Nokia CEO is a coward to not give the exact count of Lumia sales in his Q4 results, the launch quarter for Lumia. So lets do some math based on the available info, to count exactly how many it was.
(Note an update added on April 11 - an update at the end relating to Q1 Nokia profit warning and published Q1 smartphone numbers)
When Microsoft launched Windows Phone a year ago, Microsoft proudly told the world that they shipped 2 million Windows Phone smartphones by HTC, Samsung and others. They soon were spooked, however, when the sales dwindled and dried up and stopped giving the sales breakdown. By the Spring, Microsoft insisted all Windows Mobile smartphones be counted together with Windows Phone - even as these two platforms are incompatible. And still the sales of 'the third ecosystem' kept falling, down to about 500,000 units by Q3. And early numbers from Q4 from Microsoft's best market, the USA, reveal that even more than a year after its launch, Windows Phone sales are still severely lagging its older and obsolete cousin, achieving only 1.4% or about 520,000 units. Windows Mobile meanwhile refuses to die, and in the USA achieved 2.4% market share of new sales according to Nielsen or about 890,000 unit sales.
Thus if you remember seeing a 'Microsoft' market share in smartphones somewhere near 2% for Q3, that includes the better-selling Windows Mobile, and the newer and supposedly better so-called 'third ecosystem; Windows Phone has far less than 1% market share globally.
So with that context, the analysts' consensus estimate for Lumia launch quarter sales was 1.3 million units. We know that didn't happen. Nokia would have proudly celebrated if it had at least matched the expectation, or exceeded it. I explained on this blog why the real comparison target should have been 6.4 million for the first quarter of Lumia sales, and the minimum barely acceptable level was 4 million. But thats neither here nor there. Lets now see what we know, to try to get to the bottom of what Nokia is hiding.
Nokia told us in the Q4 results published January 26, 2012, that Lumia sales 'to date' had passed 1 million. We know its well below 1.3 million. And we know that it includes January sales with nearly a full month of sales of Lumia 710 in the five expansion markets (Hong Kong, India, Russia, Singapore and Taiwan) who only got the Lumia a few days before Christmas in mid December. Also the T-Mobile USA Lumia 710 was never sold in December. For these cheaper Lumia 710 unit sales, the vast majority of their sales will have come after Q4.
The early Lumia markets of Europe that got the Lumia 800 (Austria, France, Germany, Italy, Netherlands, Spain and the UK) received their Lumias from November. As Christmas sales is a peak period, its fair to assume most Lumia sales in these markets did happen in Q4, not Q1.
Lets measure the maximum potential market for the Lumia, based on market measurements. Kantar Worldpanel kindly gave us a summary statement about Lumia sales in Q4, saying that in every market that they follow, which includes most of the big European markets where Lumia had launched, Kantar found that Lumia did not exceed 2% in any single country.
Kantar reported from September 2011 market shares (and looking also at September 2010) that in September 2011, in the five biggest European markets, Nokia's market share in smartphones was 46.7% (as calculated on the basis of a weighted average per capita). So almost half of European consumers today will come to a store selling mobile phone handsets, with an existing Nokia smartphone in their pocket and would expect to replace it with the newest Nokia model.
Remember that Nokia did not have a broad portfolio of new rival smartphones to offer as a rival to the Lumia in these countries. And when 47% of customers walk in asking for the newest Nokia, then try the Lumia, and only (less than) 2% walk out with one - it means Nokia has managed to disappoint 94% of its existing customer base! The Lumia smartphones are so undesirable that more than nine out of ten currently Nokia-owning consumers will try it but reject it. (I said this would happen, especially in Europe, especially with existing Nokia users, but even I could not imagine it would be this bad). That is total comprehensive market failure - even where Microsoft will toss in a free Xbox gaming console to try to entice sales. No wonder Apple's iPhone and Samsung's Galaxy have had a stellar quarter.
These numbers are consistent with Nokia Q4 results (which do not break down the smartphone sales per region - I will do a calculation estimating that mix later on this blog). The overall Nokia handset sales declined 8% from the same quarter a year ago. But in Europe the handset sales (smartphones and dumbphones) declined 24%. Nokia in Europe is suffering far more than globally. And the most revealing number comes from handset revenues by region - which fell by 38%. So where Nokia was gaining revenues by sales of its premium smartphones like the Lumia and the N9, that was spectacularly not happening in Europe in Q4.
LUMIA ESTIMATE Q4
So lets take the European market. Kantar said no more than 2% in any market they measured. Lets forget about 'less than' and use the highest number, lets say every European market achieved 2% Lumia sales. You can't accuse me of trying to suppress the 'success' haha..
