I was definitely stunned yesterday, when analyzing the Nokia Quarterly Results. The findings were so utterly opposite to what I had expected. I was engaged with several discussions, some who had emotions of 'we told you so, Tomi' and at the other extreme there was Steve Litchfield of All About Symbian, who suggested I was over-reacting.
It was Steve's comments and our back-and-forth on Twitter, that made me re-think the issue. Steve is one of the experts of our industry that I respect immensely, and a very wise, calm voice. I was thinking, that maybe I was now spreading undue panic, maybe I was yelling 'Fire' in a crowded theater and just making matters worse. Why did Steve think this was not such a big deal. Steve argued that when you are the biggest in the market, you tend to grow more slowly - as a mathematical measure of 'growth rate' and the smallest players can have far faster 'growth rates' yet their total sales growth be smaller. Fine, this seemed reasonable but - it came to market share. 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'.
What happened in the past 6 months was utterly abnormal. Not unusual in the mobile telecoms sense - unusual, abnormal in fact, in ANY global industry serving mass market customers. So we have to understand why this truly is alarming, so first - understand the unpredecented growth rate of smartphones in 2010. Never before has any mass market consumer goods industry worth more than 10 Billion dollars in annual revenues (smartphones were roughly worth 25 Billion in 2009) grow by 75% in just one year. That rate of growth is typical of new industries, tiny ones, of the size of under 1 Billion dollars, but once you sell tens of Billions of dollars, then the industry never grows at 75% or more per year. The PC industry at its peak, the plasma screen TVs, the hottest fight of Playstations vs Wii vs Xbox never got this level of annual growth, nor did Blueray DVD players etc. We do not see this kind of growth in any industries, not even in mobile telecoms, I believe that 2010 was the peak year of highest growth rate in smartphones and now this year 2011 we'll grow at a rate closer to 50% from last year.
Because the growth rate is pretty much unprecedented and phenomenal, it hides 'bad news' inside exceptionally great growth numbers. So take Nokia smartphones. They grew 36% in one year! In any other industry you can imagine, in cars, in plasma screen TVs, in personal computers, in clothing, in soft drinks, whatever - if you grow 36% in one year, it is a fantastic year! Except if the industry grew 75% and you grew the slowest of any of the big competitors - it means you lost ground (compared to your rivals). While you grew numbers, you effectively lost sales that your rivals picked from you!
MARKET SHARE MARKET SHARE MARKET SHARE
I am obsessed about market share. Why is that? I wrote 'the' book for the mobile industry on how to win in the market, for carriers/operators, a book called 3G Marketing (my third) co-authored with Timo Kasper and Sara Melkko. It was not just a bestseller and gone into multiple printings and editions and translated - it was celebrated by the world's biggest publisher of technology and science books, John Wiley & Sons, as the fastest-selling telecoms book of all time - when they brought me to the world's biggest telecoms event (The GSM World Congress) to a special book-signing event for the launch of the second edition. That book is all about market share, how do you build loyalty in mobile telecoms, how do you handle churn, how to you gain customer affection, how you do pricing, etc if you are a mobile operator/carrier.
And why would I know how to write a book like this? Because I've done it. Back in the 1990s, I led the team at Elisa/Finnet/Helsinki Telephone that set the world record for taking market share from the incumbent! I own a world record in telecoms market share battles! I really know what I am talking about. The long-range race is for market share - and the only major constraint you have, is that you have to remain profitable, you should not dip into loss-making in market share battle - that is non-sustainable in the long run. But as long as your company is healthy (makes profits) then the battle is for market share. This is my history, this is my legacy to the industry, this is core to much of my consulting, and this is what I keep focusing on, at this blog. Not about the market valuation of share prices (I do not allow any discussion of market share prices here on this blog, this is not a blog about Wall Street speculation) but I obsess about market share.
