Lets first be very clear. What I am about to discuss is almost always a boneheaded idea. Some decisions are relatively easy to change or reverse. Platform decisions are very deep, involved, complex and far-reaching. Once a management makes such a monumental decision as Nokia did to switch platforms - to end its homegrown Symbian platform and to replace it with Microsoft (and simultaneously ending the MeeGo migration project) - then what is needed is nerves of steel and management determination. There will be always inertia, there will be nostalgia, there will be hysteria, there will be denial, and there will be tons of reasons why some will feel that the decision is wrong and should be reversed. Once a decision is made to switch platforms, almost always any other decision after that would be pointless, as reversing it or going another way, is almost always even more costly.
I wrote in February that while I disagreed with Elop's decision to select Microsoft, once he made it and communicated it, he had to stick to it - and we pundits had to give Nokia and Elop time to implement this decision and the analysis should be made on the results - as seen towards the end of 2012 at the earliest - and not mid-stream as the costly transition was under way. And I warned that 2011 would be a dramatically costly year for Nokia, the smartphone unit would go into losses by the summer, and all of Nokia would report a loss by the end of the year. But inspite of that, we had to give Elop and Nokia time to implement the strategy and wait to see if it panned out.
I even wrote on some follow-up blogs in February and March, that while I disagreed with the Microsoft choice, there was merit to it, the strategy may be a long-shot but it could certainly pan out for Nokia and if successful, the Nokia-Microsoft partnership could provide a strong contender from late 2012 onto 2013 and beyond. And as an example, when Symbian staff was laid off, I said that while I was sorry for those jobs, that was certainly consistent with Elop's determined actions to shift Nokia rapidly to Microsoft Windows Phone.
I said all that early on, and I meant it.
But two acts and three facts emerged, that have utterly changed my mind on waiting.
First fact - that the resellers are boycotting Nokia phones from March on. This means Nokia will die. There is no time to wait for Microsoft phones next year.
First act - Microsoft bought Skype in May. This instantly killed the viability of the Microsoft Windows Phone strategy.
Second fact - that the resellers started to boycott Microsoft phones from June. If there was any doubt the Nokia-Microsoft alliance could not save Nokia, the carrier reaction to Skype sunk any hope of that strategy.
Second act - Elop's MeeGo madness around N9 excitement. The CEO of a company who faces a hit product, a hugely profitable hit product, and actively tries to sabotage it, is a criminal.
Third fact - then we see the Nokia share price crash so badly, Nokia market value is now below the danger level, as Nokia is worth more if sold for its parts, than as a whole. That means that Nokia is in danger of disappearing quite literally within days or weeks.
I did forecast on February 15, very meticulously documenting what theories and what analogies I used, what historical precedent etc, to calculate how badly Nokia market share would crash this year after the February 11 announcement of the Microsoft partnership. And I did calculate even an early projection of how badly Nokia unit sales, average prices and total revenues would decline this year. It turns out that I was correct on every element of my forecast, the direction and scale of the Nokia crash - but I was far too optimistic on the speed, thinking Nokia's troubles would not get serious until the end of the year. I could not foresee (not even in my private worst case scenario) how badly things are going already now, less than five months after that fateful day.
I have since updated my forecast and now its clear to me, that Nokia ends this year with about 7% market share in smartphones (down to under one QUARTER of the market share it had at the start of this year). It is BY FAR the biggest total market collapse by any company in any industry of meaningful size. From 29% to 7% in 12 months, that is so massively setting the world record, it will probably stand forever as the world record for destroying a company by any voluntary action by the company's top management (so ignoring natural disasters and catastrophic accidents).
It is increasingly now said by many analysts that the Microsoft strategy is likely going to fail, and more voices are starting to suggest that Nokia may not survive as a company.
So. Its time to think the unthinkable. I am not saying its time to do the unthinkable. I am saying, now the prudent thing to do, is to try to calculate, what effect would it have, if Nokia did indeed reverse the Microsoft decision, and return to Symbian and MeeGo. What kind of market share could be recovered. What kind of unit sales of smartphones. Clearly Nokia cannot hope to climb back to the levels it had before the ill-advised and error-ridden Burning Platforms memo, and the ill-timed announcement of the Microsoft strategy on February 11, when Nokia had no Microsoft phones to sell, or even to show.
