Many people have written Nokia histories recently. This is my attempt. I wanted to write it mostly in present tense, think it as a time travel through the history of Nokia.

YEARS UP TO 2005 – THE GOLDEN YEARS

nokia2110

In the 1990s Nokia’s product development was still very much concentrated on one product – or at the most two products – at any given time. Every product had a clearly-defined team working on it, where the people focused on that one item and no others.
Hit mobile phones emerged and went into production. Devices that many people remember even today, such as the 2110 or the 6110, with its infra-red port and menu icons.” [1]

In 2000 Nokia’s market value is roughly 210 billion USD and it has over 40% market share in US. Globally Nokia has market share of 30.6%, followed by Motorola (13.3%), Ericsson (9.7%) and Siemens (8.6%).
It is worth noticing that by 2013 Motorola (with market share disappearing to rounding errors) has been acquired by Google, whereas Siemens and Ericsson have quitted mobile handset business altogether. Siemens will even sell its half of network infrastructure company NSN to Nokia in 2013.

In year 2000 a decision is taken to increase the number of available Nokia handsets.
Two new models a year was no longer enough, but there was a perceived need to bring out as many as 40 or 50 models a year. An utterly terrifying number.
The old teamwork way of doing things no longer worked in this climate, because it would not have been effective. A decision was made to establish so-called component workshops that would build functions for phones across the old model demarcation-lines. Phones began to be constructed by ordering up selected functions – for example an onboard camera application – from the component workshops.
This really was an effective way of working. But at the same time it meant the loss of a product-centred approach, and we forgot what the firm was actually selling – mobile phones for people“, says a former manager.
The products became characterless, standard fare devices; phones cobbled together out of basic components and not really differing one from another in any meaningful way. And the wild ideas and visions were killed off effectively by the choking grip of factory thinking.” [1]

Nokia-7210-01Nokia_6230i_01
(Nokia 7210 and 6230. Phones have same internal parts except the outer shells and keymat.)

Meanwhile Apple changes the way music is being bought with its iPod music player and iTunes music store as the store is opened in April 2003. Instead of a pricey CD one can now buy their favorite song for $0.99. At this point there is no clear impact to Nokia’s market but this move Apple made will matter within few years.

Also in year 2003 a Finnish company named MyOrigo appears with their MyDevice – mobile phone that automatically adjusts screen orientation based on how phone is held, has touch screen and haptic feedback among other innovations. MyOrigo presents their device to Nokia that dismisses the device and says that users won’t appreciate “fingerprint smudges” on the display.

myorigo02

Our trip brings us to year 2005. Nokia’s market value has shrunk to 75 billion USD and US market share is down to 14%. In US Motorola has lead with share of 35%. (Feature- and smartphones combined). Globally Nokia is still in the lead with market share of 32.5%.

nokia770

In 2005 Nokia 770 Internet Tablet is released. It is touch screen operated device that runs Linux-based operating system designed to work via touch screen interface from the day 1.

2007 – YEAR OF “PEAK NOKIA”

During next two years Nokia presented literal tens of new phone models and grew its market value to peak of 150 billion in 2007. Global market share grew to 38.1%.
Nokia N800 Internet tablet is released early 2007. Like 770, it runs Maemo OS and has touch screen as primary interface. Successor of N800 – named N810 – is launched later in the year. N810 has QWERTY keyboard in addition to touch screen and was originally planned to have phone functionalities. However, Symbian management feared N810 would compete with incoming E90 Communicator so they manage to leverage the decision to drop phone features from N810, reverting it back to Internet Tablet.

nokia-n810

I called this year of “peak Nokia”. Reason is that during 2007 Nokia had its highest share price, highest profit and also highest R&D expense.
It is worth noting that in the coming years Nokia is able to decrease its R&D costs from the peak of 2007 but despite the increasing revenues they will never get to see same profits they have in year 2007.

Apple launches iPhone. Nokia N810 with phone functionalities would be ready answer from Nokia, but Series 60 management promises to add touch support within weeks and Nokia keeps Symbian as main platform.

