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« The No Straight Lines challenge: be realistic imagine the impossible | Main | Apple Results? Beyond Monster Quarter selling 37M units of iPhones to 25% market share »

January 24, 2012

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AtTheBottomOfTheHilton

IBM have been in business more or less ever since and Microsoft have dominated the PC world after IBM and Microsoft separated their businesses. Both Microsoft and IBM have been successful despite of this.

Now with Nokia and Microsoft, they are both losers. Nokia ditched all their in-house development for the benefit of Microsoft that will in turn fail because it has very low attraction. Microsoft try and try to get into the handset market, Windows Mobile (which was so far the most successful one), Zune, Kindle and now Windows Phone.

Analogy somewhat right but it is the result that is almost the opposite.

Sander van der Wal

IBM also had a couple of other businesses, mainframes, mini's and services. IBM's problem wasn't only that it did not sell a lot of PC's, it's problem was that PC sales and the move to client server programming was also killing its mainframe business.

IBM was saved by re-orienting the company doing more services and less hardware.

Steve

Ik looks like Nokia is already paying the price for getting in bed with the MS vampire. They are being pressured to lower their prices on the Lumia 710 so their margins will be squeezed further. So as far as WP handsets are concerned it looks like the race to the bottom is on:

"Nokia's upcoming Windows Phone handset, the Lumia 710, has been deemed too expensive by UK networks. And they have pressured the Finnish outfit to lower prices in order to compete more effectively with rival low-end smartphones.

While the Lumia 710 is more powerful than most budget handsets in question, sales of the Lumia 800 allegedly failed to meet network expectations, leaving carriers sceptical over just how popular the new model will be."

http://www.reghardware.com/2012/01/23/networks_nag_nokia_to_lower_lumia_levy/

aguest

"Microsoft try and try to get into the handset market, Windows Mobile (which was so far the most successful one), Zune, Kindle and now Windows Phone."

The Kindle uses a version of linux. You surely mean the Kin.

Well, I think while one might well discount Nokia at this point, it is still a bit early to write off Microsoft -- although its real punch will come with Windows 8.

The analogy with IBM is also debatable in another sense that IBM then was more diversified than Nokia today. The ship could be steered in another direction.

Peter

nokia's issue is Steven Elop. Get rid of this Wall Street Criminal, Nokia will be set free and recover easily.

kan

Microsoft forrays into mobile have not ended well. Windows Mobile was a mess because they were trying to shoehorn a desktop metaphor onto a phone with limited memory, processing and screen real estate.

The Kin was another disaster - developing a phone for teenagers and young adults - concentrating on a subset of the market rather than actually concentrating on user experience.

When all this happening Apple developed and improved the Iphone through its iterations. Microsoft to their credit realised they needed to have a total rethink of how to enter the market once again. Apple redefined smartphones as "app centric" with a touchscreen. Microsoft were not going to beat Apple at its own game so rethought their o/s around a "task centric" and integrations approach. This has become a hard sell due to Apple influence and marketing but also Microsofts inability thus far to communicate this to consumers.

Tomi

One thing in the Nokia-IBM analogy is completely incorrect. IBM tried to develop the OS/2 operating system together with Microsoft, but then Microsoft realized that their Windows 3.0 was selling very well and stopped developing the OS/2. However, IBM continued to develop and use the OS/2 and it proved to be a failure in the end. We can see a parallel that if Nokia would have continued to develop and use its own operating system MeeGo, the same thing that happened to IBM could have happened to Nokia. If IBM would have switched to Windows 3.0 early on, it would have secured the biggest market share in PCs. In your post you talk about continuing with Symbian^3. That was not the strategy. The strategy was to develop and use MeeGo that had even smaller market share than Windows Phone 7 and the MeeGo would have been kind of like OS/2.

Baron95

Tomi, the disruption was *NOT* moving from dumb/feature phones to smartphones. That was no disruption at all. It was a nice and slow progression, where many "feature phones" were actually more expensive and functional than early smartphones.

The disruption was the creation of multi-touch mobile pocket internet computers, that also happened to make phone calls. Those devices, and the iPhone was the first and only one for 1 year plus, ended up capturing the consumer imagination, and destroyed the value of the earlier smartphone paradigms like Nokia's and RIM's. Google instantly understood that, and geared up very fast to be a fast follower.