So this blog is not to say Nokia should go back. But if the Microsoft strategy seems unlikely to ever bring success to Nokia - and will keep Nokia producing big corporate losses for many quarters to come - and lose most of Nokia's market share - then the prudent thing to do now, is to try to calculate the cost/benefits of any alternative.
And there is a very viable alternative. By viable, I am talking of organizational and commercial and manufacturing issues. A shift now to Android is not viable. Switching to Android would cause at least 12 months of further disruption, only pushing Nokia's 'recovery' far beyond the date that the Microsoft cavalry would arrive.
No, there is only one viable alternative that could be activated now and its effects would be seen within days or weeks, and all of Nokia's organizations, factories, sales force, designers, engineers etc could instantly adapt to - and that is the return to ... yes ... Symbian and MeeGo, while abandoning Microsoft.
So lets explore this option. When the Microsoft strategy was announced, Stephen Elop did not warn us that Nokia will be making massive losses already from Q2 (would have made from Q1 if his announcement had been at the start of the quarter, not the middle). Elop has clearly miscalculated, he admits as much in saying the effects have been far more severe than he had expected.
I am not saying Elop admits to having made a mistake. But clearly, it is possible that he has perhaps made miscalculations in his decision to go with Microsoft. The reality is clearly not appearing as Elop was promising us. Even if there was a mistake, that does not mean that it would be the 'right' move now to reverse the mistake. But the prudent thing is to try to evaluate the option.
WHAT WOULD HAPPEN IF NOKIA WENT BACK TO SYMBIAN (and MeeGo)
So lets try to model what would happen. And this would have to be total reversal. Not a wishy-washy half-way house. If Nokia (said by Elop or anyone else) said they are not going to discontinue Symbian, but still kept the alliance with Microsoft, nobody would believe the Symbian story. The only way the industry took Nokia's reversal of decision seriously, would be if Nokia categorically rejected Microsoft, and cancelled all parts of that partnership that Elop announced on February 11. Obviously Elop would also have to resign or be fired, else again, it would not be believed. He is too closely alligned to Microsoft and his actions the past four months are far too suspicious.
But to evaluate this scenario - imagine this news conference say Monday morning. Espoo, Finland, Nokia HQ. Nokia Chairman Jorma Ollila holds a brief press conference, where he announces that Stephen Elop is no longer continuing as CEO of Nokia and is no longer employed by Nokia. Jorma Ollila himself steps back as interm CEO while the Board embark on a search for a new CEO. The partnership with Microsoft will not be pursued, and Nokia will not manufacture any smartphones using the Microsoft operating system, Nokia returns with commitment to Symbian and MeeGo, with the migration path from Symbian to MeeGo resurrected using both the Qt developer tools and the Ovi store. Nokia would pay back to Microsoft any payments received and will also pay any penalties of breaking the partnership contract.
If we had this press conference, that would effectively and immediately end the Microsoft path of Nokia's smartphone strategy and it would restore the Symbian and MeeGo strategy as was Nokia's official position as recently as February 10.
So, what would happen to Nokia sales, if Jorma Ollila had that stunning press conference? Lets try to model that scenario and see what would happen. First of all, obviously, Nokia smartphone sales would not magically jump up to 29% it was before the February 11 announcement. But today Nokia market share is down to 15%. So Nokia lost almost half of Nokia's customers in less than 5 months. There was no 'antennagate' to poison Nokia technology image. There was no failed new phone like the Mercedes A-Series (remember the car too dangerous to drive into a curve because it would tip over and fall in curves). No. Nokia was highly desirable in December - sold more than all Apple iPhones and all Samsung smartphones combined - and today has fallen behind both of those. There was no radical new phone by a rival (the iPhone 5 is actually delayed, expected around September). So why the collapse of the sales? It is known as the Osborne Effect. When a manufacturer announces its current product is going to be superceded, the current model sales collapse. Nokia announced a whole new operating system, so all phones on the older operating system suffered that fate.
But go ask your mom or your uncle or your sister or your cousin what is Symbian and most will not even know what it is. We the technology geeks know all about Android and iOS and Symbian etc. But the average consumer doesn't. The demand for Nokia's phones did not collapse on February 11. It was that any smart salesguy in a phone shop somewhere on the main street of averagetown, knows that Symbian is obsolete. The smart salesguy knows to avoid selling Symbian. Why? Because even if the customer is very loyal Nokia user and wants the Nokia phone, odds are, that in the coming weeks, what was a happily satisfied customer, returns to the store - after hearing from some friend or colleague that Nokia's Symbian is obsolete - and demands a refund.
