Remember all that BS written about the Nokia and Microsoft partnership and the supposed 'third ecosystem' we heard from several big analyst houses in early Spring of last year. The sheer baloney that Nokia would somehow achieve 20% or more in market share with smartphones running the Microsoft Windows Phone OS. I was on this blog pointing out that those were utterly implausible projections, and they were made when we had no data yet of how damaging the Elop Effect had been, ie before even Q1 results were out from Nokia.
Now, finally, eleven months after the Elop Effect, we have the first new projection of Nokia and Microsoft partnership success, by a major analyst house, that was released reflecting the performance of Nokia Symbian smartphones and various Windows Phone smartphones in 2011. The major study out today is by Morgan Stanley, that projects specific annual performance for years 2011, 2012 and 2013. Their slide is on the All Things D blogsite at this link. I have recreated that slide here, as I want to make some points about it.
First. The story is being reported in many news outlets as supposedly 'good' news for Microsoft and Nokia. They celebrate that Nokia and Symbian will sell about 37 million Windows Phone based smartphones this year. Yeah. The Spin Doctors are at it. Those who are writing about it, have no idea what the truth is out there and what is the relevance.
Secondly, please note that this January 2012 forecast for Nokia smartphone sales (Symbian and Windows Phone) is eerily similar to what Horace Dediu wrote at his Asymco blog and I wrote on this blog - forecast for 2012 is here and forecast for 2013 is here. The point is that both Horace and I wrote those forecasts in February 2011. It took the big analyst houses this long - eleven more MONTHS - to come to the same view as we did back then?
Here is the big picture. First. Nokia smartphones grew from 2009 to 2010 at a rate of 47% per year, powered by its new flagship phones like the N8 and what many call the obsolete Symbian OS, that released its latest version for Q4, called S^3. So what did Elop do? He replaced 47% growth in unit sales, and growth in revenues and giant growth in proftits in his smartphone unit, by causing the Elop Effect - and crashed Nokia smartphone sales.
The reasonable view to Nokia's future for 2011, when viewed in December 2010, with highly successful Symbian S^3 based phones like the N8 that was rated one of the year's best smartphones - is that the growth that Nokia saw in 2010, would continue roughly at the same rate in 2011. If Elop was a reasonably competent CEO, that is what he should be able to achieve? So Nokia should have sold 147 million smartphones last year and made a huge profit out of them. That would not have been growth at the rate of the industry, so Nokia would have lost some market share but it would still tower over Apple and Samsung for the full year, easily. Instead, Nokia will sell (according to Morgan Stanley projection) 77 million smartphones - meaning that Nokia voluntarily abandoned 48% of its market with the Elop Effect. (my forecast for Nokia Q4 is a bit lower than Morgan Stanley but until we get the official numbers, lets go with their numbers for now).
The Morgan Stanley numbers suggest Nokia market share for 2011 was 18%, for this year 2012 it will be 11% and for 2013 it will fall even further to 8%. That is almost exactly what Horace and I said independently eleven months ago. And note, the Morgan Stanley 2011 projection is consistent with a current Q4 market share for Nokia down to 12%. I think this alone spells utter disaster for Nokia. But it gets worse.
Bear in mind, for the full year 2010, Nokia's market share was 33%. So Elop exchanges a 33% market share and growing Nokia smartphone sales with growing profits, using Symbian, for a massive drop in sales (and making huge losses) and then he can hope to find flat sales into 2013. And if this Morgan Stanley projection comes true, Nokia will have voluntarily thrown away 3/4 of its market share! Thrown away 3 out of every 4 customers it had.
When I wrote that market share projection in February (and July) I was accused by many as being far too pessimistic about Nokia. Now we have the first big analyst house who publishes annual breakdowns of coming sales, that do not support any fantasy of a 20% or better share for the third ecosystem. This 8% market share for Windows Phone is likely to be 5th or 6th among the ecosystems at best.
I don't mind the reporters writing about the numbers for this industry and yes, the 37 million projection is what Morgan Stanley said, and it is very consistent with my view and that of Horace and others. But what I don't like is that it is being spun now as supposedly 'good news'. What good news is there, if you own 33% market share (making big profits) and replace that with 8% market share (making a loss)? For Nokia this is more evidence that the Microsoft strategy is sheer lunacy and a recipe for failure pushing Nokia towards bankruptcy.
The only one who gains out of this is obviously Microsoft who currently have under 1% market share after more than a year of desperately pushing Windows Phone. If they can end with 8% for Windows Phone in 2013, then Microsoft will have bought some time to survive a bit further. But 8% is nothing like the third ecosystem. Not even close.