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July 05, 2011

Comments

Nelson

The sterilization imposed to MeeGo is absolutely unbelievable, Selop is not even giving it a fair chance. How can the Nokia board neglect this? And how could Jorma Ollila have said that the software dominance in mobile has shift to the States when we look at the great job the Finnish engineers did with MeeGo? Oh by the way Reuters announced that Nokia has cut prices in smartphones by about 15%... ouch! That boycott must be hurting ;)

janne

http://www.comscore.com/Press_Events/Press_Releases/2011/6/comScore_Introduces_Device_Essentials

Nokia is in the 'other' category (Share of Non-Computer Device Traffic for Selected Countries in May 2011). There's huge amount of work to do to counter iOS and Android dominance. Those OS's were created the web in mind.

Matthew Artero

Wow, Stephen Elop's statement that even a successful Meego will be discontinued is in direct contradiction to what he said his number one priority is on the supposedly leaked video in which Elop stated the first and most critical priority of Nokia is to sustain its existing business/sales.

I don't see that a company with a schizophrenic at the helm can generate any confidence from the stock market, retail market, or this eco-system that Elop claims is necessary to succeed. Now its past delusional, we also have a split personality to contend with.

Nokia is looking like the USA civil war where the USA President Abraham Lincoln said a house divided cannot stand and fought to keep the country unified. Except in Nokia’s case the President is from a southern state and wants the break up. It’s a belief in “divided we stand, united we fall” rather than “united we stand, divided we fall”.

Not only has Elop divided Nokia internally, he has also divided Nokia from its customers and needed partners.

Matthew Artero

Perhaps Elop's business model was the breakup of the Soviet Union.

Matthew Artero

Maybe Elop thinks Nokia can be like Canada, claim its independance but still be part of an ecosystem. I think Elop's brain is stuck in the past when files on Windows were not compatible with Mac. Now there has been too much standardization with how data is handled allowing for the many operating systems we see today.

Microsoft is no longer able to offer a safe harbor that gaurantees a large number of customers. Other operating systems sync with Microsoft desktops just fine.

Phones are the Wild West and the PC boom was tame in comparison. In the PC boom a manufacturer like Nokia could easily survive. With smartphones the market is less locked in to a single way of doing things.

Because the replacement rate is over three years, Nokia should make Android phones just for the purpose of keeping a sale away from its competitors for another three years. Every Android sale is another customer Nokia will not have access to for another three years.

Instead Elop has a convoluted excuse for ignoring these customers. He only wants to make a sale, make money, if he can make it on his terms. One doesn’t get to choose the battlefield. The money that everyone wants is in the pockets of the customers. Therefore the customers choose the battlefield. If you don’t enter you don’t matter.

Just like he shouldn’t have destroyed his Nokia's sales before he had something to replace it with; he should have been actively destroying the profits of his competitors. Nokia gave away its share of the Android sales and then gave away their own sales.

Look at the example of HTC. They backed both Windows and Android and then went with the winner. They played both sides of the fence. Why choose to win or die when you can choose to win or win?

JORGE SPAIN

Hi Tomi,

Unfortunately the Nokia blame lies squarely with Mr. Gold Standard - Jorma Ollila and his Board. I cannot believe that this kind of crazy behaviour can take place unless sanctioned by the Board. The only logical explanation I can think of is that Microsoft has built in severe Penalty Clauses and conditions in their contracts and the crazy Board signed them....Another beautiful company ruined by Microsoft.

Thanks for your blog.

@rodrigottr

@Tomi

My opinion on why WP and Nokia BOYCOTT is almost UNNEVITABLE

"Why the hell would carriers boycott windows phones if iOS and Android also have Skype?"

1 - Because they can! Apple and Google are already too strong for carriers to fight. Boycotting the carrier unfriendly iPhone would be impossible in the US since Apple was one step ahead and had a partnership with AT&T. Carriers on other countries also wouldn't boycott iPhone because iPhone sells like whater and that would means losing users. So, carriers MUST have an option to fight AT&T and iPhone back. Android was, and still is, the only option. So, they had to accept Skype to don't be behind. And they accepted.