Then the salesguy has to first do a 'new sale' to change the mind of the customer to not demand an refund, but accept a substitute phone. Then the salesguy has to do ANOTHER new sale, to convince that a given alternate phone is a genuine equivalent to the Nokia that is being returned. The customer will be looking at the prices and most customers will not be willing to accept a replacement with a lower price, or even the same price, so they will haggle for a slightly more expensive phone. More sales work. And if the customer 'wins' and the salesguy gives the slightly more expensive phone to the customer, the salesguy now has recorded a discount - which will be deducted from his sales commission. The salesguy has done three times the amount of work for one sale of one phone to one customer, and his commission is cut at the end. And then, after the customer has left the store, the salesguy has to pack the returned phone for refurbishing (the box is opened, it may miss some parts, there are signs of wear etc). No smart salesperson wants this amount of hassle. It makes perfect sense, that if they know Symbian is dead, they will go to extraordinary amount of trouble - the first time - to sell the alternate phone. So for what Nokia phones the store shows and sells, all sales staff know which Android model they will steer the customer to, rather than sell the Nokia.
My point. The strong Nokia brand and loyalty did not die on February 11. The sales commitment to Nokia died. The customers still walk in, totally unaware who is Mr Elop and what he said about Microsoft and whether Windows is coming to Nokia phones. They had a nice two year old Nokia and want to replace it with a nice new Nokia, with a nice camera, nice screen, etc. They probably didn't even know the phone they had was a smartphone..
So. If Nokia is able to sell 15% of all smartphones in Q2, while the reseller channel is 'boycotting' Nokia smartphones, and now Nokia reverses the end to Symbian - some of those salespeople will feel happy to sell Nokia again. Some will be wary and be on the safe side, and keep pushing Android etc. But some will rather keep the customer happy and if they wanted Nokia, sure I'll sell you Nokia - as long as Nokia itself is not telling the world that Symbian is dead.
There is certainly no reason to think that Nokia's catastrophic sales collapse would continue. So lets say, that Nokia did the Jorma Ollila announcement at the start of August. We have one month more of Nokia misery obviously, July is already gone, but right from August the sales boycott would end. Note, it would not end 'instantly'. The recovery would be far more gradual. Some salespeople would change their own minds instantly, others would take longer to decide, some would never really trust Nokia again.
So we start at 15% market share, lost more in July but would have August and September to start to climb back. I think it would be fair to think, that in the first two months of the come-back, Nokia would rather 'easily' recapture what was lost in July. The far harder part is to climb back from the 15% towards the 29%..
So Q3 would be 15% market share. Then what of the climb back up? First, the theoretical target cannot be 29% anymore, because Nokia has had a historical and very consistent natural downward trajectory of its Symbian market share, which has been losing about 5 share points of market share per 12 months. So if we aim for Q4, the theoretical ceiling would not be 29%, it would be 24%. But obviously Nokia is not going to jump from 15% back to 24%. How much could Nokia recover per quarter?
I would say, that salespeople are quite 'greedy' or you could say they are 'motivated by money' so they would typically be less likely to be tied to strong philosophical convictions, if facts - and specifically money (sales, commissions) show them the way. So I'd say (early in my career I used to be a consumer salesguy, then later a B2B salesguy and then a sales manager) most of the sales would have totally forgotten the Elop Effect by a year. Between now and then, it would be a gradual return. So I'd say - without any facts to prove my case, that the recovery would last about 12 months, four quarter, and the pattern would be linear.
And to be conservative with the model, lets ignore the first partial quarter. So we do 14 months not 12. But yes, lets aim for Q3 of 2012, that is when the Elop Effect sales boycott would be completely over. What is our target market share for Q3 of 2012? Its 20.5%. And we'd be growing from 15% end of Q3 of 2011 to 20.5% by end of Q3 in 2012. So we'd need to grow 1.375% per quarter. Lets call it 1.4% just to keep the math easy.
