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February 14, 2011

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jammypup

I told you on twitter that this would be a defining moment for you and you did not disappoint.
You sound like a different person.
All the arguments from others (I was the one you told that should re-read your OPK piece and I would maybe change my mind - now you are saying he had to be replaced) that you once disagreed with; you now agree with.

You made some excellent points above - which is the first time I have ever said that to you in my various tweets to you.
I look forward to this new, more critical, circumspect Tomi and also to this new, more succinct posting style :)

jammypup

BTW, I have to say, I am constantly amused by your adoring fans who always say "great analysis Tomi" even when it is a correction of a previous post that they also praised with "great analysis".

Antoine RJ Wright

It was either OPK or Jaaski (sp?) that threw something out there some time back - something to the effect of "what if Nokia was no longer in hardware?" People looked at that statement as if it was crazy, but that could very well be the outcome of this partnership. Your deductions point to something along these lines, and I blogged as much some months ago myself (http://arjw.wordpress.com/2010/08/24/could-ibm-be-the-model-for-a-mobile-future/).

The platform wars seem to be over, its now about ecosystems on larger, further reaching scales. I think we are nearing the point where we'll see what's after mobile (and AR has a lot to do with this as well).

Michael Scharf

Hi Tomi, great analysis. Your conjecture is more than likely to be very close to what actually happened last year.

Two quick items...

1. A clarification. I believe that you stated that Nokia's revenue is basically 1/3 NSN, 1/3 feature phones, and 1/3 smart phones. Is this correct?

2. From the board of directors perspective, please tell me how Microsoft has betten Apple. What has each company's share price and market cap done over the last ten years?

jammypup

Forgot to say, you say HP never dabbled with OS's but don't forget HP-UX running on their own PA-RISC architecture. They were more than box shippers.

Heke

Tomi,

The process might have been very much as you imagined. However, it would be interesting to know how the board reached to the final choice. Did they have to vote? Who favored who? It is sure that there were more than one choir to sing in.

A piece of news I read today, sounded odd. Mr. Elop mentioned that the board reached the final consensus about the SW strategy on Feb 10th, one day before the announcement! Now, everyone who love conspiracy theories would start to think about the a-week-ago leak reported in German week magazine Wirtschaftswoche, stating that four of the execs may have to jump off from the oil-rig first. One may ask if those four were against the plan? A carrot and stick case? Also taking in 3 more execs on the board while same time giving a statement about massive cuts seems a bit strange. Would it have something to do with gaining majority for voting...? How did that get through in the board of directors?

Xavier Itzmann

One interesting point is that whereas webOS' interface is already proven, the jury is out on WP7. WP7 is conceptually modern, to be sure, but many argue that ultimately it may not be a practical interface paradigm. If true, this is a much more severe criticism than lack of multitasking, copy/paste, etc.

Your description of Elop's/the Board's strategic assumption is foundationally based on the idea that MS will deliver a viable OS, and that this untried and untested OS will be successful.

But will it? Surely you —and the Board— are aware that many/most OS companies died while transitioning to a new one. This is an established fact going back to the 1960s.

One wonders whether in Espoo they realize the only four successful initiatives at Microsoft have been MS DOS, Windows, Office, and Peripherals. All other initiatives, which number legion, have failed.

How do we know WP7 will be one of MS's extremely rare corporate successes?

 Tomi T Ahonen

Hi jammypup, Antoine, Michael, Heke and Xavier

jammypup - hey, thanks! We've had our share of differences in the past that is for sure. Happy you can at least see that perhaps I am regaining some sanity. Maybe, just maybe, I haven't changed that much and some of the areas you and I have disagreed in the past, are also a bit more palatable for you now haha..

