think they are rather so-so but they focus on “Kid’s corner” which is a Windows Phone differentiator.
Jessica Alba: http://youtu.be/WpBTr4mxfhA
Gwen Stafani: http://youtu.be/3CVBJ0FaCuU
3 by Cam Newton
Andy Samberg http://youtu.be/1_-HW6wMaUo
Kerry Walsh Jennings: http://youtu.be/-atZ7UMky6U
Sophie LaMontagne and Katherine Kallinis: http://youtu.be/VgQMKPXKMpQ
They are splitting 1/2 and 1/2 between HTC and Nokia.
______
In any case lets all remember that for the first time in a long time Nokia is supply constrained not demand constrained. Their problem for the last few months has been making enough phones, not selling phones. A far far better problem to be having.
@CD-Host
Please do fully link. Everybody on this forum has “get out of the jail free”-card. I’m going to hunt down that annoying “two links is a potential spam” – setting and kill it. :-]
EDIT: Found and seriously injured it. Limit is now 20 links.
@happosai
Instragram, flipboard, bad piggies, temple run.. etc are missing.
Do you really think they’ll be missing next year? Right now on Verizon’s website they are advertising their mobility solutions
* First responder (ambulance, firefighter, police in an emergency) applications
* Interactive educational robots
* EMR software for healthcare delivery
* Mobile software to reposition solar panels
* Waste management (garbage collectors) software
Now those are apps that in 2014, 2015, 2020 will not be on Android. And those are the apps that drive high margin sales, not Angry Bird. But even if it was Angry Birds, Microsoft Game Studios owns about 10 different high quality game companies, they can easily fix a shortage of bad piggies and temple run type games without it being a blip. As for Instagram, Facebook is not going to cut out Microsoft long term, and Microsoft already has Skydrive photo sharing integrated into the camera application.
Worse, if they really get cut of Google mail, calendar and contacts.
Yeah that would be a pity. What a serious threat, they might lose access to some customers who use a free web based email solution (like my teenage daughter) and in exchange is about all they get is access to the 50-100m people who pay $100 or more per person per year for an email calendaring and contacts system. One could mitigate that threat if only Microsoft had the most popular mail, contacts and calendar system on the planet, largest than all the rest combined twice over. Something which on license sales alone along with Sharepoint / Office generated $24b in revenues for 2012. And even if we didn’t consider Exchange, Outlook.com and Hotmail come in at 385m users while gmail has 460m, so they are still competitive.
But much more importantly. Google is in the advertising business. The whole reason gmail exists is to get information about people and opportunities to feed them ads. Android / Mobile handsets for Google are just a way of generating advertising revenue. That’s why Google is fine selling the Nexus phones at cost, they don’t want to make money in handsets. Whenever Apple has meaningfully threatened to reduce Google’s access to their user base, Google has caved. And they have to continue to cave to Microsoft for precisely the same reason. If Google ceases to be ubiquitous then Google’s core product is badly damaged. Android is a means to an end, the end is being able to correlate between different social services on multiple devices. Google has no reason to damage the end to advance the interests of the means.
But now for rest of the market, app offering would have been THE reason for selecting Android.
Then why is the Android app market so small (25-70x smaller per user than iOS)? Why does Android do well in China where the app market isn’t available?
Okay… I altered the time setting of the blog (moved it to Finland time zone) and apparently it will mess up comments for next 2 hours.
@Platformwarrior
Let’s remember Tomi Ahonen describing Nokia’s year 2010 (reference [1] of this post):
“The reality is that Nokia had been fighting in all three fronts, against very ‘weak’ rivals – many of which really ‘threw in the towel’ – Siemens, Philips, Panasonic – and others who were pretty clueless for long – Sony and Ericsson took years to get their act together – and Motorola got drunk on the Razr. Nokia HQ got to believe that they were somehow so smart, that they could fight a three-front war and win all three. That is not possible, not when you get real rivals in all three. Today clearly Apple and Google/Android are far ahead of Nokia in customer satisfaction; Samsung, Sharp, Apple etc are more innovative than Nokia in the speed corner; and ZTE, Huawei, G’Five and even Samsung are beating Nokia in the price leadership corner. Nokia is not leading in ANY corner.”
Nokia never had real competition while everyone did Symbian. (Also said by Tomi in same blog post.) Perhaps one could say Nokia was afraid of the real competition they would face in Android camp. Perhaps they took the road that was sounding easier. Or perhaps Samsung really should be seen as too strong competitor to be competed with its own weapons.