Now we can model the recovery to cancel the Elop Effect. Nokia's market share should fit roughly this pattern for Nokia Symbian smartphones:
Q4 2010 - 29%
Q1 2011 - 24%
Q2 2011 - 15%
Q3 2011 - 15%
Q4 2011 - 16.4%
Q1 2012 - 17.8%
Q2 2012 - 19.2%
Q3 2012 - 20.5%
I think this looks very reasonable and my gut says in reality the recovery would be faster, but remember the ceiling, Nokia's natural Symbian market share decline would bring us to just under 20% by end of next year in any case. So this can't really get much better than this.
And for all those who say it is utterly ridiculous to suggest Nokia could grow the old and obsolete and undesirable Symbian OS based Nokia smartphones - that may have been true of older editions of Symbian, but the facts show, that the new S^3 version of Symbian (powering the N8, E7 etc) was VERY desirable by consumers. The Nokia N8 set a Nokia record for the most successful new smartphone launch, sold about 3.75 million units in its first quarter - you don't set records with an undesirable phone. Nokia smartphone sales grew unit sales in Q4 - yes, grew unit sales - and grew average prices (so the growth was not by giving price discounts) and grew PROFITS - so the growth in sales was not by big marketing blitz campaigns. It was genuine customer satisfaction with the N8 and its new touch-screen Symbian S^3 operating system.
Since then Nokia has released a series of new Symbian phones, including the first on an even newer version of Symbian OS, called Anna, which powers the new X7 for example. And Nokia will be rolling out at least 10 new Symbian phones still in the second half of 2011, so the product line keeps getting more fresh and modern.
So then MeeGo. MeeGo was intended to be Nokia's new OS to replace Symbian. Stephen Elop has taken every step to delay, disparage and damage MeeGo. But now we finally see the N9 and the tech press absolutely love the N9 and MeeGo. Most analysts say its far better than Android and Windows Phone, some actually say the MeeGo-powered N9 is better than the iPhone.
The first Microsoft powered Nokia smartphones would not be available except in small quantities, in only a few markets, close to the end of this year, if all goes well by current plans. The nice thing about MeeGo is that it is available now. Nokia could sell the N9 in all countries, but Stephen Elop in some fit of madness has said it won't be sold in most of Nokia's markets. The Nokia smartphone factories are running at half-capacity, so there is ample ability to ramp up N9 sales. So it could be launched widely and sold globally easily before Q3 is done.
What is better yet, is that there is a second MeeGo powered phone, the N950, which is a kind of big brother to the N9, an even more expensive superphone, that with a QWERTY slider. And again, Elop has decreed the N950 will not be sold at all, only limited production to give to some developers. But the phone is totally ready and already now shipping. So its only a question of approving the production and sales, and Nokia would have instantly a second MeeGo device it can sell now in Q3.
Then Q4? Well, Nokia has two other smartphones that are completely ready and can run MeeGo. The first is the device that was ready to show last autumn and ready to sell by early Spring, called the N9-00 (this is not the current N9, which had an internal model number of N9-01). Stephen Elop killed the N9-00. But the beauty is, that it is totally ready, fully functional, ready to be mass-produced and sold. Nokia can easily put it into production at one of its idling smartphone factories and sell globally.
And there is a fourth device instantly ready for MeeGo. This is a bit of a curve-ball, but the two-year old N900, that ran Maemo, is also capable of running MeeGo. Give it a bit of a face-lift (more memory, that kind of thing) and voila, Nokia has four MeeGo devices it can sell by Q4, rather than one Microsoft WP7 smartphone. This N900 would be somehwhat older in specs, so it should also be sold as a 'basic' or 'entry level' MeeGo device at a lower price point. But nonetheless, with no new handset design whatsoever, there are four MeeGo devices already to run now or latest by Q4.
Then Nokia should do some changes to planned phones. If there are some cool new phones coming for the Spring of 2012, which could be modified for MeeGo, then that should be done, or else expedite the design of new phones for MeeGo to try to have new MeeGo handsets by around the summer of 2013.
All of the early MeeGo devices are quite premium phones and quite costly. So their sales volumes would not be high. But they would help very much with Nokia's image, and as there is the migration path, the MeeGo devices would rapidly gain from Symbian developers and the Ovi store. And obviously the MeeGo device series 'sexiness' would help revitalize developer interest in developing using the Qt developer tools helping not just MeeGo and Symbian app portfolio, the tools also work for developing apps for Nokia's mid-priced S40 featurephones.