RIM and Nokia dismissed the iPhone as inconsequential and a joke.

The rest is history.

Similarly, for Kodak, the disruption was not the invention of digital photography. In the beginning, most people were still getting most of their digital pictures printed on Kodak kiosks, on Kodak paper, etc, Kodak was making some digital cameras and its revenue actually increased.

The disruption was the advent of digital cameras everywhere, combined with Internet access and services. Suddenly pictures were no longer to be "printed" (developed). They were to be shared on FLixter and Facebook, emailed or MMSed around. All of a sudden digital cameras become must haves, and the smartphone with good enough cameras sealed Kodak's fate.

*THAT* was the disruption that killed Kodak.

There are also multiple errors in your background pieces. BTW, Google has not yet *bought* Motorola. They have an agreement to buy Motorola given certain conditions that have not yet been met. Motorola Mobility is still around and has a market cap that is 50% higher than RIM and about 60% of that of Nokia.

You keep on repeating that Motorola has died. But it's shareholder equity is higher than RIM's (the only other pure handset player) and probably more valuable than Nokia's mobile business. [it is obviously impossible to compare to LG, Samsung, Apple since they are so diversified].

So please adjust your "facts" to match reality.

Reda

It's been a long time since I commented here and I was hoping that after Apple gained the top position you would give up and take off your fanboy glasses. You didn't I'm afraid. I commend the effort but the result it's quite disappointing.
How can you not see now that the disruption was a mobile computer that everybody could use. Nokia like Kodak did not leverage what they had and developed for quite sometime (not symbian but what is today called Meego!). It's was the great Anssi Vanjoki (sarcasm here) that killed the product (by not adding a GSM module) to maintain the current Symbian install base (his loved NSeries)
Compare that to Apple who is currently cannibalising its iPod install base and its computer install base. I agree the computer install base is not a great sacrifice but the iPod was at the time and they risked it because they knew/know that innovation is the only way to keep the lead.

Please, please take off your fanboy glasses

Alex Kerr

@Baron
> "multi-touch mobile pocket internet computers, that also happened to make phone calls. Those devices, and the iPhone was the first and only one for 1 year plus"

That is simply not true. Nokia already had invented those devices some time before the iPhone, and EVERYTHING the iPhone had, and has had since, (hardware features, software features, ecosystem) already premièred LONG before on Nokia phones, and in the Nokia ecosystem. This is historical fact - look it up! (And Tomi has mentioned this multiple times in previous blog posts too). Furthermore for all those things iPhone had, Nokia was consistently better at them (apart from number of apps in appstore once iPhone store took off) - and still is.

What iPhone did was make those few elements that it did implement (i.e. copy from Nokia) APPEAR to be better to end users and developers (e.g. slick pretty UI for starters) and then absolutely marketed them as hard and as cleverly as possible. That's it.

Nokia's fall and a large part of iPhone and especially Android's success is purely due to Nokia's own action against itself, internal bureaucracy (which in some ways Elop has tackled) and mismanagement and missteps. Not because iPhone or Android were that great. Nokia stumbled, it's competitors rose as a result.

On a separate and more general note, the facts and history show very clearly that the mishandling of the Feb 11th announcement of Symbian's eventual end of line is what brought Nokia to the state it's in now - that and the lack of speed with which Nokia updated Symbian (it should have had the Belle release a full year or more ago).

The point is the WinPho devices could have been launched alongside, addressed at suitable markets (e.g. the USA) and then if they failed (as they probably will) it wouldn't have been too big a deal, just like a temporary experiment that never worked out. And not having Qt on them from the outset was a huge mistake too.

Amazing that easily the most expert and successful mobile company in the world (Nokia) decided to listen to the least expert and most incompetent of companies in the mobile space (Microsoft)...quite how one explains that without coming to some sort of conspiracy based conclusion involving the board and major shareholders of Nokia and Microsoft, I don't know. Elop couldn't have done anything without their backing and direction as I understand it.

Tomi T Ahonen

Hi all, nice comments! Will respond in small sets

Hi At, Sander and Steve

At - good points and we agree obviously, especially your last point, that the result is dramatically different.

Sander - Very good observation about the fact IBM had several other related businesses - but so too has Nokia, in addition to smartphones, sells cheap dumbphones, super-expensive luxury phones (Vertu), telcoms networking gear, software and services led by Navteq etc. So again I think the analogy is still strong on this and what smartphones today are to Nokia, is similar to what PCs were to IBM.