Market share wins. Sony's Betamax VCR was technically better, in every generation than the VHS video recorders, yet Betamax lost and VHS won (I remember, I owned VCRs on both standards haha). The Apple Macintosh was the clever smart 'superior' PC but the IBM-compatible/Windows-compatible PCs took over 90% of the market and the Mac sells at about 4% of all personal computers annually. The Concorde was technically the superior aircraft but the lumbering Boeing 747 is what won the market share of jet aircraft in the 1980s selling over 1,000 planes while the Concorde managed to sell 14 units. Market share market share market share. In the mobile telecoms world, GSM took over from CDMA, not because it was somehow technically a better solution (in some ways it is, in other ways it is not) but because GSM got the market share, globally (about 90% of all mobile phones in use are now on GSM or compatible networks).
NOKIA LOSS QUANTIFIED
Nokia did GROW smartphone unit sales. The 4Q Results tell us that Nokia grew smartphone sales 7% from Q3, and 36% from the same period one year ago. That alone seems to be good news. If the industry sales were 'flat' for the year, then any growth (or loss) of sales would directly relate to market share. If you grew 5% sales (in unit sales, not dollar value), and the world total sales number was flat, then your market share grew 5%. If the market shrunk 5%, and you simultaneously grew unit sales by 5%, that means your market share actually picked up 10%. You see what I mean. It is all about market share.
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!
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.
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. This might be something like Tylenol maybe (a US medicine that had deadly poison in it) which I recall was in the 1980s - or perhaps some terrorism action - like Israeli oranges that were once injected by the PLO with some poisons in the 1970s, something like that which can destroy a quarter of your market in half a year.
But Nokia's market share in June of 2010 - half a year ago - was 39% of all smartphones. Its now 28%. How big is that loss? Its 11 million smartphone units of 'opportunity cost' as the economists say. This is what Nokia should have had. How big is that? Its more than all HTC smartphones! Or its more than all of Samsung's smartphones. Or its more than all of Motorola and all of SonyEricsson smartphones - combined. That is how much of Nokia's market has vanished in just six months.
What is it in money? 11 million smartphones in one quarter at Nokia ASP for smartphones of 156 Euros is about 1.7 Billion Euros (2.2 Billion dollars). And at 12% profit margin for all phones (probably more for smartphones, but Nokia does not break down that number for us) means at least 265 Million dollars of abandoned profits. For a full year, Nokia has just destroyed almost 9 Billion dollars of total revenues and 1 Billion dollars of total profit! This is not market share that Nokia could have 'attempted to gain'. It is market share that Nokia used to own! These were Nokia customers who had faithfully been loyal for years. They were not lost in 2007 when the iPhone came or 2008 when the App Store launched or 2009 when the N97 was a disasterous phone or 2010 when the N8 was delayed. Nokia lost one quarter of its customers in the past six months.
These customers were lost between June of 2010 and December of 2010, when Nokia had finally released its best touch screen operating system, when the Ovi Store was well established as the world's second best-selling app store for handset makers behind only Apple, and with the N8 finally released. Do you understand now, why I obsess about market share. If someone focused on unit sales - Nokia grew 7% in just one quarter - that is excellent growth in most industries, in the car industry, seven percent growth in one YEAR is excellent growth. Nokia unit sales grew 36% in one year, that is fantastic growth in just about any other industry and the CEO would be getting fat bonuses. It was so disasterous at Nokia that the CEO was fired. You cannot study this industry by focusing (only) on unit sales. You have to look at market share.
Nokia also reported better margins, and better profits from the previous quarter. This in almost any other instance is good news. I am devastated. Its not that I am somehow a communist, hating profits haha. No, I am a Finance MBA, I fully have internalized the corporation's and the CEO's mission to increase shareholder value - yes, I fully support the need to be profitable, and a growth in profitability is good news, in most cases. But if the company is already profitable (as Nokia was in Q3) and the growth in profits comes at the expense of market share - that is a perilous situation. Market share is long term viability. I don't believe in excessive profits, and I don't believe in excessive market share. But a sudden drop in either (market share or profits) is bad news. I signalled it here on this blog when reviewing Nokia numbers earlier in the year, that the profit margin was slipping dangerously low, but that reflected a global economy, where most of Nokia's traditional rivals (Motorola, SonyEricsson, LG etc) were reporting losses. Other major industries like Banking and Automobiles were so badly in the red, that they needed government bail-outs! Nokia was still making profits in its handset unit - but those profits had shrunk to very slim. That was cause of concern but - as long as you are profitable, then you focus on market share... That is my mantra. Once you are not profitable - that is not sustainable, that means you may go bankrupt and be gobbled up like Palm was - so if you can't make profits, then fix that, but Nokia was making profits, it should focus on market share.