2 - But WP7 is a fiasco on sales, less carrier friendly then Android, and now that M$ owns Skype, we can easily imagine M$ is going to provide stronger skype integration with the device. So, this echosystem is clearly not interesting for the carriers to support since brings no new marginal advantage for them. Also, they have to worry with another nightmare: integration of skype with WINDOWS and FACEBOOK a! Suddenly more then 750 million more accounts on skype and all that fully integrated with Windows phone!! So, windows phone is a Nighmare, and if it can be destroyed, let's do it.

3 - Strategic paradox: when skype wasn't from M$ skype was a Third part app and competidor. Which means Skype incomes gone for Skype. Now that skype is part of M$, and the profits of using the service are going to M$, M$ becomes one more competidor to the carriers. Skype is no more neutral from the point of view of the mobile maker. Now, Skype is the child of the mobile maker and because of it, the mobile maker becomes enemy of the carrier. Why would a carrier sell its enemy's product? In the case of Google voice (who is not really comparable to skype in popularity), that is tolerable since Android is an evil necessary to face iPhone and AT&T. But carriers don't want another OS like this.

4 - Carriers are against the wall in the industry: Each year they are being pushed to invest more and more to make possible a heavy and expensive structure for data connections that their users demand to be 24x7 online on youtube, facebook, skype, google, iTunes, iCloud, using less SMS and voice calls, and generating profits for whom?? For the online services providers like google, facebook, apple who are tottaly unfriendly to them.

Why? Because there are only 2 or 3 online services companies and hundreds of carriers in the world. There is much less competition on online services then there are carriers. And carriers are strongly regulated by governamental institutions. Who's regulating Google, Apple or Facebook?

Doesn't that explains why many carriers in the world are stopping to offer unlimited data plans?? Aren't the carriers the champions of complaints on justice in your country? It has been hard to be a carrier these times.Low profits, high investiments, hight competition, and all the complaints for not delivering a service that interests more to online services companies than for you.

5 - If you where a carrier CEO: So, if you where a carrier CEO, you would probably support Android and it's native Skype app as an evil necessary to face iPhone. But you would not give support to one more platform that brings nothing good to you on a hard moment. And you DEFFINETLY WOULD BOYCOTT A COMPANY THAT HAS PROMISSED TO BRING A COMPETITIVE OPEN SOURCE CARRIER FRIENDLY PLATFORM AND IN THE END BETRAYS YOU AND BECOMES YOUR COMPETIDOR! In fact, does it make sense to call as boycott if you don't support products from your competidor?

So, we will see the results of this SCHYZOFRENIC STRATEGy when the results for the Q2 come.

But I believe there is no chance of WP being successfull with this strategy. It is unninteresting to the most important stakeholders involved except Microsoft. That completely explains why Nokia's stocks felt 50% on 4 months and why they are cutting 15% on prices. THERE IS A BOYCOTT ON NOKIA GOING ON, justified by Nokia AND M$ behavior on:

- UNFRIENDLYSHIP OF WP OS compared to Android

- BETRAYING CARRIERS, promissing an open source carrier friendly OS AND BECOMING AN COMPETIDOR and abandoning the carrier friendly Symbian.


- the nightmare of M$ integration of Skype to wordwide massive products and services like Windows, MSN messenger and Facebook and making all that fully integrated to the Windows Phone

hugo

@rodrigottr
I'm absolutely not with you.

Carriers fear one thing most: One mobile OS maker controlling the market. And currently Google is heading this ways. Carriers have to prevent this if they want to retain some of their power. And they need to act fast.

Apple with iOS is not heading for the mass market. So another one has to stop Google for the carriers. The only possible option is MS/Nokia with WP7. So they have to support it. Regardless of skype or not.

And once the mobile OS market is split up into 3 competitiors, it's way easier for even more (RIM, WebOS, Bada, ...). The more, the better for the carriers.

Steve Woodgate

@Leebase
Read Tomi's book on SMS profits. At 5 cents a message that's more than $327 a megabyte.
But many carriers charge up to 25 cents a message, $1638 a MB.
So a data plan is just nothing compared to the profits on SMS.

Steve

Tomi T Ahonen

Hi all, I'll do a set of replies now, with more later

Hi Nelson, Janne, Matthew, LeeBase, Jorge and rodrigottr

Nelson - good points. And thank you for mentioning the 15% price cut, I noticed it too right after I posted the blog and already added it to the story itself.