Steve - excellent point and thanks for the link. Yes, carriers are very disappointed with Lumia 800 sales and when they see the Lumia 710 and how much of a downgrade it is (and looks and feels cheap), its price is way too high. As the Lumia 710 price is lowered, that depresses the profits generated by the Lumia line. Same we hear with Lumia 800 that its prices have been slashed too because of disappointing pre-Christmas sales (and large inventories of unsold Lumia units).

Thank you all, keep the discussion going

Tomi Ahonen :-)

Baron95

AlexKerr said...."Nokia already had invented those devices some time before the iPhone, and EVERYTHING the iPhone had,"

Please. To this day. TODAY. The Symbian browser on Nokia's flagship, the N8, is unusable. It is less functional and slower than on the original iPhone. You have no clue of what you are talking about.

Apple sold over 37 million iPhones last quarter. In the US in December, iPhone sales ran neck and neck with ALL the Android phones combined - 45% vs 47% of the market, according to Nielsen. In the 3 networks that sold both iPhones and Android, iPhones sold more.

You can't have it both ways. You have to explain *WHY* iPhones, who didn't exist 4 and 1/2 years ago, are outselling all other smartphones. In the US (largest market in the world by value), in the operators that sell the iPhone (AT&T, Verizon, Sprint), iPhone is outselling ALL OTHER SMARTPHONES COMBINED.

Think about that. You can't say any more that those are Apple fanatics buying the phone blind. iPhones are selling because they are UNIQUE in the user experience and joy they provide to end user. Nokia and RIM NEVER HAD and NEVER WILL HAVE THAT.

That is disruption. What Kodak went through is peanuts by comparison. Apple is now worth $450B. 22 times more than Nokia. In a few short years. 72% of Apple's revenues are now from iPhone and iPad - multitouch, mobile, connected computers. That is the category. The fact that some models make cell phone calls, while others only make skype or facetime calls is a small detail.

nic

@Baron95 "iPhone is outselling ALL OTHER SMARTPHONES COMBINED" where did you get that from? Apple was the top seller in 2Q2011, I think, only to be surpassed by Samsung later, but neither had more than 50%.

As for Nokia having all the good stuff already before the Iphone, if you really consider that making phone call isn't all that important, then please take a look at the N800. It was announced at a CES, a few days before the first Iphone was announced. The N800 had a touchscreen, had an app repository (like other Linux distros, the real innovators), makes video calls via IP, has quite capable browsers... It was supposed to be used along with a "featurephone" with a camera, GPS and GPRS, yes... Eventually it became the N900, which is great, and now the N9, which is awesome, and innovates in ways that certainly rivals the competitors.

nic

Great article, Tomi. Very true.

It would have been nice if you had mentioned the actual origin from Symbian, the British company Psion, if I am not mistaken. Android too was bought "ready". Not exactly the same thing, but there's a small resemblance there.

I have been thinking a lot about some graphics I saw the other day that show the sales curves of the first different personal computers. Then it shows smartphones. Symbian appears to be following a pattern seen previously of starting earlier, but reaching a peak then vanishing. It seems to be at a plateau right now. Let's see where the next point falls tomorrow, Jan 26.

Jonathan

@nic

As I wrote in a previous (interestingly missing) comment. N800 and N900 had resistive screens, styli and non-accelerated GTK graphics. They are not really comparable with iPhone or WP7.

N9 is comparable, but it came almost 5 years after iPhone. Too little too late.

I must be doing something right when my posts get censored constantly.

Jonathan

To sum up my censored posting

@alex kerr

It is not about innovation or ideas, it is about execution. Having the bits and pieces does nothing good, one must be able to put them in a great product.

Before N9 and Lumia, Nokia could not create a similar UX to iPhone. iPhone was also way better for developers. The exact same problem hit RIM, which saw it's unit sales decline first time in years in Q2/11. And the real problem is not market share or even unit sales, the real problem was Apple and Samsung stealing profits, and setting an UX benchmark. At the same time a league of cheap Android phones gave more bang for buck.

About Elop conspiracy: Board (chaired by Jorma Ollila) decided about the Microsoft deal, and if Elop does not perform as they wish, they can and will show him the door. If there is a conspiracy, it must go much deeper than Elop.

Tomi T Ahonen

Just to Jonathan...

