Nokia was prominently featured at the CES show in the USA this week, the biggest consumer electonics show of North America. Nokia CEO Stephen Elop was on stage a couple of times as was Microsoft CEO Steve Ballmer. The brand new Nokia Lumia 900 won best product of the show. And nicely on que, Forbes ran an article of the Five Reasons Why Windows Phone Will Make Big Splash in Smartphone Market. The article got a lot of attention and on first read, to the random reader, it seems to make good arguments (I will deal with those later). The first point to make, is that the author, E.D. Kain, had actually written a pair of articles about Windows Phone, this one yes in favor but also another one against.
There have been many commentaries of the issue, perhaps the best direct response was by Don Reisinger at eWeek. He gave 10 reasons why Windows Phone will fail. His arguments are very good, but they are somewhat USA focused and still do not tackle some of the biggest reasons why Windows Phone - and Nokia Lumia - will fail. Lets take this issue logically, reasonably and with facts, not just conjecture and opinion and hope and hype. And lets start where most sensible marketers start, not from the product but from the consumer. What is it that we, smartphone buyers, want. And readers, this is again one of those ultra-long Tomi Ahonen essays, about 16,000 words (more than a full chapter in a hardcover book) so go get yourself a good cup of coffee before you start. It will probably take you half an hour to complete this article but I promise you, it is stuffed with facts, stats, insights and goodies.
I know this is a painfully long article for most to read. So let me give you the quick executive summary version here on the top. Please do read the specific part in the full article, before commenting. But the short version is this. We know from global consumer surveys what people do on their phones, and what consumers look for when buying smartphones. That has even been measured across the differences of the wealthy countries of the Industrialized World, and the less-affluent smartphone buyers in the Emerging World. I have used real consumer data mostly from 2011, to examine every major element that is decisive in smartphone purchases today. I took the 13 most relevant areas which cover consumer phones and business/enterprise phones; across the rich world and the Emerging World. And on every one of those 13 areas, I evaluated Lumia compared to where Nokia (and Microsoft) was before and where its rivals are now. This is what I found:
Reason 1 - Messaging Madness: Nokia has a natural strength in messaging-oriented smartphones (the most used feature of all mobile phone owners from Africa to the USA is messaging, including smartphone owners). It is abandoned with the first 3 Lumia phones. Nokia voluntarily foregoes a competitive advantage that it has always before taken advantage of. Thus Lumia will perform worse than Nokia smartphones have done before.
Reason 2 - Camera Catastrophy - Nokia mobile phones have always been known for good cameras, its flagship phones tend to have had the best cameras in the world. The camera is the second most used feature. The Lumia series is a downgrade of Nokia camera capability and will severely disappoint past Nokia owners and not stand up to rivals today.
Reason 3 - Look and Feel is not competitive. Nokia Lumia has gotten good reviews for its appearance but nothing beyond that. And by its one form factor alone, it will not win many converts, but on the abandoned other form factors, and its lack of typical Nokia elements, it is a downgrade from what Nokia has been in the past, and yet is not competitive with rivals today.
Reason 4 - Nokia Brand failure. Nokia's brand has been damaged very badly in the past year. Whatever Nokia was able to do in 2010, today Nokia will do far worse, whether in the USA or rest of the world.
Reason 5 - Windows Brand failure. The Nokia brand damage is recent and perhaps reversable but Microsoft's brand damage with Windows Mobile and Windows Phone has been sustained far longer and been far more comprehensive. Microsoft has good brands such as Xbox and Office Suite but its Windows Brand is weak and in mobile, it is poisonous.
Reason 6 - Input failure. The Nokia strength has been exceptional QWERTY keyboards. On the N9 using MeeGo Nokia was able to innovate with touch screen inputs. But Lumia has neither. It is a cheap copycat of the iPhone style touch screen input and Lumia abandons natural Nokia strengths while showing no competitive advantages.
Reason 7 - Fails in variety of models. Nokia has traditionally been able to hold to the world's largest smartphone market share - a year ago Nokia was literally not just bigger than the iPhone, it was bigger than the iPhone and all Samsung smartphones - combined. Now Samsung is 'doing the Nokia' with its expanding Galaxy portfolio while the three Lumia devices are near clones of each other. Nokia is again voluntarily abandoning a competitive advantage, which means Lumia will perform less well than Nokia was able to do in the past.
Reason 8 - fails on apps and app store. Nokia's Ovi was the world's second most used app store just a year ago. That was replaced with Windows Phone, at best the 8th 'best' ecosystem today, which still a year later has less than half the number of apps as Nokia currently still has on Ovi and Symbian. Whatever you thought of Ovi and Symbian 'failing' in apps, it is far worse on Windows Phone.
Reason 9 - the OS is deficient. The Windows Phone OS can seem exciting when first seen with its 'Tiles' but on short usage it reveals how limited and unfinished it is. The tech reviews after using Windows Phone (and Lumia) are quite consistent that Windows Phone is not yet ready for prime time. It may become so in the future, but its not yet nearly competitive with advanced OS platforms out there.
Reason 10 - regressing on features and services. Where Nokia smartphones tended not to be the coolest and sexiest in recent years, at least Nokia was always known for stuffing every conceivable tech feature onto its flagship phones. The joke was, that to see what will be on the next iPhone model, just look at a 3 year old Nokia flagship. The Lumia is the first time ever, that Nokia has regressed in its features, severely. Not just pruning unnecessary tech 'bloat' but literally going back in tech, to specs that were normal on Nokia phones a year, two, even three years ago. That guarantees that any current owners of Nokia will find the Lumia a severe disappointment.
Reason 11 - rejected by business/enterprise customers. I also discuss the enterprise/corporate side of the smartphone business. That market seems a great opportunity due to Microsoft Windows OS and Office Suite integration with Nokia smartphones. Except that this is nothing new. Nokia and Microsoft had done full Office Suite integration years ago and it helped Nokia and Microsoft sell... zero more smarpthones into the enterprise space.
Reason 12 - poisoned carrier relationships with Nokia. The handset industry is different from the PC industry or home electronics, in that the carriers/operators decide which phone succeeds and which fails (witness the short-lived Microsoft Kin). Nokia used to have the platinum-standard carrier relationships a year ago. Those were burned by the CEO last year. Today Nokia's carrier relationships are the worst they have ever been.
Reason 13 - poisoned carrier relationships with Microsoft. But even worse, is that Microsoft never used to have good carrier relationships. And yet, with Windows Phone, Microsoft's own departed exec admits Microsoft has been making those carrier relationships worse. So Nokia Lumia trades the best carrier relationships to bad ones, and then partners with the company with the worst relationships - that has been making them only worse last year.
There is very much more in the article including aspects that are particular to the Emerging World (where half of all smartphones are now sold) and issues to such matters as build quality - Microsoft and Nokia have already admitted to two production quality problems with Lumia. Please read the article for all the details. But I said last February that the Microsoft adventure for Nokia was a high-risk gamble. Now we have seen what the Lumia is like, when managed by Stephen Elop, and it is an utter, comprehensive flop - on every single one of the 13 relevant issues that matter in the market success of smartphones. The Lumia series is doomed to fail. But please read the full analysis:
LETS START WITH CONSUMERS
Smartphones (invented by Nokia four years before the Blackberry) first were enterprise/business tools. Then they became consumer gadgets (also invented by Nokia four years before before the iPhone). What is their proportion? Deutsche Bank counted in 2009 that the total global market for enterprise/business smartphones was 96 million handsets. The enterprise/business market is very stable over time, it will not be significantly over 100 million today, so enterprise smartphones account for roughy speaking 1 out of every 5 smartphones sold globally. And Blackberry obviously owns a lions's share of that market. So that is why I want to start with the consumer market where almost 4 out of 5 smartphones are sold.
What do we do with our smartphones. You will fling a couple of birds angrily at some pigs and no doubt say 'apps'. Maybe you will say 'surf the web'. Those sound very reasonable. So lets see what the facts say. (And lets ignore voice calls). So what else do we do? The most used aspect on our phones is not apps or web surfing. It is SMS text messaging. The second most used funtion is the camera. I don't say so. So says ComScore in 2011 - said 83% of Europeans and 68% of US phone owners sent SMS text messages. 58% and 53% respectively used the camera. Web browser is far lower, at 33% for Europeans and 39% for Americans. Apps are even further down the list, 28% for Europeans and 34% for US consumers. And if you are curious about email or social networking, they come far below.
Is that SMS and camera emphasis perhaps an anomaly? No. Ofcom's global survey just in November 2011 reported that SMS was by far most used service in Europe and the USA, mobile web well below and apps further down the list. Consistently with the above. Ofcom did not ask about camera use, but did ask about picture sharing and MMS. They were used on par with mobile internet and far above apps. So Ofcom is consistent with ComScore that SMS and the camera come ahead of web and apps.
And lets be really really clear about this. If you don't trust them Europeans and want the Pew picture, we have that too. A global Pew survey in December 2011. In the USA, SMS used by 67%, camera used by 57% and internet surfing by 43% (they did not ask about apps). In Europe Pew found in every country the same order, SMS most, camera second and web third.
These were major surveys of all mobile phone owners. How about specifically smartphone owners? Well we have that data too. Zokem surveyed 10,000 smartphone owners in 2011 in the USA and Europe and guess what was used most by smartphone users. SMS of course! But yes, apps and the mobile web had switched places (they did not ask about the camera).
Whatever we think of the smartphone buyer in the world, the target customer for potentially 4 out of 5 buyers of smartphones, the consumers, their number 1 interest is SMS text messaging. And yes, I am not saying that. It too was verified in 2011. Cloudtalk surveyed US smartphone owners in July and found 71% used SMS and only 40% used the mobile web (they didn't ask about apps). Note again how consistent the finding is with the above. But Cloudtalk asked what one thing smartphone owners would most want to improve - 90% of US smartphone owners said they would want better SMS text messaging!