2008 – YEAR OF IPHONE

In January 2008 Nokia acquires Trolltech and their Qt programming framework. Strategy is that SW development will be platform independent through Series 60, Series 40 and Maemo.

By 2008 iTunes has turned into largest music retail in US.
Nokia opens its own music store at spring 2008. Nokia’s problems are well visible in the fact that the store works only with Internet Explorer, even though Firefox is already very popular. Still, there is clear answer to iTunes whose significance has become more than obvious.

One could say that with Qt strategy Nokia has good technical head start compared to Apple that launches its AppStore (combined to iTunes) in summer 2008. However, the meaningful part is the iOS SDK launched at the same time. Nokia does not have 3rd party SDK that would come even close to it and Qt SDK for Symbian remains uncompetitive for years still. In addition to that Nokia lacks one thing, which is the aforementioned AppStore. Apple users can browse the store and install apps from their phone. Nokia users are expected to find and install apps more or less manually.

On financial side: Between 2003-2008 Nokia bought 18.68 billion euros worth its own shares. Quite a dent to cash reserves, considering how low the share price will get by 2012.

It would be unfair to talk about 2008 and not to mention reorg machined by Nokia management at the time. The goal is to make company less hierarchical and decrease the levels of management. When previously developer had 10 levels of management above him (counting CEO as a “level”), the goal is to have 8.
New organization is built top-down, revealing levels one-by-one to those who still are wondering if they even have any place in the resulting pyramid. The atmosphere inside the company is stalled all the way to the end of reorg.
From grass-root level employee perspective the whole reorganization is done in a way that tries to save as many managers as possible. Very little if any manager positions are removed whereas many are renamed. As an end result there indeed are only the wanted nine levels of hierarchy. Closer look to the resulting organization reveals the two missing levels, though:
team leaders are now team members that have authority within the team (call them level 9a and teams level 9b if you wish).
Other level is more or less lost by removing regional split. In new organization it is totally okay that a Symbian team seated in Finland has a line manager that is not only seated in UK but has never actually met any of the team members in person. In coming years it becomes much easier to lay off employees as the line manager does decisions without ever seeing his/her subordinates face-to-face. Not to mention the management problems and chaos this will bring to organization.

And also in 2008 Nokia board decides to cut costs on both R&D expenses and in actual manufacturing of the phones. The management takes the strategic decision to discontinue Nokia operations that manufacturie cellular modems. Instead the plan is to buy CPU and modem as one system-on-a-chip (SoC). Decision that has far-reaching consequences in the coming years, as we will see. Ironically Apple takes step to exactly opposite direction and acquires PA Semiconductor which gives Apple more control over their hardware.

2009 – YEAR OF THE APPS

As we move to (and especially towards end of) year 2009, importance of apps becomes clear. Smartphone buyers are getting conscious of what apps they expect to see in their phones, compare the apps between different phones and are very disappointed if they buy a phone that does not have certain app available for it. The app developers in 2009 are already focusing on iOS and developer interest moves away from Symbian and towards Android. This should not be a surprise: while developers can earn money from their apps made for iPhone, Nokia lacks application store until Ovi store is finally available in May 2009, almost a year after Apple AppStore. And even then the user interface is so bad that annoyed customers actually find it worth spending hours to create an animation pointing out how flawed it is.
(For those who have Windows Phone or iPhone, I understand. Here’s Youtube link for those who live without Flash.)

At the end if year Finnish company Rovio launches its hit game Angry Birds, first on iOS. This is notable move from a Finnish company, especially since Symbian has highest installed base and Nokia is still dominating brand in smartphone space.

On devices, Nokia launches N97. The technical specifications of the phone are dire, especially for a 700$ device in 2009. The n97 has the same 480 mhz CPU and 128 mb ram as the 5800, it doesn’t have a GPU, the system disk space is tiny, and it relies on a resistive touchscreen. The specs would be acceptable on the 99$ phone called 5800, but having the same thing on a 700$? [2]
The joke of a phone called N97 may be most returned phone (by dissatisfied customers) in the history of Nokia and all that is pure gain for Apple that is most valued brand in the $300+ price range where Nokia effectively has no seriously competitive device to offer.

nokia-n97-white-2

Nokia N97, Apple iPhone, Nokia 5800 XPressMusic and Nokia N78.