I don't recall why I have removed your comments, I remove several almost every day. I remove them when they break very clear long-standing rules on this blog - we don't get personal and nasty, the comment cannot suggest that the person didn't bother to read the original comment, and in some cases I specify on my blog article, that I will limit that discussion in rare cases where the topic is prone to be misdirected.

Your comments here just before this response to you are perfectly sensible and topical. If you post with that attitude, your comments will always be kept. Note that I have no interest in deleting comments that are against my view or call me crazy etc - hundreds of such comments remain years later on this blog. I keep them to illustrate what was the discussion at the time. You are entitled to your view and my readers greatly enjoy not only my blog postings, but the intelligent discussion here in the comments. Just stick to the simple rules.

Tomi Ahonen :-)

Tomi T Ahonen

Now second set or replies

Hi aguest, Peter and kan

aguest - thanks for responding to At. About IBM diversification, I think the degree of diversification with Nokia is similar in scale. IBM made mainframe and PC computers, their OS, software apps, and services. Nokia makes basic featurephones, smartphones, their OS, software apps, and services. But beyond those, one third of Nokia's total revenues comes from its networking unit - a degree of diversity IBM didn't have back then. But yes, the proportion of hardware/software/services with IBM was certainly at different ratios than at Nokia now.

Peter - we agree. Nokia's fastest road to recovery is firing Elop, bringing MeeGo back fully online - promising carriers Nokia's future is not tied only to Microsoft - and the MeeGo and Symbian based smartphone sales will recover enough to bring Nokia to profits. Then Nokia needs to manage its transition to Qt supported platforms and perhaps limit the WP7 sales to North America (if they maintain success there)

kan - totally agree with WinMo and Kin. I also do agree, Microsoft did a total reset and WP7 is far more competitive, done in a 'post iPhone era'. But it now comes too late with Microsoft partner relationships all ruined except Nokia. With only one handset partner, Microsoft cannot win in this game and the other partners not only dislike Nokia, but they hate Microsoft. And the carriers now hate both. This partnership cannot succeed.

Thank you all, keep the comments coming

Tomi Ahonen :-)

Sander van der Wal

Regarding Apple marketing its UI to developers, Apple did almost no marketing to developers. They said where you could sign up for the SDK. That's it.

I did saw Nokia market their Qt SDK at several non-mobile developer events. That became a bit embarassing as the demo's they showed did not change at all, mimicking the progress they made in porting Qt on Symbian.

darwinphish

Tomi:

I like the comparison between Kodak and Motorola. Motorola has become so irrelevant lately that its easy to forget their past glory. As for the Nokia-IBM comparison, well, it's hit and miss. There are some similarities, but there are lots of differences. The main difference is that IBM learned the future (and profits) are in software, not hardware. Nokia is ignoring that lesson and may never be in position to make the adjustment.

I think in the not too distant future, you will be able to make an analogy between Nokia and Motorola. Motorola was stuck in a 1G mindset when the world moved to 2G and they never caught up. In many ways, Nokia has been stuck in a 2G mindset as the world has moved to 3G. Nokia did a lot of great things in the 2G world, but they became less relevant in a 3G world.


Tomi T Ahonen

darwinphish

Good points. But again, in IBM case, IBM did clearly see the growing importance of the OS side to PCs and did try to move to own it. Nokia too saw the growing importance o the OS and built an empire around it - but then abandoned it.

Which brings me to your second point, I think history lessons and MBA case studies will retell the story of how Elop inherited a market leader which he destroyed. Nokia itself (prior to Elop) was on the right path, 100% the right path - from hardware to software, from dumbphones to smartphones, from phones to services, from devices to ecosystems - and on all of these Nokia was the market leader or in strong competition to be the market leader. Nokia's problem prior to Elop was execution, not wrong strategy or wrong direction. Elop was hired explicitly to fix the execution (so said Ollila when he announced Elop) but Elop instead decided its too hard to try to execute this strategy, and abandoned a potentially winning hand, and replaced it with the weakest option.

So I don't see the evidence proving that Nokia's case will be like that of Motorola (or Kodak) but I would not be surprised, if many make that correlation. Especially where the conventional wisdom starts to think the smartphone was invented by Apple in 2007 and that Nokia's fall started with the iPhone in 2007 (when in reality in 2007-2008 Nokia GAINED market share, not lost. The iPhone killed Palm and Windows Mobile, not Nokia nor Blackberry. It was Android which was cutting Nokia and Blackberry sales). But those views will no doubt become more common and widely believed. I will try to do my best to keep the truth alive haha..