REASON 1 - MESSAGING MADNESS
Did I make my case? Now is Microsoft the expert on SMS? No. The world's first person-to-person SMS text message was sent in Finland in 1993 on the Radiolinja GSM network from one Nokia phone to another, by a Nokia employee Riku Pihkonen. Nokia wrote the book on SMS. Even the inventor of SMS, Matti Makkonen finished his career at Nokia (he was my last mentor). And what has been a major feature of Nokia smartphones always - a high proportion of them have had physical QWERTY keyboards in several formats such as the folder (ie Communciator format) and slider and Blackberry style wide candybar. There even have been exotic QWERTY form factors like the butterfly keyboard. If anything, Nokia was known as the brand that did SMS texting just about as well as it could be done.
Did Nokia bother to put a QWERTY keyboard onto its first three Lumia phones? No! Note, this is a Nokia competitive advantage. Note, 90% of American smartphone owners wish this more than anything else, and its something for example Apple refuses to do with the iPhone. But no. Lumia series is pure touch screen only. Nokia had a massive competitive advantage that it simply refused to exploit. And is this relevant? NPD reported in 2010 that 46% of all mobile phone handsets sold in the USA had a QWERTY keyboard either as its sole input or combined with a touch screen input. Nokia voluntarily abandons nearly half of the addressable market and instead - forces, FORCES all Lumias to be compared to iPhones (rather than compared to Blackberries).
Then we have the SMS design flaw. Microsoft has already admitted that it is true, if anyone sends a specific string SMS text message (or FB message or Tweet) to a Microsoft Phone based smartphone - it will shut down the phone and when the phone is turned back on, the messaging function is inoperable and the only fix is to wipe out everything stored on the phone - all messages, pictures, phonebook etc. What moron moron moron didn't prioritize SMS and allowed this kind of failure at Microsoft? This would not have happened if the phone and its software was designed by adults. SMS is the most valued and most used service on mobile phones in every market - even the USA is now in that state, so said the USA's own CTIA the Cellular Telecoms Industry Association in 2009.
REASON 2 - CAMERA CATASTROPHY
So lets go to Nokia's second huge advantage against all competitors outside of Japan and South Korea domestic markets. The camera. Nokia partnered with German camera optics specialists Carl Zeiss, and from the early N-Series on, Nokia had far and away the best cameraphones in that part of the planet where 98% of its population lives (Japan and South Korea have exceptionally advanced domestic mobile phone markets). Nokia introduced the world's first optical zoom (ie real zoom) camera lens in 2006. The first Xenon ie real flash in 2007. Nokia had a 5 megapixel camera when the iPhone was introduced with only 2 megapixels. Nokia did the (non Japan/non-S Korea) world's first 8mp cameraphone and first 12mp cameraphone. And its not just megapixels. Nokia had better glass on its optics, better sensors in the camera and better software for the pictures. Plus Nokia had removable storage media ie microSD cards so you could shoot many hours of DVD quality video and then just swap your microSD card and continue shooting. The whole camera and video experience was always superior on Nokia. Nokia introduced TV out in 2006 meaning you could watch your pictures, websites, videos etc on your home TV. And today that is of course HDMI out.
This is the second most used ability of the mobile phone. We just heard from Christmas electronics sales in the USA, that digital camera sales and videocam sales had fallen catastrophically - because consumers were switching their camera and video capture to their smartphones. And this is a Nokia superiority. And what does Lumia offer. A massive downgrade to what Nokia used to have. The 2010 flagship Nokia smartphone, the N8, had a 12 mp camera and Xenon flash. It won every contest and comparison against every rival everywhere, a superb cameraphone and videocam phone. It was selected the phone of the year in Britain. And the N8 was that cameraphone used to shoot a full-length motion picture that had a commercial release. Yes. A Nokia cameraphone so good a professional movie maker made not an 'experimental film' for a film festival, or a short film, or amateur film, but a full commercial production movie for cinematic release. That is Nokia excellence in cameras.
What does Lumia have? The topmost Lumia900 that was announced at CES has its camera downgraded from the N8. It doesn't have 12mp. It has 8mp. The flash is not Xenon flash. It is LED flash. There is no TV out. There is no HDMI out. There is no microSD. This 'flagship' phone seems like it was designed by total amateurs who were somehow utterly ignorant of the vast competence Nokia had built over the past decade. And it is. The Lumia series was not designed by Nokia top engineers in Finland. Elop in his Microsoft Madness decided not to use Nokia's Finland based competence, he went to the USA to design his Lumia phones. Yes the USA, known for such fantastic global hit phones as the Palm, the Danger, the HP, the Compaq, the Motorola - anyone remember the Rokr - and yes, Microsoft's own magnificent Kin, the phone so disasterous, it was terminated 6 weeks after launch.
Nokia's flagship phones have always, always had the best cameraphones (Japan, S Korea blah-blah-blah). The Lumia series is the first time ever that Nokia not only was not the best cameraphone, but it actually regressed. If you like your cameraphone, you are better off buying a 1 year old N8 than any of the brand new Lumia phones. The N8 was so good, that the first side-by-side test with HTC's Titan II - with a 16mp camera, and the N8 produced better pictures. That is Nokia knowhow! And Lumia? Abandons it all.
WHAT DO CUSTOMERS WANT IN THEIR NEXT PHONE
We have seen what consumers do with their smartphones. Now, what about specific decision criteria. All those who say 'but the eco-system, Tomi!' That the smartphone OS will decide. Or the number of apps in the app store. Sure they will be important, sure. But lets go to the facts again.
TNS surveyed 34,000 mobile phone owners around the world and found that in the Industrialized World (North America, Europe, Advanced Asia-Pacific) apps and the OS do matter. They came in ranked.. fifth. Tied for fifth. What is ahead of the selection of apps and the operating system in selecting smartphones in the Industrialized World? The Look and Feel. The Brand of Handset. The Input Method. And the Model of Handset. This is not me saying the OS is not top on the mind of smarpthone buyers, or the number of apps in the app store. This is what smartphone owners in the USA, Britain, Spain, Australia, Germany, France, Canada, Singapore etc have said. So before I discuss the OS and the Apps, lets do the more important factors starting from the top.
REASON 3 - DOES NOT WIN ON LOOK AND FEEL
Look. The Lumia 900 and Lumia 800 do look like flagship phones and have won plenty of praise, copying Nokia's radical look of the N9 from last year. So yes, this is a brave attempt. But the Lumia 710 has a decidedly cheap look to it, very plasticky. But yes, what of the flagship(s). If you like QWERTY form factors ie a slider or Blackberry style smarpthone, then this look is wrong for you. The sad thing is, that usually with new lines, Nokia has done a pair, ie the N8 was the tablet style pure touch screen, and its sister model was the E7 with the QWERTY slider. Same with the N9 (pure touch screen) and its sister the N950 (with QWERTY slider). So while Nokia had every chance to gain an advantage on the look side, it voluntarily abandoned about half of the total market potential. By deciding not to make what is a competitive advantage at Nokia.
But if you do love the pure slab tablet style pure touch screen smartphone. Then yes, the Lumia 900 and Lumia 800 are good-looking smartphones, but not as good as the iPhone 4S while being in the same price range. The big screen on the Lumia 900 is nice, but far bigger screens are on current Androids including the monster screen on the Samsung Galaxy Note. And where Nokia previously did have near retina display pixel density on the E90 Communicator, Nokia has again regresssed and now both Lumia 900 and Lumia 800 fall far short of the Retina Display sharpness of even the year-old iPhone 4. If you really love your QWERTY look, you won't even consider these Lumias. If you do love this purist touch screen look - then you will buy.. the iPhone or the Galaxy.
And while we are on the look, what about those weird neon colors? Yes, obviously the Lumia will stand out in the crowd, but it will soon mean that Lumia owners will be ashamed to show their phones. No wonder that one of the US carriers refused to offer the glaring color options. What happened to subtle and stylish? Nokia knows how to do that. But these colors are garish.
Feel. What of the feel? Nokia has a history of truly exceptional feel to its top phones. The perfection in the camera shutter on the N93 or the precision of the hinges on the E90 Communicator or the sheer delight of engineering bliss that is the slider/folder motion in the E7. Nokia could have given us great feel on the mechanics - where Nokia excels far above all other handset makers. But it did not. The Windows Phone OS forces the standard buttons on the touch screen that crowd out part of the screen permanently and the other controls are pretty lame. Again, Nokia abandons what is its competitive advantage in a futile attemp to match the iPhone. For anyone who actually owns an iPhone will not play long with the Lumia in the store, before knowing the iPhone is a far better buy (if you already are an iPhone owner).
The Look and Feel will be above average definitely but not on par with the top phones by the rivals. And when the price is about the same, on the look and feel, the Lumia is the clear loser already in the store. All consumer reviews by the tech press say that the Lumia 800 fails head-to-head against the iPhone 4S or Samsung Galaxy etc, and the Lumia 900 doesn't bring anything better on its look and feel.
REASON 4 - FAILS ON NOKIA BRAND
So the second highest factor deciding which smartphone normal consumers buy, is brand. Nokia had failed in the US market, so the Nokia brand cannot help Microsoft in the US market, that would need to be the other way around. In the USA Nokia is a bargain-basement cheapo-phone brand and the US market hasn't even seen most of Nokia's recent flagship smartphones like the N9, the E7, the N900, the E90 Communicator, the N86 etc. So in the USA, on this Lumia partnership, the conventional wisdom says that the Microsoft brand will help restore Nokia (on the Brand).
What usually totally surprises US based readers is how strong Nokia is outside of the USA. In the Global Brand survey of 2010 by Interbrand, Nokia finished 8th best brand ahead of such icons as Rolls Royce, Rolex, Mercedes Benz, Porsche etc. It was no fluke. Nokia had been in the top 10 for the past decade, as high as 4th best brand in the world. In practically every country outside of North America, Nokia was the top phone brand as recently as 2010. Usually with a huge margin.