Janne - good stuff, but remember the ComScore measurements are only from a few markets and they reflect traffic, not users, so it is biased to the heavy users on devices and price plans of the heaviest users, not truly respective of the whole mobile user base. (I'm sure you knew that, I'm telling more for the other visitors)

Matthew - yeah, we agree. Funny comparisons to the US Civil War and the breakup of the Soviet Union. Obviously I am still holding hope that it need not end that way for Nokia (watch for my next blog, am trying something a bit more humorous again..)

Leebase - so you were referring to the Nielsen survey? First, its not that Google Android had declined, the Nielsen finding was very clear Android was flat, the iPhone gain was at the expense of RIM's decline, not any decline by Android. But for the May month, Android was flat for the first time. Secondly, as always, Nielsen measures consumers only, so it undercounts enterprise/corporate smartphone sales where RIM is strong etc. But yeah, if you want to celebrate the iPhone's resurgence in the USA, there is good reason to note that - it is obviously primarily driven by the first full quarter of Verizon CDMA iPhone sales in Q2, plus some iPhone White sales. These do not produce the same effect as the next iPhone (rumored iPhone 5 or iPhone 4S) which is now much too much delayed, hurting Apple's market share for the year. And you know I am hoping we will hear there is a new iPhone Nano this year, I am not sure if you felt that was a good strategy when we discussed it before but you know my view on it.

Matthew - good stuff on the 'Wild West' analogy (you are full of analogies today haha, Civil War, Soviet Union, Wild West..). A small correction, the average phone replacement cycle is not 3 years, its 18 months but regardless, yes, Nokia should be locking in customers now, not abandoning them. Any loyal Nokia customer who is told to wait by sales for the new Microsoft WP7 phones, and doesn't want to wait 6 more months, will then go to Android or iPhone (or bada or RIM) and then the loyalty cycle is pretty well busted. Modern phones by most rivals are very good and its likely that Nokia customer won't be coming back..

Jorge - I partly agree but not wholly. Yes, Jorma Ollila and the Board have to have approved the decision to abandon Symbian, and separately then have to have blessed the choice of Microsoft (vs Android vs MeeGo). But like I wrote in February, while I didn't like the Microsoft choice, I said it was Elop's choice to make and something had to be done at Nokia. It was not the selection of Microsoft that caused the calamity at Nokia now. It was a long series of CEO blunders since. The timing of the announcement. The idiotic 'burning platforms' memo about which Elop has since issued statements several times that he really doesn't believe anymore many of the ludicrous claims made in that memo. And the statement Symbian would be killed fast (why?) ie by summer of 2012, and now backtracking from that to 2016. The silliness about the N9, MeeGo (come on, which company who is about to have a winning product, says 'but we will not follow it with more winners' ?????? I could understand if it was 'costly' to do MeeGo phones (expensive licenses) and 'free' to do Microsoft WP7 phones, but its the opposite. Every WP7 phone will cost Nokia a license fee and every MeeGo phone is free.. So its this type of CEO mismanagement, which is not 'micro managed' by the Board. The Board would bless or debate (or deny) major decisions, but not interfere in Elop's daily decisions. And its that daily stupidity which is now causing Nokia share prices to crash.

About a possible Microsoft penalty clauses. Yes, they must be there - because Microsoft paid so much (billions) you can be 100% sure there are penalty clauses but no matter what they are, Nokia has very deep pockets, pay the penalties and get out. Leave the rest to the lawyers. To the degree Elop is found to be colluding with Microsoft, any contract signed by Elop supposedly on behalf of Nokia will be null and void in any court. He's clearly been screwing Nokia for this whole episode.

rodrigottr - You make good points but some I have to disagree with. First on Apple being 'too strong' for carriers to fight back. No. Apple is nothing nearly as strong as Nokia was in 2004 when Nokia was nearly 40% of all phones sold on the planet and did over 80% of all smartphones and launched the N-Gage as the world's first consumer smartphone. Yet the carriers/operators punished Nokia and brought Nokia to its knees. And today, the carriers said clearly a comprehensive 'no' to Apple's intentions to do a virtual SIM card. No, they are not afraid of Apple or Android. The carriers hold all the cards, because they have a monopoly to the only scarce resource in telecoms - the spectrum.