So what do we know. Nokia lost market share from 39% to 28% in only six months. That means, Nokia has abandoned one quarter of its total smartphone market in only half a year. I have never witnessed such a wholesale destruction of any company's market share in a similar period of time. The nearest I can find, is Motorola which lost a quarter of its market in all handsets from 2006 to 2007 in a period of one year. Nokia smartphones today is twice as bad, as Motorola Razr led mobile phones was when facing the iPhone in 2007.
THE DAMAGE IS HIDDEN
This is such an important point, and when I debated it with Steve Litchfield on Twitter, it hit me. The disaster is hidden inside Nokia's enormous numbers. Nokia has 'too much of a market share lead' that this damage is 'hidden'. Nokia has such a 'buffer' that even abandoning one quarter of its market, Nokia is still by far the biggest smartphone maker. Its pain is not visible in any way! But market share does not lie. Let me show with a familiar example.
Lets go to my favorite analogy to phones: cars. The world's biggest car-maker in 2010 is (by a slim margin still) Toyota ahead of GM. What would happen if Toyota lost one quarter of its market - I am not destroying 11 market share points because Toyota's total market share is only 12%, so we can't drop them to 1% haha, that is destroying nine out of ten customers. No, the same 'ratio' of loss. If Toyota lost one quarter of its market, and instead of selling 8.4 million cars, they would only sell 6.3 million cars. That is the same proportion of loss as Nokia going from 39 million to 28 million sales. If Toyota fell from 8.4 million to 6.3 million, Toyota would be in the news headlines all over as the ultimate catastrophic collapse of a global market juggernaut - Toyota would fall behind General Motors, AND Renault-Nissan AND even behind Volkswagen Group, landing in 4th place, just ahead of Ford Motor Company. Do you see what I mean? It is a totally exceptional situation in mobile telecoms, that Nokia has such a massive lead in its own industry, that even when it loses one quarter of its market, we 'do not even notice' because before this happened, Nokia was the biggest, and after it happened, Nokia is still the biggest. Nokia still today is bigger than RIM and Apple, the two nearest rivals making smartphones - combined.
WHAT DID NOT CAUSE THIS
Lets now play Sherlock Holmes and try to find out what happened. Please read carefully, we have many possible suspects and we must examine each to see if they have a valid alibi or perhaps a motive and opportunity.. Many have been saying this is clear evidence how badly Nokia's smartphones are undesirable, the Symbian OS is old and the Ovi store is bad etc. The important point to understand is - that the Nokia market share has been stable - very stable, usually a variation of one or two market share points per quarter - for most of the past years. Yes the market share has been in gradual decline, but very gradual, on average less than one percentage point per quarter. And from Q1 to Q2 in 2010 - Nokia smartphone market share grew by two percentage points from 37% to 39%. There was no dramatic fall in any period in past years, until from Q2 of 2010 to Q3 of 2010, when the market share plummetted from 39% to 33%. And then the immediate next quarter from Q3 to Q4, another massive fall from 33% to 28%. The Nokia market share has been very flat - including many periods of slight growth - with gradual decline over time, and then utterly out of the blue, a catastrophic fall.
Something happened between Q2 of 2010 and Q3 of 2010. THAT is what we need to focus on. First, there was not abnormal external event, like terrorism, suddenly a Finnish Nokia exec writes some horrible cartoon about religious figures related to the Middle East and the world starts to boycott Nokia phones.. No, nothing like that. And its not like Sony batteries on laptop PCs that started to explode. No exploding Nokias in the summer of 2010. And we don't find cases of poison paint from China and children eating Nokia phones and starting to die. Or a poison cloud in an Indian town due to some chemical factory explosion etc. Or a big oilspill off New Orleans by Nokia's oil rig. No radiation damage like health causes like Toyota's brake problems and massive recalls, etc. No, there was nothing like that, we'd have covered it in the news. We have eliminated one possible cause for a catastrophic market share crash.