Does it matter? Lets look at specific consumer opinion. A survey of nearly 2,000 consumers of the UK mobile phone market by Right Mobile Phone found that the mobile phone brand is more influential in deciding the next phone, than the carrier/operator brand. And in the UK, Nokia was the phone brand with the highest loyalty (not the iPhone or Blackberry which were a lot in the news for big market gains). How good was Nokia sales in the UK in 2010? Nokia's market share of new sales in the summer of 2010 in Britain was 33% according to Kantar. That was the best market share of any smartphone maker in Britain. iPhone came second and Blackberry third. This bodes very well for Nokia and Lumia as these customers are coming in to replace their smartphones now in 2012.
Except that something wild happened between 2010 and today. Nokia did not make an utterly failing phone like the N97 or one with a technical error like the Antennagate of the iPhone 4. The rivals did not come in 2011 with superphones with unbelievable features like say time travel or teleportation. Nokia gave ever better phones with better features (E7, X7, N9) and the Symbian OS released ever better editions and the Nokia Ovi store became the second-bestselling app store and everything was improving at Nokia. I am NOT saying Nokia had somehow magically caught up with the iPhone but the fact is, Nokia had a record Christmas Quarter in 2010, and then things were improving for 2011. Improving! This for the brand that had highest loyalty in Britain at the time!
So what happened to Nokia sales in Britain in 12 months. Kantar gives Nokia's market share in the summer of 2011 as .. 11%. Nokia had been the market share leader, with the best loyalty in the nation, and then produced ever better phones including one of Britain's best smartphones of the year - and its rivals did nothing spectacular - remembering the iPhone 4 had already been released by summer 2010 and the 4S was delayed till Autumn 2011. And Blackberry had its dramatic market failure in this period. Yet Nokia lost two thirds of its customers in just one year. What happened?
The British know what is the Ratner Effect and what is the Osborne Effect. Nokia's CEO Stephen Elop decided that one utter communciation disaster like Ratner Effect is not enough, he compounded it with an Osborne Effect. Both of those communication disasters independently ruined their respective companies, Ratners and Osborne. Elop doubled down and made the most costly management communciation fiasco in the economic history of mankind and devastated Nokia's brand and market demand. He combined the Osborne Effect with the Ratner Effect in something I now call the Elop Effect. Elop single-handedly wiped out Nokia's demand in February 2011. He ruined Nokia's brand.
Its not limited to Britain, obviously. Kantar reported the same crash of Nokia smartphone new sales in all European markets. Similar stats come from all around the world and obviously Nokia's own reported smartphone unit sales tell the same morose tale. In 2010 Nokia grew smartphone sales by 47% from the year before. Elop took that growth and torpedoed it, and for 2011 Nokia global market share collapsed from 29% in Q4 of 2010 to about 12% in Q4 of 2011 (we will know when Nokia releases its Q4 results shortly). This happened while the global smartphone industry exploded in 2011 growing by 59% from the year before.
Nokia brand is sheer garbage today. So the second most important thing customers ask for, which was a strong Nokia asset, has been ruined not by manufacturing errors or market forces, by Nokia's CEO with his idiotic communications last February. So maybe we can find salvage from the Microsoft side of this partnership. Or maybe not.
REASON 5 - FAILS ALSO ON WINDOWS BRAND
Microsoft is a strong brand. The Office Suite and some of its components like Word, Excel and Powerpoint are clear market leaders in their fields. The Xbox brand is strong. But Windows. Windows is not a loved brand. Windows is synonymous with crashes, bugs, delays, incompatibilty, viruses, spyware and tedious updates. Windows is why people talk of the 'Microsoft Minute' in the delays to boot up a PC. The term Internet Exploder came more as mocking Windows crashes than IE the browser crashing.
So Windows is a most unfortunate decision in branding. And the irony is, that Microsoft decided to rebrand its smartphone operating system when it switched away from Windows Mobile. Microsoft could have called the new OS anything. Microsoft Seven. Microsoft Mobile. Microsoft Phone. Xbox Phone. Zune Mobile, Internet Smartphoner. XPhone, Ballmerphone, Redmondo. Or just about anything other than Windows. But no, they called it Windows Phone. So now the new Microsoft smartphone OS has the worst branding baggage out of the whole Microsoft empire. What a dumb move.
But Branding is far more than the name of the brand. Lets see how strong the Windows brand is in smartphones. Lets go to the USA, its home market. In Q2 of 2009 Windows smartphones in the USA had 9.7% market share according to Gartner. One year later in Q2 of 2010, that had fallen to 4.6% !!! Note, at this time, Microsoft smartphones were made by Samsung, LG and Motorola - the top 3 bestselling phone brands of the USA - which did NOT experience a significant change in their market shares! Same for HTC, the pure smartphone maker. It too made Windows Mobile smartphones and it also did not see a fall, on the contrary, HTC saw a growth in the USA on its market share.
How is that possible? These four smartphone makers also make Android smartphones. And in Microsoft's best country market - the USA - when supported by each of the three bestselling phone brands of the US, and its biggest non-proprietary smartphone brand HTC - yet Microsoft's Windows brand was so poisonous, that half of its customer base churned away from Microsoft. That is not a highly loved brand.
So that was the 'old' Microsoft Mobile. What of the brand-spanking new Windows Phone brand then? Windows Phone launched in 2010 We've now had over a year of its 'success' and Kantar reported that the combined sales of Windows Mobile and Windows Phone based smartphones in the USA dropped by half again, from 2010 to 2011. Yes, even while switching to the newer OS, and giving it more than a year for 'ramp up' Microsoft lost again half of what customers remained. This is a brand which is not loved.
The global picture tells the same story. Windows Phone had its peak sales a year ago of about 1.5 million smartphones in the quarter. Last quarter we have data for, Q3, Windows Phone sales had fallen to about 500,000 units worldwide. The Microsoft Windows Phone is not a strong brand in smartphones and neither is Nokia. For the second most important factor for smartphone buyers, the brand - both brands are so poisonous, this is the classic comment, two turkeys do not an eagle make. No matter how much lipstick you put on a pig, it is still a pig. Or polishing shit is still shit.
REASON 6 - FAILS ON INPUT
The iPhone revolutionized smartphones. The multitouch interface, on capacitive touch screen, and Apple's brilliant, logical and intuitive software system, all worked. It was inherently better. That is what you need if you want a competitive advantage. Else if you do touch screen, you are just another rival. Nokia's N9 and N950 on the MeeGo OS, with its radical swype method of input, is a major step. The Windows Phone input is not a radical improvement. In fact, it has severe shortcomings with no foldering, so the more you install apps, the more cluttered and clumsy it becomes. So the touch screen input is no better than any rivals, and is worse than the best. Nobody will buy the Lumia because its touch screen is superior.
And where are the QWERTY inputs. Nokia failed the opportunity to do something Apple doesn't. To be a viable option for the nearly half of consumers who do insist on a physical QWERTY keyboard on their phones. The sad fact is, that on QWERTY the keyboard on the E7 is truly magnificent. So it would have been an easy selling attribute for anyone trialling a Lumia in a store. But no. No QWERTY keyboards. Even though Nokia designed three very similar spec smartphones (and Nokia has tons of QWERTY phones on Symbian, S40 and MeeGo operating systems).
REASON 7 - FAILS VARIETY IN MODEL OF HANDSET
The fourth most important factor is the model of the smartphone handset of any given brand. And here again, Nokia has the biggest production capacity. Nokia has the widest range of components and suppliers. Nokia can do the broadest product portfolio. Just like in cars, consumer preferences in mobile phones are very diverse. Someone prefers a Cadillac Escallade, another prefers a Toyota Prius. Someone prefers a Mercedes Benz C-Series, another prefers a Porsche 911. Someone else wants a pickup truck, or a minivan or a Smart Car. Apple makes its iPhones very similar to each other. Nokia is able to stretch its range to suit very divergent needs. If one of its three Lumia models is aimed to be an iPhone 'killer' then make the other two as different and all three quite distinct from each other. When you look at the Lumia 900, it is like the designer of the Lumia 800 fell asleep. Where is the difference. Even the Lumia 710 is just a cheaper lame version of the Lumia 800. This is the desperation move by the small rival who tries by a few cosmetic tricks to expand its product line.
Compare to Nokia's biggest rival (who is not Apple's iPhone, it is obviously Samsung). Samsung does just on its Galaxy series the obvious iPhone clone basic slab touch screen versions of almost exactly iPhone physical size; and then offers the Galaxy Indulge with the QWERTY slider; the Galaxy Beam with the pico projector; and the Galaxy Note with its gigantic screen. Thats how you do differentiation. But no. Nokia which could easily do this, rather has made three variations of one boring theme.
But again, its even worse. Why is Nokia Lumia not on every network in every country? Nokia has easily the production capacity and the world's largest phone sales network and distribution system including the ability to air ship a million phones a day, every day, anywhere it needs to. So lets take again just the USA. T-Mobile will sell the Lumia 710 but not the 800 or 900. AT&T will sell the Lumia 900 as an exclusive. The other big US carriers are not selling any Lumia handsets this Spring. So, in a perfect world, Nokia could sell 3 handsets on four networks ie 12 variations for the consumer. Now Nokia only offers 2 of those 12. If you want the Lumia 900, you can only get it on AT&T. If you want the Lumia 710, you can only get it on T-Mobile. And the Lumia 800? Gotta fly to Europe to get that.
It is perfectly possible that Nokia and Microsoft marketing have convinced a random customer that they do want the Nokia Lumia smartphone. And that customer most likely went online somewhere to see what model they want. And then went to their carrier store, to buy it. And in 10 times out of 12, the carrier will not offer the Lumia which the customer would want. Then - while the customer WOULD be willing to prioritize the brand of phone (Nokia) ahead of the exact model - in these cases, there is no other Nokia smartphone to sell (because idiot Elop decided to pull all Symbian phones from the shelves in the USA, and worse - refuses to sell the magnificent N9 and N950 which run on the MeeGo operating system). So. If the customer wants a specific model, and that is not sold by that carrier, the facts tell us that the smartphone customer would be willing to buy another Lumia or even another Nokia smartphone - except that because of management madness, there are no others. It may be to Microsoft's advantage that the customer doesn't buy a MeeGo or Symbian based smartphone - but that customer will then go to another brand - and in 9 times out o 10, it will be either an iPhone or an Android. And in any case, if a customer wanting a Nokia branded phone, is not walking out of the store with a Nokia branded phone, that is a lost customer to Nokia (and gain to Apple or Android). Elop's 'strategy' is totally not in Nokia's best interest.