Then you say the carriers had to accept Skype. No they didnt and mostly they haven't either. You look at Skype on almost all carriers. It is EXPLICITLY forbidden on your data plan, or else it is sold as a premium data service (ie for extra cost). Almost nobody does Skype voice calls and Skype videocalls as part of a standard smartphone package on 3G data - it would cripple the networks instantly.

I agree on your second point, the carriers will fight Skype harder than they've fought any other 'innovation' by any handset maker ever. And the rest of the posting is more in line with how I see it too.. Cheers!

Thank you all, keep the comments coming

Tomi Ahonen :-)

Steve Woodgate

@Leebase

The people you are missing are the 93% of mobile phone users who are not in America and that part of the 7% in America who don't have the knowledge or the credit rating to have a phone plan like you.
Even in the USA, 70% of subscribers sent a text in the last quarter but only 40% used a mobile browser, http://bit.ly/qB6xXc
For the carrier its all about controlling the customer and limited the churn. That's why "virtual sim cards" are bad and Microsoft is not a great partner.

Steve

@rodrigottr

@Hugo

I partially agree with you. Carrier fear one mobile OS maker controlling the market. But they fear the MOST one UNFRIENDLY mobile OS maker controlling the market. A monopoly of a FRIENDLY OS wouldn't worry them that much.

What is our concept of Friendly OS? An OS who helps the carrier to sell services like: Apps, Games, Musics, Ringtones, inputing their Brand (carriers also fight for the the mind of the consumer) sell cheap phones helping the carrier to penetrate all economic classes...

What is our concept of UNfriendly OS? An OS who blocks the carrier personalization to sell services like Apps, Games, Musics, Ringtones, inputing their Brand, AND Bypasses other services that are the most important revenue for a carrier like Voice Calls and SMS. An OS that Demands expensive hardware, making more difficult to penetrate lower economical classes with telecom services.

As we see, iOS is very UNfriendly since you can only install Apps, Games, Musics from iTunes or Appstore. Block inputing the Brand inside the OS. And offers lots of services to bypass carrier Voice and SMS services, like Whatsapp, Skype, Fring, Nimbuzz and others. Also, the iPhone is expensive.

Android is more friendly since you can put the Brand, sell services and sell it on cheaper phones. But bypassing services is also possible with VoIP or Free sms services.

But the most unfriendly is WP. It demands more on the hardware then Android, and can fully integrate SKYPE WITH FACEBOOK WITH THE PHONE in the future. That would mean an almost FULL Bypass of the carrier on SMS and Voice calls. And has less flexibility for personalization then Android, even having more then the iPhone. (I'm not sure about this point. Correct me if I'm wrong)

@lebasee @hugo

But why carriers worry so much about bypassing voice and SMS with DATA?

First because they earn more with Voice and SMS. Second because Voice and SMS pays more then DATA. Third because DATA demands high investments on 3G structure, while 2G structure is sunk costs and all its revenues are profits. While the smaller revenues of 3G must honnor its investments.


So, if the 3rd echosystem aims to be completely DATA centric, therefore more unfriendly then the other two, then they would surely prefer the duopoly and try to kill the 3rd if possible.

KPOM

MeeGo would not be one of the big platforms. Admit it, Tomi, you are letting your disdain for Stephen Elop cloud your judgment. Apple owns the tablet space right now, and not even Android, which is the dominant smartphone platform, can make a dent in the iPad at the moment. Unlike with phones, people aren't dependent upon carriers for their tablets, and thus it is difficult for competitors to Apple to gain traction.

The N9 is an interesting smartphone, but it doesn't follow that it would be a good tablet platform. Even in OPK's vision, MeeGo was primarily a high-end/tablet OS. Given that Nokia has already made its strategic decision, to water it down by saying you'll still support MeeGo would be counterproductive. Nokia just told the world in February that the old path is dead. They can't go backtrack now.

I think Elop's mistake, if things don't go well next year, will have been not going with Android. In the end, Nokia had a choice between a "sure thing" becoming a low-margin but high volume maker of a commodity (the most efficient manufacturer of Android phones) or taking a gamble on carving a niche with Windows Phone. We won't know for a year or so whether the Windows Phone gamble will succeed, but I'm guessing that the stock wouldn't have crashed so much had they switched to Android. People know that Android phones sell well, and they'd trust that a Nokia Android would sell well. The jury is still out on whether a Nokia Windows phone will sell.

k tee

this is a flat world. unless n9 supplies are severely suppressed artificially ... phones cross borders better than humans.