At the same time Nokia finalizes its move to outsourced SoCs. In R&D the move has been questioned several times during past year as customer feedback is that new cell phones are noticeably inferior to past models that utilized Nokia’s own modems. Board sticks with the plan and in summer 2009 all of Nokia’s modem functions are sold to Renesas, along with 1100 employees and truckload of patents.

2010 – YEAR OF ANDROID

When we enter 2010, we see Nokia in a very troublesome situation what comes to Symbian apps. Early 2010 developer interest says that iOS leads the race:

  • 91% of developers are “very interested” in developing for iPhone.
  • Android gets 82%.
  • Even Windows Phone 7 gets 28% of “very interested” votes even though it hasn’t even been shipped yet!
  • Despite the largest installed base, interest towards Symbian lessens through year 2010 even though developers should be excited about Qt and incoming Symbian^3.
    Symbian drops from 16% to 15% to 13%.

In recent interview Olli-Pekka Kallasvuo (CEO of Nokia 2006-2010) said that already during his tenure Nokia board came to conclusion that they cannot continue with Symbian.
Nokia N900 was launched to very limited markets due to pressure from Symbian but now that Symbian is seen as obsolete, Nokia strategy for high end is going to be covered by Maemo OS. The glue between these all is of course going to be Qt that was bought in 2008.

Network technology is shifting to 4th generation LTE networks and Nokia’s recent decision to stop making its own cellular modems makes it mandatory to buy SoCs outside the company. Two possible vendors are Qualcomm and Intel.
As Qualcomm does not have any special incentive towards Nokia deal, Nokia decides to join their forces with Intel. In agreement Moblin – mobile Linux-based OS from Intel – will be merged with Nokia’s own Maemo and thus at beginning of year 2010 MeeGo is born.

Nokia had started developing the Maemo 6 operating system already in 2008, and was quite far in the development before Nokia and Intel decided to merge Maemo and Moblin into MeeGo. Nokia decides to continue developing Maemo 6, codename Harmattan, and to make it as compatible with MeeGo as possible. It is a quick solution to ship Maemo devices to replace Symbian in high-end while real MeeGo devices are still in development.
Developers are so ‘excited’ about MeeGo that while Windows Phone 7 has not even launched, it already gathers more developer interest than Symbian and MeeGo summed up.

During year 2010 SonyEricsson, Samsung, all other manufacturers jump off from Symbian platform. (To freezing cold sea, perhaps?) Nokia is left with NTT DoCoMo – a “partner” who has never ordered a single phone from Nokia and whose version of Symbian is not compatible with Symbian that Nokia uses.

April 2010. Nokia brand has collapsed. Last year Nokia was 13th in the BrandZ list of most valuable brands. Now it is 43rd. Although the other rating agency, Interbrand, still lists Nokia as 8th and they listed Nokia as 5th in 2009, signs are alerting.

June 16th, 2010. Nokia issues a profit warning. Market value has dropped to less than third of the peak in 2007, even below the “crisis” value of 2005.

In September new CEO Stephen Elop takes over. Elop is introduced to remains of the plan:
MeeGo should cover the high-end but it starts to be obvious it will slip from the schedule.
An interesting solution is offered as low-end replacement of Symbian: Meltemi – Linux-based OS that is designed to have source code compatibility with MeeGo, through Qt. Public launch for it is set to late 2011 – one full year away. Elop approves.

Third quarter results are seemingly OK but market share is alerting. Nokia has suddenly lost 15% of its market share in one quarter, from 39% to 33%. Nokia’s loss of 6 points of percentage is more than the entire market share Samsung had in previous quarter – 5%. Nokia’s market share loss rains directly to pockets of Android manufacturers, especially Samsung that gains 4.8 points and doubles their market share in just one quarter.

