Yeah, its yet another Nokia blog article. But this is genuine Bloodbath news and is a big story and it deserves a fair look. So this blog is not Tomi ranting about Elop madness. This is my first view to the Nokia Lumia launch and preliminary glances into its market share performance. And you know what? We have a mixed bag. Some good news, some bad news. Spoken like a true consultant, eh?
MASSIVE MOMENT FOR INDUSTRY
So. Yes we start with the historical view. Nokia invented the smartphone. Nokia's primary smartphone OS has been Symbian up to this quarter. While Nokia had flirted with other OS options in the past, the CEO announced in February that Symbian would be replaced by Microsoft Windows Phone OS, and nine months later we had the first Nokia branded smartphone using the Microsoft OS being sold. The Lumia 800 is now spreading to more markets.
A moment if you will allow it, please. So, Nokia had invented this industry and had held a dominating market lead every single year, every single quarter, every single month and every single week and every single day, ever since. Up to February when the CEO announced his intended replacement OS. So yes, even then, Nokia warned everybody that this year (and 2012) would be years of adjustment and Nokia's short-term market performance would take a hit. That is inevitable in this kind of transition. But now we have in essense 'Nokia Smartphones 2.0' haha. This is the true second generation of Nokia's smartphones. This is as big to the industry as when Sony launched PlayStation 2, or when Microsoft went from DOS to Windows. Not many were around to remember Windows 1.0 (was horrid) and few can remember that it wasn't until Windows 3.0 that Microsoft delivered any kind of major market succes, and Windows 3.1 was the first that was considered reasonably bug-free and user-friendly (but even then, not a match to the Macintosh of the time).
Sony took Playstation 2 to new heights in dominating the home console gaming world. Microsoft grew its global market size as it shifted from DOS to Windows. Nokia had 29% market share before it announced this transition. Theoretically there is nothing to prevent us from believing, that Nokia might achieve that level at some point once again, on this new WP7 platform. What we have to do, obviously, is now to monitor this period of transition to see clues to how well Nokia's new platform might perform. And that Symbian still outsells WP7 by a wide margin is no inherent flaw - so too did PS One outsell Playstation 2 for a long while, as did DOS outsell early Windows for years. But a transition to a new platform is no guarantee that the market-leading position is carried. That same timing of DOS that allowed Microsoft to transition to Windows, was also used by IBM to transition from DOS to OS/2 (a kind of Windows clone or Macintosh OS clone) which failed. And while Sony was able to hold its market lead going to Playstation 2, the next transition to Playstation 3 saw Sony losing its market lead.
In any case, the first sales of Nokia Lumia800 smartphones is a huge event for Nokia and notwithstanding this year's short-term stumbles by the former smartphone-maker juggernaut, this is also a major event for the global smartphone industry. And considering Nokia is still by a wide margin the world's biggest handset maker, and Microsoft is (by an even wider margin) the world's biggest OS maker, their partnership has the potential to produce a powerful entrant to the market.
So lets start with the news. Lumia710 the second Lumia series smartphone was initially announced by Nokia to be available in the first half of 2012 (meaning end of Q2). Nokia then did something it very very rarely has managed before - it underpromised and overdelivered - it launched the Lumia710 also this month just before Christmas. So now Nokia has two actual Microsoft Windows Phone based Lumia smartphones shipping and selling, while both Lumia800 and Lumia710 are available only in limited countries. Still, this is a rare treat by Nokia which has become known much more for chronic delays. Congratulations!
The Lumia710 is a modest-price smartphone, the little brother to the Lumia800 so its hardly going to make the world excited about Nokia's comeback but it is a second smartphone in the line of Lumia and helps Nokia get more sales volume and market share. And its actual sales levels will be nominal during the last days of December in only a few countries, but that will ramp up during Q1 of 2012.
