The facts get ever worse about the Microsoft Windows Phone strategy for Nokia and its Lumia line of smartphones. We have just seen the brand new market share numbers from the UK by Kantar Worldpanel. And first, here is the 'logic' of the Windows Phone strategy for Nokia. The assumption was, that while Symbian sales saw a gradual erosion of market share (a couple of points of market share per year lost), if new CEO Stephen Elop stepped in while Nokia was still on top, and quickly changed the operating system away from the declining Symbian to another (could have been Nokia's own Linux based and open source MeeGo or Google's also Linux based and also open source Android or the proprietary and very closed Microsoft Windows Phone), he could stop the bleeding and stabilize the Nokia smartphone market share.
NOTE THREE UPDATES TO THIS STORY on 21 & 22 March (at end)
The very early and ridiculously optimistic projections from early 2011 were that Nokia and Microsoft might get over 20% market share in a few years. Those were abandoned once the evidence came in. Now the best case hopefuls are looking at the low teens, and others have Nokia and Microsoft in the high single digits. To understand, just before Nokia announced its shift away from Symbian to Windows Phone last year in February, the combined market shares of all Nokia smartphones on all Nokia operating systems (Symbian and Maemo), combined with all smartphones by all manufacturers on all Microsoft based operating systems - Windows Mobile and Windows Phone, by HTC, Samsung, LG, SonyEricsson, Motorola etc - was 39%. So yes, just before Elop announced the switch, the 'partnership' when both parts were added together, had a global market share of 39%.
Remeber that joke about when you add two turkeys, you do not get an eagle? By Q4 of 2011, when we add all Nokia branded smartphones on its 3 operating systems now (Symbian, MeeGo and Windows Phone) plus all other Microsoft smartphone makers on both Windows Mobile and Windows Phone - have a guess how much the partnership controlled the global market around Christmas? So this was after Nokia had introduced already two of its Lumia phones for sale in many of Nokia's best and most affluent markets in Europe and Asia? Have a guess. The two turkeys alone had 39% just before Elop announced this partnership. What was it in Q4 less than 11 months later? 14%.
Yes. When you add all the power of Nokia with all the power of Microsoft, and toss in the smartphone brilliance also of Samsung, HTC, LG etc - you go from 39% separately, to 14% when combined. Two turkeys make a... what? a turtle that is what this looks like. That is a big ouch indeed. A total waste of more than 6 out of every 10 of their combined customer base ran away to iPhones and Androids and Blackberries and bada and other devices.
CAN THERE BE A COME-BACK IN 2012 WITH LUMIA?
Ok. Now for today's news. Maybe there is hope? Maybe the bleeding happened in 2011 but now for 2012, maybe this will be the year of the comeback? Maybe now that there are several Nokia Lumia phones selling, and even the US market is available, maybe now we get to see that majestic return of this Eagle of Nokisoft Microkia? Maybe... not.
The facts are in. Kantar Worldpanel has just reported on its half yearly reports from the UK market shares. The nice thing is that we have this info from the same source nicely just before the Nokia Microsoft partnership was announced, and along the way. We have four excellent points in time. In late 2010, there was no partnership. In February of last year, the partnership was announced. By September of 2011, it was just before the first Nokia Lumia phones would start to ship, and now we have seen five months of Lumia sales, so we are starting to see the early patterns. All conveniently in the UK, one of Nokia's best European markets, and nicely, a country where there is no domestic handset rival nor any domestic operating system maker rival to muddy up the picture. And UK is one of those countries which is nicely a mix of roughly half prepaid and half postpaid contract customers, and phones are sold partly with subsidy and partly without subsidy. A good test laboratory for any industrialized world market with a lot of relevance for the rest of European sales for example. How did Lumia do?