REASON 8 - FAILS SMARTPHONE APPS AND APP STORE
The smartphone apps portfolio is ranked only tied for 5th/6th highest priority for buyers of new smartphones. Note that all of the above come ahead of your precious app store. But then, come on. Windows Phone app store? It has only passed 50,000 apps. Even the 'burning platforms obsolete' Symbian based Nokia (Ovi) app store has twice that in apps. Android is 8 times bigger, Apple iPhone App Store is literally 10 times bigger. If you walk into the store with the apps as your decision criterion, then Windows Phone fails from the start. And that is not even before we look at the apps. The reviews of WP7 apps say rather consistently that they are poor versions of their iPhone and Android masters, and further, that they do not take advantage of WP7's abilities.
These will get better over time. But the application developers' interest in making apps is totally dependent on their belief that its worth their while. Once they bother to count, to do the basic math, and see that there are about 190 million Android users worldwide, about 120 million iPhone users (and about 170 million iOS users when we add iPad and iPod Touch); and over 300 million Symbian users; and about 100 million Blackberry users - and only about 5 million Windows Phone users. Yes. The total installed base of Windows Phone today, about a year and a half from launch is... under one percent of the smartphones in use worldwide. Under one percent. Less than 1%. This is when the futility of bothering to create WP7 versions becomes obvious. Microsoft has been able to peddle the sheer impossibility of a 'third ecosystem' - which even Microsoft loyalists would not have believed considering how ridiculous are Ballmer-oriented claims about Microsoft's future - but they suddenly believed it, when the Nokia CEO said the same.
Please do the math. We just heard from Morgan Stanley that they project Nokia and Microsoft to sell 37 million Lumia phones this year 2012 and 64 million Lumia smartphones next year 2013. This forecast by Morgan Stanley is quite optimistic. But lets assume it truly happens. Those numbers sound great, don't they. That is awesome, isn't it.
So by December 2013, the world will have about 111 million Windows Phone smartphones in use. Yes. That might sound good. Except that in December 2013 the world will have about two BILLION smartphones in use (we will see about 700 million sold this year alone). So, even three years from now, the Microsoft Windows Phone OS family will have only about 5% market share. That is not a third ecosystem in anyone's book. And Android will be over a Billion smartphones. Where is the developer attention going to go. Understand that even in 2013, Symbian will utterly tower over Windows Phone in installed base. So Apps will not win the battle for Lumia.
REASON 9 - DEFICIENT OPERATING SYSTEM
The Windows Phone 7 and 7.5 Operating Systems do look cool and sexy when shown on stage or briefly demo'ed. But all experts who have reviewed Windows Phone have immediately pointed out that they are not even up to modern standards yet, far less being in any way 'leading edge' technology. The tiles are a gimmick but mostly are only an update of Widgets that have existed on such 'burning platforms obsolete' operating systems as Nokia's Symbian. Windows Phone does do multitasking, but only just. For example the phone will not wake up from the alarm. So you buy yourself a Lumia and then set it up to wake you for the next day to go to work - and will have a severe 'I hate Nokia' moment when your phone rings silently without waking you up. What is with that?
The camera utility is limited and restricted. Windows Phone 7 doesn't even support dual cameras (that came with 7.5). There are many application developer issues that are not supported - like the hottest area right now, Augmented Reality. Nokia's past flagship phones have proudly done AR, but not these Lumias. And there is no support for NFC. And you cannot transfer apps and various content via bluetooth etc. The system is very restrictive and limiting.
What is worse, the next update to Windows Phone is aimed at the cheapest phones, so the flagships cannot even catch up to the rivals with the next Windows Phone release. This is the Microsoft way. The short term allure of the Tiles does provide some in-store excitement. But when smartphone users start to use the Lumia, they soon are frustrated and disappointed. Again this is not me saying. I have not used a Lumia or any Windows Phone based smartphone. But the Guardian tech writer who bought a Lumia 800 in the UK before Christmas, was so fed up with it already after Christmas when using it, he returned the smartphone - and wrote in one of Britain's biggest newspapers that its what he did. This is not proof of an OS that is ready for prime time. It may become that one day, but it is not competitive yet. This is probably more like Windows 2.0 (remember that, ouch ouch ouch) than Windows 3.0 which finally was the first Windows on the PC that was (barely) usable.
Not everybody will return Lumias. But it will see more returns than its peers. That poisons the reputation both for friends recommending smartphones and the sales reps at the stores. The sales reps hate returns - because the customer has to be sold another model smartphone - but the sales rep won't get a new commission. And then the rep has to do the returns paperwork and packaging hassles. Three times the effort for zero more commission - while the customer bitches and moans and gives the sales rep a bad day. So the sales reps learn real fast which phones have high return rates - and stop selling them!
REASON 10 - REGRESSING IN FEATURES AND SERVICES
And the last of the major decision criteria in the Industrialized World for selecting smartphones is the features and services offering. And Nokia is known for a lot in this area. Nokia smartphones used to come with a huge array of pre-loaded apps and the devices were overloaded with technological goodies. If the iPhone was sexy and slick, and the Nokia was more bulky and unsexy, at least the Nokia had every conceivable tech built in, and several more you didn't even know existed.
I'll be the first to admit most consumers won't use most features and in recent years the smartphones have become so complex, even expert users couldn't work all parts of their phones. So it was overkill on many levels. But for some consumers - remember this is only the 7th most important priority - they have their 'check lists'. Does this phone have LTE. What resolution is video recording. Which file standards does the media player support. Etc etc etc. And then there is the specialist need. Like the customer who has had a previous Nokia and loved that its FM transmitter lets you connect to your car without an iPod cable connector. Or perhaps the customer has a collection of movies transferred to microSD memory cards, or whatever.
So lets see how technologically advanced the Lumia 800 is, the flagship currently available - the Lumia 900 will release only on AT&T late in the spring about the time when we expect the iPhone 5 to launch.
So, Lumia 800? Compared to Nokia's previous flagships and current rivals. The Lumia 800 has only 8 mp camera regressed from 12 mp in N8 a year before. The market leader now has 16mp (HTC). The screen size is 3.7 inches, which is regressed from 4 inches on the E90 Communicator four years ago. Current market leader Samsung Note has 5.3 inch screen. There is no slot for any kind of memory card which is regressing from the microSD slot in the N8 that supported 32 GB memory cards. Today top phones support at least 64 GB microSD (and probably even bigger). The Lumia 800 doesn't support video calling (Gosh, how far back can I go, I think it was the 6680 back about 2004 that first had videocalling support and every Nokia flagship has had it since.. except not now the Lumia. And obviously, after even Apple added videocalling support to the iPhone 4, essentially every rival (not using WP7) does videocalls.
The flash on the Lumia 800 is LED, the first Nokia flagships to go better was the N95 and N82 in 2007 with Xenon flash. Several better cameraphones have it now. The Lumia doesn't have FM radio, Nokia added it gosh, years ago, about 2005. Many rivals have FM Radio today. The Lumia 800 doesn't support Real Media player files (that will play well with web services haha). Real Player was standard on Nokia phones still last year and most rivals support the file format. The Bluetooth on the Lumia 800 won't support many types of file transfers, it did on past Nokias and does today on rival phones. The Lumia 800 doesn't have a QR code reader installed. Nokia put it on its flagship first in 2006 on the N93. Most rival smartphones have QR code readers.
Lumia 800 doesn't have TV out, that came to Nokia flagships in the N93 in 2006 and many rivals have it. The Lumia 800 doesn't support HDMI out which came to Nokia on the E7, and now some top rivals do it too. The Lumia 800 doesn't read USB thumb drives and memory sticks. Nokia introduced this fantastic feature on the N900 in 2009 (note, yes, read thumb drives and other USB memory devices including portable hard drives making the smartphone behave just like a real laptop). I don't know if other smartphones support this function yet but obviously Nokia has brought it to newer phones like the E7.
And the Lumia 800 doesn't offer a replacable battery. Nokia has started on that dumb path already earlier under Elop with the N8 being the first Nokia smartphone that didn't let users replace the battery. Considering how heavily smartphones can be used on some days this is a huge disadvantage, especially for power users who surf the web, use WiFi, shoot video, play music, watch YouTube videos etc etc etc. Luckily Elop has seen the error of his way and now starting with the Lumia 710 the practise is ending, but there are still phones in the pipeline that don't allow battery changes - like the Lumia 900.
This is Nokia's current 'flagship' which fails in side-by-side comparisons on many widely used and desired features and specs - with its Nokia brothers from years ago! Years ago! How badly is the Lumia 800 regressing ! It seems like it was deliberately designed to fail in the market.
We have looked at how consumers use smartphones, and what are currently the top things that decide which smartphone we buy next. By every SINGLE criterion, Nokia Lumia is underperforming the market - and on most it is regressing from where Nokia was before Lumia. If you thought the Nokia of the past was 'obsolete' for your market, whether that was the USA or Europe or Asia-Pacific or wherever, this Lumia line offers you NOTHING that is better but on TEN separate factors, Lumia is now worse than what Nokia was last year. WORSE.
REASON 11 - REJECTED BY BUSINESS / ENTERPRISE CUSTOMERS
So that was consumers. Many will be eager to argue the synergies of Windows and Office Suite at the enterprise/corporate customers. And drool at the amazing opportunity that Nokia business-oriented E-Series smartphones can have with full Microsoft Office integration. The massive global market share dominance that Windows and Office have in the workplace. This must be Lumia's big market and Tomi is a total fool to not see it. Yes. Total fool.