I have said many times, that I will not hold blindly to dogma, when facts emerge, if they force me to change my mind, I will be the first to say so (that I've changed my mind) and will do so in public. I am also not going to change my mind because of 'conventional wisdom' or 'popular' views. I base my views on the facts as I see them, and my experience and my analysis. But yes, I am willing to change my mind. BTW, that doesn't mean, that my analysis of the world - before such a change - would not be valuable haha.. If we had known in September that Nokia had thrown MeeGo under the bus, I would have seen the total logic in the burning platforms memo for example. But as the memo was in many of its stated facts, diametrically opposed to Nokia's then-official strategy (Symbian, Qt, MeeGo, Ovi) and nobody had yet said Nokia was going to abandon those and go Microsoft - then yes, also my view that only a psychopath CEO would say those words if he was still running Nokia - as the Nokia we all knew. We didn't know that the Board had approved the plans to go with Microsoft.

Also good point about HP.

Antoine - yeah, I remember and that would have been in line with the long-term view of why invest in Symbian/MeeGo now, to have the path to the pure-software Nokia future. This decision now terminates that path. Nokia's only way forward now is retreat into the hardware business and try to make that more profitably than the Chinese and Koreans (and the new phones coming from India. The first pico projector phone was just released in India over the weekend, I believe its the third in the world and yet nothing from most traditional big makers like Motorola, LG, SonyEricsson, RIM, Apple, ZTE and obviously not Nokia. Only Samsung of the big makers has done it)

Michael - about one third each - yes, in Q4 the handsets made 12.6B Euros, NSN made 3.9B and of the handsets, 4.1B was basic phones, 4.4B was smartphones. Its been tilting ever more to smartphones, was almost identical 1/3 each at start of 2010. Roughly speaking that is still the split with smartphones slowly pulling ahead. Navteq was 310 million so tiny part compared to those three.

Michael - I was obviously not talking about profits, BUT also - the race was not today, the race was to win the PC OS platforms and those wars were over by the end of the 1990s. If Apple hadn't gone to Microsoft-compatible software, they'd be out. And if Apple hadn't released the iPod, their Mac sales would have dwindled out. It was the iPod which revived the company for the 2000s decade and now only after the iPhone has Apple taken major profit share. But until the playstation/Xbox and iPod/Zune era came in - in the previous PC platfrom wars, Microsoft made most of the total profits of the PC industry. I was not talking of Apple today, I was talking of Microsoft in the era when all analysts agreed, Microsoft had utterly beaten Apple (to the time when Apple reported losses, you remember, middle of the 1990s)

Heke - I wish we'd know, I doubt we ever will haha. To me, it would be interested to know who was the other finalist non-Finn, just a person, what kind of person was in that final selection. Someone from a carrier maybe or another West Coast American or perhaps a Brit etc, or a Woman (Carly Fiorina, anyone? haha..)

On the decision, interesting! I understood that the Microsoft negotiations were happening in November and clearly there are already prototype forms for new phones, you don't make those in one day. So this was more a final 'go/no-go' vote, and the Board was asking for unanimous support haha. I would think more it was a commitment, either you vote with this plan and stay with Nokia, or if you vote against it, you're gone from the Board. I am pretty sure the concept that MeeGo was dead, was approved on the hiring of Elop, else he couldn't have done the dirty tricks to it earlier (delays etc) that forced Ari Jaaksi to resign in disgust.

Xavier - very good points and yes, recognize, when I am trying to guess what happened 5 months ago, I am imagining what was the state of the world of mobile at that point. The problem with an unfamiliar OS is, that you can show off all the cool new stuff - and get the 'oohs and aahs' from the audience, with the audience always thinking it also does all the 'normal' things that all other existing OS's do. Only after it ships, we find out, that oops, nobody said it doesn't do multitasking, etc... Its easier to fall in love with the impression of the new OS, than the known bugs of your own OS haha..

The point about Microsoft's early success and recent lack of, is very very relevant too. It relates to all those disasters in 'partnerships' of the past haha.

Thank you all for writing

Tomi Ahonen :-)

HCE


Well, I did expect something like this to happen - however, I didn't think it would be announced in such a dramatic way. I was thinking that WP7 would be introduced as Nokia's strategy to enter the US market. I was thinking that "the big switch" would be announced only when Nokia had at least a few Windows phones available to demo. My worry is how Nokia is going to keep revenues and sales of existing products going until the new Windows products arrive.