Now, what Nokia would need to do, is start the migration of smartphones from Symbian to MeeGo obviously. And because Symbian is not now under death penalty, that transition would not need to be so urgent, and Symbian could live long at the low-cost end of the Nokia price pyramid. But Elop killed most MeeGo projects. So the current pipeline is not ready to roll out many good MeeGo devices next year. So after the initial excitement, there would be somewhat of a lull in MeeGo early next year until the first newly designed MeeGo devices would appear around the summer or Autumn.
But then, the transition should be strong and especially should start to hit the mid-price Symbian phones, not just the top end of the price scale.
So I think, MeeGo transition would start from about Q3 in 2012 and by about end of 2013, half of Nokia's smartphones should be on MeeGo.
I think its rather clear to see, from the incredibly strong response to MeeGo, that it is a hit platform and will produce many hit phones for Nokia. But lets keep this conservative. I do think Nokia will see an increase in market share once mass market MeeGo devices appear next year. The first edition of MeeGo and the first phone on it have been so incredibly strongly received - that considering these were made under duress, and with the CEO sabotaging the whole MeeGo project, if given reasonable support, the next editions and phones should be even more spectacular.
But. Lets keep this conservative. So. Lets say the only benefit to Nokia market share from MeeGo, is that from Q3 of 2012, the market share erosion of Symbian, is cancelled. That Nokia will start to hold steady on its market share. No growth. Just hold steady. That gives us a reasonable scenario of what would happen to Nokia market share if Jorma Ollila fired Stephen Elop tomorrow.. So now we get this market share pattern:
Q4 2010 - 29%
Q1 2011 - 24%
Q2 2011 - 15%
Q3 2011 - 15% (MeeGo Symbian split about 2/98)
Q4 2011 - 16.4% (MeeGo Symbian split about 5/95)
Q1 2012 - 17.8% (MeeGo Symbian split about 7/93)
Q2 2012 - 19.2% (MeeGo Symbian split about 10/90)
Q3 2012 - 20.5% (MeeGo Symbian split about 15/85)
Q4 2012 - 20.5% (MeeGo Symbian split about 20/80)
Q1 2013 - 20.5% (MeeGo Symbian split about 25/75)
Q2 2013 - 20.5% (MeeGo Symbian split about 30/70)
Q3 2013 - 20.5% (MeeGo Symbian split about 40/60)
Q4 2013 - 20.5% (MeeGo Symbian split about 50/50)
Note again how conservative this is. What is typical of handset sales, is the 'hit' phone. Look at the Galaxy S II from Samsung or the iPhone or Motorola Razr etc. One phone can totally explode and make huge sales in a short time, quite disproportional to its price for example. And the N9 on MeeGo has a lot of potential to be the best-selling new smartphone from Nokia ever. And the N8 sold about 3.75 million in its first quarter. So the N9 could sell something like 4 million. If we say it starts at end of August, and give it one month in the quarter, that would still be 1.3 million N9 units and the MeeGo/Symbian split for Q3 2011 in the above would become 8/92. And then if it sold 4 million in Q4, the split for MeeGo/Symbian would go to 20/80. And this is without any sales of N950 or the other MeeGo devices haha..
WHAT OF PRICE?
So then average sales price? Nokia ASP was 155 Euros/200 US dollars in Q4 (grew 14% from Q3, a Nokia record jump in one quarter). Now the ASP is down to 138 Euros/180 US dollars. The sales price is under enormous pressure as the resellers are in that boycott. So. What would happen? I don't see a climb up to the 200 dollar level where we were six months ago. The phone model lines are older and the resellers have been discounting Nokia and can't suddenly jack up the prices in their catalogs etc. So I think any higher prices would come with new phones, rather than trying to move current model prices higher.
But the price pressure would ease greatly. I think in the short run, this would stop the price pressure on Nokia and the ASP would be flat. Then the effect of the high-price MeeGo phones would kick in.
When Nokia introduced the N8, the ASP jumped 14%. A similar jump should happen when the N9 is launched and that would be seen in the first full quarter (Q4). The early excitement and demand for the N9 is far greater than it was for the N8, and the price of the N9 is higher, so a bigger jump should be seen. But there would be four MeeGo devices, further boosting that jump. Again to keep this conservative, lets say all four devices only achieve a 7% jump in the ASP for Q4. So the ASP would climb to 148 Euros/190 US dollars.