@anonymousexnokian
Ollila said himself that Nokia chose a high profit – high risk -strategy. I think the strategy was based on the hope that WP will become more popular with the help of Nokia’s brand. That hasn’t happen, at least not yet. Android is democratizing smart phones no matter what. If Nokia refuses to be part of that development it will loose a significant part of the market in all price categories, including dumb phones. I believe that there are lots of consumers who would be ready to pay an extra cost for getting a North-European style Android phone with slightly better quality than Asian phones, so I believe there is a market opportunity for Nokia in Android market. But it looks like Nokia will stick with their current strategy so we will never know how the alternative strategy would work. Personally I feel sorry about that because I would like to own a Nokia device again, but I don’t like WP so I cannot buy Nokia.
And biggest downside in Windows phone (if you ask me) is – and has been – that it creates so strong emotions. It’s like opera – you either hate it or you love it. 40% of Yankee survey respondents hated it. About same amount loved it. That does not fit to gauss curve.
Nokia should focus on enterprise where phones are sold as complete solutions and emotions of a single employee do not matter. But that’s of course what our own CD-Host has said for half a year now.
@platform
I think the strategy was based on the hope that WP will become more popular with the help of Nokia’s brand. That hasn’t happen, at least not yet.
Actually with the WP8 it has happened. Assuming the whisper numbers are true Nokia was setup to be able to produce 2m Lumias / mo with 600k of them being the high priced 920s; 750k the 820s and 600k the 620s. And they have been selling all of them. Nokia is supply not demand constrained. Again based on rumors: Nokia is having to up their supply chain to target 37m for 2013 from the 30m target they had had.
What more do you want?
What more do you want?
I can guess the answer:
- 28% market share for Nokia and 32% for Windows Phone (as Nokia & Symbian had at Q4 2010)
- Nokia sales of over 28M smartphones/quarter (as Nokia had Q4 2010)
- Nokia net sales 12.7 billion / quarter (Q4 2010)
- Nokia operating profit (non-IFRS) 1.09 billion (Q4 2010)
…at least for anyone who takes “everything was fine before strategy change” approach, that is the expectation for all the years to come.
)
(insert sarcasm tags
@CD-Host
What more do I want?
I really hope that those rumours will be actually realized i.e. new WP8 devices are selling well. Nokia/MS have been announcing many times already that Lumia devices are selling great, but when the actual numbers have been published the result has been a disappointment, at least to me. So what I want see is the real evidence that Lumia sales volumes are really increasing. Let’s see that again in April when 1Q’13 results will be published.
Don’t take me wrong, I actually hope that WP will succeed. I am just questioning the huge risk that Nokia have taken by relying only on the success of WP in its strategy. I think Nokia’s fate doesn’t have to be the same as WP’s fate.
I think it would be good for the industry if MS could get a significant market share in the OS race. Having only Android and iOS dominating the market is not good for the industry. A key thing for making WP successful is to attract application developers to support it. Talking about that, it is not fully clear to me why there are so many variants of the OS : (Windows 8 for desktop, RT for tablets and WP for smart phones) and what does it mean for application developers? If I want to make an application that runs on desktop, RT and WP what do I need to do? Another detail that I don’t quite understand is why MS has decided not to support OpenGL ES in WP/RT? If you write a game for Android and iOS you can use common graphics code using OpenGL ES, but that is not the case for WP/RT, which support only DirectX. Qualcomm SoC’s definitely support OpenGL ES, so what is the reason why MS is not exposing that to application developers? Of course if you use a game engine, it can give you a unified HW abstraction but I think this kind of limitation doesn’t help MS to make WP/RT attractive for application developers.
I really hope that those rumours will be actually realized i.e. new WP8 devices are selling well. Nokia/MS have been announcing many times already that Lumia devices are selling great, but when the actual numbers have been published the result has been a disappointment, at least to me. So what I want see is the real evidence that Lumia sales volumes are really increasing. Let’s see that again in April when 1Q’13 results will be published.
There is a huge differences between “our sales are really, good we couldn’t be happier” and detailed problems with the supply chain where they are indicating they are trading off markets and having refresh problems.