The reason cannot be 'Symbian is the obsolete OS' because it was equally obsolete in Q1, and more explicitly, the new OS was released at the start of Q4 - if Symbian was the reason, the fall should have happened in long before - and the decline should have mostly stopped by Q4. No, I know its popular to beat on Nokia for having a horribly old and obsolete and cumbersome and 'ugly' OS, Symbian, but we are exploring the cause for the dramatic fall in Nokia market share. It is NOT caused by Symbian. It cannot be, else the fall would have started many quarters before Q3 of 2010. Remember, the Nokia market share GREW from Q1 to Q2 using that horrid Symbian OS.
The reason is not Ovi store, for the same reason. The Ovi store was launched less than two years ago. Its been steadily growing. It became the world's second most-popular handset-maker app store behind only Apple's App Store during 2010. In the beginning of the year, Ovi was achieving activity at the rate of less than half a billion downloads per year (Apple gets 7 B per yer), today Ovi is doing three times better at about 1.5 Billion downloads per year. There was steady almost linear growth of Ovi. If Ovi was the reason, we would have seen a dramatic failure of Ovi around June or July of 2010 and after that, an wholesale rejection of Ovi. That Ovi keeps growing and grew steadily during the summer - guarantees us, that Ovi is not the reason. Sorry, you guys who hate Ovi store - that is not the reason why Nokia lost market share. Ovi is helping Nokia now in the second half, not hurting it.
Something happened in the summer of 2010. Well, Nokia did its second delay of the N8. That was times right then in the summer, that could be it. Very good my dear Dr Watson, yes what of the N8? It was delayed once before and the industry expected it for exactly that Q3 period, when it was suddenly delayed again. That could be it. Big disappointement, big drop in Nokia sales in Q3. That part of the pattern makes sense - but then Q4 makes no sense at all. If delaying N8 causes 6 market share point drop in Q3, then the launch of N8 three months later must achieve at least a partial recoverly in Q4. Not complete recovery, fine, but must achieve a partial recovery! What happened in Q4, after the N8 was launched, Nokia market share crashed a further 5 points! It cannot be the N8. It cannot be the 'delay to N8' because that would mean that in Q4 we must have seen a recovery. Because Nokia market share crashed FURTHER even after the N8 was released, no - the N8 delay is not the cause for this crash, even though the delay announcement is conveniently timed. That cannot be the reason either.
I know there are very VALID reasons to dislike Nokia's current product portfolio, its elderly Symbian OS, the Ovi store etc, and the frequent delays to flagship models but - those are long-term systematic problems, that will only cause long-term gradual decline. None could have caused the sudden drastic fall.
If not Nokia products, what of the competition then? Ah, yes! Now we have good cause to consider. 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.
It cannot be any of the other rivals either. Blackberry has been gradually losing market share, so it cannot be the cause. HTC and Samsung are not even big enough if all of their sales were the cause - and both were selling plenty of smartphones before Q3, the growth that either HTC or Samsung has had, is nowhere near enough, so it cannot be the Galaxy series of bada for that matter. No, the competition did not cause the Nokia market share crash. The competition probably gained from the change, but did not cause it.
THE EVIL VILLAIN IS STEPHEN ELOP.. I am kidding of course
Haha, we eliminate all other alternatives and what is left must be the reason, so says the book of our master, Sherlock of the Holmes, and so say we. It was not Nokia products or services or their delays or bugs. It was not Nokia competitors. It was not an external event like an act of terrorism or say a natural disaster like a volcano in Iceland grounding European airplanes etc. No, what else happened in the summer. We did not know it at the time, but by late Q2, Nokia's Board was in the process of firing then-current CEO Olli-Pekka Kallasvuo (OPK) and in the headhunting task of finding his replacement very rapidly, which turned out to be Stephen Elop of Microsoft, who was announced on September 10, 2010. The gossip in the financial press about OPK being fired started around July. I blogged quite passionately here on this blog that I felt OPK was not really doing such a bad job, and felt he deserved a chance, but also that I understood that the Board might want to replace him.