@rodrigottr

@Tomi

"First on Apple being 'too strong' for carriers to fight back."

That's true! And explains why Apple where smart and used the strength of the carriers against themselves (by exclusivity with AT&T, Orange etc

(Sun Tzu's teaching: if the enemy is bigger divide him)

M$ (it is clear to me that M$ is in command) since the beginning betrayed carriers by abandoning MeeGo, and then, did the unforgivable buying their greatest enemy: Skype. Which is the most brilliantly STUPID movement he could ever do.

He just united all the power of the carriers against him. And is trying to hit knifes with punches, as we say in Brazil. I have to say. He is a master in the ART or LOSE.

hahahahah

The more I think about it, the more I see how carrier relationship means EVERYTHING on this industry.

But there is something I would like to know. Don't my carrier knows I using Fring and Skype on 3G making free calls as I wish?? (In Brazil I use TIM) Could they block me from using VoIP calls? If they could, why they don't?? I even use a pre paid plan limited on 300mb and that is pretty OK for me.

Baudrillard

What I don't understand is how Nokia can be rolling out a range of new 1ghz Symbian^3 devices when MeeGo is getting all this positive hype!

They should load those Zeta phones with MeeGo and watch it fly off the shelves.

MeeGo is ready NOW!

@rodrigottr

@staska

I just answered @hugo who said the same thing about carriers desiring a 3rd System and fearing a duopoly. Well. That is really baseless. If they REALLY NEEDED, then why couldn't promote it well?? Why don't we see millions of WP outselling?? Is the product that bad that USERS are rejecting it??? Well. I don't think so. In fact. WP seems pretty interesting to me. What I think is that they are not promoting it well. And why would they not promote it well if the product is so interesting??

So, the answer is:

YES, they desire one more OS in the race
BUT ONLY if it is more friendly then Android is. And it seems WP is not since the beggining. Now Skype isn't good news at all. You and Me are saving money with skype on 3G. That is a fact, and a real threat to carriers.

"Hooks for the carrier to disable/enable Skype on any phone?"

You don't seem to remember that business strategy is much about politics. Carriers know how Microsoft is. They know what M$ did to Apple in the eighties when they stole their interface and created windows. They know what M$ did with Windows Mobile. They know what they did to HTC. They know what they did to Kin phones. All those exemples are exemples of cathastrofic partnerships/behaviors with M$. They didn't liked M$ aborting an open source carrier friendly OS like MeeGo and changing it to the unfriendly Windows.

But that was not enough. Here comes the strike from the back, as always: M$ buys Skype!

It is a pattern. That is how M$ do business. That is why they are hated. That is why Google's moto is: don't be evil (means don't deal with microsoft)

What is happeing to Nokia seems pretty much like re watching the same movie.

Elop is clearly following M$ agenda. Not Nokia's. Why in the hell for the sake of Nokia would a CEO of Nokia abort a winner project like MeeGo??? Why don't keep it as a plan B if plan A fails? Samsung has their own OS, HP has their own OS, RIM has their own OS, Apple has their own OS, why the hell aren't they aborting their OSs like Nokia is doin't to that lucious N9??

Because that is STUPID! IS SUICIDE! Is only good for M$!

Carriers are watching this. And ask them if they want to be friends with M$???


HAHAHHA

Jontte

About two iPhone tiers.

I have no idea who would be advocating for two different physical sizes of iPhone. It will not happen. All the hundreds of thousands of apps are done to 3.5" 4:3 screen, with 320x480 point resolution (in iPhone 4 the point equals two pixels). Why would Apple want to fragment their phone platform? What would be the gain?

Having two price tiers is another thing and that can easily be done with the model they are using at the moment, selling a year old, low mass memory, product alongside the new one. They just would need to price it considerably lower than today. What is the optimum between profits and marketshare is hard to know. But definitely Apple is not going all for market share, they never do.

Boris

@ Leebase

You can't use Skype without a data plan.
---
LOL, all you need is WiFi, and bye bye carries.


@ Hugo

Android OS is open sourced, WP7 is not. That's why carriers don't fear it. US (and many European) carriers bloat Android as much as possible. With WP7 and iOS – no way.

beats by dre store

between profits and marketshare is hard to know. But definitely Apple is not going all for market share, they never do.

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