NOKIA IN FOUR STAGES BY KANTAR (UK MARKET SHARES)
September 2010 before Microsoft . . . . . . . 23.1% market share in UK (Symbian + Maemo)
February 2011 after Elop announcement . . 12.4% market share in UK (Symbian)
September 2011 just before Lumia launch . . 6.7% market share in UK (Symbian)
February 2012 after Lumia sold 4 months . . 4.6% market share in UK (Symbian + Windows Phone)
First. From just before Elop announcing his suicidal Microsoft strategy with the Elop Effect, Nokia sold almost one in every four smartphones in the UK according to Kantar. One year later, Nokia has lost four out of five customers it had and sells only one out of every 20 smartphones sold in the same country. This has been a comprehensively destructive strategy for Nokia the former smartphone giant which used to dominate the UK market.
Secondly, look at the last two periods. Just before Lumia launched, in September 2011, Nokia only selling Symbian smartphones, had 6.7% of the UK market. Now that Lumia has launched, after Nokia's most expensive launch campaign ever, combined with massive Microsoft marketing push including giving away free Xbox 360 gaming consoles for buyers of Lumia 800 smartphones, Nokia did not manage to convert the existing Symbian market share 1 for 1 to the share now with Lumia devices. From September, after Lumia launched for Christmas, Nokia has now lost another third - another THIRD - of its existing customer base, going from 6.7% just on Symbian, to 4.6% market share when the Microsoft Windows Phone based Lumia smartphones are 'added'.
NOKIA LOSES A THIRD WITH LUMIA
This is disasterous, and honestly, I DID NOT SEE this coming. I wrote on this blog a year ago, that I expect year 2012 to see a 1 to 1 conversion, as Symbian declines, the Windows Phone (ie Lumia) smartphones by Nokia will replace them. For every Symbian lost there will be 1 for 1 a Windows Phone gain by Nokia. That was a reasonable assumption. That is now proven not to be true. Nokia lost one third of its last remaining loyal customer base, when trying to force them to take Lumia smartphones over the past five months.
(For those who may be a bit confused, there is some strange reporting about the Kantar story from the UK, please read carefully what they said. Nokia's Symbian sales had fallen to 2.4% market share. All Microsoft Windows Phone based smartphones achieved 2.5% market share, including HTC, Samsung, Nokia, LG etc. Of that, Kantar reports that Lumia had 87% of the Windows Phone share, so Nokia did 2.175% of the total UK smartphone sales, and all other Windows Phone partners, HTC, LG, Samsung etc - did a combined 0.375%. That is where we get the above market share. Nokia total smartphones in the UK in February 2012 were 2.4% Symbian based and 2.2% on Windows Phone, giving 4.6% total Nokia smartphone market share).
MICROSOFT SO DEEPLY IN TROUBLE, NEEDED NOKIA DESPERATELY
So also, we have very interesting views to Microsoft. Its not that Nokia somehow needed Microsoft to survive, clearly the Microsoft strategy is suffocating Nokia and killing its customer relationship. But look at Microsoft in the past year and a half, according to the Kantar numbers. Look how massively Microsoft is collapsing without Nokia. It really is true, that Nokia is Microsoft's last gasp in mobile and without Nokia Microsoft would have been eliminated from the game by now:
MICROSOFT IN FOUR STAGES BY KANTAR (UK MARKET SHARES)
September 2010 before Nokia . . . . . . . . . 1.0% market share in UK
February 2011 after Nokia announcement . 0.5% market share in UK
September 2011 just before Lumia launch . 0.5% market share in UK
February 2012 after Lumia sold 4 months . 0.4% market share in UK (excluding Nokia)
COMPARE TO NOW WITH NOKIA
February 2012 after Lumia sold 4 months . 2.5% market share in UK (including Nokia)
Microsoft was totally doomed and its 'awesome' Windows Phone operating system was doing a death-dance globally, from a Microsoft Windows Mobile peak market share globally of over 12% just five years ago, to 5% in year 2010 when Windows Phone launched, to a paltry 1% for Q4 of 2011 (which includes Nokia Lumia sales) - Microsoft was totally dead in the water. Bear in mind, even if Windows Phone had 2.5% in Europe that is barely over 0.5% globally for Microsoft. When you add its weak US market share and its nearly non-existent rest-of-the-world market share, Microsoft is still only at about 1% or maybe just maybe reaches 2% for Q1 of 2012. Microsoft was a dead man walking last year. Its only hope was to convert some - any - Nokia sales to get some life back into the utterly dead OS. This is not a 'third ecosystem' not now, not ever. Microsoft's CEO Steve Ballmer has expressed his disgust in how poorly the Windows Phone is doing. The departed Microsoft President of Windows Phone sales has admitted that Microsoft was hated by the carrier community, and to solve that problem, in 2011, Microsoft just made matters worse with the carriers.