First, remember that only 1 in 5 smartphones sold worldwide is a business/enterprise smartphone. Secondly, remember that Blackberry owns roughly speaking half of that. Before we get into massive argument about Blackberry is dying, hear this: A 2011 survey of 20,000 businesses in the USA by TNS, found that Blackberry penetration ranged from 61% to 81%. Six out of every ten smartphones was a Blackberry in tiny US businesses of less than 4 employees and 8 out of ten smartphones was a Blackberry in the biggest corporations of 1,000 employees or more. The myth of the iPhone replacing the Blackberry is, alas, quite premature. The statistics of smartphone sales reflect that too. Blackberry is collapsing in consumer sales in the USA, yes, that is true (but growing internationally) but the enterprises are replacing their smartphones rather loyally, Berry by Berry.
And before you say 'Windows' - the second most popular smartphone in US businesses - Microsoft's home country and Microsoft's Windows PC and Office Suite penetration's best country by far - is not Windows, not Windows Mobile nor Windows Phone. It is yes, the iPhone. If Microsoft Windows was such a magical synergy tool, why is the consumer-oriented iPhone outselling the Windows smartphones in the US enterprise/corporate space, after a DECADE of Windows Mobile / Windows Phone sales by Microsoft and its partners. There is no synergy.
Which brings us to the Nokia Magic with Microsoft Office Suite integration. So what if we really do put the full Microsoft compatibility to E-Series? Surely that is the magic potion. Haha. You know what? That was already done. Not last year. Not in 2010 when Elop joined Nokia as its CEO. No. Microsoft and Nokia did full E-Series and Microsoft Office Suite and other Microsoft software business/enterprise integration in... 2009. And the big corporate/enterprise clients they landed in the next years? None. None. And you know who was in charge of that project on Microsoft's side? Stephen Elop thats who. Rather than achieve corporate sales successes for their 'strategic partnership' Elop rather prepared his job transfer from Microsoft to become CEO of Nokia the next year.
So today ANY Symbian phone can do full Microsoft Office fully and all its peripherals and apps. Including Skype (Windows Phone does not support Skype). Symbian supports such vital business needs as.. folder (Windows Phone does not) and full multitasking and the transfers of apps and files via bluetooth. So doing your Microsoft business solution is far better on a Symbian E-Series phone than with Windows Phone! Remember, the old Windows Mobile was built to be business-oriented (as was Symbian originally). But Windows Phone was built to be the iPhone-killer - so admit Microsoft execs now - and it was made to be a consumer-oriented smartphone OS, not a business-oriented OS. If you seriously believe that Microsoft can win enterprise/corporate customers of any meaningful degree with Nokia, you are deluding yourself.
And this is all without considering the natural need of enterprise/business phones - keyboards! Why is every Blackberry and every Nokia E-Series carrying a full QWERTY keyboard? That is what enterprise/business customers want. Why is Lumia not offering a QWERTY variant!
No, Lumia will not do better than Nokia did before with E-Series on Symbian and E-Series on Symbian is more Microsoft-friendly and enterprise/corporate user friendly than Lumia using Windows Phone. Whatever success or lack therof, you have seen of Nokia in the business/enterprise space, that will do worse on Lumia and Windows Phone, not better.
And finally on the enterprise/business users. The Microsoft loyalty and brand was equally demolished with the catastrophic crash of its market from 10% in the US market in 2009 to 5% in 2010 to under about 1% today (when adding both Windows Mobile AND Windows Phone). So don't delude yourself into thinking that Lumia can somehow grow on the enterprise/corporate client side, either in the USA or the rest of the world. If Microsoft was the magic potion - surely Nokia should have been able to capitalize on it in 2009 and 2010 before Elop decided to set his platforms on fire like the psychotic arsonist.
WHAT OF EMERGING WORLD ?
Hey, that was only half of the world of smartphone sales. The planet has a population of 7 Billion who have 5.9 Billion mobile phone accounts. Only 1.2 Billion people live in the Industrialized World and all of the above only related to what is called 'The West'. What of the Emerging World where 5.8 Billion people live, where 75% of all mobile phones are sold, and now half of all smartphones are sold. China overtook the USA as the biggest individual country market for smartphones last year. India is rapidly growing into another giant as is Indonesia, Russia, Brazil etc.
First, most of the points in the above apply to the Emerging World but in perhaps different orders of priority. So for example the TNS global survey of 34,000 mobile phone owners worldwide on their purchase priorities with mobile phones, the rankings are different. The top 7 most important decision criteria are in this order: 1) Brand, 2) Model of Handset; 3) Network Provider; 4) Look and Feel; 5) Features and Services; 6 Operating System; and 7) Apps and Content. Lets look how these differ for the less affluent part of the planet's population.
AMPLIFYING REASON 4 - BRAND IS MUDDLED
You understand that if Nokia was a rubbish brand in the USA, but still ranked 8th most powerful brand globally in 2010. then Nokia had to be far better than ranked 8th outside of the USA, after all the USA is by far the biggest economy on the planet. And it was. Nokia was not only the best phone brand essentially in every country outside of the USA, Canada (and South Korea and Japan); but it was literally the most valued brand: period. In many countries from India to Nigeria. The most trusted, most desired, most valued and loved brand. And that was of course also damaged massively by the Elop Effect as in the above. But some evidence. In India for example Nokia was toppled in 2011 from being the topmost brand.
In the 'West' we have PCs at work and home. We know Microsoft well and most of us use Windows based PCs. Both Microsoft and Windows are very powerful brands for us. But in the Emerging World they do not have PCs in every home or every office. If they do, they are often Linux based PCs (or have pirated Microsoft software which may be very buggy etc). So while we in the Industrialized World can at least theoretically have a good impression about Microsoft and Windows, and it can 'help' in the branding battles - top priority please remember, then in the Emerging World countries the Microsoft Brand is no help and easily a hindrance.
But Elop has consistently been making it worse. Making Nokia's branding worse. He made a widely criticized decision to change Nokia's naming, to go to pure numbering in its names (Not Nokia N9 or E7 or X7, but just Nokia 500 etc). This was very confusing and he reversed his decision two months later and today we have the Lumia series, the Asha series, and even individual phone models like the Lumia Ace ie Lumia 900.
Then he decided to kill the Ovi store brand. The Ovi store was nothing, nobody and nowhere in the USA and no doubt when Elop flew every week from Finland to his other home in Seattle USA, he felt Ovi was a failure. Except that it wasn't. The iPhone App Store is the world's bestselling smartphone app store .. in those countries where the primary language is English. But all those countries combined have a population that covers 7% of the planet's population. What about the other 93% of us? The biggest country by population is China. Biggest app store in China? Ovi. The second biggest country by population is India. Biggest app store? Yes, Ovi. Third biggest population is the USA, but fourth biggest? Indonesia. App Store king? Ovi. Fifth biggest population is Brazil. Store? Ovi. Then Russia. Ovi. Nigeria. Ovi. Pakistan, Egypt, Bangladesh, Vietnam, Turkey, Ovi Ovi Ovi...
Nokia's Ovi store supports over 50 languages! And obviously, local developers can offer local apps in their home languages! And now Elop wants to cause all that confusion by discontinuing the Ovi store brand. Why? What possible benefit can it deliver, while Nokia's overall apps partnering is in turmoil with Symbian and MeeGo and Maemo and Windows Phone and S40 and Meltemi and whatnot. And its not just that, very big global partners have been cross-promoting the Ovi store. CNN for example was promoting its Symbian smartphone app worldwide on countless daily ads on all CNN channels. The value of just that advertising runs in the millions except that Nokia got it for free. And what did CNN still promote in December of 2011 - half a year after the end of the Ovi brand - yes CNN's smartphone app was available on the Ovi Store. No wonder Nokia's brand is being flushed down the toilet. The CEO is actively assassinating the brand in every way he can.
AMPLIFYING REASON 7 - FAILING MODEL OF HANDSET
In the Emerging World the smartphone situation is dramatically different from that of the wealthy Industrialized World. For us in the Industrialized World countries, it is no hardship to pay 600 dollars for a premium smartphone like the iPhone or Samsung Galaxy or Blackberry Bold or Sony Xperia or Nokia Lumia 800. But in the Emerging World where it is very common to have a daily wage of 2 dollars (thats before taxes) a 600 dollar superphone is totally beyond reach. As implausible as thinking of buying a corporate jet or a superyacht. They dream of buying a bicycle to improve their lifestyle. They do have mobile phones but ones that cost under 50 dollars, often as cheap as 20 dollars new.
(For US readers, remember, a 'free' iPhone 3GS on 2 year contract is not a free phone. I am always talking of real prices, not the bogus prices of bundled contracts with handset subsidies. The African farmer who earns 2 dollars per day, can neither afford to buy the iPhone at 600 dollars without contract, nor to sign up for a 2 year contract of 50 dollars per month to get a 'free' iPhone on handset subsidy).
Here we have to go to the phone price pyramid. I don't have a current one in the public domain but in 2009 Morgan Stanley published their price pyramid for mobile phones worldwide. Morgan Stanley found 2% of the phones sold to be premium smartphones; 11% to be other smartphones and the remaining 87% to be 'featurephones' ie non-smartphones or 'dumbphones'. These cheap phones in 2009 had an average price of 100 dollars (that has come down since then). In 2009 about 13% of new phones sold were indeed smartphones. Now about 29% of all mobile phones sold worldwide were smartphones.
The planet did not suddenly have a huge rise in its wealth in the past two years (arguably, we've suffered globally with the economic crash). The poorer people didn't suddenly all - billions of them - receive massive pay rises. But the total smartphone proportion of all phones sold more than doubled in the past two years. The only way that is possible, is if smartphones have become less expensive at the low end of the price point. The 100 dollar smartphone (remember, this is without contract! Without handset subsidies, a 100 dollar smartphone).
And we have them! Nokia shipped sub-100 dollar smartphones from 2009 as did Samsung. We are now fast approaching the 50 dollar smartphone led by ultra-low-cost phone makers who specialize in the Emerging World markets, from global giants like ZTE and Huawei, to regional players like MiFone of Africa and Micromax of India etc.