And there is more good news. T-Mobile USA will launch the Lumia710. Why not the Lumia800 is what everybody was saying, the Lumia710 is really a cut-price model that speaks of discount brand product but hey, at least it is one carrier in the USA. T-Mobile is the smallest and weakest of the four carriers but yes, this is a start perhaps. The timing is most unfortunate for the Lumia series, as the Lumia710 launches in February - right smack in the time when all stores are overstocked with after-Christmas products at deep discounts. The Lumia710 will fare VERY poorly against discounted iPhones, Galaxies, Blackberries and Xperias etc. But yes, at least Elop has found one US carrier to offer one Lumia, next year. It is something and this is definitely some good news.
So then onto the bad news side. First, a survey of consumer preferences by BNP Paribas of the European Lumia launch countries. Remember Nokia's smartphone market share there a year ago was about 35% to 40% and thus most 'normobs' ie normal people who might wander into a phone store now in December 2011, would have bought their previous phone around the summer or autumn of 2010, when Nokia was still strong. Those customers would have (or should have) a natural tendency to ask for a Nokia branded smartphone - perfectly oblivious to the Symbian/MeeGo/WP drama we technologists may obsess about - and should therefore have some natural market share near 35% or so. What did BNP Paribas find? Only 2% of current smartphone buyers in the launch countries of Lumia were interested in buying a Nokia Lumia smartphone. Note if you don't live in those countries, the Lumia marketing blitz - paid for by massive Microsoft marketing budget and by Elop's personal commitment to push Lumia hard - so the Lumia marketing blitz would be unavoidable. In Britain for example, Lumia is the sole sponsor of one cable TV channel haha. One of the operators/carriers is giving away a free Xbox360 gaming console for everybody who buys the Lumia800. And yet, customers who had owned a Nokia and had heard that Nokia was now launching Lumia with Microsoft - resulted in only 2% wanting to buy one. That is a huge fail. Many major analysts have downgraded their market performance for Lumia in Q4, often slashing sales expectations by half.
Then there is management delusion. Nokia Sales Director Niels Munksgaard said that the youth are "fed up with iPhones" (!!!) Wow. Lets go to the scoreboard. In the UK - a neutral market neither Apple's nor Nokia's home market, but one where Lumia has been broadly launched and has massive marketing push - how much are they tired of the iPhone? Gfk surveyed the UK market two weeks ago and the bestselling smartphone heading into Chrismas was.. the iPhone 4S. Apple had several iPhones on the chart. Samsung's Galaxy was at number two and Blackberry had several models on the list. Nokia's Lumia 800 ? Did not make the Top 10 - and neither did any other Nokia (Symbian) based smartphone either. Last Christmas the hot Nokia N8 was the top seller this time in Britain. So. Nokia Lumia managers are now living in some alternate universe utterly disconnected from reality. Fed up with iPhones? Come on.
Then Microsoft. Steve Ballmer must be proud of his Windows Phone team. Or not. He demoted the President of the Windows Phone unit, Andy Lees to 'an unspecified role'. This, say Redmond-watchers, is how Ballmer castrates those top managers who are too visible to be fired. But yes, Microsoft's CEO is so disgusted by 2011 performance of his mobile unit that the unit boss is effectively fired. This right as the Nokia Lumia phones, Microsoft's last play into mobile - are being launched - perfectly on schedule and with no reported bugs! So its the market side of WP that is utterly failing according to Ballmer's view, not the technical or roll-out schedule sides of the software.
But there is still more trouble in Lumialandia. Some customers started to complain about rapidly disappearing battery life or even batteries that stop recharging. This has a small whiff of Antennagate. So yes, we heard from Nokia - official announcement - yes, Lumia has battery problems and those will be fixed by software early in 2012. Ouch. So now sales reps have a brand new reason to tell their customers, you know what, the Nokia Lumia has battery problems, you might want to steer away from that. Let me show you a nice Android phone here from HTC or Samsung..