So we have seen OPK leading Nokia for about four years, and we know now, that by the summer of 2010, probably by late Spring 2010, Nokia's Board had come to the conclusion that OPK was no longer fit to run the company. A-ha! Now we can start to dig for some possible clues. So first, to be VERY clear, I thought it was funny to label Stephen Elop as the Evil Villain, just simply because of course we want an evil villain in this Sherlock Holmes story - he is not evil and he is not the villain, but in a kind of way, he may be part cause of what we see. Understand, Stephen Elop took control in September (ie end of Q3) - the first market crash happened during Q3 - Mr Elop could not have been the cause. I just liked the headline haha, in our mystery story. Sorry Stephen Elop, I was just kidding.
But yes, the timing! OPK has been in charge, he is effectively dismissed during Q2, the Chairman and former CEO Jorma Ollila holds the reigns (behind the scenes) while the Board decides on the new CEO, and suddenly Nokia market share plummets massively. The new CEO steps in at the end of Q3 - and the market share suicide dive does not stop in Q4! The new CEO Elop must be in total agreement with what was already happening in Q3. Something happened on the inside of Nokia. This market share crash is actively self-caused by Nokia! (the mystery deepens)
A HOUSE OF CARDS
Lets go back to the historical comparison. This kind of event does not happen 'naturally'. The market share under normal conditions for normal companies does not shift this dramatically in global industries. It is not because of a bad product, not this rapidly. It does not even happen if a rival introduces a fantastic product - remember the original iPhone in 2007 and how much it hurt US rival Motorola - even then the damage was only half as bad as what we see now in Nokia. Cars, PCs, TV sets etc - mobile operator subscriber market shares - etc - do not fluctuate that dramatically in periods as short as six months. It doesn't happen. We need utter collapse of business - a banking scandal or bankruptcy to cause this kind of utter collapse so fast. And nothing like that happened, Nokia is a highly popular phone maker, released many good new phone products during the period - sells them profitably, on one of the widest footprints across hundreds of carriers/operators globally. No. This was a deliberate management action.
So we hunt for the clues. What else changed between Q2 and now. Average sales prices are up. Nokia profits for handsets are up. Nokia profit margins are up. A-ha. At least part of the answer is here - Nokia has been transferring high market share in smartphones vs low profit margin, to higher average sales prices and higher profits, at the cost of market share. That much is clear to any Wall Street analyst. But it does not explain the sudden catastrophic drop. Nokia's profitability did not experience a similar 'dramatic jump' in profits. The gain in profits is only modest, not nearly as big as the fall in market share. But we do have a critical clue.
A major reason why the investors were demanding OPK to step down was because Nokia's profits were dwindinling. Nokia had not followed Ericsson, Motorola, LG and others into making losses, but Nokia used to be a powerful profit factory in mobile phones. Now that was Apple, and Nokia was struggling to keep its head barely above the water. The profits were becoming razor-thin.
Now lets go back to history. From Q1 to Q2, Nokia profit margin and ASP for smartphones declined, but its market share grew! From 37% to 39%. We know after Q2, Nokia's market share has been in free-fall and its average sales price and its handset profit margin has not recovered in similar proportion. What does this tell us. I think I know the answer for the market share crash. I think the evidence is overwhelming and the pattern is perfect. OPK had been buying market share into early 2010, by propping up an un-sustainable level of market share - by heavy discounts and/or marketing support of carriers/operators.
This is what I mean. The 'real' market share for Nokia in Q1 should have been about 35%, but Nokia offered big discounts to the major carriers, said, 'sorry the N8 is delayed, please keep selling Nokia phones' and this boosted Nokia's market share artificially to 37%. But it hurt average sales prices and profit margins. Then the N8 and new Symbian OS is delayed further during Q2, and Nokia comes back to the carriers and say, wait - hold on, please keep your order levels as what they were and we'll double our discounts for you. The real market share should have been about 33%, but Nokia props up the sales with huge discounts, selling most phones effectively at zero-margin - and cause the real market share to grow to 39%. But the profitability of the handset unit is near zero.
The Board finds out about this, and decides to stop the practise and issue an edict, no more buying market share. Nokia's real market share now starts to fall. It should have been 31% in Q3, but falls to 33% (some delaying factors) and with no further massive discount actions - the market share continues to fall to 29% today. It is where Nokia's market share should have been 'naturally' and meanwhile, Nokia's handset unit is returning a reasonably healthy profit margin of 12% and the average sales prices are significantly up in the past half year.