Thanks!

Tomi Ahonen :-)

Tomi T Ahonen

(Sorry, I forgot we had previous comments)

Hi Tomi and Baron

Tomi - good point about co-development. But in that case, the analogy with MeeGo isn't valid, because Nokia wasn't developing MeeGo with Microsoft. Nokia co-developed Symbian with a broad partnership as well. Its now with Windows Phone that Nokia has no real role in the development at all. IBM analogy is not perfect, but its the nearest I can think of.

Baron - Ok, your point sounds reasonable, except it is NOT consistent with the facts. The original iPhone was yes a multi-touch pocket device, but it didn't allow apps. Nokia's Symbian devices allowed apps to be installed.

(continued)

Tomi T Ahonen

Sorry Baron, am having a very difficult time to get this response to you, even after editing it down massively and now cutting it up

(continued)

And multi-touch is FAR MORE a progression than the first smartphone was truly a revolution. Before multi-touch we had plenty of touch screens all the way back to stylus-operated PDAs.

But you are right, Nokia and RIM both dismissed the iPhone early on and both expected touch screen phones to be a fad or only a tiny niche (and were wrong). You will remember, I said the iPhone would be a success, and that it will reach the incredibly ambitious 10 million unit sales level in its first year. Notice that for example now, when smartphones sell 4 times as many per year, Microsoft with all its minions including Samsung and HTC, were not able to sell 10 million smartphones in the first year of WP7 haha.

But again, your assertion that Nokia or Blackberry were somehow injured by the iPhone is NOT BORNE OUT BY THE FACTS. When the iPhone grew from 0% market share to 14% market share from 2007 to 2009 Nokia was essentially flat and RIM actually grew market share. It was Android to hit both RIM and Nokia hard into declines. The iPhone stole market from Palm and Windows Mobile

On Motorola and Google. Fine, split hairs if you like.

Tomi Ahonen :-)

Marc Aurel

Since I know you like the facts: Samsung was in the film camera business. They started making film compact cameras some time in the late 1980's (probably for the SK domestic markets at first) and achieved some limited success in Europe during the 1990's. Something else I bet you didn't know: even Panasonic (i.e. Matsushita back in the day before they changed the name of the company) made film cameras in the 1990s, or at least film cameras were sold under the Panasonic brand.

Now to the IBM PC, Windows and OS/2 question; unfortunately the whole story has not been told in these comments. OS/2 really was a Microsoft and IBM co-development, but Windows 3.0 did not come out on top because it was better or because it was available earlier (it wasn't). OS/2 could run MS-DOS applications just like Windows 3.0. The real reason for Windows 3.0 success was the Microsoft Office software package, which Microsoft had developed for Windows 3.0 and Macintosh, but not for OS/2. MS Office had much better integration between components, a nice graphical interface and it was more WYSIWYG than its DOS-based competitors like Word Perfect and Lotus 1-2-3. They key to Windows' success was Microsoft Office, not Windows itself. In other words, MS Office was a true "killer app". MS Office was so successful that even on Mac it's still by far the most successful office application suite (well, file format lock-in and other underhanded measures are part of the reason, but those came later when MS Office was already the established industry standard).

You also completely forget the clone PC makers when discussing IBM. Even Nokia was once one of them! The biggest one was of course Compaq in the 1980s and by the beginning of the 1990s they had already seriously eroded IBM's market share even though IBM was still the largest. IBM also made some hardware-related errors like the IBM PS/2 computers with their proprietary Microchannel bus. The clone manufacturers did not want to pay the expensive licensing fees and simply developed their own bus, the EISA, which later became the industry standard for high-end PCs (before the PCI bus), whereas the Microchannel peripherals remained expensive and the bus itself was not used by other PC manufacturers than IBM. The Microchannel/EISA debacle shows that IBM was already losing its grip on the PC markets and it had very little to do with the software; after all you could buy an IBM PC with Windows 3.x installed "out of the box" already in 1991! IBB never sold PCs exclusively with OS/2...

I just thought people needed a little history lesson ;-)

Patrick

@Baron95 and @Reda : your opinions make a lot of sense !

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