Nokia was perfectly poised to fight for this low-cost price segment with Symbian, because Symbian was designed to work on very modest technological requirements and often these ultra-low cost smartphones are not touch screen devices. Meanwhile Microsoft's Windows Phone was designed to work on very high spec components - in fact, Windows Phone does not even work on Nokia's standard chip supplier equipment like Texas Instruments. And Nokia owned the low-cost smartphone space. Canalys statistics tell us that in China in 2010 in Q2 the market share for Nokia (obviously running Symbian) was.. get this.. 77% !!! The second biggest smartphone maker brand in China was Motorola and Nokia was .. 16 times bigger than its nearest rival. This, in the country that was about to become the world's biggest smartphone market.
Similar stats from market after market after market. Over 70% of smartphones in India over 80% over the whole continent of Africa in new smartphone sales in 2010 were Nokia branded. Nokia had very accurately foreseen the future markets as they emerged, and provided suitable, low-cost smartphones for those markets and utterly dominated the Emerging World. And how? By offering a wide range of smartphone models. Now the Lumia 800 and 710 are far too expensive for this market. (again, US readers, don't be fooled about T-Mobile contract price of 50 dollars for Lumia 710, it costs many times more without the subsidy).
Lumia 800 (And 900) is utterly beyond the market price except for the rich elites, who will rather buy iPhones, Blackberries etc. The Lumia 710 is yes, cheaper than the 800 but its still far too expensive to become any kind of mass market success (its price without subsidy is about 350 - 400 dollars). But in the Emerging World countries, the price differential between models is far more value-driven. There are almost no subsidies, so you pay exact real retail price. One phone model costs 479 dollars, the next 529 dollars, another 499 dollars etc. The differences are nuances.
And the buyer has worked far more for that dollar than we have had to for our dollar. The customer is far FAR more value-aware. The customer knows FAR more accurately what is true value. So the feature list is scrutinized far more thoroughly. All aspects are tried and tested before purchase. The advice and guidance of peers and friends is seeked even more than we might do. Remember, these customers do not have an internet to go do price-shopping. They do not read tech magazines with product reviews and contrasts and recommendations.
With Symbian at low-cost smatphones, Nokia had conquerred the world. If Elop could have left Symbian alone, he would be now reaping the benefits of all the hard work Nokia did over the years. Except he didn't. The Elop Effect collapsed the Nokia smartphone sales globally, not only in the Affluent countries but also in the Emerging World countries. So look at China. Analysys gave the Q2 market shares for China in 2011 and Nokia had crashed in one year to.. 22% with Samsung and Motorola nipping at Nokia's heels. Now in October 2011, Morgan Stanley reported that Chinese consumers plan to buy their next smartphone preference for Nokia had fallen further to 18%.
What Nokia would have desperately needed out of early Lumia was low-cost smartphones now, to try to hold onto that market share. It is being now burned forever. And the Microsoft Windows Phone cavalry will not arrive in time to save Nokia. The current Windows Phone edition does not support low-cost smarphones. Because of that, Nokia can't even start to ship low-cost smartphones until the second half of this year at the earliest (if Microsoft manages to deliver on time). So the handset portfolio problem is far bigger here in the low end of the smartphones for the Emerging World markets.
REASON 12 - HOSTILE CARRIER RELATIONS WITH NOKIA
The third biggest factor for smartphone buyers in the Emerging World, far ahead of apps or the OS, is the network provider ie the carrier ie mobile operator. The issues range from network coverage to service reliability to network technology to service offering and pricing etc.
Nokia had THE BEST carrier relationships in the world. Nokia phones are sold on more networks than any other phone brand and Nokia has special partnership relationships with many carriers, ranging from the world's largest carrier/operator China Mobile to the world's most advanced and demanding carrier/operator NTT DoCoMo of Japan (the carrier who launched the world's first cellular telecoms mobile business ie the company that started this industry).
I am not suggesting that all Nokia carrier relationships were in good condition. The USA relationships were particularly damaged. But compared to any other handset maker, Motorola, Samsung, LG, Apple, RIM, HTC, whoever, Nokia had the best, THE BEST carrier relationships worldwide. That is why even when Nokia had problems like the failed flagship smartphone N97, Nokia overall global sales did not suffer severely. Compare to Motorola which after the Razr launched the Rokr and today Motorola is no more, as the bankrupted and split-up handset maker it was bought by Google.
Nokia cultivated the partnership model with its app store, Ovi, and its content and its networked services such as maps, advertising, mobile payments etc. Nokia had secured 'carrier billing' relationships with over 100 carriers worldwide for Ovi (no other rival app store had even one quarter that level - carrier billing means one-click payments that get charged directly off your phone bill or prepaid account. No credit cards etc needed). With the language support, the ecosystems nationally around the carriers and Nokia grew meaningful in many cases. Now last year in February that all was suddenly sunk, with the Elop Effect.
I am not suggesting the carriers/operators loved Nokia - Nokia was too big and powerful to be loved. But Nokia was seen as a mostly gentle giant, and one that mostly did not do harm to the ecosystem. And over time Nokia management earned a reputation that you could count on Nokia's word. That all died with the Elop Effect.
From February 2011, the global carrier community revolted against Nokia and Elop. Nokia was placed on a sales boycott. This has been reported only in anecdotal evidence and mostly in countries of the Industrialized World, but Nokia itself admitted in the Quarterly results that its carriers and distribution channel had reduced inventory suddenly and to an unanticipatedly large degree. Evidence? I can't 'prove' prove it to you, but it is very widely accepted by experts in the industry, that Nokia's resale channel froze in February and Nokia products were removed from displays etc. This phenomenon continues and reports trickle in from many countries that Nokia smartphones are conspicuous in their absense from store shelves and inventories. Obviously the global utter collapse of Nokia smartphone sales is partially a symptom of this problem (and other problems).
REASON 13 - HOSTILE CARRIER RELATIONS WITH MICROSOFT
Nokia was known to be friendly to carriers if bureaucratic and uncompromising. If that feeling turned to hostility, there is good chance it can be reversed. But Microsoft was known as the Evil Empire long before they announced the partnership with Nokia. Forget about Microsoft's bullying of its developers and partners and rivals, and the prolonged feuds with the regulators on both sides of the Atlantic. Just in wireless, Microsoft is the mobile death wish. Their very first strategic partner and launch customer for Microsoft's first smartphones, UK based Sendo was driven to bankruptcy after lengthy court cases with the Evil Empire. Motorola went from profitable to loss-making in its strategic partnership with Microsoft smartphones. Motorola was so disgusted it announced it would discontinue smartphones on Microsoft platforms which gained it a lawsuit to boot. LG's strategic partership with Microsoft bled the company profits into losses and LG ran to Android. HTC, Microsofts' longest-serving smartphone partner was so upset with Microsoft, it refused to support the final version of Windows Mobile and now strongly prioritizes Android. If you don't know the history of how devastating Microsoft has been to its 'strategic partners' in mobile, like the vampire, its bled them dry. Read Horace Dediu's review of In Memoriam: Microsoft's previous strategic partners.
Microsoft is like the cheap prostitute. Not only has Microsoft been sleeping with everybody, but Microsoft then awards its 'strategic partners' with a sexually transmitted incurable disease as a parting gift.
While mass market consumers are usually blissfully ignorant of the backstabbing in the corporate world of partnerships, the carriers/operators are not. They pay very close attention to every player in the market. The carriers/operators know they need the handsets, and smarpthones need operating systems to run. They are very aware who is who and who plays naughty and who plays nice. No wonder that 'do no evil' Google is getting global support everywhere. I do not have to go into the specifics of what all Microsoft has been doing in the past to anger the carrier community, as it is widely acknowledged that Microsoft's carrier relations were 'strained' or 'challenged'. Even Microsoft executives acknowledge this as a fact.
Then came Skype. I have written another long blog explaining why Skype is the ultimate red flag to carriers/operators. You can believe me, or not. That doesn't matter, we now have an ex Microsoft executive, no: ex Windows Phone General Manager at Microsoft, Charlie Kindel, who acknowledges that Microsoft had further angered the carriers in 2011. This is how he phrased it "Windows Phone raised its middle finger at the carriers" and to make matters worse, even after that, currently "Windows Phone requires Microsoft to push hard on the carriers" And the carriers do not like this at all. Kindel said carriers are reluctant. He said because carriers have explicitly decided to support Android rather than Windows Phone - "that is why Windows Phone has not sold as well".
Whatever you thought of Microsoft success or failure in the past in mobile, the ex General Manager of Windows Phone tells us that Microsoft had indeed had a bad relationship with carriers, Microsoft's attitude to carriers had already been one of arrogance and abuse; and that carriers hated it; and that since then Microsoft had been making matters worse - and the resulting penalty from carriers was to push sales away form Microsoft to Android. I say boycott, you say tomato. Regardless, it is patently obvious that Microsoft relationships with carriers were bad before and are getting worse with Windows Phone. This now is again worsened as we hear for example from Europe that Nokia was bullying carriers about commitments to sell Lumia in Q4 etc.
Whereas in the Emerging World, for smartphone purchases, consumers will look at the operator/carrier as the third most important issue - where Nokia's reputation has suffered with Elop and Lumia; and its partnering with Microsoft has only made matters worse. This means Lumia is worse off than Nokia was before the Elop Effect. Worse off. Lumia is in trouble.
AMPLIFYING REASON 3 - LOOK AND FEEL
Remember in the Emerging World Nokia is the gold standard for consumers of mobile phones. They worship Nokias. Even the superphones are featured in the stores even as few customers ever can afford them. Proud owners walk with four year old models if they were top models way back when and so forth. In countries where the average person has no hope of ever owning a car, the mobile phone is the nearest thing to a true status symbol. Nokia has far higher assigned esteem than just a phone or gadget.
So the customers know Nokia models and their specs. And they truly appreciate some minor details. That FM radio that you laughed at in the Features section many thousand words ago in this story? In Africa, literally, for about half of the population, the first radio they ever personally owned, is the one that comes on the Nokia phone. Yes, they don't have TV sets. They are so poor they don't even own a radio receiver. Not until the first radio in the mobile phone.
