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December 08, 2011

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KPOM

Two thoughts. First, why not Android? Samsung has done a decent job keeping up margins and driving volumes with Android, ranking second only to Apple in terms of profits, and ranking first in market share. Couldn't Nokia have done the same? Second, if they wanted more flexibility than what Android offered, then might a Windows Phone in the US strategy have worked, keeping MeeGo/QT in the rest of the world, and possibly eventually merging them by porting QT to WP7.5? It isn't as if they had much to lose in the US, anyway, plus it would have been a way to avoid the Osborne Effect (or as you call it, the "Elop Effect")?

karlim

Tomi, During earnings call HTC has forecasted that they will ship only 13 million smartphones in Q4. A month later they have issued a profit warning that their Q4 sales will come in 25% below expectations. Which probably means that they will ship only 10-11 million smartphones in Q4.

So even with your current estimate of 14M smartphones, there's no way Nokia will drop behind HTC this quarter

roberto mulazzi

in my opinion mr. Elop has an agreement to sell nokia to microsoft
That's all

who cares about shareholders...not him. Sure

ej victor

May not be that bad... as a nokia loyalist in the USA (yes I'm odd :o) I have replaced my N8/C7 combo with a N9 and E7-for work. Firesale prices and well I just had to have the N9-64gb may keep the shipments up.

Tomi T Ahonen

Hi KPOM, karlim, roberto and ej

KPOM - yeah, Android would have been better than Microsoft on very many levels. But a FAR more clever strategy would have been to keep MeeGo and what we now know is their Meltemi (Linux based low-cost OS to rival bada) - and using Qt tools, achieve partial compatibility with Android family. Any developer of Nokia/Meego/Meltemi (and Symbian and S40) would have automatically been able to create to Android too. Thus Nokia/Qt would have become the preferred authoring platform - gathering all developers to the Nokia side of the 'Android-MeeGo-Meltemi' ecosystem. Duh? The only OS Nokia has ever supported that is incompatible with that - is WP7.

karlim - thanks! I didn't notice that. Very good info. That changes things yes.

roberto - Yeah, that the Nokia Board is doing nothing - and none of the big corporate shareholders is critical of this, suggests there might be some level of collusion, but then the intended merger would risk being voided by US and European courts.. I can't imagine Jorma Ollila and Steve Ballmer being that stupid.

ej - fair points. But you do know that Lumia800 is a SEVERE step DOWN from N8 and N9, and there is no projected E7 equivalent in Lumia line (at least not yet). So then the question becomes - if you'd have to now downgrade to lesser phones by Nokia, would you still continue?

Thank you all for the comments.

Tomi Ahonen :-)

guest

> The Microsoft Muppet.

Hey! The muppets were fun. Elop is not.

Jonathan

Lee makes a very good point noticing that Apple changed the rules of the game with iPhone. The market is nowadays much more about software and apps than hardware.

Before the direct manipulation touch revolution initiated by Apple the biggest mobile operating systems were Symbian, PalmOS, BlackberryOS and Windows Mobile. All of those made an attempt to go to touch, but results were less than perfect. First Palm noticed that their old OS is not going to make it, and started from scratch (new kernel, completely new UI, new app frameworks, no backwards compatibility) and created WebOS. Microsoft did basically the same with Windows Mobile -> Windows Phone 7. RIM is in process of doing the same with BlackberryOS -> BBX (QNX based). Also Nokia came to the same conclusion after years of fighting with sub-par Symbian touch. They tried to make the transition with Maemo/Meego, but unfortunately the Linux project failed catastrophically last year. At that point their choices were really few, basically just Android and WP7.

It very interesting *none* of the old operating systems, designed for keyboard use, made it to the new age, perhaps with the exception of Android. It started life as a blackberry clone, but was very quickly adapted for touch use after iOS launch. Google had a good talent and *much* less baggage in terms of backwards compatibility, because first Android phones shipped much later.

dr_zorg

@LeeBase

"But...we can't convince each other. There is no way to know "what would have" happened."

That's not true.

If your casserole is smoking, yes, theoretically your house can catch fire and burn down.

But if you take a canister of gasoline and pour it all over the stove, then the result is pre-defined.

Elop's incompetence was that canister of gasoline.

So yes, we can say with absolute surety, than if it hadn't been for his criminal actions, Nokia would not have been in the mess it is in.