I also suspect that the decision to go with someone else's OS had been made at the time the hired Elop. I don't know whether Elop suggested to the board during his interview process or whether the board independently came to the conclusion that using someone else's OS was needed and then started looking for candidates who could make that happen.

- HCE

Mikko

Tomi, I guess we all are wondering what the heck Elop means with a phrase "MeeGo focus shifts to future disruption in mobile ecosystem". I've to admit that a word disruption is far beyond my normal vocabulary, so I took a view to a dictionary. First explanation was: "To throw into confusion or disorder". Wow. Now that phrase made sense :)

Anyway, during last days was often repeated "first Meego device", not only one. Whatever this means...just successor of N900 and some tablets. But can't blame Nokia, they're just doing what it takes to survive.

don_afrim@twitter

I highly doubt that this Nokia-MS alliance will be fruitful. People don't want yet another Windows product, being forced to have Windows on your PC is painful enough. Windows has failed miserably in the mobile space as we have witnessed the past decade and from looking at the new refreshed OS I don't see much that could draw people to it, quite the opposite, once people find out its Windows operated they will run. And judging by the sales figures MS is so reluctant to publish we can all agree that WP7 is not an OS thats flying off the shelfs.

Although I do agree that Nokia is not good at software making, choosing Microsoft is the worst strategy imaginable. If they wanted to move away from baking their own OS I do think that going through a popular open source platform would have been the wiser choice, hence Android. If Nokia is scared of control, I think they haven't seen what kind of control freaks the Windows people can be and the Windows platform isnt even open source. I would have thought after the failed attempts of heading their own open source platforms Symbian&Meego they would join a successful open source platform is only smoke. They wanted an open source platform they could control, not a real open source platform.

I think they will fail with Windows and end up with Android at the end anyway because at the end of the day they need to sell devices and if their devices aren't selling in masses they will have no choice but to abandon yet another failed platform, this time the Windows Phone platform.

Nokia should sell Navteq (Apple would buy it), adopt Android and concentrate what they do best: great hardware. Navteq would no longer be needed since google offers free maps.

What they're doing now is not much different only with an OS thats not really selling in masses despite having some big players backing it and about 10 different devices in the market already. What makes Nokia think that they can make it sell?

This is a kamikaze strategy that will vanish 2/3 of Nokia's market.

Arun

And best of all, HP. They were in smartphones for a decade. They were selling smartphones in small numbers. But they felt they wanted Palm - the OS - so they could make a bigger entry into smartphones. I think this is the most poignant lesson of them all - the world's biggest IT and tech company, as big as Microsoft and Nokia added together, HP who had for 30 years made Microsoft-compatible PCs (also as Compaq) - feels that for the next generation of computers - pocket computers - smartphones - they feel they need to make the OS. This is the lesson from HP. But Nokia is the only one who goes the other way.


Given that Nokia is an industry veteran, and a smartphone leader, while HP is a newbie, the above fact can be spun as saying HP is being naive, right?

Michael

Hi Tomi, great analysis....from your recent post...


Some Symbian Sanity - why Nokia will not join Google Android or Microsoft Phone 7. If only OPK and Anssi were around to read it

I somehow have a feeling that your conversion to WP7 will be quick...

Sam

As much as I'm gutted & sickened by this entire development, what distresses me far more is the on-going assumption, by certain Nokia bloggers, that if you just keep repeating the same Micro-Vision statement on various blogs that this will somehow make everything alright.

That it's somehow suddenly more believable because you wrote it down. That's it's some kind of quasi-formal Nokia statement of intent. Like Qt. Like Meego. Like Maemo. Like "developers, developers, developers".

Honestly, it's so bad that it's like watching Bagdad Bob in March 2003.

"...we are slaughtering them in their tanks..."

