Honestly, I do NOT want to make this blog only about Nokia and its madman CEO Stephen Elop. But the story took such a bizarre twist today, I HAVE to comment on it.
Remember the Star Trek (original series) episode where Captain Kirk returned to the Starship Enterprise on the transporter, to find himself in a parallel universe where his staff is evil and sadistic, Spock had a beard etc. The episode was called Mirror Mirror. Anyway, Kirk had to think real fast to adjust his behavior, so that his evil crew in that alternate universe did not notice that they had accidentally received a 'kind' Captain Kirk rather than their evil one..
That is the kind of utter total twisted sense of reality we now face. The definition of delusion says that the person will look at overwhelming facts to the contrary, and still hold onto a false image of reality. So I ask you, our readers, is this not delusion in Nokia CEO Stephen Elop? He was interviewed in South Africa by the daily financial newspaper, Business Day. And Elop said that Nokia was no longer on a burning platform.
Because Elop has openly admitted to authoring the February 9 Burning Platforms memo - the costliest management memo of all time (I just calculated last week that it has cost Nokia in just one year, 3.9 Billion dollars of profits lost, directly attributable to the memo) - and he now says Nokia is not in the Burning Platforms memo situation. Lets compare the two and you tell me, is this evil Kirk or gentle Kirk. Who is delusional.
On November 9, 2011, one year ago, a few days after Nokia's latest quarterly results were released, we found out the following: Nokia's smartphone unit sales had grown 48% in the previous year. Nokia sold literally more than one out of every 3 smartphones on the planet. Nokia's total smartphone sales were more than twice as big as its nearest rival (RIM) and Nokia also sold well more than twice as many smartphones as Apple sold iPhones. Nokia corporation revenues and profits had grown, and the driver of Nokia revenue and profit growth was the smartphones unit. Nokia had by far the biggest market share in the world of smartphones, selling the most smartphones on five out of the six inhabited continents: Europe, Asia, Africa, Oceania and Latin America - only in North America was Nokia not the bestselling smartphone. Nokia was so dominant in China, the world's biggest smartphone market country, that Nokia's market share was 76% and Nokia was by far the most desirable smartphone brand.
Elop lectures us about the future of the smartphone wars being won by 'ecosystems' rather than handsets alone. Nokia's ecosystem was by far the biggest by installed base, by developers, by new sales of handsets, by carriers/operators covered, by language support etc. By downloads, Nokia's Ovi store was second, to Apple's iPhone App Store but closing the gap. Nokia's migration from dumbphones to smartphones was well ahead of the global level at 25% vs 22%. Those smartphones that accounted for 25% of Nokia's total handset sales, generated 34% of Nokia's revenues and nearly half of Nokia's profits. In the first five months that Elop had been in charge, the Nokia share price had gained 11% - a very strong growth level well ahead of the global economy or the telecoms market overall for the same period.
And into that context, Nokia had just in Q4 of 2010 launched a new operating system version, called S^3 for Symbian, which had set a Nokia record for most new sales in the first quarter, of 4 million units, led by the N8, a flagship touch screen smartphone that won numerous awards as the best phone of the year.
This is what Nokia CEO Stephen Elop calls a total Nokia corporate disaster so bad, he says it is a 'Burning Platform'
Now today, one year later. Nokia has released its latest quarterly data which tell us that Nokia overall smartphone sales have collapsed, they fell 31% from this time a year ago - while the global smartphone industry grew by 63%. Nokia's market share has crashed from 33% to 12%. Where just a year ago Nokia smartphones alone were more than twice as big in unit sales as all iPhones, now Apple's iPhones are almost exactly twice as big as all of Nokia's smartphones. Nokia has not just fallen behind Apple, it has also fallen behind Samsung in smartphones. Nokia corporation now generates a loss, which is driven by the biggest loss-performing unit of Nokia... its smartphones unit! This while Apple, Samsung etc all find smartphones the most lucrative part of their corporations - as Nokia did itself just a year ago. The smartphone unit now drives Nokia's losses! Nokia has retreated now from market leadership positions and is no longer the biggest on four out of the six continents, having lost the leadership in Europe, Latin America and Oceania (as well as North America) and only leading in Asia and Africa. In China Nokia's market share is crashing, with only 18% of Chinese now even wanting to buy a Nokia branded smartphone.
In ecosystems Nokia has terminated the migration path for its developers - which angered the developers. Nokia has sold its advertising unit. Nokia broke its promise of another 150 million more Symbian devices. Nokia has rebranded (or unbranded) its app store. Nokia has switched from the biggest ecosystem that it controlled, which was based on open principles, for the smallest of 8 mobile ecosystems, Microsoft's disasterous Windows Phone, which is shrinking in size, where Nokia is slave to Microsoft, has to pay Microsoft a license, and a system which itself is not based on open principles. Where Nokia's own ecosystem was growing by 48% a year ago, the Microsoft Windows Phone ecosystem has been shrinking the past year, and was last measured at less than 1% in reach. Nokia's migration from dumbphones to smartphones has been reversed, now Nokia lags the industry which is at the point of 33% of all new phones sold being smartphones, but Nokia has regressed where only 17% of its new phones are smartphones. The smartphones account for a minor fraction of Nokia revenues anymore and yes, generated a huge loss to the corporation. In the past 12 months since the Burning Platforms memo, Nokia's share price has fallen by 55%.
In the past quarter, Nokia launched its new Lumia smartphones on the new Windows Phone operating system in the most expensive and massive marketing launch of any new smartphones ever. Using all that Nokia marketing could do, Nokia then had hundreds of millions of dollars of Microsoft's marketing money to boost that - including giving away free Xbox 360 gaming consoles for those who bought Lumia smatphones. Yet the new flagship Lumia 800 and its sibling the Lumia 710 did not sell more than 600,000 units in Q4 (passing 1 million sales when counting the added sales of January). The Lumia launch is probably the weakest Nokia flagship launch in history and the Lumia 800 did not win any significant awards - it is so despised, some like the UK newspaper the Guardian who used it are already returning it and others like the Germany newsmagazine Der Stern suggest Nokia fans should drive to another country to buy another Nokia new smartphone called the N9 running the MeeGo operating system - that is not even sold in Germany, rather than this lousy Lumia on the failing Windows Phone - that is how disliked Lumia is. Meanwhile analysts like Morgan Stanley project further crash of Nokia market share even with Lumia to fall from 12% today to 8% a year from now. All ratings agencies have repeatedly downgraded Nokia and its prospects.
And this today, is Nokia's situation that CEO Stephen Elop says is 'not a burning platform' anymore. That Nokia's future is 'secure'. And yes, after Samsung sold nearly twice as many smartphones - very profitably - than Nokia in Q4 - and is now poised to pass Nokia as the world's biggest overall handset maker this Spring - Nokia's CEO says he is not losing sleep over Samsung.
Is it just me? Is this not an alternate universe? If your product is utterly dominating its rivals, growing massively, and making huge profits, that propel your company share price to jump - when ALL the numbers and trends are good - that is a platform on fire? But when your product is failing in the market place, dwarfed by your rivals, losing massively, making huge losses, that propels your share price to collapse - when literally on every measure the good has been reversed to bad - that is a platform today somehow suddenly 'not on fire'?
What planet is Elop on? (please read his interview of utter total denial in Business Day of South Africa) and if you want to read my analysis of the reality - yes the truth - behind the Burning Plaforms memo, my blog is here.
He is not just an incompetent CEO - he is looking at the facts, and making absolutely opposite conclusions to the reality. Elop is truly delusional. He is destroying Nokia due to his deliberate wanton disregard of the facts. Elop must be fired now!