The hideously stripped nature of the feature set of the Lumia line is screaming for rejection. Look at electricity. We take electricity for granted. In countries like Pakistan and Bangladesh the electrical grid is shut off several times.. per day .. to conserve energy. How do you live in that kind of world? The replacable battery is far more necessary. And power grid? In India and much of Africa the access to electricity is so rare, that people often send the spare batteries to nearby towns or villages to be recharged (while using the other spare battery to power the phone). Bluetooth file transfers, microSD cards, these are absolute must-haves where there will be no practical use or indeed network connectivity to use Microsoft's SkyDrive. Nokia knows all this. The sensible smartphone designed for emerging world markets as a low-cost smartphone will have dual SIM slots, will have family ringing and family phonebooks (allowing the sharing of one phone with several family members) and will include the torch/flashlight etc where the village has no street lights at night etc.
The Lumia including Lumia 710 was designed by affluent American college kids. They have zero concept of what a farmer in Nigeria needs or a lumberjack in Brazil or a fisherman in the Philippines. But Nokia's 'real' designers know. The past Nokia phones, dumbphones and smartphones have dominated the Emerging World. But this Lumia series including its 'cheap' version Lumia 710 is a slap in the face of Emerging World markets. And the series will flop utterly, comprehensively.
I COULD GO ON
Yes, I could. There is NOTHING in the Lumia 800 or Lumia 710 today, or in the Lumia 900 late in the spring, that is better than what Nokia had in the past, or what rivals offer today. Whatever you think of Nokia's success in the past, whether you applaud it or are aghast, the performance of Lumia will be worse. I have given you only 13 reasons why Lumia will fail. These 13 reasons are not my opinions of what I think should be the cause or effect for smartphone market succes. I have given you evidence and facts and stats and end-user surveys, showing what smartphone users do, and what smartphone users want, and what other factors influence the purchase decision ie the carrier relationshiops the corporate purchase departments.
If you think another reason somehow 'trumps' these 13 problems, I suggest you not only decide it is so, because you think that makes sense. If it is indeed true, you should be able to find experts saying so. If you do find experts claiming some benefits for Lumia, then compare those to this list of 13 and see if the evidence suggests one is more relevant than another.
I SAID NOTHING OF BUILD QUALITY
The above is all sales related matters. Marketing, branding, design, price, distribution. They are utterly dooming Lumia. I didn't talk about the reality of the device as it is manufactured, whether design flaws or component problems or build quality etc.
This is a whole new can of worms. Imagine if if I sold you a Ferrari. A brand new Ferrari. And rather than it costing say 200,000 dollars, I charge you 150,000 dollars for the brand new Ferrari. Bright Ferrari red, the prancing horse logo and all. You get full registration and all details. A genuine Ferrari 2 seater sportscar. Luxury. Sportscar. And you are not quite familiar with all Ferrari models, so you then talk with your friend and then you go to the internet to see the actual details about this particular Ferrari model.
What if you find out that your 'genuine' Ferrari was not actually manufactured in a Ferrari factory in Maranello Italy. It actually came from India, from the Tata motors factory (the company that makes the cheapest car in the world). Well, that is not really the end of the world, as long as it does have real Ferrari components, except that when you look at the engine, you find it came not from Ferrari's engine factory. The engine your Tata sportscar has, came from Proton the cheap car maker in Malaysia. But you do love the look and feel of the Ferrari and its bright red Ferrari color, until you drive next to another red Ferrari, and obseve that your red is not the same red. So you dig more and you find out, that this car wasn't painted by Ferrari in its colors, it was painted by Kia the cheap car maker of South Korea. And you think, ok, but it does drive well, and at least it was designed by the iconic sportscar superstar designers from Italy. And then you find out, the car was designed by the tractor factory designers from Zetor in Russia. The only thing genuine Ferrari is the badge, which they bolted onto this fake Ferrari, and even that was not put on in Italy. No part of the car has ever seen the country of Forza Ferrari! Would you feel betrayed?
That is the Lumia. No aspect of it is genuine Nokia. It was not designed by Nokia's top designers from Finland. It was not manufactured in Nokia's world's most efficient and competent handset manufacturing factories. And it isn't even powered by Nokia components like the CPU (the engine). And we know the decorations are not genuine Nokia - the operating system and apps (the paint job). Rather than Nokia's own-designed mobile-optimised and smart OS platforms, Symbian and MeeGo, this fraudster uses an OS that was never designed to any degree by any Nokia programmers. And the production.. Get this. Nokia factories are the world's most modern and efficient, including the world's largest handset plant in China. They are now idling because Nokia sales have crashed. What does Elop do? He actually hired an outside company, Compal of Taiwan, to manufacture the Lumia smartphones! That is not a Nokia. Nothing about it is a Nokia, except that the CEO has the nerve to stick a Nokia badge on the phone and claim it is a genuine Nokia.
Let me make an observation here. Stephen Elop is an excellent communicator but he seems to be a systematic liar. Just about everything he does, and everything he says, turns out to be untrue, often the opposite seems to come true. I am thinking of former Vice President Dick Cheney and 'we know where the weapons of mass destruction are'. He looked you in the eye and lied, deliberately. That to me, is what Elop seems to be. None of his words have any relationship with reality or the truth. So lets continue..
No matter what any expert may have said about how obsolete Symbian was or how horrible Ovi store was or how bad the software was, the one thing everybody agrees about Nokia, its build quality has always - always - been the best in the world. No Antennagates at Nokia. No exploding batteries at Nokia. No cracked screens at Nokia. There was the famous dog who ate the Nokia phone. It went through the dog, and the next day, in the dog poo, the Nokia phone was there, and it worked. They are bulletproof.
Is that the same for a contract manufacturer with near slave labor in Taiwan who make phones and gadgets for dozens of companies? No. It cannot be. And the first evidence is already out. I mentioned the SMS crippling text. There is a second technical manufacturing problem already admitted by Nokia. The Lumia battery is failing. Some batteries draw down too fast, others don't recharge properly and sometimes the problem blocks the whole battery operation. This is the build quality you get when you outsource your factory. The last vestige of Nokia strongholds - its superb build quality - is now jeopardized and indeed, first evidence of problems already not just reported - but acknowledged by Microsoft and Nokia! The Lumia is a failure and it will get worse.
FORBES REASONS ARE QUITE SILLY, ACTUALLY
So lets go to the Forbes article then. The Forbes article starts off saying Windows Phone has a totally unique User Interface. That may be true. But is it truly more important, that the UI is 'unique' - something no buyer asked for - or whether the operating system itself if useful, or the app store has tons of apps, or the camera is easy to use; etc. I am not saying it doesn't matter at all. But I don't see someone coming to the store, and buying the lousy phone with the unique interface rather than the good phone with the familiar interface.
So let me quickly comment on the other five reasons. Forbes said Windows Phone would have less patent wars. That may be good for Microsoft (which seems not to care in the least about suing everyone so it might even be seen as a drawback at Redmond). But this is utterly irrelevant to Nokia. Nokia has the biggest patent portfolio of any handset maker in mobile and has invented the second most aspects to mobile behind only NTT DoCoMo. Look at the Apple lawsuit. Apple is suing everybody and winning. Apple surrendered to Nokia and now pays Nokia not just for every iPhone made, but Apple also paid a lump sum to compensate Nokia for the patent infringements of early iPhones. Nokia didn't need to pay one penny to Apple. No, Nokia doesn't need patent protection, and this wont' matter one iota in Lumia's success or failure.
The third point raised by Forbes is that with Windows Phone there will be uniformity across devices. So they claim no fragmentation. Obviously that is impossible, even with the iPhone there is fragmentation (Retina Display for example so the screen resolutions are different in the 3 series and 4 series of iPhones). But yes, I'll accept this is a fair argument. Symbian is plagued with fragmentation (although it was getting less so) and Android is seeing more and more of it.
So? Do you go asking your handset dealer about fragmentation? I think this phone has too much fragmentation, I'd like another phone with a bit less fragmentation? No. This issue is a total non-issue - for end-user consumers when buying the smartphone. Yes, some geek like you and me may know of it, but even for us, its very VERY low in the order of what we want. Fragmentation is relevant to application developers and other partners, not to end-users. If the market is big, and there is money to be made, then application developers will cope with the fragmentation. They don't like it, but they will do it, if there is money. If the ecosystem is tiny, no matter how uniform it might be, if the market size is too small, they won't care. Market size totally trumps fragmentation.
Then Forbes says that Zune is a reason why Windows Phone will succeed. Maybe so. But first, remember that 'services' (like Zune) came in at 7th most relevant point when deciding, in the Industrialized World and 5th in the Emerging World. And Zune is only one in a series of services. Will it matter, of course it will. Will it decide some sales, maybe. Will it change the world for Lumia, of course not. Because most of all, there is Nokia Music! Nokia's OWN music service! Nokia has been selling 'Comes With Music' handsets for years. Zune might - might - duplicate the modest success of Nokia Music in the best case. More likely, today consumers have so many ways to get music by sideloading and on free music services, that it won't matter one iota.
Lastly Forbes mentions Xbox Live support. Note, this doesn't exist and no word has been given that it will be arriving to Windows Phone and/or Lumia. So this is utter speculation of what MIGHT help the smartphone. Sure, like Madonna said to Wayne and Garth, And monkeys might fly out of my butt. Microsoft MAY do this some day. After that all games need to be repurposed to the Windows Phone format - thats no small feat - and the handsets need the gaming accelerators etc for the hardware, etc. This is at best a long-term gain. Except that I have bad news for you. Nokia HAS a VAST library of videogames already formated for the small screen. Nokia has its own gaming engine with graphics accelerators and all. Its called N-Gage. The first Nokia flagship smartphone to include the N-Gage gaming engine was the N82. And you know what. It did not set the world on fire, the gaming side. Yes, we all play Angry Birds but a vast gaming catalog of 'pure' platform games, rather than custom 'casual' mobile games? I don't see Xbox gaming to be a 'game changer' haha. But yes, even if you like this, this idea is pure speculation and cannot be implemented this year. So its pretty phoney by Forbes to add this as a reason why Windows Phone will 'make a big splash' in the smartphones market this year.