Oh, I hate to say I told you so, but the Lumia was a rush job. I said that this would result in production problems that Nokia was just trying to move away from. And even worse, obviously, as the Microsoft phones are not made in Nokia factories, the Nokia Lumia800 (and 710) are not even 'real' Nokia phones, they are Compal phones with a Nokia badge glued on. Even the guts are not traditional Nokia as Microsoft's Windows Phone is not compatible with some of Nokia's standard components like the CPU. So its like Porsche went to Tata and asked them to make some Tata sportscars and then put a Porsche badge on them. Not Porsche models built by Tata, not Posche engines, nothing. Yeah, this was going to be a problem and there will be more such issues I am sure. I do weep, however, that Nokia produces smartphones in Taiwan by a third-party factory while Nokia's world-leading mobile phone production capability in the most advanced factories is running at half-capacity..
Then about the sales reps. A press story from Britain tells of the customer service rep who had told a customer that Android phones cannot get viruses but Windows phones can. Now, first of all, obviously any smartphone can get viruses so that was obviously utterly false statement. Secondly, I am sure it was not 'taught' to the sales force to say about Lumia. But third - it was a genuine bit of advice that some customer service rep in Britain had been saying - no doubt to many potential Lumia customers (who will then tell their friends etc). And if one person thinks this, there will be many more who also believe it. This image comes no doubt from the PC side, where Windows is notorious for viruses. (Yet another reason why the Windows Phone branding is so stupid by Microsoft).
The bad news continues online. Two people, one from Nokia and one from Microsoft were caught having been going to legitimate reviews of Lumia800 handsets and posting very hostile comments where they found negative mentions by the reviewer. Both posted anonymously but were traced to come from Nokia and Microsoft offices. Ouch! This is something the blogosphere takes very seriously and the tech press has picked up on the story and all are strongly condemning this practise. This will hurt both Nokia and Microsoft credibility and good will. Not what you want at your first product commerical launch.
And then there are weird 'statistics' the most odd is a 'study' by 'Customer Think' which claims to take in the opinions of a massive 82,600 customers of smartphones (wow). And they find that Windows Phone has the best customer satisfaction of any OS. Now, I would be willing to accept that kind of finding but look what else this 'study' claims. This is strongly USA-biased in its survey population, bear that in mind. First, it finds that by 'customer satisfaction' Blackberry is better than both iPhone and Android? What? Blackberry has been crashing in the US market. But maybe an anomaly. Next, lets look at cameras. They found that on individual smartphone models, the Blackberry Torch has a better camera and video than.. the Nokia N8 ! Wot? Then, take this. On 'apps' the Blackberry Torch is AHEAD of the iPhone 4S ???????
I repeat myself: ??????? This is an utter bullsh*t 'study' that produces absolutely wild findings. But I bet that 'study' will be repeated in many stories as if Microsoft Windows Phone has the best customer satisfaction of any smartphone OS haha. There is some very serious reality distortion going on right now in the Nokia+Microsoft camp around Lumia, I tell you.
HOW ABOUT RETAIL
So then a bit of very informal market research. When I had a visit to Britain a few weeks ago on business, I visited a shopping center and saw several phone shops. One (Orange) had the Lumia 800 prominently in one window display. Another store (T-Mobile) had no Lumia window display. And the independent phone store Carphone Warehouse had Lumia in one but the iPhone 4S in the other window, very much prompting the comparison of the Lumia800 vs iPhone 4S where Lumia falls on every measure - exactly what Nokia does not want consumers to do with the Lumia800. (the N9 would have stood well against the iPhone 4S but Nokia refuses to sell the N9 in Britain haha).