I have reported here on this blog many times, about the resellers hating Microsoft Windows Phone and also punishing Nokia. I have then explained why Microsoft's Skype purchase was the final nail in the coffin which sealed Microsoft's fate in mobile last year. There is no coming back for Microsoft, not with or without Nokia. Meanwhile, Nokia's CEO Stephen Elop has admitted that the retail channel is not supporting Lumia sales. I reported here just last week that in Nokia's home country, Finland, the retail channel so hates Nokia Lumia, they will not show the device even when asked by name, and will sell Androids instead - all this while the stores have the biggest Lumia sales displays. The launch and market reception of Lumia is a disaster. I have reported that press reviews range from the UK's Guardian saying customers should return their Lumias like the reviewer did his; to German newsweekly Der Stern writing that its buyers should take the trouble to drive to Switzerland or Austria to buy the better N9 instead of the Lumia, to reviewers from Australia to India recommending consumers buy Androids instead of the Lumia or that the N9 is indeed a better phone (not sold in India again, haha, so that was not what they wrote in India). And now, Kantar tells us that the early sales of Lumia in the USA are also disappointing.
I have explained why the Lumia is a dog of a phone and will not succeed. I have explained why the new Lumia 900 and the added info we have about the phone and the operating system guarantees it will not succeed. I have then added the reporting that the reseller channel is steering customers away from Lumia. Now we have the facts.
NOKIA BLEEDS A THIRD IN FUTILE TRANSITION
Now we know. From just before the Lumia launch last Autumn, Nokia's UK market share was 6.7% in smartphones. That was six months ago. Those were all Symbian. Now about half of Nokia's UK smartphone sales are already Lumia smartphones and how is Nokia doing? It did not grow Nokia's market share back to the 23.1% it had just before Elop flipped his mind and destroyed Nokia's market share. No. It did not jump to 23.1%. It did not jump at all. Nokia did not even manage to hold onto its 6.7% market share. No. When Nokia shifted from 'the obsolete' Symbian to 'the awesome' Windows Phone, Nokia lost a third of its customers! In just one quarter! Yes. That is how toxic the 'magnificent' Windows Phone is. It cannot restore Nokia. After all the damage done by Elop last year, now with what little hard-core loyal Nokia fanatics are left, even out of those loyalists, Lumia expells a third!
Compared to the weeks just before Lumia, Nokia traded away, for every 3 customers it had, to get 2 customers today. After Lumia 800 and 710 launched in the UK, today Nokia's market share is down to 4.6%. Nokia is bleeding a third of its market share as it forces customers to migrate to the unloved Windows Phone Lumia smartphones. This is a certain recipe for doom for Nokia. Any fool can see this strategy is a road to definite ruin.
There is absolutely no evidence in any market anywhere, that the Lumia sales would be anything like a success. Even the unloved and unsupported N9 running on MeeGo and exiled to such distant lands as New Zealand and Kazakhstan and South Africa where it is sold, countries of tiny smartphone markets and low income levels - yet in Q4 of 2011, when it was the launch quarter both for the Lumia 800 and 710 smarpthones on Microsoft Windows Phone, and the lone N9 running on MeeGo - the N9 outsold the Lumia series by 3 to 1. Yes! by 3 to 1.