SO THE VERDICT
I have given you my 13 reasons why Lumia is currently failing and will continue to fail. I based them not on my personal desires and preferences of what I like in my phones, I based it on the facts and stats of what real consumers do and want. I also refuted each of the 5 reasons Forbes felt that Windows Phone would win. What is the truth?
We will know in a few days when Nokia reports its Q4 results. Last year at this time, for Q4, Nokia introduced a new operating system version, Symbian S^3 led by the new flagship smartphone N8. This was not a make-or-break critical product launch. It was just routine, supported with no particular marketing effort. The smartphones were competing with many other Nokia smartphones already in the stores, so they faced competition from Nokia's own product line. They sold 4 million units. That was a year ago. Since then the global smartphone market has grown by 60%. So just to compare apples to apples, the new operating system launch led by the new flagship phone, Lumia 800, would need to sell 6.4 million copies in the past Q4, only to match what Nokia did a year ago.
And notice. All factors were totally in the control of Elop. He could choose which type of models Nokia would create - as these are truly new-from-the-ground-up smartphones, as they do not even use standard Nokia components. He could decide their specifications, their intended target markets and end-users. He could decide which countries and which carriers would be offered the Lumia. He could decide how to price them and support the launch with marketing. Elop could decide how and where to introduce the actual models to the public, how near or far from the commercial launch date. He could decide when to announce the Microsoft partnership. Nothing was forced upon him. This is totally Elop's choice. The Nokia share price was not falling in February - the stock market liked Elop's first five months of Nokia leadership so much, that the share price had climbed 11% - a very strong growth in a five month period for the new CEO, when the previous three years had seen a 50% drop in Nokia share price.
And Elop could plan carefully, organize everything and make sure the most important product launch in Nokia's history would be a total success. Elop had carte blanche to overspend on the launch marketing activities as much as he wanted, and obviously no other CEO in any other situation would have approved as extravagant marketing budgets for just any year's 'regular' flagship model launch.
If thats not enough for you, there is the Microsoft marketing machine. Microsoft committed 'billions' of marketing support to Nokia Lumia. So this is by every measure the single biggest product launch in the history of mobile phones. Nokia could throw all at it, and Microsoft would essentially then double that still.
You would have to be a colossal idiot to mess this launch up. So, last year with only normal launch, with a tight schedule which could not be changed (the N8 and S^3 were delayed to an embarrassing degree), with only modest marketing budget (Nokia had just recovered from a quarterly loss) the N8 and Symbian S^3 sold 4 million copies. Adjusted for growth, this time that would be 6.4 million units. If Elop is only an average manager, he will achieve 6.4 million in his sleep. This time there is huge pent-up demand for Nokia phones and almost no rival Nokia handsets to steal any Lumia sales.
With these matters utterly in his control the CEO can easily deliver that. Olli-Pekka Kallasvuo, the disgraced previous CEO could have easily delivered 6.4 million sales of Nokia's newest flagship and its OS if given those parameters. Anssi Vanjoki even if asleep, even if simultaneously having nightmares, could still outperform the 6.4 million under those conditions. So we will see the mettle of Stephen Elop, is he competent to run Nokia.
And all the evidence says Nokia Lumia sales in Q4 were a total disaster. Unmitigated utter colossal catastrophy. In Britain Lumia didnt make it into the Top 10 bestselling smarpthones even for the December month. In Germany the same story, not even the Top 10, not even for the December month. Customer surveys suggested only 2% of customers in the launch countries even considered a Lumia. The measured sales are worse than that. Every industry analyst with short term quarterly forecasts has either reduced their target or held steady. Not one, not a one analyst has increased their forecast. This while the industry reports massive jump in Q4 sales by rivals like Samsung and Apple.
But the spin doctors are at it. Taking a book from Donald Rumsfeld they are trying to convince investors that Lumias will be greeted as liberators. They try to erase the known unknowns. Look what is happening. Nokia unattributed executive said Lumia sales were "getting good traction" and "we are pleased with the early results". But no named source and no numbers! One Nokia executive claimed the youth were growing tired of the iPhone. This against the reported evidence that the iPhone is breaking all of its sales record and on every national chart for which I have seen statistics, the iPhone 4S sits as the bestselling phone for Q4.
What is even more insidious and will damage Nokia's tattered reputation considerably, is the revellation that Nokia and Microsoft executives have been going to blogsites to argue with reviews if they were negative about Lumia. The employees did this with aliases, but were revealed from the website addresses they used. They came from Nokia and Microsoft offices. The Guardian reported on this for example. The Blogosphere is very upset with Nokia - perhaps less so with Microsoft as it seems to be par for the course. We now apparently have the Evil Empire and its Evil Twin.
FARCE OF THE THIRD ECOSYSTEM
It is hard to avoid articles that talk about Microsoft and Nokia, that do not mention the promised nirvana of the 'Third Ecosystem'. Elop and Ballmer talk about it at every opporunity. And they are very happy to quote reputable analyst houses who promised Windows Phone with Nokia will reach 20% market share or better in smartphones.
There are literally thousands of news stories parroting that 20% number and the Third Ecosystem baloney. And when you think about it, if Google's Android has about 45% and Apple's iPhone between 15% and 20%, then if Nokia and Microsoft can get 20% - game on. This is Xbox vs Playstation vs Wii. Then yes, most definitely, Microsoft and Nokia are in the game and can certainly be believed, that they can win this game.
Now the reality. While Nokia and Microsoft have been repeating the 20% numbers from those big analyst houses, as recently as October of 2011, the reality is, that those numbers are not news in October. They were repeating an old story. Not from September. Not from August or July or June. Not from May, but from April and March. And here is the relevant point - the two major analyst house projections for Microsoft Windows Phone with Nokia partnership, were published before Nokia and Microsoft Q1 financial performance numbers were released.
They are based on data form Q4 of 2010. The forecast was based on numbers, prior to the Elop Effect. So yes, if you take Nokia in December 2010, when Nokia had 29% market share with Symbian; and you add Microsoft Windows Phone and Windows Mobile, who had a combined market share of 3%, and add those together, you get 32%. From that it is a very 'safe' projection - actually quite negative of this alliance, if separately they are worth 32% but combined they only do 20% or 22% or something like that.
Now we know that Stephen Elop destroyed his company in February. We know there emerged a sales boycott. We know the market share crashed, sales revenues crashed and Nokia profits vanished. Did those analyst houses bother to give an updated forecast? No. They have remained silent (in shock). They are hoping and praying that nobody ever ever mentions their absurd forecasts again.
So, earlier this week, we had the very first major industry analyst house issue a fresh, post Elop Effect, forecast for Nokia and Microsoft Windows Phone. That was Morgan Stanley. They say that Windows Phone would reach about 37 million unit sales this year and 64 million in 2013. These number have been reported in hundreds of stories and the vast majority of those stories cheerfully reported that this was good news.
I could tell you that a gambler left Las Vegas with 100,000 dollars in his pocket. Is that good news? It depends how much he had in his pocket when he arrived in Vegas. In this Nokia case, the gambler arrived with a million dollars and only has 100,000 to show for it. Utter total failure. That is what the 37 million and 64 million numbers reflect. Not success by any definition. Why?
Lets add in the Symbian sales and see. Morgan Stanley forecasts that in 2012 Nokia will sell 40 million Symbian based smarphones so the total for 2012 for Nokia is 77 million. In 2013 the projection has 16 million Symbian sales for a total of 80 million Nokia smartphones. So far so good. Now the cold shower. In 2010 Nokia's annual unit sales was 100 million smartphones which gave Nokia a market share in smartphones of: 33%. For 2011 it will be around 18% (maybe less). But after Nokia jumps into bed with Microsoft in 2012 the market share is not 20%, it will be.. 11%. In 2013 Nokia and Microsoft will not magically recover to 20%. Morgan Stanley's projection when converged to markets share is.. 8%.
Do you believe that abandoning 33% market share - when your unit sales grew 47% and your revenues grew and your profits grew so explosively, for the last quarter Nokia set a record in profit growth of its handset unit - and replacing that with 8% market share only 3 years later, with no growth but about flat sales, dramatically fallen revenues and at best miniscule profits (probably continued losses). Nokia has taken its customer base and walked it in front of a firing squad, and shot it dead. Destroying 75% of its customer base in three year! This is corporate suicide. This is a hara-kiri by the CEO.
Please do not say Tomi hates Nokia. Those are not my numbers, they are Morgan Stanley's numbers and they are the FIRST analyst house to dare to make a projection on the Nokia-Microsoft partnership. For what its worth, my gut says they are way too optimistic, the evidence suggests it will be worse that this.
If Stephen Elop can deliver 6.4 million Lumia sales in the past Q4, I am willing to say in public, I was wrong, he is competent to manage Nokia and I will accept he's made some mistakes that should be forgiven as learning on the job.
If Stephen Elop can deliver at least the 4 million Lumia sales that Nokia N8 and Symbian S^3 did last year - without adding the industry growth, I would conclude that Elop is spectacularly incompetent or irresponsible or foolish or rash, but perhaps the Board can be forgiven to allow some more time for Elop to try to make his strategy work.
If Lumia sales are below 4 million, Lumia has failed to an unacceptable degree. Elop will have squandered the only chance Nokia had had, to try to shift platforms, and blasted what any opportunity may have been left for Lumia. If the Lumia sales in Q4 fall under 4 million, the signs are undeniable that Lumia's path is a dead end, a cul-de-sac, and the sooner Nokia Board sees this, the sooner they must terminate all activites that waste resources pursuing that route. It is the proverbial dead horse. And you can't ride the dead horse the only thing you can do, is get off the horse and find some other way to proceed. If Lumia fails to sell 4 million copies in Q4, it will be so comprehensively rejected that Nokia cannot revive it. Then it is time to think what to replace it with? Android? MeeGo? Tizen? bada? Blackberry OS? Palm/WebOS? (check out where the leading forecasters now estimate Lumia sales for Q4. Can you spell 500,000 units?)
And obviously my view already now as we await the Nokia Q4 numbers for Lumia is, that based on his behavior in the past year, Elop has mismanaged his company so totally, that he may not be allowed to continue running Nokia. He must be fired. Now!