Those just aren’t the same kinds of announcements. Also the analysts are all pretty consistent in the 23m to 39m range with most of the clustered 30-36m. This isn’t just Nokia. This is even people who think Nokia is incompetent or no longer has the pull when it come to supply chain management are buying into that range.
So 2013 looks good to me. I think everyone more or less agrees that Nokia is going to be able to sell every Lumia they can make, and the is only +/- 25% disagreement about how many they can make.
As an aside, 2014 from the “let’s sell handsets and not worry about strategy” might be very good too. I’m hearing think they are working on their supply chain to get to 55m and assuming that HTC doesn’t pull way ahead of them, or Samsung catch up, WP and the Lumias are popular enough they should have that demand. It is still not certain but I could see Nokia supply constrained right into 2015.
Obviously the proof is in the pudding but if moving units is what you want to see. Nokia’s won that battle. And I’m happy for Nokia to be getting the money. I understand you need to see the proof but the skies are (18 months out at least) clear. Now the real question for Nokia is having gotten through the worst part of this transition do they now want to really make money and get back to that 28% marketshare or do they want to repeat the mistakes that got them here in the first place.
@CD-Host
Talking about marketing, this one looks good: http://youtu.be/loaDvQXOyXU
Talking about that, it is not fully clear to me why there are so many variants of the OS : (Windows 8 for desktop, RT for tablets and WP for smart phones) and what does it mean for application developers? If I want to make an application that runs on desktop, RT and WP what do I need to do?
Win8 desktop = x86 based system
Win RT = ARM only system
Windows Phone = variant of Win RT with phone specific features
In terms of what you need to do, as long as you aren’t making use of platform specifics: do a little clean up and recompile against the appropriate libraries. I think Microsoft’s longer term aim to cut that down so that intermediate layer code runs on any of those systems but they aren’t quite there yet.
Another detail that I don’t quite understand is why MS has decided not to support OpenGL ES in WP/RT? If you write a game for Android and iOS you can use common graphics code using OpenGL ES, but that is not the case for WP/RT, which support only DirectX. Qualcomm SoC’s definitely support OpenGL ES, so what is the reason why MS is not exposing that to application developers? Of course if you use a game engine, it can give you a unified HW abstraction but I think this kind of limitation doesn’t help MS to make WP/RT attractive for application developers.
Well yes exactly. Open GL is an open platform for developers. Things written in OpenGL port easily between systems and thus don’t offer any lock-in advantages. Why would Microsoft want that? Microsoft bought Direct 3D 20 years ago to make Windows platform gaming have different performance criteria than other systems and thus make porting complex. It has even changed the hardware industry as most high end video cards sold are tweaked for DirectX. Arguably the entire reason for XBox was to get the high quality engines to be locked into DirectX. They are going to want to do the same thing with their phone platform.
Microsoft’s entire strategy for mobile is that it is part of ubiquitous computing. That’s going to be their unique advantage. That you can run the same application on your phones, tablets and desktops one seamless end to end experience. To make that happen, while still retaining lock-in they have to make sure people are using Microsoft engines.
This is where Microsoft is headed: http://www.youtube.com/watch?v=a6cNdhOKwi0
Notich how the applications move seamlessly from mobile to tablet in the hotel room.
Nokia needs to be focused on ubiquity across Microsoft devices not openness between Microsoft and non-Microsoft devices. I get that Nokia has always been a big supporter of open standards. And open standards are more popular with developers and customers for much the same reason. But that’s a cultural thing that they need to change. The open platform is Android, Google is the open platform vendor. Apple, Microsoft and possibly RIM all support walls.
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The appeal of DirectX will be to XBox and Windows gaming developers who are used to working with DirectX. Mobile developers who do casual gaming will use Hardware abstraction. Mobile developers who want to work low level and have written in OpenGL are probably going to stay away.
anon –
Definitely a good start: Nokia is designed to integrate out of the box with your business is terrific. I’m thrilled.
But… the commercial is flawed in execution.
The music is too repetitive.
The strong beats on the music nicely pair with high-points in the narration: smartphone, Microsoft, Microsoft standard, out of the box, perfect fit, malware protection, all day battery.
but then from about 20 second on they don’t punch.