Nokia’s Symbian is still the world’s bestselling mobile operating systems, and Nokia 5230 is the world’s bestselling smartphone ever, eventually selling over 150 million units. But the ugly truth behind that is that the $99 Nokia 5230 accounts for nearly 75% of all those sales.[2] That leaves very low sales numbers to all other Symbian models.
The user experience of old Series 60 is not competitive and new Symbian^3  just launched in high-end Nokia N8 whose UI was still seen behind comptetition. Symbian Anna is supposed to fix part of that, Symbian Belle should make finally Symbian UI competitive but all these Symbian^3 improvements demand more from hardware. There is currently no product in queue that could offer improved UI experience in same price point as Nokia 5230 so under current setup the Nokia 5230 end of life may also end of 75% of Nokia’s current shipment volumes. That is truly horrifying thought with no obvious exit visible in sight.

Let’s stop here. We have reached end of third quarter of 2010, N8 launched, Stephen Elop is in charge of Nokia. Strategy has not changed yet.

At this point I hope all of my readers are aware of the year 2013 problem that Instagram is not available for Windows Phone and that is (in addition to few dozen other apps like official DropBox client) indeed one reason why sales are so low. This is one of the main arguments against Nokia’s strategy to choose Windows Phone as their platform of choice – lack of apps. I want you to remember this.

Back to 2010:

As said, consumers care about apps. It would be silly to say that availability of Angry Birds or some other top rated app is not a reason to reject a phone in the store. That would have been true in 2008, decreasing chance through 2009, but in 2010 apps do matter.
Now when Nokia is still heading full speed in Symbian train, let’s see the app offering, shall we?

  • Ovi store has less than 35,000 titles at the time of our stop, compared to 350,000 iOS apps in AppStore so we cannot brag with amount of apps Ovi Store has.
  • To make situation worse, that number includes all content – screensavers, themes, Java apps, flash apps and alike. (Remember the Hannah Montana screensaver in the video I linked before?)
    Actual count of Symbian apps is less than 5000 – a shockingly low number.

In more detail:

  • Official apps are missing for number of services like PayPal, eBay, DropBox and Flickr (just to mention few examples).
  • I would love to say Symbian lacks only some niche apps but fact is that Nokia tries to sell “enterprise” E-Series to business and at same time cannot even offer official LinkedIn app (until May 2011) so the missing apps are not small nor niche.

Some even more ugly views on Symbian, the largest of the smartphone OS’s:

  • Evernote was made as web runtime to N97, but it did not run on other Symbian devices.
    In April 2010 Evernote says “they are not working on a generic S60 application”.
  • If you thought lack of Instagram for Windows Phone is bad, consider this: in our journey through history of Nokia we stand at late 2010 and Symbian has largest installed base of all smartphones. Not only that, but Symbian-based smartphones have existed for entire lifespan of Twitter, the social service. It is therefore quite stunning that there is NO OFFICIAL TWITTER APP for Symbian.
    This goes so far that if Symbian user browses to http://mobile.twitter.com, there is no instruction to install ANY app at all (not even Nokia “Social” app) to their phone while users of Android, iOS and even those of less-than-a-year-ago-launched Windows Phone 7 get a link to app download.
    (And just to rub salt to wounds, the situation has not changed to present date of 2013.)

But how did it come to this? One can say it is because Nokia by heart was hardware company and could not move to selling software to customers and offering developer tools to developers.
On the other hand majority of the significant apps come from US where Nokia’s market share is…
Insignificant.

Nokia has taken actions to proper direction in 2010 but it is generally seen as “too little, too late“.

Qt acquisition was move to correct direction but it was never explained to the complex organization and grass-root level employees had no clue why they need to spend so much time trying to get this “Qt” work with a phone that is already running just fine as it is. In addition to that, Qt for Series 40 feature phones was abandoned about one year after Trolltech acquisition as it became obvious that due to low hardware and memory of S40 the plan was not as feasible in reality as it seemed on paper. Appeal towards 3rd parties is not helped by the fact that Qt SDK for Symbian only matures to competitive state in late 2010.