Gijsbertjan

I'v always read your blogs with interest and pleasure. I still do actually!
However, I think that you're wrong on this one. Nokia might have made it with MeeGo, but I don't think they'll go down now they're using WP.
In my country (Holland) Nokia has not been a "contender" for over two years. The normal consumer and the youth wouldn't even consider buying Nokia. Instead, they all went for Samsung Android devices, Apple iPhones or Blackberries.
Now with Nokia Luma's is the first time since the N95 that ordinary people are talking about how cool and beautifil the "new Nokia"is. Those people don't care that Nokia threw away a potentially superior OS, they don't care that Nokia lost big market shares (they were losing it anyway here, big time!).
All they care about is that the new Nokias are pretty, cool to be seen with (VERY important), and are able to do anything that the iPhone of their friend does, and often prettier.
Those people don't use Exchange servers, seldomly tether their devices and don't want a thousand options, they just want simplicity and status with theit phones.
Those are the peoples that build marketshare and spread mindshare. It;s happening here, I see it around me.
I ahve been contemplating between an N9 and a Lumia 800 and went for the latter. I've ahd it for two weeks and have been loving it ever since, and I'm halfway between a normal consumer and a power user.
I actually ahve faith it's al going to work......

klma

Good and interesting analysis but remove those "haha"-words and sentences, please.

bungle

While apps are great, apps do not change the markets. Apple didn't win the markets with apps or ecosystems, or portfolio of well connected devices. They did win it with hardware, or with the best touchscreen for that matter, and the OS that made it work smoothly. I do not believe that apps are the future. Software come and go, but new hardware is what makes the product. More, and different types of sensors, and other peripherals, better optics, better screens, faster internet, faster processors (can we replace computers with phone and a docking station?), better battery life, more and faster memory, more ways to connect etc. If you can be best in any of these, you can surely grab some markets. If you can be best in many. You will surely be the leader. These are in my opinion the killer features - the hardware. Well, the implementation has to be good too, and the APIs. The point is that ecosystems and software will always form around good products. And in mobile phones, good products mean hardware.

Nokia was on a right track with Meego (open software on a great hardware is always a good combination). Sadly they decided to throw the ax into pit. They raised the hands, and said: "we are losers, we cannot make this work. let the microsoft try it on our behalf". Needlessly to say what happens to these kind of companies. Yes, at first they lose their identity. Then they lose their mindshare. And then it's over.

n900lover

Gijsbertjan:

"All they care about is that the new Nokias are pretty, cool to be seen with (VERY important), and are able to do anything that the iPhone of their friend does, and often prettier.
Those people don't use Exchange servers, seldomly tether their devices and don't want a thousand options, they just want simplicity and status with theit phones."

And this is the reason why nokia with ms WILL go down. Ms primary and only goal with smartphones is extension of exchange & office & windows monopoly, that's why you have office app absurdly put on main screen of phone for general public. They aren't going to do anything that would harm their main business, luckily for them Elop is in fully on board and actually windows "ecosystem" for him is reason to go with wp7. LOL.

n900lover

http://news.cnet.com/8301-10805_3-20128013-75/the-inside-story-of-how-microsoft-killed-its-courier-tablet/

Nothing that isn't fully supporting windows & office monopoly is allowed to exist, no matter how successful or innovative it could be. Good luck with that, nokia.

karlim

Hmm, Tomi I looked at your predictions of Nokia sales since Feb. 11th, and it seems you have been wrong on every single one of them. First on the high side (Q1 and partly Q2). Then on the low side. To recap:

Q1 2011 - Actual- 24 million units. Prediction 29M (wrong by 5M units).
Q2 2011 - Actual 17M. Pre-profit warning prediction prediction 25M (wrong by 8M), post profit warning prediction (June 14th, Who's On First Post) 12-15M smartphones (wrong by 2-5M)
Q3 2011 - Actual 17M. Pre-profit warning prediction 21M (wrong by 4M), post-profit warning prediction 13M (wrong by 4M)
(I'm using your own rounded numbers)

Now you have a happy coincidence that the actual one quarter (Q3) Nokia numbers fall right in the middle between your optimistic and pessimistic forecasts. And on the basis of this simple coincidence you decide pat yourself on the back, claiming that it was a great forecast all along?! And then decide to use just this one coincidence, mathematical average, as the basis of your next forecast? Without any updates to your forecasting model and assumptions?

I'm 99% sure you will be proven wrong again.If only because your both previous models (optimistic and pessimistic) were based on the assumption/trend of continuous quarter by quarter decline of Nokia Symbian smartphone sales. The trend Nokia has decidedly broken in Q3.