There are problems with Nokia and Lumia. Americans do not know much about Nokia, Nokia needs to stop assuming they know who Nokia is. Those terms are never defined. For example when the narrator is saying “this is Lumia” the Nokia label is showing up. That causes mental discord, which is not the mental state you want someone in who is going to be watching the rest of the commercial. At the very least “this is Lumia by Nokia”. But that still opens up the “who is Nokia” question. So even better would be: “this is Lumia by Nokia of Finland. The world’s largest mobile cellphone manufacturer for the last 14 years”. Punch that high note on Finland. Finland immediately puts Nokia in with Mercedes, BMW, Gucci… it is going to make the rest of the “best of business” go down much easier.
The narration is in too much of a monotone. Given the poppy music it has a nursery school feel. I’d also go male for the narrator on a business phone preferably one with a tenor voice.
The opening starts off good
“This is Lumia, the world’s best business smartphone.” — good.
The top too icons are Office and Outlook — excellent.
But then the first visual they show after CNN is the Carl Zeiss camera — that should come later. They should have opened with those Excel visuals from around 44 seconds in.
Also I’d question the choice of CNN for the left Phone. CNN is moving in the direction of frivolous. I like Bloomberg for the right. Left maybe a more serious news source like New York Times, Washington Post or a trade publication.
Under the Bloomberg tile, the sentence isn’t grammatical English. Most people can’t read that fast but if they can they are wondering what S&P just said about May and trying to parse it not.
The next tile with drought and food prices under CNN is terrific. Great choice. I might try and take it up a step and have “wheat prices” rather than “food prices”.
The narration doesn’t match with the images when she’s talking.
Shown: Office start, Excel, Lync
Spoken: Outlook and Exchange, Word and Excel, Sharepoint and Lync
The left phone should show Outlook mail.
That pullup menu from Excel as :20 is brilliant. Great example of advanced functionality. I’d hold that image longer and maybe have another phone pull up a a menu. But then we loose that image and go to watching a video and the front screen for Linked-In and watching a video stuff any smartphone does.
from 0:30-45 The visuals during the security discussion are complex, boring and unrelated. They do a nice job showing off the look and feel of the interface but other than that they are distractors from the narrator’s key point about security advantages and integration. So this would be a great place for the camera visuals which are simple and thus don’t distract from the complex narration.
0:50-1:04 on charging goes on too long. People know what charging a phone is. Punch all day and wireless. I think can skip the pan to the battery indicator showing that the phone knows it is charging.
1:06 – 1:13 should be dropped. That’s too long a pause before “don’t compromise”
I’m not sure why the dune imagery gets used.
So if this sequence ended by 0;55 we cut right into
1:15 about “don’t compromise” and then it is pure 1 minute commercial.
You can even pick up another 2 seconds. Don’t show the website address for Nokia Business and then a box around Nokia. Just show the website, a view knows Nokia’s business website is associated with Nokia.
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I’m thrilled they are focusing on business more. I’m not an ad guy. They need to have ad guys building these things. Nokia gets a blank slate to build a brand identify. Americans are inclined to believes that Nokia of Finland engages in a relentless pursuit of perfection. Clean, beautiful, quality, honesty are the associations with Finland. The content of the commercial is excellent: we offer advantages for business that no one else does. It offers a lot of detail to back that up. But the execution screams slapdash and inexperienced which conflicts with the message of the commercial.
They gotta work on that.
@CD-Host
First, MS have been supporting OpenGL for years on desktop Windows in addition to DirectX. So they could do the same in RT/WP environment as well.
I believe in the gaming scene there are roughly two kinds of developers: the big houses that have been developing games for XBox and other games consoles, and then those smaller mobile developers who have been born to write code in embedded environments i.e. Android and iOS are the main target environments.
For the big houses it is not a problem to support both DirectX and OpenGL ES but it can be a big problem for a mobile developer, who may consider porting his/her application to RT/WP, but if there is an extra effort required for doing it, like converting OpenGL ES code to DirectX, he/she might not see the effort worth for the additional value.
So the reason for MS to support OpenGL ES is to attract those mobile developers to support RT/WP. I wouldn’t underestimate the importance of those small games/apps coming from mobile developers. It is disappointing for many RT/WP owners to see a friend saying “Look what a cool game I have found from App Market for my Android/iOS device” and then notice that the game is not available for RT/WP.
Maybe we should turn the question around: considering the small market share that MS currently have for the embedded application market, what is the benefit for MS to not support OpenGL ES in addition to DirectX?
@platform
First, MS have been supporting OpenGL for years on desktop Windows in addition to DirectX. So they could do the same in RT/WP environment as well.
