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« Nokia Profit Warning (again) - Here is what you need to know why it is actually far worse | Main | Was That 007 at Shanghai GP this past weekend? »

April 12, 2012

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AtTheBottomOfTheHilton

It's a cute little fantasy you have there but Microsoft will never allow Nokia to be profitable again. Remember, Nokia is a competitor to Microsoft and still is. Microsoft will force Nokia to use every penny for WP7 marketing and if Microsoft think WP7 is popular to stand on its own, then Microsoft will kill Nokia. This is not very likely to happen so Microsoft will continue to pump in money to keep Nokia above the surface.

The only way to stop this is by legal means and that the Finnish government goes in and stop the dismantling of their company. This could never happen in USA because they have laws against this, also they way more nationalistic about their industry.

A second alternative could be that a new company is created and the competence is acquired from Nokia into this new company. A restart like this could actually be a good way to get rid of the old baggage from Nokia and filter out the best while unproductive stays with Nokia. What is obvious is that move to WP7 has alienated and severely hurt the self esteem of the developers at Nokia and what is important is that they have a company where they can continue to develop their own SW otherwise that competence will disappear very quickly.

Sander van der Wal

Here we go again. Symbian was designed with touch in mind. When it was EPOC in the late nineties of last century it had touch. It had touch on SonyEricsson's UIQ smartphones. It had touch on Nokia's own 7700 phones with S90.

Only Nokia's own S80 and S60 user interfaces did not implemented touch.

And when they finally got round to implementing multi-touch, it was done in such a difficult-to-program-for way no developer bothered to add it to their apps.

Anyway, Nokia might have a change with MeeGo, if they took complete control of it, and hired a bunch of software people managing it, like Rick Green. They will have lost two years, one because of Windows Phone, and the year before that because if company infighting.

Tomi T Ahonen

Hi At and Sander

At - haha, ok. I don't think MS has that kind of power (past partners have gotten rid of MS but half of them then died in the aftermath haha, starting with brave little Sendo..)

Sander - sorry my bad. Just too tired, you can see I've rushed this thing just to get it out, I'll be heavily travelling again tomorro and this needed to be posted today. I will fix it in the mix.. Cheers! And yes, Rick back! Definitely

Tomi Ahonen :-)

Rumor in the market

Tomi,

If the board of Nokia would suggest you as new CEO of Nokia, would you accept?

I am hearing a lot of guys over at GS and MS talking about the importance of a leadership change at Nokia. Your blog is getting more attention now.

So, if the question would come, would you accept a new role as CEO of Nokia?

Stephen Reed

Your posts are brilliant - and persuasive. I hope that its not too late to save Nokia.

Daniel

My complements to this blog post! Extremely informative and valuable. Great insight.

Michael

Everything can be debatable except of return of Symbian. However right you may be, you will always be wrong about Symbian. Honestly, Symbian couldn't compete 5 years ago, so why do you think it can compete today. There is no use in crying over spilled milk.

Also, counting millions and millions of units of any technology sold doesn't mean that that technology will stay forever. 20 years ago 100% of all recording tv devices were VHS, is that the logic of keeping it forever? Hundreds of users of Symbian don't mean jack in industry where product is replaced 18-24 months. Also you don't take into account that many users were leaving Nokia camp long before Elop came along. People didn't stop buying Symbian 11.2.11, they stopped buying it when N97 came along After N97 nobody really cared. Reviews about Nokia N97 were not how bad Symbian was, but how slow the device was.

Former Nokia users were not brand loyal to Symbian per se, they were more brand loyal to Nokia. The problem is that today ante is up. All smartphones are benchmarked against iPhone and Samsung. The biggest and most questionable move made by Elop is: Was Microsoft better option than Android. Everything else he did was more or less correct. His biggest fault is that the game of musical chairs ended just as he was about to enter the room!

So you now fire Elop and offer your customer what? Symbian phone with good camera with Nokia messaging client? Today, Nokia has no time to stop. If they're lucky they will pull it through with Windows Phone 7, if they are not they will probably be bought in next 12 months just for the patent of it. If they stop now, make announcement of returning to Meego/QT/Symbian they can be bought immediately. Why would the markets react positively on news of a company in problems returning to technology which got them in problems in first place.

It's been all said before. Nokia was in perfect position to make iphone before apple. They had it all, and they failed, as simple as that. It has happened before and will happen again.

don_afrim@twitter

While it was a good plan back in 2010 and in 2011, it is too late for Symbian and Meego. No chance to resurrect this dead horse. The damage has been done, ppl have moved on from Symbian to iOS or Android and the ones that haven't will eventually in max. 12 months.