We have a convenient point in the global smartphone market to help us with this estimate. In Q3 China passed the USA as the single biggest smartphone country by volume. Europe has sold slightly more than the USA. When we add Canada to the USA to make a 'North America' market, we get actually four almost exactly even sized markets for smartphones - Europe, North America, China, and Rest of World. The total global market for smartphones for Q4 was about 148 million units, so each of these four markets has an individual market size of about 37 million smartphones. Lets do some math!
The 7 big European countries where Lumia 800 had launched in Q4 account for 63% of the subscribers. When we take 63% of the European 37 million market, we get 23.3 million for the countries where Lumia launched. Take 2% of that and we have 466,000 Lumia smartphone sales.
Then the expansion countries where Lumia 710 launched in mid December are Hong Kong, India, Russia, Singapore and Taiwan. These countries account for 26% of the mobile phone subscribers of the 'Rest of World' market so 26% of that 37 million gives us 192,000 smartphones. Except that Lumia had nearly two months of sales time in the first European markets, and only two weeks for these expansion countries, and only days before Christmas, it is definite that if Nokia Lumia can achieve 2% market success across those first 7 countries in about 2 months, it cannot even achieve half of that in only two weeks. But again, lets be generous to Nokia, and lets say that in these next five countries, Lumia achieved half the performance it did in the longer time in the first countries. So we cut the 192,000 in half, and thus Nokia sold 96,000 Lumia smartphones in the next five countries.
We have a total Lumia sales estimate for Q4 of 2011, in 12 countries of Europe and Asia of 466,000 + 92,000 = 558,000 units. Then to add the sales to the stores (there will always be some units in inventory not yet sold) we can call it roughly 600,000 total sales of Lumia during Q4, when measured as Nokia sales. No wonder Elop didn't want to mention the number. And yes, obviously, the Lumia sales account for 0.4% (not four percent, but zero point four percent) of all smartphones sold in Q4. Note we have to add other Windows Phone sales to that number and we'll have about 1% total global market share for Windows Phone the so-called third ecosystem haha..
LUMIA SALES EARLY PROJECTION Q1
And then we can see that if Nokia did about 1.1 million Lumia sales 'to date' - it would mean so far 500,000 more sales in January. Multiply that by 3 to get a full quarter, and we have 1,5 million sales. Add more growth or some more countries and in rough terms, expect Q2 sales for Lumia 800 and 710 to sell approx 2 million units in Q1. Pretty pathetic actually (especially if you are still holding your breath, that Nokia somehow matches that Morgan Stanley projection of 37 million Lumia sales this year haha).
HOW COMPARES TO N9
So Nokia did 600,000 Lumia sales in the most important new smartphone launch in Nokia history. The launch where all factors were totally in the control of the new CEO, without any limitations. He could decide what form factor the new phones would have, what countries to launch in, WHEN to launch the phones, when to ANNOUNCE the phones, when to demo the prototypes, who to receive samples to try them, etc. He had the biggest Nokia launch promotion budget ever, and that was then added to by literally several hundred million dollars of Microsoft marketing money to push the launch - inlcuding those famous free Xbox gaming consoles that you would receive if you bought Lumia 800s with some carriers/operators.
The Lumia first launch countries were not only markets where Nokia was exceptionally strong (having like I said, 47% market share in the installed base ie return customers) - they also were some of the wealthiest nations not just in Europe (UK, Germany etc) but in Asia (Singapore, Hong Kong etc). And they achieved 600,000.
How did this compare to Nokia's N9, where Nokia only had one handset to sell (vs 2 with Lumia). Where Nokia had almost no meaningful marketing support, and selling in many countries of very modest income levels like in Europe Romania, Turkey, Hungary, Slovakia etc - and in the rest of the world such less wealthy nations as Russia, Brazil, Mexico, Vietnam, Bangladesh and Indonesia.
Luckily I didn't have to do the math for this, the nice people at All About Symbian had tracked the numbers (read through the comments) and calculated the limits, finding N9 sales to be between the level of 1.5 million and 2.0 million units in Q4. Wow! Nokia specifically excluded all of its richest and biggest traditional markets where it tried to sell the Lumia, and these countries achieved - lets call it the average, 1.75 million unit sales of the N9 in Q4. So the one N9 outsold both Lumia handsets by almost exactly 3 to 1. And the average price of the two Lumia handsets is far less than the price of the N9.
Obviously MeeGo on one handset alone, with no Nokia support, is outselling all Windows Phone smartphones by Samsung, HTC and Nokia, with the massive Microsoft marketing effort, globally, by about 2 to 1. MeeGo does this in its first quarter when it was not sold for the full quarter. This compared to Windows Phone that is well into its second year of sales. What is wrong with this picture? Did I just see the 'Third Ecosystem' fall from 7th to 8th? Behind Android, Symbian, iOS, Blackberry, bada, Windows Mobile, and now even MeeGo? Why isn't Elop and Ballmer calling it what it is. Windows Phone is the 8th bestselling ecosystem, ie it will never succeed.