Of course they could do the same. On the desktop during the crucial period of time when there was a switch to 3D they made sure the drivers worked better for DirectX than for OpenGL. So if by support you mean “actively and aggressively undermining the standard while still offering token support for the now undermined standard”. Yes, absolutely, Microsoft supports OpenGL for about 15 years.
So the reason for MS to support OpenGL ES is to attract those mobile developers to support RT/WP.
They don’t want them. Those developers are going to bring with them the cross platform Unix/Linux/Android culture. They aren’t going to follow Windows interface standards and they are going to follow a lowest common denominator approach because they want their application to run on iOS, a huge range of Androids and WP. The open system is Android. Microsoft is going to be somewhere 1/2 way in between Apple’s absolute focus on platform and Google’s wide open system. Apple’s classic, Thoughts on Flash, might make the other side clear.
This open culture, is precisely the same sort of PIA that Java developers were when they were trying to push through systems to knock Microsoft off the desktop and have Unix backends. Microsoft spent years killing Java. Why would they create the same problem on their mobile platform? Why would they want them to introduce that poison (from Microsoft’s perspective) into the veins of their ecosystem?
Rather what Microsoft will do, is expose some of those developers to the very attractive Visual Studio environment (arguably the best IDE around), their first class languages and compiler. Have some of them learn how to use Microsoft tools and become experienced in the Window’s libraries. So when they get sick of doing game development during or right after college they will be skilled to get jobs for companies. Or if they are really good game developers go that direction.
Nokia didn’t think this way with Symbian. Symbian culturally was far more like Android than like Microsoft. Microsoft culturally now is moving in the direction of Apple, not away from it. Customers in no uncertain terms have shown strong appreciation for the advantages of integration and speed of transitions that closed systems bring. Apple is going to dominate the fully integrated tightly coordinated. Android is going to offer the poorly integrated, wide open and experimental. Microsoft is hoping to give people 80% of the integration, 80% of the fast moving, and 80% of the results of experimentation by holding a best of breed middle ground.
I wouldn’t underestimate the importance of those small games/apps coming from mobile developers.
I would. Remember Microsoft studios is 10 game companies. How many of those games do you think a professional game studio could churn out in 100 man years? Microsoft can pay people to port if they come up with a creative idea. Most importantly. They want applications which build the platform not tear it down.
Maybe we should turn the question around: considering the small market share that MS currently have for the embedded application market, what is the benefit for MS to not support OpenGL ES in addition to DirectX?
Read above. Are you thinking about the 11% or the 89%.
Microsoft is not in mobile to selling $10 OS licenses for a hundred million handsets a year. They are in mobile to help intrench their desktop, server solutions. Casual gaming that ties people to their platform helps, casual gaming that is cross platform hurts that end.
Nokia is in mobile to sell handsets at high markup. People are willing to pay a lot more for a windows phone than an Android phone with similar hardware only for apps that bring them great value. By definition a cross platform app can’t be one of those.
Gamers are worth attracting because they are willing to spend. The availability of a reasonable number of casual games are important for building a platform. But beyond that… it doesn’t do them any good.
I should say my previous review may have come off harsher since I didn’t mention what a huge improvement that I’m complaining about stuff like the ordering of materials and timing. Once commercial from Nokia which I really do like is their: Pure Motion commercial
This is very memorable imagery. By the end of it someone watching gets the idea clearly: motion blur is bad, our competition has it, Nokia doesn’t.
I’m not sure how good it does on selling phones because watching videos is important. But I certainly like it in places where Nokia is established (not the US but England for example).
We have a successful forecast in our hands:
Jan 28, 2013 – CD-Host:
Whenever Apple has meaningfully threatened to reduce Google’s access to their user base, Google has caved. And they have to continue to cave to Microsoft for precisely the same reason.
Jan 30, 2013 – Microsoft:
Google will extend their support for new Windows Phone connections via Google Sync until July 31, 2013.