I would then keep the ASP flat through Q3 of 2012, and from Q4 when mass market MeeGo devices would be broadly available, I'd model a gradual climb of 3 Euros/4 US dollars per quarter until Q4 of 2013 the Nokia smartphone ASP would be 163 Euros/210 US dollars when half of Nokia's smartphones would be MeeGo based.
And what of profits? We did see that Nokia had 12% profitability back in Q4 of 2010 but Nokia's guidance was 9% for Q1 before the Elop Effect hit and profitability fell to 6%. Now profitability is negative because of the boycott and Nokia's desperate moves attempting to force some phones into the channel. Stephen Elop guided that Q3 will be zero profit ie no loss. I am highly suspicious of that guidance but since we used it in the Microsoft version of the model, lets use the zero profitability level also for this case for Q3. Whatever it would be under the current Microsoft scenario, it can't be worse when the boycott is lifted and when the MeeGo phones are widely marketed.
Then profitability should recover gradually to that guidance level of 9% (not the 12%) in rough parallel with the recovery of the market share recovery so up to Q3. After that, we should start to see MeeGo positive effects, and again, I am very conservatively saying, that when half of Nokia's smarpthones are MeeGo in Q4, at that time Nokia will have recovered profitability to the level it was in Q4 when the N8 was a hit phone. Now we can populate the model:
SMARTPHONE SALES, REVENUES & PROFITS MODEL IF NOKIA RETURNS TO SYMBIAN & MEEGO
Quarter . . . mkt shr . . . units . . . ASP . . . Revs . . . profitblty . . profits
Q4 2010 . . . 29.0% . . . 28M . . . $200 . . . $5.7B . . . 12.5% . . . $713
Q1 2011 . . . 24.0% . . . 24M . . . $185 . . . $4.4B . . . 6.2% . . . . $227
Q2 2011 . . . 15.0% . . . 17M . . . $179 . . . $3.0B . . - 6.2% . . . - $186
Q3 2011 . . . 15.0% . . . 18M . . . $179 . . . $3.3B . . . 0.0% . . . . $ 0
Q4 2011 . . . 16.4% . . . 24M . . . $192 . . . $4.7B . . . 2.2% . . . . $104
Q1 2012 . . . 17.8% . . . 27M . . . $192 . . . $5.1B . . . 4.5% . . . . $231
Q2 2012 . . . 19.2% . . . 30M . . . $192 . . . $5.7B . . . 7.8% . . . . $447
Q3 2012 . . . 20.5% . . . 35M . . . $192 . . . $6.7B . . . 9.0% . . . . $603
Q4 2012 . . . 20.5% . . . 40M . . . $196 . . . $7.8B . . . 9.7% . . . . $761
Q1 2013 . . . 20.5% . . . 40M . . . $200 . . . $8.0B . . . 10.4% . . . $832
Q2 2013 . . . 20.5% . . . 44M . . . $204 . . . $9.0B . . . 11.1% . . . $999
Q3 2013 . . . 20.5% . . . 47M . . . $208 . . . $9.8B . . . 11.8% . . $1,157
Q4 2013 . . . 20.5% . . . 54M . . . $212 . . . $11.5B . . 12.5% . . $1,439
So that is rather interesting... When we compare to the same model I built two days ago for the current strategy under the very best, ultra-optimistic scenario, using the existing Microsoft strategy, the model looks like this:
NOKIA MICROSOFT SCENARIO - ULTRA-POSITIVE OPTIMISTIC CASE
Quarter . . mkt sh . . units & split . . . . . . ASP . . . . . revenues . . proftblty . . profits
Q4 2010 . . 29% . . 28M Symbian . . . . . . $200 . . . . . $5.7B . . . 12.5% . . . $713M profit
Q1 2011 . . 24% . . 24M Symbian . . . . . . $185 . . . . . $4.5B . . . 6.2% . . . $278M profit
Q2 2011 . . 15% . . 17M Symbian . . . . . . $179 . . . . . $3.0B . . . - 6.2% . . - $185M loss
Q3 2011 . . 11% . . 13M Symbian . . . . . . $174 . . . . . $2.3B . . . 0.0% . . . $ 0M profit
Q4 2011 . . 7% . . 10M Symb/1M WP7 . $169/$190 . $1.9B . . . 0.6% . . . $ 11M profit
Q1 2012 . . 7% . . 7M Symb/4M WP7 . . $164/$180 . $1.9B . . . 2.3% . . . $ 43M profit
Q2 2012 . . 7% . . 4M Symb/7M WP7 . . $159/$170 . $1.8B . . . 3.9% . . . $ 71M profit