The Nokia N9 on MeeGo is a highly rated, highly desired, superior flagship phone, winning reviews even compared favorably against the king of the hill, the iPhone 4S. The N9 has even a sister product, the N950 already being produced by Nokia (but inexplicably, not sold by Nokia). The N9 and N950 are running on Nokia components, made in Nokia factories, and could be sold everywhere today. The N9 and N950 are more expensive than the Lumia 800 and yet are consistently recommended as the preferred buy. Because they are made in Nokia factories on Nokia components at high prices, the N9 (and N950) have high profit margins.
Then there is the Lumia series. The Lumia 800, the most 'flagship-like' phone on a Nokia brand currently made, is not a true flagship, it is a severe compromise, and it is not made in a Nokia factory, it is subcontracted out of Compal of Taiwan. It is not using standard Nokia components for which Nokia would get bulk discount prices. And it is sold with severe price cuts and marketing push budgets cutting its profitability severely.
Only a fool of a CEO would refuse to sell the N9 and N950 today globally. And also, after the Nokia 808 PureView won the award as the handset of the show at the biggest telecoms event of the year, the Mobile World Congress in Barcelona as the hottest phone on the planet right now, even as it runs 'the obsolete' Symbian, only a fool of a CEO would refuse to sell this in the USA, the market where Nokia wants to make a come-back and where the reviews of the 808 PureView have been incredibly positive.
A year ago Nokia's global smartphone market share was 34% and Nokia grew smartphone sales by 48%. After Stephen Elop took over at Nokia, in the final quarter of 2010, Nokia, using 'the obsolete' Symbian, Nokia grew smartphone unit sales, grew average sales prices, grew revenues and achieved the point where more than half of Nokia's handset revenues came from smartphones. Nokia's smartphone profitabilty has a record jump. A record jump in profits yes, in the first Quarter that Elop was in charge, and this was all with 'the obsolete' Symbian. Nokia's shareholders so appreciated it, that Nokia's share price climbed by 11% in only 5 months, a very good performance.
Since Elop announced his Microsoft strategy, Nokia market share crashed to 12% its sales declined by 31% all while the industry had an explosive year of growth of 71%. Nokia's average sales prices tumbled, Nokia revenues collapsed to almost half what they were. The Nokia profit engine of its smartphone unit is now a loss-maker, switching from a quarterly profit of 510 million Euros (2 Billion Euros annual profit ie 2.6 Billion US Dollars of annual profit) to a loss of 190 million Euros (760 million Euros or 1 Billion US dollars of an annual loss). The Nokia share price has fallen since Elop's mad strategy was announced, by about 60% from its peak just before the Elop Effect of February 2011.
There was hope that once the Windows Phone handsets come out, they can restore Nokia to its former glory. There is no way Nokia gets back to 34% it was just before Elop's madness. There is no way Nokia and Microsoft have any hope of recovering to the above 20% market share some optimists hoped for in early 2011 after this was announced. It was a realistic view to hope for something like 12% late last year, as the data came in, hoping once Lumia launches, the market share might stabilize. Now we have the facts and it will not happen. Nokia will continue to bleed market share even after it tries to push unloved Lumia phones at customers, who will escape to Android and the iPhone. The Lumia strategy is now clearly going to fail. The longer Nokia continues on this path, the more damage it does to itself, and has to sell its assets just to survive. Nokia is on a path to become a slave of Microsoft
(And let me comment on the idiotic plans to now invest in a tablet PC are only going to make matters far worse. The short version is this: any PC maker would be wise to consider tablet PCs, as they have hardware synergies, distribution channel synergies, marketing, pricing and brand synergies. Like PC makers Apple and Samsung. Any mobile phone maker would be an idiot to consider tablet PCs as they have NO hardware synergies, distribution channel synergies, marketing, pricing nor brand synergies. Its a sure way to go from profits to loss-making, witness Motorola and RIM. Nokia is a fool to waste development efforts to try to battle Apple's iPad at its game.But this would - of course - be to Microsoft's advantage, getting Nokia to waste its efforts in this futile battle. And any Nokia CEO who would authorize such development waste would have to be a Microsoft Muppet. Read the full story at the link)