At the same time, the Windows Phone team is building support into our software for the new sync protocols Google is using for calendar and contactsCalDAV and CardDAV. These new protocols, combined with our existing support for the IMAP protocol for email, will enable Windows Phone users to continue to connect to Google services after July 31, 2013.
http://blogs.windows.com/windows_phone/b/windowsphone/archive/2013/01/30/synching-google-services-with-windows-phone.aspx
@CD-Host
Very interesting topic. I was thinking that by supporting OpenGL ES Microsoft could still keep DirectX as a positive differentiator but get rid of the lack of OpenGL ES support as a negative differentiator i.e. RT/WP would still be the only platform supporting the DirectX based high-end games but at the same time fully supporting casual gaming based on OpenGL ES. This would help Microsoft to get the number of applications available to the same level as in Android and iOS. I somewhat understand your explanation from Microsoft’s point of view as there would be a risk that soon nobody would be using DirectX in embedded environment. But from OEM’s point of view (Samsung, HTC, and even Nokia), is it encouraging for OEMs to use RT/WP if the availability of applications is 1/10 compared to Android? Maybe yes, if OEMs can really get higher margins with WP/RT to compensate the lower volumes compared to Android devices, but is quite uncertain assumption to take.
Regarding the reason why MS is in mobile, isn’t it important for MS to keep Windows as the primary development environment in laptop/desktop environment? Microsoft has been dominating desktop environment as the main application development environment for ~25 years now, but what seems to be happening now is that popularity of embedded devices is growing much higher than laptops/desktops and the application development is shifting more and more towards embedded devices. What if on one day Google will announce Android to be available for laptops and desktops as fully compatibe with Android for tablets and smart phones (there is already Chrome OS for laptops (Chromebook from Samsung) but I am not sure how that is positioned in Google’s strategy)? Isn’t that something that Microsoft is concerned about?
@platform
is it encouraging for OEMs to use RT/WP if the availability of applications is 1/10 compared to Android?
The issue is more one of a small percentage of applications that exist on OpenGL that don’t get ported. It is not 9/10th but say 5% of the gaming market which are graphic intensive and would have been ported in Microsoft support OpenGL.
In terms of the broader question, the vision is this won’t be a long term situation. Today, application availability is a weakness for WP. They were a much bigger weakness in 2012. They will hopefully be a smaller weakness at the start of 2014, where the view becomes more mixed and by the end of the year a huge strength. Elop was always quite clear he was buying into this ecosystem.
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As for the issue of desktop loss.
There are two desktop groups here.
a) Home / Small business desktop (hereafter H/SB)
b) Enterprise desktop.
On (b) Microsoft is still quite secure. No one is close to offering a product that is threatening in that space. Microsoft’s problem is in H/SB where Microsoft is concerned. And it is this concern that’s driving the whole strategy of ubiquitous computing.
Google’s strategy here is phone -> tablet ->H/SB -> enterprise. Microsoft is well aware of how they replaced IBM, DEC and Unisys as the corporate desktop. Lose the creative small business market in 2020 and you setup to lose the enterprise desktop in 2030. Consider the situation prior to Windows 8. Apple attacked them from above and now has owned for 5 years the over $1000 laptop market. Which has crippled the ability of Microsoft OEMs to sell high margin. Windows hardware has been poor quality but cheap. Using consumer electronics techniques you can make poor quality cheap even cheaper. And so, they are being attacked from below by iOS and Android tablets eroding sales.
Prior to Windows 8, they really were plausibly looking down the barrel of being knocked out of the home / small business market by say 2020. To stop this, Microsoft via. the Windows 8 strategy is forcing Google into a confrontation in the tablet/phone space in 2013 rather than waiting till around 2017 when it would be better for Google. Nokia BTW does not need Microsoft to win, they just need Microsoft to not lose decisively for their Windows Phone play to work out.
So absolutely Microsoft is concerned about the threat from Android. I think virtually everything they are doing is addressing the threat from Android. Think of Microsoft as trying to establish defendable borders, inside H/SB while at the same time looking at weak points to attack in the phone/tablet space.
One of the big shifts in Microsoft thinking, unlike say when they aggressively went after the NetBook space, is not trying so hard to defend the bottom 1/3rd of the H/SB market.
So cut the market into 1/3rds
Bottom 1/3rd — offer a higher cost better alternative and see how they split.
Mid 1/3rd — core strength. Won’t pay Apple’s prices, won’t suffer with Android quality.
Top 1/3rd — Contain Apple to an upper niche. Slowly regain territory on price and issues with Apple’s culture.
Whatever the final breakout is as far as phone/tablets/desktop/laptops the main thing for Microsoft is that if tablets are going to be directly acting as enterprise end user devices Microsoft must be there.
I do like Tomi’s slogan: Communities Dominate Brands. Apple and Microsoft are managing their communities.