But lets go back to MeeGo. So you have cheaper smartphones, sold in the most affluent markets, with the biggest marketing support by Nokia ever, and with massive multi-hundred-million dollar marketing budget by Microsoft. And you get 600,000 unit sales for Lumia.
Then you have the more expensive smartphone, sold in far poorer markets, with minimal Nokia support and visibility, and no partners to toss in dollars, and you sell 3 times more? What is wrong with this picture?
WHY IS ELOP NOT FLOODING THE PLANET WITH MEEGO
The total footprint of the countries where the N9 now sells, covers a smartphone market in Q4 of 59 million units of smartphones sold. And Nokia did 1.75 million sales in it. If Elop had bothered to launch the N9 in all markets, rather than 1.75 million unit sales, he would have achieved 4.4 million unit sales just using this one handset. But there is a second MeeGo smartphone also manufactured today, that Elop simply refuses to sell. Understand, Nokia currently has a second MeeGo superphone, that it has not just designed and tested and put into production. All the big costs are now done. And Nokia refuses to sell this second MeeGo device to any markets! It is the N950, the sister phone to the N9, the QWERTY variant of the N9, much like how the E7 was the sister to the N8 last year. The N950 would sell well in all markets. If we assume it only sold 50% of the level that the N9 is selling now, Nokia would have MeeGo sales of 6.6 million smartphones globally.
Note, I set my target 6.4 million before we had this data. And if only Nokia release the N9 globally, rather than bizarre distant lands like Kazakhstan and New Zealand - and offered the sister phone N950 - even before any real strong Nokia support, the math suggests Nokia would have easily cleared the target I said what Nokia should be able to do today, when launching a new smartphone platform and device. Why Elop only managed 600,000 in Q4 - yes, only one TENTH of what any reasonable expectation would have been - says less about how bad Elop is as a manager, and more about how much the carriers and retail channel hate now Elop, Nokia as it currently is seen, and especially Microsoft, and Windows Phone.
But yes, 6.6 million unit sales is what Nokia had in its hand for Q4 if any sane manager had been in charge. This is BEFORE we consider Elop's personal support of MeeGo and any reasonable marketing support by Nokia, which would boost those sales considerably! Remember, the N9 already is being called superior to the iPhone 4S by some comparisons (the Lumia 800 and even Lumia 900 comes nowhere close to such comparisons). Remember the German newsmagazine Der Stern endorsement that was so glowing, they urged Germans to drive to Switzerland to buy an N9 rather than buying a Lumia 800 today.
HOW MUCH MONEY
The profit margin for the Nokia smartphone unit a year ago, when it was selling the N8, was 11%. As this was the flagship phone, a very conservative estimate is that the profit margin for the N8 was twice that, at 22% (probably far bigger at the time). If we use a 400 Euro price for the N9 and N950, and we assign 22% profit margin - provocativcely now - the total revenues that Elop is now abandoning out of not selling his MeeGo smartphones is ... 6.6M units minus 1.75M units = 4.85M units of abandoned sales to loyal Nokia customers who are yearning for a new Nokia flagship smartphone they can love.
How much is that? 4.85 million MeeGo sales (N9 and N950) at 400 Euros per handset = 1.9 Billion Euros of revenues. Rather than Nokia reporting a 1.6 Billion Euro decline in sales revenues in Q4, with 2.7 Billion total revenues in the unit, Nokia's CEO could have proudly reported an INCREASE of 300 million Euros above the revenues a year ago in smartphones and total revenues now of 4.6 Billion Euros.
And profits? The extra 4.85 million MeeGo sales that Nokia had in its palm, but refused to take, would have generated at only 22% profit margin, additional profits to the smartphone unit of .. 426 million Euros !! So the smartphone unit, rather than reporting a loss of 190 million Euros, would have instead reported a profit of 236 million Euros !
That not only would have been the biggest profit in the smartphone unit of any of the Nokia quarters in 2011, it would have even pulled the Nokia smartphone unit into the profit column for the full year 2011 !!!!
What is wrong with Stephen Elop? How incompetent is he, to take a highly desirable product he has, and refuse to sell it broadly, now when it still is reasonably hot and in demand. This opportunity will vanish in only some months. He is a criminal for not selling the MeeGo handsets broadly now. He is acting against the best interests of Nokia (out of some mis-placed loyalty to Microsoft). Elop must be fired, now!
PS - I have now added the regional split calculation and some stunning findings about Lumia and N9 customer acceptance.
UPDATE APRIL 11
For anyone still reading this blog, Nokia just issued its profit warning today and I have commented on it and crunched some numbers. The Q1 Lumia sales were disasterous too, at only 2 million - which means that as China had its New Year's gift-giving sales and the iPhone 4S had severe launch problems (some shops shut for several days fearing riots) - the N9 may have outsold all Lumia also in Q1. Read my view of the Nokia Profit Warning and why things are even worse.