Vitaly

Tomi,
Thank you for your great post. You have tried to be as mild and moderate in it as possible, I understood your intention.
But the very core of this "deal" is not what you all see, alas.
Nokia had some problems and troubles, but they were not THAT bad as pictured by almost everyone.
I noticed this anti-Nokia hysteria in US led mass-media several years ago when Nokia was an undisputed king or emperor among phones manufacturers. All this lamenting about "bad management" at Nokia even then appeared to be suspicious.

Vitaly Polozhiy

It goes about salvation of Microsoft, not Nokia.
Microsoft is at the much more endangered position than Nokia.
After HP had bought Web OS and declared that they would pre-install their new operational system on their computers alongside with Windows, Microsoft's senior-management realized that they were endangered and faced probable extinction from the market of software for home PCs. I can imagine what panic and despair were there at the Microsoft's HQ after the ominous HP's announcement.
The biggest PCs manufacturer in the world and biggest Microsoft partner will empower its computers with ITS own OS.
Knowing the psychology of the young people and their curiosity and inclination to all new and fresh, it was not hard to guess that a sizable migration to WebOS is inevitable. So, the merge with Nokia is the only opportunity for Microsoft to survive in this segment of the market.
I stress and emphasize it repeatedly and over again. It is not about salvation of Nokia, it all goes about rescuing Microsoft. Microsoft fears and awes HP and Nokia is the chance to survive in the segment MS is faced to lose in the near future.
Microsoft wants to settle its problems ans sorrows at the expense of Nokia. That is very clever and smart, but it is shameless butchering. Nokia was selected as a victim so as it is a Finnish company and nobody in the US will care if it perishes. Only US companies such as MIcrosoft and others matter. They feed US economy, they make US prosperity.
Nokia has turned out to be a weak competitor. The Finnish authorities and national security have failed to trace where all the legs of this deal grow from. Life goes on.

Phil W

Thanks Tomi, an interesting view on to what probably happened. I'm still trying to get to grips with the change. I don't know what to think about the long term prognosis for the company now. I saw my first WM7 handset on Friday and the UI is very nice, certainly smoother than the Symbian handsets I've seen, so who knows, it may work out. It doesn't affect me personally, as I will shortly be taking early retirement from Nokia (been in the planning for the last 5 years, so not caused by the events of the last few years). I still love the company and hope it can succeed.

Vitaly Polozhiy

I'll try to summarize:
1. Nokia has enraged their multimillion army of fans, customers and evangelists, those who made their profits and margins buying expensive top-models. It is a mere loss of the customers. To announce abandoning of MeeGo and Symbian before the release of expensive E 7 model is something incredible and moronic from the piont of view of marketing of sales;

2. Nokia is being used as a life-boat for Microsoft. Microsoft has faced a deathly menace if HP have their computers with pre-installed WebOS (though in couple with Windows);

3. The state of affairs in Nokia was not THAT bad as it was pictured and still is by US and other well-paid journalists.

4. Nokia has turned out to be a pawn in the world of big business. It has been clearly shown WHO really matters in this world and WHO is to be saved first and whose expense.

5. This is not a conspiracy theory, as I am sure US readers will definitely brand it. It is a thorough subjective analysis of mine. I may have missed and overlooked some points in-deliberately, but the whole picture is as I expounded it above.

Nth

> And Nokia tried a second time - with Maemo - and lost.
Can we say "tried"? I didn't even see it marketed, advertised. Unlike later Apple did with the iPhone, or course.

> Apple is very good at software, but Microsoft is the master at it.
Sometimes people talk about the market like if it was made from parts that compete and the one that sells the best product for mankind wins, all without using things like...
- millions of dollars in marketing to make people buy a product and not the other.
- planned obsolescence and other unclear ways to earn the biggest quantity of money in the long term.
- meetings with stakeholders where the target is "getting money now" (and in the forthcoming years we'll see what happens due to this).
- deals of manufacturers with sellers, like software companies with computer sellers, which also go for their own interests and not for the interests of the others.
- deals of companies with intermediaries, like mobile makers with carriers (telecommunications operators), to include some features (and not include others, like mobiles with two sim cards).
- proprietary formats that hinders better software just because of the giant added work of deciphering the proprietary format, an artificial problem.
- etc.