I think it is time to move on in Nokia history.
Let’s step to end of year 2010 and fourth quarter during which Nokia sells 2.6 million units (feature phones and smart phones combined) to entire North America (US and Canada). United States smartphones market share for Nokia’s Symbian OS is reported as one of the “other OS” (including likes of WebOS, Moblin etc.). ALL of the other OS’s (Symbian included) sum up to less than 5% of the US smartphone market, Symbian having miniscule 1.6% of the US market according to sales market share stats by Kantar.
Just ten years ago Nokia had market share of over 40%.

  • At the same time Nokia’s global market share in smartphones sinks even further from 3rd quarter and is now in 28%.
    Just six months ago it was 39%.
  • Six months ago Nokia sold 77 percent of smartphones sold in China.
    Now they only sell 56% of them.
  • Even in Finland – Nokia’s home market – Nokia’s share has dropped from 76% to 66%.

One can say the situation is unexpected as Nokia has not done anything during last six months. In reality that is half of the reason; Nokia has not done anything of significance to adapt to changed market.

Let’s have a deeper look into fourth quarter sales: traditionally Nokia sells 33% of their annual sales in fourth quarter. This year Q4 sales only make 28.2 percent of annual sales – 15% less than expected. Market share compared to previous quarter drops again – by same 15%. Once again Android market share grows practically 1:1 compared to Symbian loss.

Android bypasses Symbian

Canalys reports that in fourth quarter more Android phones were shipped than Symbian phones. As shipment numbers take a while to reflect to other statistics like shop sales or Android activations, the number faces some criticism. But writing is on the wall: smartphone OS that launched two years ago is beating the once-dominating Symbian. When Android launched, Nokia definitely did not expect its competition to catch up so radically with it. Even at the eve of the market share collapse of Symbian Nokia management is unable to see how big of a threat Android is.

If we look a bit further back in time we see that Nokia increased its sales by 6.8 million units during last three quarters. At the same time Samsung increased its sales by 8.3 million and Apple by 7.5 million units. At end of first quarter this year Nokia was almost TWICE as big as Samsung and Apple – combined. Now in fourth quarter Nokia still ships more units than Samsung and Apple combined but difference is less than 6%. For three quarters Nokia has not been able to keep up with growth of either, far less their combined growth.

Nokia states they have shipped 5 million Symbian^3 devices in fourth quarter. Widely quoted number is that 4 million of them were new N8 smartphone.
Problem is that N8 is first Nokia flagship in 16 months. Previous flagship device – N97 – was huge disappointment and Nokia admitted it was shipped with too little testing. Maemo based N900 did not see wide distribution or big sales so N8 entered in a sense to “empty market” and was priced way over other Symbian handsets. It is unrealistic to believe that four million customers suddenly spent over hundred euros more for their planned cellphone, which means that the N8 buyers are people who in previous quarters would have bought one of the Android flagships that are priced even above N8.
So here’s the ugly part in those numbers: If those 4 million N8 buyers were not same customers that normally buy mid- to low end Symbian phones, then Nokia’s Symbian sales in fact SHRINK in Q4 2010. If N8 sales are ignored, Symbian sales drop 2.3 million units from third quarter. [3]

Even the long time pro-Nokia speaker Tomi Ahonen writes series of Blog posts explaining the market share crash of Nokia and how he has been a close follower of global business for over thirty years and can not remember any such instance in ANY industry where any major global brand loses a quarter of its total customer base in a period of only six months.

We can easily imagine Nokia Board seated around a large table being presented these numbers. It would not surprise me if few of them peed in their pants – and this time it would not be for warmth.

—END OF CHAPTER ONE—

Epilogue
This is my first post on Nokia history. The upcoming two episodes will be “the strategy change that did not save a company” and “who should we blame for this?“. They are not coming tomorrow; writing a post this long is a time consuming task and believe me, time is not a renewable resource.

REFERENCES:

[1] http://www.hs.fi/english/article/Knock+Knock+Nokias+Heavy+Fall+Part+II/1135260599730

[2] http://www.theverge.com/2013/9/18/4747002/the-rise-and-fall-of-the-symbian-empire

[3] http://www.staska.net/2011/07/25/symbian3-resurgence-myth-how-nokia-q4-2010-results-show-smartphone-sales-collapse-well-in-progress/</a

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