And this is all before we even consider the majority of Nokia's market now, the Emerging World where the average price of phones is about 50 US dollars and most smartphones sold cost under 100 dollars (without subsidy, remember the iPhone 4S real price without subsidy is about 650 US dollars, not the 179 dollar nominal 'price' you might get with a US carrier who forces you to a 2 year contract where the rest of the price is hidden). Microsoft has admitted the Windows Phone OS is not suited for low cost smartphones. Nokia has admitted Windows Phone is not suited for the low-cost smartphones (but 'the obsolete' Symbian is perfectly suited for low cost smartphones, haha). Even the newest lowest cost Lumia 610 costs about 250 US dollars without subsidy, FAR too much for the typical buyer in the Emerging World. Deloitte just reported in February that this year will see the sales of about 300 million smartphones under the price of 100 dollars (without subsidy) or about 41% of all smartphones sold this year. And obviously these will be predominantly in the Emerging World where Nokia's current Symbian market share is usually over 50% and as high as 80% in some countries. And Elop tries to push a 250 dollar Lumia 610 at those markets? And this crazy smartphone that does not have a QWERTY keyboard and is so US centric and not suited for the Emerging World need being horribly bad value not supporting Bluetooth file transfers or microSD cards etc. If the Lumia fails in the UK, it will totally tank in the Emerging World markets.
Forcing existing Nokia smartphone owners to take Lumia smartphone will damage Nokia more this year. I said before I expect a 1 to 1 transition this year. That is no longer true. Now we have seen how badly Elop has poisoned the reseller chain and how badly the Lumia series is designed with so many failures and undesirable elements. I now expect Nokia to bleed about 30% of its existing base as it transitions. The previous projection I had for Nokia to end this year with about 8% market share will be revised downwards, closer to 6%, depending on how the other parts go with Symbian and MeeGo.
Last year, it was possible to see a path where the Nokia and Microsoft partnership might, against all odds, succeed in the long run. That was hoping against hope. But since then, Nokia and Microsoft have both torpedoed any conceivable path to success on this strategy. Now the facts are irrefutable, from the design, to the severe limitations of the operating system itself, to the badly destroyed carrier relationships and poisoned reseller channel, to now the facts and stats. The Microsoft strategy for Nokia is a certain road to death. The Lumia smartphones will doom Nokia. The Windows Phone OS is never going to be the third ecosystem. The sooner the Nokia Board see the facts, and make the right decision, the sooner Nokia can start onto the road to recovery. But before that - obviously - CEO Stephen Elop must be fired, now!
UPDATE (on 21 March) - I have been chronicling the problems that Nokia (and in parallel, unfortunately also Microsoft Windows Phone) have had with the retail channel, since the Elop Effect of last year. I just spotted a story at Finnish Talouselama where they did a survey of the major European markets where Lumia first launched. Right now in March, this is what Talouselama found (countries in order of smartphone market size):
Germany - at T-Mobile (Germany's largest mobile operator/carrier) Lumia 800 is ranked 9th bestselling smartphone. At Phonehouse (independent phone retailer) Lumia 800 is ranked 8th. Whereas on Amazon Germany, the Lumia 800 is not in the top 100 smartphones.
UK - at Vodafone (UK's largest operator/carrier) the Lumia 800 is not in the top 10. Amazon UK site lists Lumia 800 ranked 86th, behind Nokia dumbphone X1-01 ranked 20th bestselling phone.
France - at Orange (France's largest carrier/operator) the Lumia 800 is not listed among bestselling smartphones. With Phonehouse France, Lumia 800 is listed 9th bestselling smartphone. Amazon France does not find Lumia 800 among bestselling smartphones.
Netherlands - KPN (biggest operator/carrier) lists the Lumia 800 as the second bestselling smartphone.