Nemus

First thank you for this post, story about CEO selection is really interesting one. However, more than anything else, this NokMsft deal is monument to the Nokia software incompetence. After i actually saw numbers and resources poured into developing Meego and Symbian and poor returns they got from that, it became perfectly clear what was happening.

More i read about this I'm more convinced that this deal is here to save not Nokia, but Microsoft.

If it fails, Microsoft retreats to try something else, we all know they will never give up, and if killing partner is what it takes, so be it. Nokia scrapes for leftovers with 1/3 of current smartphone market share if they are lucky.

If the deal succeeds (as we know history is against that, but let's argue) Msft will merge with or takeover Nokia. Simply if successful Nokia will kill all other Windows Phone OEMs (let's face it Nokia hardware quality on high end is unmatched by anyone) and after while it won't make any sense for them to exists as separate entities.

So at the end you win. Company that controls software and hardware on their phones, controls it's own destiny. Thing is, as it looks now, that company won't be Nokia.

Nth

Stephen Elop is the 8th biggest individual stockholder of Microsoft, so Elop's actions are probably criminal.

http://imgur.com/3nN2k
http://www.dailyfinance.com/company/microsoft-corporation/msft/nas/institutional-ownership
He holds shares worth 3 million dollars.

Vitaly Polozhiy

The answer to the puzzle was quite simple. As it's turned out US press was chewing this issue in Decemebr 2010:
http://www.businessinsider.com/microsoft-should-buy-its-way-onto-nokia-phones-2010-12#comment-4d1f37ffccd1d59a632f0000
http://www.prweb.com/releases/2010/12/prweb8019958.htm

Bob Shaw

Tomi - Your analysis makes lot of sense. The first responsibility of a company is to regain its health so I can fully understand Nokia's choice. As the saying goes "One has to live to fight another day".

Now accepting the decision of Nokia to use a third party OS i.e. Windows, I believe Nokia still retains its advantages in smart phones with their great hardware capabilities provided they execute well. Some of the points to support my statement are:

1. There is enough market for smart phones especially at the mid price range where consumers care about functionality rather than OS and the apps. In this market, consumers are looking for a great hardware at a decent price. Nokia can still address this market with their N8, E7 etc. probably at a little lower price.

2. The importance of hardware in comparison to software increases as the constraints around the size/weight/battery life increases. An example the OEMs were better able to distinguish themselves in the laptop/netbook space where the above constaints exist and improve their margins significantly as compared to PCs. The importance of hardware increases significantly in the smartphone/tablet space thus allowing Nokia to distinguish itself significantly even using a third party OS provided the third party OS is competitive which I believe Windows to be.

3. Besides normal computing, there are some unique uses of smartphones especially in the areas of audio, video and imaging. Nokia has great strengths in these areas and thus can easily distinguish itself despite using a non-exclusive third party OS.

Kalle

Tommi I agree with your thought play. When the burning platforms memo was confirmed very similar thought came to my mind. The whole point of hiring Elop was to execute this plan. Last fall it was obvious that ice water was poured down peoples back every time something that could have evoked hope for either Symbian or Meego. MeeGo kept hiring, but I guess that was just a ploy.

As an independent software guy I'm glad I didn't spend more time on MeeGo scratchbox and Qt. I think now the only thing to do is to finish up last Symbian apps and download android sdk and join iOS developers. Damn java and objective-C, meh. When is anybody going to buy apps for Microsoft? Two years from now I'd guess.

Vitaly Polozhiy

@Bob Shaw
I would like to ask Mr. Bob Shaw, what about the client, customer base, which Nokia seems to have lost? After such illogical steps and. After 11 February 2011 Nokia is the most hated and despised company in the world so as its customers of many years feel betrayed and disparaged by Nokia.

OK, let us presume that Elop tried to save Nokia, but what about the cancellation of the release of long-awaited and achieved through many sufferings N9?
Why delay it for a year?
It has nothing to do with "regaining health" . It is called SABOTAGE.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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