Then I took a bit more time to see the shops here in Hong Kong earlier this week. The Lumia800 is being sold by all major networks. How is it in the stores. I went to four shops of the local carriers/operators and two independents. The China Mobile store had plenty of Nokia basic and smartphone models in the store but they were all in the back. There was one Lumia800 model in the store display near the front but after the hot phones. No Nokia in window display. The PCCW store had plenty of Nokia basic and smartphones in the displays and also several Nokia phones including Lumia800 in the window display among many other Nokia phones, in roughly the same proportion as their other phone brands in the store. This was most like all mobile phone stores used to be in Hong Kong last year. SmarTone had only a few basic Nokia phones in the store far in the back, ut had two separate Lumia models. SmarTone had one Lumia800 quite prominently in the window display but no other Nokia phones there among many rival phones. The Three store had only three Nokia handsets in the whole store but one of them was the Lumia800. No Nokia phones in the window display.
Then the two independent stores. The Fortress store had many Nokia phones, cheap and smartphone but only at the very back of the store behind all other brands. In their window display Lumia800 was the only Nokia phone on display among many rival phones. Then at the Wilson store there were plenty of Nokia phones well among the rival phones, and Lumia800 was there too. But the window display did have a Windows Phone based phone - by Acer. No Lumia in the window display.
This is Elop's grand strategy to dominate the world with Microsoft-money on his amazing once-in-a-career type of situation to launch a totally new OS for what was at the time of the announcement the world's biggest smartphone maker. Wow. And how underwhelming. I've seen bigger new product launches by Motorola haha. And by the way, here in Hong Kong the pre-eminent phone everywhere is not the iPhone, its the Galaxy. Everywhere. HTC runs a good second.
This is the most important event Nokia has had in years. This is Mr Elop's career making-or-breaking event. This is the most important event for Microsoft's aspirations in mobile at least for a year. And the timing of the launch, the countries of the launch, the carriers/operators of the launch - the announcement of the partnership - etc - were all up to Elop. This is totally Elop's show. He had billions of dollars to waste on this initiative and a year to plan it and execute it perfectly. And he is failing spectacularly. The consumer survey from Europe that only 2% of consumers want to buy Lumia - when more than a third of them currently hold Nokia phones and Lumia is on every TV screen - is dismal. The actual sales performance from Britain is horrid news. The individual stories from sales rep 'virus' stories to now the Nokia version of antennagate - come on, Batteries? Really! Nokia which like an idiot abandoned a competitive advantage of providing user-replacable batteries - is now drawing attention to this drawback and obviously pushing customers to Androids (this Samsung Mr Customer, by the way, also has a replacable battery! I don't mean to suggest the Samsung will have any problem with its battery but that Lumia you are considering does have problems with its battery - Nokia itself has admitted it..). And my very informal and not statistically relevant survey shows quite consistently that Lumia is not anywhere near as prominent in the stores as Nokia used to be. Is there still a carrier boycott vs Nokia (and/or vs Microsoft and Skype) or is it accident. But I can tell you the signs are VERY bad. The Lumia sales for Q4, the critical Christmas season - and Nokia's other smartphone sales in its shadow - are going to disappoint. Disappoint heavily. So say all the early signs. All of them. There is so far no news that suggest Nokia is outperforming the modest launch expectations and Nokia is millions off from its previous new OS launch of Symbian S^3 and the N8 which did 4 million sales Q4 of last year. The Lumia is lucky to do one million haha and some analysts say half a million.
If the N8 can do 4 million last year, and the market is 60% bigger today, and the Lumia800 is 20% cheaper than the N8, and you get all the Microsoft goodies (like free Xbox360s) - then Elop should deliver 7 million at a minimum this Christmas. Even if he did only 4 million it is a huge flop for Nokia's most important product launch of the decade. But the signs suggest it will be brutal, and yes I would not be surprised if the Lumia numbers are below one million. If that is the case, I am sure Elop will be so ashamed that he will not release the number (and neither will Ballmer).
So for those Nokia-optimists who hoped Lumia will bring Nokia back, sorry. That won't happen. Nokia's world-record crash of destroying its own market will continue in Q4 and Lumia will only make matters worse.