Also, assuming 1M Lumia phones sold,you predict another 4M (23-24%) drop in Symbian unit shipments. A drop, that would result in huge revenue and profit losses for Nokia. And if there would have been such a loss in smartphone sales - Nokia would have known it already and would have been obligated to issue profit warning. Just like they did on 31st of May. One month before the end of quarter, a date we are well past now in Q4.

My prediction for Q4 sales - 18 million. 17 million Symbian and 1 million Lumia phones. Modest ASP increase, offset by a huge jump in marketing expenses

Baron95

Tomi, you seem to have problems with a simple concept.

After the iPhone/iOS/Multitouch/App phenomenon, ALL, let me repeat, *ALL* existing smartphone lead vendors had to scrap their plans.

EVERY SINGLE Symbian vendor, from Samsung to SE to Motorola abandoned Symbian. Nokia and the DoCoMo FOMA (bastardized Symbian) OEMSs are suffering the most because they stuck with Symbian longest.

Palm, Microsoft, RIM, even Google/Android - *ALL* of them also scrapped (are in the process of) their pre-iPhone OS. They all had to start anew to compete with the iPhone.

The only difference is that a single company (Google/Android, Microsoft/WindowsPhone, Palm/WebOS, RIM/BBX-QNX, Samsung/Bada) moved fast to develop the new OS within 1 year. Nokia tried the ridiculous open-source, then Intel Linux Maemo/Meego. That would have never worked - they'd be always way slower than the competition.

Elop had no choice. Maemo/Meego was going nowhere. Symbian was on its last legs and could never ever be a tablet OS. Android was occupied by a dozen plus OEMs. He was forced into Microsoft's arms.

Yes, Nokia will pay a heavy price and will never again be on top. OPK presided over $200B of market cap destruction. Market cap is the only measure of success for a company (not unit shipments). Elop, by comparison, to date destroyed, what, $10-$15B in market cap.

And you claim that the CEO that destroyed $200B in market cap is better than the one that destroyed only $10B? Seriously? You really think that?

eduardo

It looks like we may get to find out exactly what Microsoft and Nokia agree to, and why

http://www.groklaw.net/article.php?story=20111208101818692

karlim

@Lee

For some reason I think this hardware/software thing is like a pendulum. There are times when hardware rules - pre 2007, then it gets good enough. Software takes over 2007-20??. Then it gets good enough too (Android 4/ICS is getting close). Then it's back to hardware, or something else, cloud?

@Baron95 - great observation about capital destruction :)

@Eduardo - That would be hugely interesting. Always wanted to know what Nokia/Microsoft contract says. But don't get your hopes up too much. I doubt full Elop testimony will be made public, and big part of documents produced will be blacked out when they are released to the public. And court has no interest to release them to the public, if they believe there are trade secrets involved. They just want to look at them to make up their own minds, and black out a lot. Still, might be better then nothing :)

tango

I just say that I love my Lumia 800.

Since Whatsapp is not available for Harmattan (it was an OS with lack of useful softwares and a dead ecosystem anyway) so I returned back the N9 and get the Lumia 800.

I must admit that it was a damn right decision.

Patrick

WebOS and Meego : both very good OSses, but both dead in the water.
WP7 was the only viable way for Nokia to survive.
I don't always agree with Elop's style of execution, but at least, his dicision to go to WP7 was a sound one.
Like Gijsbertjan said what's happening in the Netherlands, in Belgium it's exactly the same : since a long time, Nokia is becoming cool again amonst youngsters and selling very well because of the playfully WP7 user interface and the nice design of the hardware.

E.Casais

The remarks that what entices people to buy the Lumia phones is basically the look and

feel, not the intrinsic functionality and hardware capabilities, and the fact that

"tango" acquired an N9 without even investigating the availability of his preferred

software for it, makes me think that what we call "smartphones" must cater for a new

market segment that is primarily interested in good-looking, simple phones with

pre-defined (mainly social-networking) functions -- feature phones indeed.

WP addresses this market (looks, simple UI, focus on social-networking and

inter-personal communication).

Symbian has its roots in the PDA and business-oriented phones -- where rich

functionality, diversity of connectivity, advanced software features are a must, but not

necessarily ease of use (including the necessity to spend time configuring the device).

This is why previous Symbian fans are disappointed by the the turn of events; they are

more likely to switch to Android.

cycnus

Hi Tomi,

I was wondering what is your opinion on Nokia bundling their phone with XBox?