I don't think Nokia will be fortunate enough to turn this thing around. They are a d.e.a.d. m.a.n. w.a.l.k.i.n.g.! We might as well hold a funeral ceremony for Nokia and Windows Phone (just like Microsoft did at the launch of Windows Phone against other platforms hahaha)

Amen to Nokia and to Windows Phone. +2012

Let's move on.

Altough I do think that Nokia could be a great Android OEM, but they rather die than do that.Oh well.Next.

jbbandos

I'm afraid it might be too late. The US based investment companies that control Nokia (and have a vested interest in seeing MSFT shares rise) won't probably allow it.
However, your analysis seems to be the more likely way to save Nokia.
I'd do some things differently - for instance, instead of recalling the Lumias, I'd port Meego to them, and would offer it to existing customers, as an alternative to the installed WP7.5. It would be a nice way to bring them into a supported ecosystem.
But your analysis is mostly sound, and your recommended solutions make sense. Now if the board could be persuaded to follow them...

n900lover

I'm not so sure it is even possible for nokia to left ms at this point, Elop had more than year to implement his "no plan b" strategy. He fired lots of people, there was/is big brain drain and now there are no developers able to do significant work on Symbian and MeeGo/Harmattan, instead high managerial positions are filling with old ms pals, then there is the stripping of assets critical to long term survival and chaining whatever is left into ms "ecosystem", killing own production capacity and so on.

But I think the biggest obstacle is that changing course would amount to Elop and the board admitting failure. I don't think they are capable of doing that, it seems they are in the group think mode of doubling down on the WP bet and hoping WP8 will bring salvation, somehow.

Tomifan

Tomi, why do you expect that the reseller boycott would not apply to MeeGo and Symbian too? I mean: whrn people ask for Lumia, sales reps are promoting iPhone and Android, not N9 and N8...

Sander van der Wal

There are no 400.000 Nokia developers. There "might" have been 40.000 developers before apps were declared dead in 2007, just before iPhone came along. Not that I would believe that number either. I would be very surprised indeed if there are now 4000 left, changes are it's 400, or even 40.

A Nokia strategy that resurrects Qt will only be believable if Qt is to be ported to Windows Phone too.

You assume that normal people won't have heard about the Burning platform memo, but I am afraid that everybody who has at least some interest in buying a smartphone knows about it, or at the very least that Nokia is moving to Windows Phone. In Holland, all news about smartphones, Apple, Nokia, Android and whatnot is part of news targeted at the average consumer, not just the IT specialist or business analyst. Which means this is news for the average consumer all over the world.

Carlos

Bad news: Jorma Ollila is going to step down as chairman next month.

"""
Nokia's board proposed to name Risto Siilasmaa as its next chairman to replace long-time leader, Jorma Ollila, who is due to step down in May.

Siilasmaa, a 45-year old enterpreneur, has been a Nokia board member since 2008 and is known in Finland as the founder of software security company F-Secure , but has a low profile outside the country.
"""

http://www.breakingnewsonline.org/technology/nokia-profits-dive-new-phones-yet-to-take-off.html

"""
Nokia proposed a dividend of euro0.20 per share for 2011 and said that chairman and former CEO Jorma Ollila will step down at the annual meeting in May. A nomination committee proposed board member Risto Siilasmaa as the new chairman.
"""

http://phys.org/news/2012-01-nokia-loss-tempered-windows.html

So Vatar

Tomi, great post, and it is clear that you really care about Nokia. Thanks for that.

I disagree with some of your analysis and solutions. I have the biggest problem with your analysis of "Product". You write rightfully that product is much more than the handset, but you explain that the handsets per se are desirable. But I see the following problems:

- Symbian has lost so much momentum that necessary applications are not developed anymore for it. I am not talking about games and eyecandy, but industry specific apps that let e.g. the medical community chose a non-iOs or non-Android device. Symbian is just not there anymore.

- Maemo / MeeGo / Meltemi: The N9 is a wonderful handset. But again it is let down by no momentum at all to get some basic applications for the platform. Again, industry specific ones are not developed, additionally no banking apps, etc.

For both points above you argue rightfully that Qt is the answer. But realistically Qt will only gain momentum again when trust is restored, and it will take years to see real results.

- Lumina WP: I don't know what to write. Personally I see it is a total failure, and I see WP as undesirable at any price point. Others may disagree.

So bottom line: As of now 4/2012 Nokia's products are weak and cannot be made strong in short time. And I am not sure how much time Nokia has left.

But absolutely yes to replacing Flop with an Asian carrier CEO.

Felipe

I agree with Michael. Symbian ship has sailed. Nokia brand was the only reason Symbian was the market leader, now Nokia has lost this brand recognition and got replaced by Samsung, Apple and Android, in the eyes of customers.