First. If your phone model is consistently around 8th best or 10th best or so, across all sales channels of a country, your market share is about 2%-3%. Netherlands is one third the size of France and one fourth the size of Germany. The KPN news does not in any way balance the problems in Britain, Germany and France.
Secondly, Nokia Lumia had under 2% market share in Q4 of 2011 (the Christmas Quarter) in these countries. The survey now by Talouselama suggests, Nokia's Lumia 800 has been falling in sales from Q4 into Q1, not improving.
But there is the Lumia 710? Talouselama makes the point, that the alarming news is that in these countries where Lumia launched first, the Lumia 710 was the cheaper model - it should be selling more than the Lumia 800. In no case, did Talouselama find the Lumia 710 to be on any bestseller list. Not once. So it is selling even more poorly than its more expensive Lumia 800 brother.
UPDATE (on 22 March) - I have just posted the logical follow-up blog posting to this article. I think you will like it, it is .. how to fix Nokia of course. This is my advice (knowing that Nokia will of course ignore it). How to Fix Nokia.
ADDENDUM (on 21 March) - there are a lot of visitors to this blog on 21st March, most of whom are clearly first-time visitors. The story is gaining a lot of attention from Slashdot, Mac Daily News and Ars Technica forums to various investment sites from Sweden to Canada to even a legal matters forum now (?) and onto news sites from IT World to Talouselama of Finland to HW Upgrade in Italy. Welcome visitors!
So let me briefly say who I am, so you understand. I am an ex-Nokia executive. I was not fired haha. I left in 2001 to start my own consultancy. After I left, my first published book was accepted as an official Nokia book, sold on the Nokia website and given in large numbers to Nokia customers (network operators/carriers). Since then Nokia has used me and my consulting services countless times across the planet. There was no bad blood haha. And note, its not just Nokia, almost every major player in this industry has used my services - and said so in public, from Google to IBM to Hewlett-Packard to RIM to Vodafone to Ericsson to Telefonica to Orange to China Mobile to NTT DoCoMo to Telenor to Intel to LG to TeliaSonera to MTS to Axiata etc. Why is that? Because I am the world's most published author in mobile - yes, I have written 12 books - I am a bestseller many times over, and my books have been translated to several languages - which are so highly regarded, I am already quoted in over 120 books by my peers.
My day job is consulting, this blog is a hobby - and please observe - no advertising on this blog! I am not here to make money from you, I am not asking you to register and I am not trying to sell your email address either. I do this blog purely as a hobby to connect with my readers. I also lecture at Oxford University's short courses in mobile. And Forbes just measured and rated me the world's number 1 most influential expert in mobile. Thats who I am. I am not writing this blog out of some vendetta about Nokia - I have been on this blog since 2005 and called out stupidity in this industry when I have seen it, from how SprintNextel tried to fire customers who were complaining too much, to the silliness Motorola went through that drove it to bankruptcy, to the problems Nokia had long before there was any Stephen Elop in charge. I call it as I see it, and I am known for telling the truth. If you want to follow me on Twitter, I am @tomiahonen
With that, please accept this blog as my honest evaluation of the chances of the Nokia-Microsoft partnership and the chances of Windows Phone based Nokia Lumia smartphones. The brutal truth is, that as Lumia cannot even convert the last die-hard Nokia loyalists, from Symbian to Windows Phone, then the Lumia Strategy for Nokia is doomed. The facts are clear. Nokia has to make some change to its strategy, and the fastest way Nokia can return to profits in its smartphones unit, is to capitalize on the luck it had with the N9 and MeeGo and the N950. Sell those magnificent top tier smartphones globally and Nokia would stop bleeding and start on a path to possible recovery. I am not in any way suggesting going back to Symbian, that was a strategy abandoned long before Elop came along - and I was fully supportive of the transition away from Symbian - except that it has to be done over time, not suddenly. Only this Windows Phone strategy is now clearly a dead end. It cannot succeed. The sooner Nokia ends it (and fires Elop who has lost all credibility as CEO) the sooner Nokia might return to strength.