A couple of month/year back, Microsoft also have a great deal in Indonesia bundling their Windows phone with some microsoft product that make it a must have. But after a while, the user don't like the phone and sell it at less than 1/2 of the market price.... because no one don't want to buy it at even at 1/2 the price. Thus making it a bad image because real potential buyer were afraid that the devices is really bad.

I know that Microsoft said this time is different, Mango is magical. But I wanna hear your analysis on this effect on the market.

Thank you

n900lover

karlim:

Well, this is getting hilarious. For almost year you guys have hearth attack every time tomi says that Q4 2010 marked turnaround for nokia symbian sales, repeating to death that that christmas was just random bump, symbian is old and uncompetitive and on fast slide into irrelevance regardless of what Elop did.

And now, right here on this blog, you declare that "the trend Nokia has decidedly broken" based on one quarter of data which even doesn't show reversion of trend. And the funniest part is that what broke this trend is - wait for it - symbian! Yep, that crap os which forced Elop to immediately go with wp7 to save nokia, now somehow managed to grow from ashes.

This isn't just fanboyism, but looks more like good old astroturfing. But as I said, I'm eagerly awaiting yours analysis Q4 lumia results, that will be something to watch.

Jippu

This would indicate that decline of Symbian started long time before Elop announced MS strategy. This is only for China but similar thing was happening elsewhere too.

http://paidcontent.co.uk/article/419-heres-how-android-has-destroyed-symbian-in-china/

n900lover

cycnus:

I'm responding although I'm not tomi, but who is perfect, right?

I think this idea tha ms has some sort of ecosystem nokia could use for its advantage was nonsense from the start and xbox is prime example of it. Consoles have totally different user interface, if you want develop game for both devices you are actually creating two different games and you must work very hard to make them concurrently playable in the end compromising both with no effect, because people will always play Skyrim primarily on console (or pc) and angrybirds on smartphone. At best there will be two separate worlds, one with xbox players and second with mobile players, with just game scores and overall tables on start screen in common.

Besides ms has currently about 40 millions of users on xbox live, that isn't even two quarters of sales for nokia (well, wasn't before Elop happened) so this bit of the deal is another gift for ms, because smartphone hw is becoming faster and faster by the day and consoles will be endangered spiecie in short time, with pc for top performance, smartphones (wifi connected to tv) for everything else. Really, nokia doesn't need xbox(live) at all, but for xboxlive nokia is one of its last chance (but this is true for whole ms/nokia deal, of course).

Earendil Star

Regarding market cap... interesting topic!

Apart from the fact that market cap depends... on the market... since share price is its fundamental driver... (that's why benchmarks are used when measuring success...)
Apart from the fact that market cap change depends... on the specific dates you choose...

Fact is that:
Last time Nokia had market cap > 200 bn (approx 225 bn - estimate on share price) was back in 2000... Do you remember the Internet/High tech bubble?
OPK became Nokia's CEO in 2006... with a Nokia market cap of approx 75 bn...
OPK, as CEO, after one year in office (as TH Elop today)... witnessed a DOUBLING in Nokia's market share value.
How the heck were 200 bn in market cap distruction by OPK calculated????
Please stop making up nonsense arguments only to justify untenable allegations.

Now let's go back to something more serious.

1) If Nokia holds up, it will be thanks to Symbian, not certainly to its Lumias. Check the figures (Q3 & Q4 estimate).
It was no coincidence that TH Elop had to change his original strategy and re-offer Symbian support & development, which originally had been scrapped.
MS realised that Nokia was dying and had to intervene to stop the premature demise by offering renewed life to Symbian with Anna and Belle.
Again, just another nail in the coffin for the arguments that Nokia -without WP7- would have miserably failed, à la RIM.

2) It's ludricous to purport that -if adopting Android- Nokia would be one of the many, while -if adopting WP- Nokia would distinguish itself.
Nokia's choice of WP puts it in the same league of the other OEMs shipping WP on their phones.
Exactly as would have been the case if it had adopted Android.

3) What is really shocking is that almost nobody is saying what is really happening.
The actual truth is that IT IS WP that is distinguishing itself by being able to exploit Nokia's brand, NOT the other way round.
If WP will have any success with Lumia, it will be thanks to Nokia's strength worldwide (e.g. brand, carrier relations, etc.), not to WP appeal.

THE REAL BURNING PLATFORM WAS WP, NOT NOKIA or Symbian!

Nokia might now be saving WP (if everything goes according to MS's plan), but the opposite message was sent through.

This is the power of MS: money, PR, ability of putting its trolls in the right places at the right time.

Bottom line: terrible fate for Nokia, good bet for MS.

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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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