Symbian cannot compete in the $ 100 segment against Android. It has no chance against Android brands.

Also, about the 808 Pureview being the best of WMC, that was because there was no Galaxy S3 and iPhone5. Nokia has no chance against those two juggernauts based on the devices they have.

P910i - the "original" iPhone!

Tomi, great analysis!

Share price is another problem as Nokia's Market Cap is now below US$15B. This not only makes Nokia a potential take-over target for corporate raiders, but also an attractive buy for companies paying royalties for Nokia's patents.

Last year Nokia and Apple settled their license dispute, and Nokia received a one-off payment, and most likely an entitlement to a certain percentage (1%?) of the average sales price of each iPhone (~US $650). Apple sold ~93 million iPhones in 2011, thus ongoing royalty payments by Apple to Nokia might have been of the order of US$ 600M.

Buying Nokia, shutting down development and production, selling off the assets, and leveraging the patent portfolio starts making a lot of sense from an accountant's perspective. Not sure if Nokia would have any defense against such a "hostile" takeover (be it Samsung, Apple, Lenovo, ZTE, ...). Maybe becoming a subsidiary of MS would be the last, best hope?

Karri T.

What is your strategy, Nokians? Nokia is dying faster than anyone thought. In Oulu what you're doing? Perttu, Timo...you have lots of mortgage loans and your wagepayer is dying !!!

What is your STRATEGY ???????!!??!

Archie

One more up for the disagreement on the Product part. While Nokia handsets had some nifty features over competition, the overall experience of Symbian was abysmal for the last couple of years. I was shortly responsible for smartphone selection at our company and I had people returning Symbian smartphones like N97 and E52 in droves (long before Burning Platforms) as simply unusable and returning to plain old S40 handset that were at least dependable to make and receive calls and texts.

And I have to agree with So Vatar here -- there is no time anymore to get the momentum back behind Symbian/Qt/MeeGo. Realistically, while changing course away from WP7, with firing Elop, is probably right move for Nokia, the only feasible strategy now would be to bite the bullet, take over NITdroid project, bring it to completion and launch N9/N950 with Android, along with Android upgrade path for Lumias, and work Qt strategy for lowend devices/S40 from that angle.

JM

Tomi, great post, I agree with you in some clever points, others no so much.

- Symbian IS NOT a smartphone class OS (technically yes, but in real life not), but one thing that Nokia was doing great in the past was moving dumbphone users to Symbian. This is Symbian strenght, a dumbphone great alternative.
- The 808 is a Frankestein phone, no matter how many prizes it won. At $150/200 may be it has a chance, at 400/500 forget it.
- The N9 and N850 YES, I think that this is the path, but you need to built an strong ecosystem, without this they can compete only against Bada.

Now the most important:

- I am not 100% sell in the boycott argument, sure it exists but I also think that sadly Nokia has lost his mojo and this is why;

1. Apple, they don´t allow carriers to put a hand on the iPhone, they don´t allow carriers to install bloatware, the iPhone price is the most expensive that carriers pay of any smartphone, the big profits are for Apple not for carriers, all the App Store experience is managed by Apple, 0 (ZERO)cut here for carriers...AND iMessage eating carriers´ SMS profits.

2. So, carriers have a lot of reasons to boycott Apple as much as Microsoft and for sure more than they have to boycott Nokia, but customers want iPhones!!! They don´t want Samsungs, Nokias or HTCs, they want iPhones, so if a carrier boycot Apple the customer will found the iPhone in another carrier, this is not happening and will not happen with Nokia, so sadly I think that yes, also is loosing its mojo.

DF

If Nokia stuck with Symbian/Meego, they'll be no different from RIMM today. At least Nokia has a turnaround plan.

Foo

Nokia Swaps Trade Like Junk as Cash Dwindles: Corporate Finance

Nokia Oyj (NOK1V), once the world’s biggest smartphone maker, risks a downgrade to junk-bond status after cutting its profit forecast and reporting a decline in its cash.

The firm is burning cash 14 months after linking up with Microsoft Corp. to make phones based on the U.S. company’s Windows Phone software.

“We’re going to see the crisis perhaps reach a terminal phase if the cash begins to dwindle to levels where we’re looking at a couple of quarters left,” Horace Dediu, a Helsinki-based analyst at industry-research website Asymco.com, said in a telephone interview. “That will cause a liquidity crisis. It’s already causing a confidence crisis with respect to their debt. The cost of financial distress would bring the company down.”