Q3 2012 . . 6% . . 1M Symb/10M WP7 . $154/$160 . $1.7B . . . 5.6% . . . $ 98M profit
Q4 2012 . . 6% . . 12M WP7 . . . . . . . . . $150 . . . . . $1.8B . . . 6.2% . . . $115M profit
Q1 2013 . . 7% . . 14M WP7 . . . . . . . . . $137 . . . . . $1.9 B . . . 6.2% . . . $119M profit
Q2 2013 . . 7% . . 16M WP7 . . . . . . . . . $125 . . . . . $2.0 B . . . 6.2% . . . $123M profit
Q3 2013 . . 8% . . 18M WP7 . . . . . . . . . $113 . . . . . $2.0 B . . . 6.2% . . . $125M profit
Q4 2013 . . 8% . . 20M WP7 . . . . . . . . . $100 . . . . . $2.0 B . . . 6.2% . . . $126M profit
There is no point where the Microsoft strategy comes close to outperforming the option of returning to Symbian and MeeGo. It may be a bit difficult to compare those two tables, so lets summarize it to the three years. Here is the above set of tables but on annualized data:
OPTION TO RETURN TO SYMBIAN AND MEEGO
Year . . . mkt shr . . . units . . . ASP . . . Revs . . . profitblty . . profits
2011 . . . 17.4% . . . . 84M . . . $185 . . . $15.4B . . . 1.0% . . . . $ 195
2012 . . . 19.6% . . . 131M . . . $194 . . . $19.5B . . . 6.2% . . . . $2,042
2013 . . . 20.5% . . . 186M . . . $207 . . . $38.3B . . . 8.9% . . . . $4,427
OPTION TO STAY WITH MICROSOFT STRATEGY
Year . . . mkt shr . . . units . . . ASP . . . Revs . . . profitblty . . profits
2011 . . . 13.6% . . . . 65M . . . $179 . . . $11.6B . . . 0.9% . . . . $ 104
2012 . . . . 6.8% . . . . 45M . . . $161 . . . $ 7.3B . . . 4.5% . . . . $ 328
2013 . . . . 7.5% . . . . 68M . . . $117 . . . $ 7.9B . . . 6.2% . . . . $ 493
(if you missed my blog where the Microsoft analysis was done, please go read it. I am using such facts and assumptions as Microsoft's head of Windows Phone and his projection of WP7 phone ASP's - and even there am most generous and optimistic etc.)
There you go! So, would you rather have the strategy that under the most rosy optimistic scenario possible gives you 7.5% market share three years from now, selling 68 million smartphones that year with an average sales price of 117 dollars, earning you 7.9 Billion dollars of revenues and a bit under 500 million dollars of profits.
Or would you rather have the very conservative scenario of the other strategy that gives you a bit better market share of 20.5% and slightly better unit sales of .. 186 million, with an modestly better ASP of .. 207 dollars and generating just a bit more revenues - no, actually five times better revenues of 38 Billion dollars and produce almost TEN TIMES more profits? Yeah. I think its about time we consider VERY SERIOUSLY the prospect of reversing the strategy.
It is perfectly possible that Stephen Elop made his decision under the best of motives with the best available information and through thorough analysis and best advice. But now we have seen new facts emerge which were not known in February. And we have certainly heard that Mr Elop has been surprised by how the market has taken to his strategy, the reseller boycott etc. So the world has certainly changed since his decision and it may be that there were mistakes made in the decision or incomplete analysis etc. But those models tell a very compelling story. Every year, in fact every quarter, the Symbian and MeeGo strategy now looks better than the Microsoft strategy, and the further we go, the far better the Symbian/MeeGo option is than the Microsoft one.
This decision now is actually pretty clearly what Americans call a 'no-brainer'. You don't need to do any thinking about which way to go, its obvious. Now, the Nokia Board has to act. Every day we wait, costs Nokia another 10 million dollars of wasted profits, as I already calculated before, the cost of the most expensive and destructive CEO of history.