Obviously Nokia Board is not satisfied that OPK used such means, and fires him and hires Stephen Elop to come to run the company. Stephen Elop is told the reality, he is not alarmed knowing that there was false performance in the company, and its real market share in smartphones without the 'bought market share' is somewhere in the 30% range. He is not alarmed and he continues the same rules, lets compete on real prices and real products, lets not buy market share.
There is an interesting twist to the story: T-Mobile. Remember T-Mobile USA announced it would be selling some Nokia phones, and then it suddenly withdrew that. I was very puzzled by that - it does speak to me, that there was an internal deal, Nokia promised the phones at some deep discount, or else, Nokia had bundled some big marketing campaigns sponsored by Nokia to help T-Mobile. After the new CEO came in and ended such practises, T-Mobile is upset and cancels the launch. This makes sense. But remember also, OPK had previously committed to recovering US market for Nokia, so the easiest way for Nokia to do that, would have been to try to buy market share in the USA, by discounting deeply its phones for the US market.
I think this is the reason. I think all evidence fits the theory, and no other viable suspect can fully explain, why Nokia market share grew from Q1 to Q2, then suddenly in Q3 and again Q4, Nokia market share fell like we've never seen in the mobile industry. I think it was a house of cards that Nokia had tried to build - probably well-intentioned, thinking that as the N8 and Symbian S^3 was delayed (again) that they needed to do this. It fits perfectly with the corresponding price changes, profitability changes and the management change. I think what we now are witnessing is a 'correction'. The Nokia market share in smartphones of about 35% in 2010 was an unsustainable illusion, propped up by enormous price cuts. It was not sustainable. The real market share level is closer to 30%, perhaps 29% or less. Still biggest in the world but far less dominant. The Nokia Board saw what was happening, did not appreciate it, and fired the CEO and hired a new guy to take the company onto a more sustainable, healthy path. I am pretty confident this is what has happened, but I am very intersted in your view, what do you think?
UPDATE January 31 - I have added the final fourth piece to this set of Nokia blog stories. Many of my followers and people in the comments asked me what Nokia should do now (or kind of related, what are the real problems that caused the decline in Nokia's customer satisfaction). I wrote the last piece of this Nokia series of articles, Return of the Jedi, what Nokia should do to return to customer satisfaction and growth.
Note to all who leave comments. This was a long blog, sorry about that. Its my weekend, I volunteered my time to do this, and I am guessing no other mobile phone analyst has 'broken' this story yet, and solved the mystery. So please bear with me that its so tedious and long. I am not going to bother taking the time to edit it to shorter length. I have better things to do with my time, we have no ads on this blog, this is a hobby for me. But yes, about the comments. I will anwer the comments that are relevant to this blog - but you must demonstrate in your comment that you read the full blog. If anyone leaves any comments where my response would say 'if you had read the blog' - those will be deleted without mercy, no matter what other good points you make. And while usually we don't talk Wall Street share prices here, I will tolerate the profitability discussion here in this comment thread, please don't make it one focusing on share price comparisons, ok. I don't want to attract the speculators to chat on this blog, but yes, I will allow the discussions about profitability of Nokia and rivals - but also all Apple fans - I acknowledge openly that Apple makes more profits than Nokia, more profits than any tech company. THAT is not allowed to be discussed. I have explained why the iPhone did not cause this sudden drop in market share for Nokia, if you want to argue that, you may. If you want to argue Nokia profitability, you may, if you waste our time talking about the profitability of ANY other company than Nokia, I will delete your comments. Don't go there. This blog is the mystery of where did Nokia's market go, and who killed it. Apple is only relevant for iPhone sales Q2- Q3 and Q4 (and App Store etc) if you want to argue Apple. Fair? My blog my rules.
For those who are interested in the real numbers of the mobile phone handsets industry, including smartphones, I have released a month ago my TomiAhonen Phone Book 2010, the latest numbers and stats about the phones industry, installed bases, market shares, features, brands, customer segments, average prices etc. 98 tables and charts in 171 page ebook available for immediate download. Only 9.99 Euros and only available from this one source on my website, please take a look including table of contents etc: TomiAhonen Phone Book 2010.