Nokia’s net cash and other liquid assets shrank to 4.9 billion euros at the end of the first quarter, from 5.6 billion euros at the close of 2011 and 6.4 billion euros at the end of March 2011, the company said yesterday in a statement. The firm that took in almost half the global revenue from smartphones in 2007 now claims only 10 percent of the $219 billion per year market, Bloomberg data show. Fitch said today that revenue and profit are “likely to be even lower” than current forecasts.

The phone maker’s free cash flow, which produces money available to pay down debt, reward shareholders with buybacks and dividends, or reinvest in the business, plummeted 87 percent to 541 million euros last year, Bloomberg data show.

“You’re going to see revenue decline, and you’re going to see margin decline, and you’re going to see cash flow decline,” Ping Zhao, an analyst at CreditSights Inc. in New York, said in a telephone interview. “It’s very likely in the next 12 months it will get to junk.”

http://www.bloomberg.com/news/2012-04-12/nokia-swaps-trade-like-junk-as-cash-dwindles-corporate-finance.html

Titanium

Even if Nokia would insist on WP strategy Elop must be fired because anyway he has spectacularly failed. Then Nokia must hire a CEO exactly as you depicted.

Obviously Nokia should also change strategy, but should do that silently rather than repeating the same mistake of 11/2. Even if you hate Elop, martiring him don't help Nokia.

The new strategy should be presented has an acceleration of the current one (in front of the market eyes): Nokia must declare WP as a super exclusive OS and super costly (so people don't see Nokia as failing, while at the same time suggesting to the operators that they don't have to bother anymore from MS because it will simply remain a very small niche OS) while the mass market will be the new OS "Meltemi". Nokia must clarify that Meltemi will be the next generation of MeeGo and that will target all phones from high-end to mid and low-end.

This way can launch N9 worldwide saying that it hasn't done it before just to have time to test it and let it mature enough prior to propose it to the more demanding markets.

Microsoft can't complain because anyway maintain the image of a exclusive OS and if wants could try to sell more modest phone trough the other manufacturers.

Foo

Nokia Sales Slump Puts Pressure on Elop to Consider Split

As Nokia’s cash pile dwindles and a junk credit rating looms, Elop will have to consider more radical steps such as selling its low-end phone business, whose revenue slumped by a third last quarter, said Adnaan Ahmad, an analyst at Berenberg Bank in London. Nokia makes about 70 percent of its handset sales outside Europe and North America, where competition from Chinese companies including ZTE Corp. (000063) is intensifying.

“They may sell their low end business to a Chinese maker, they may sell some IP assets -- we know there’s a market for that, we know Microsoft is interested in that kind of thing,” said Horace Dediu, a former Nokia analyst who now runs the Asymco industry-research website. “Then they would essentially become a Motorola, which is a smartphone-only company that ended up getting acquired.”

A potential sale of Nokia’s smartphone business to Redmond, Washington-based Microsoft wouldn’t make sense as the U.S. partner already has access to the hardware through their partnership, said Lee Simpson, an analyst at Jefferies International in London. Nokia may instead focus on offloading a part of its patent portfolio to generate cash and buy time for its reorganization, he said.

http://www.bloomberg.com/news/2012-04-11/nokia-sales-slump-puts-pressure-on-elop-to-consider-split.html

ejvictor

So what if Elop is a genius acting like a moron to create the biggest smoke screen in corporate history?

FACT: Nokia innovates and other manufactures implement Nokia’s innovation with better success.
FACT: Nokia has a very poor track record at keeping secrets.

WHAT IF …. Nokia is architecting an industry ambush. Since MeeGo (Harmattan) was such a critical success what if Meltemi is MeeGo(Harmattan) 2.0 and its introduction leverages emulators that can run every Android App AND QT applications out of the box!– eco system issue solved.

WHAT IF… Nokia is still working with Intel to launch Medfield devices that allow Nokia to create dual function devices that at the swipe of the screen allows it to toggle between a mobile OS (MeeGo) and Windows 8 (think the old E71 work and social mode on a device like E7 with HDMI/WiDi, BT keyboard,mouse, USBOTG).

WHAT IF…. Symbian and Smarterphone OS are being stitched together to run java iOS apps on a $100 mobile device totally destroying the value proposition of the iPhone?

What IF….. Nokia totally re-invents the phone and the “phone” becomes a Medfield based “cpu” the size of a cigarette pack that links wirelessly to the twisty Nokia Kinetic?

No Hollywood in the above scenario – all these initiatives are live and real… what if these are the future disruptions?

DL

Qt runs on almost anything, from Phones to Realtime OSes to Embedded Linux to Mac and Windows Desktops. The worst thing that could happen to MS is if the unwashed developer masses suddenly considered Qt instead of .NET for their desktop software projects.
This would pose a real threat to Windows itself.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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