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May 03, 2012

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Buttface Elop

Thank you, Tomi. I fully agree and I am also convinced that it will end the way you say it here.

It's just that don't see Skype as the major problem. The problem is the Microsoft and Windows brands. People simply don't have any sympathy for them. This is a big issue.

Those who bought a Lumia did it because they like Nokia and thought that Microsoft is a powerful company. But that alone is not enough. Microsoft will lose market share throughout their products, step by step. I'm absolutely positive about that.

I also ask Stephen Elop to leave now. He put too much damage on Nokia and it will be a terrific work to reverse it. If it's even possible. Nokia will be a different company, in case they survive.

Gino

Hi Tomi,
First of all, kudos on a great blog. I was directed to your site after searching on news for Nokia. That was a few months ago and I am now a regular visitor and admire your work.

I just wanted to add something not stated in the above post related to Nokia's tablet plans. A solid App market. Microsoft doesn't have one, at least compared to Apple and Google. Apps are much more critical to the success of a tablet product than a smartphone product. Nokia is going into this segment totally unprepared. It's a mad Quixotic dash to oblivion.

karlim

As for tablets. Your insistence that this is a PC vendor thing where phone vendors have no place - is too narrow and too early to be so categorical about.

This market is simply too young and undefined. There is one absolute, unquestionable success there. Apple - who created this market/new device category. All the tablets before it were just laptops with keyboard removed.

But why tablets make sense only for PC vendors- a conclusion based solely on the success of Apple who is a PC vendor? And why did all other PC vendors who released Android tablets failed so spectacularly so far? Acer, Asus, Dell and yes, even Samsung. Their tablet shipments are miniscule compared to Apple, and way below the projections made when they entered the market in early 2011.

And how could an online retailer, a know nothing in PC or smartphone hardware biz, come out of the blue and take 50% of Android tablet market in 3 months?

My answer is - this market is too young, too fluid, rapidly evolving and nobody, except Apple, has figured a real business model and what works yet. Miscrosoft will have a shot at it with ARM Windows 8, Google may try the direct vendor route again, others may try something else.

And Nokia will try to wet its feet in tablets, just as it did with its Booklet netbook few years ago. It will not make a huge R&D investment - just add some stuff it is good at to Win8 on ARM, and get Compal to make it. And see what happens. I don't see any massive waste of resources here. If it doesn't work - it doesn't - Nokia will lose few tens of millions. If it works - this can be a huge business opportunity.

The way I see it - Nokia is finally getting to its hardware roots - and mainly focusing on building great hardware stuff. The thing it did so well, and was beating Samsung and everyone else - by just making great hardware - before 2007. The path it strayed from with ill fated OVI online portal detour and deciding to build software platforms instead of great hardware/devices. The path Samsung followed and never strayed from, and the main reason it is now #1

tcb

But Elop does not care about NOKIA, he has 0 loyalty to it. What I really dont get is how he ended up as the CEO, since his CV is nothing spectacular. And any idiot could run Microsoft business division for two years (release new office every 3 years, with minor incremental changes check).

Only reason I see is that Ballmer wanted Microsoft's planted tool running NOKIA, and Elop, being Ballmers loyal asskising bitch, was probably chosen as best suited for the role. Not a real leader, not a gamechanger, no vision, and questionable competence...

bjarneh

Trust is an issue I haven't seen discussed too much on this blog,
or the fact that both Nokia and Microsoft lost their consumers trust.

As Steve Jobs once said to a manufacturer, "just drop all those crummy
products and focus on a good one", is a lesson both of these companies
should have taken to heart.

A mobile phone is an expensive device; if you trick me into paying
money for a Nokia E51 or N97 or something similar, I will sure as
hell remember the name of the company that fooled me,
it's staring me in the face every time I pick that rubbish
cellphone up from my pocket.

The cellphones that came with a Windows OS a few years ago is the
same story, horrible phones all around, not to mention quite expensive.

This is a problem, when all your customers start to hate you, and your
brand, you start to struggle. I'm not even sure it's fixable, it will
take a massive effort at least to regain users trust.

Now these two companies; which have been pushing those crappy devices
for years are joining forces, and people are not buying..

Fool me once shame on you, fool me twice ... and so on.


The sad part of the Nokia story is that for the first time since 2007
Nokia actually has a product (N9) which can go head-to-head with the
iPhone (same price and so on) and do well. No other phone
on the market has that potential; most other phones out there in Android land compete with the iPhone using a smaller price tag.

Hoista

Pureview Meego would have helped to reduce the negative sentiment towards Nokia.

cycnus

@Tomi

It's a sad day that Elop didn't get fired today :(
I think I can assume that nokia is gone and can't be recover at all.

eduardo

Karlim,

Most companies fail at tablets because they developed general-purpose tablets that can't compete with the iPad. Amazon has been successful because it developed a custom tablet that fit in with its overall business. The same goes for B&N. Nokia, as far as we know, is going the general-purpose tablet route, and so we can expect it will fail.

As far as Nokia's tablet effort not being expensive, that contradicts what you said about it making use of Nokia's vast expertise in hardware. It is going to take a lot of engineering time and talent, and divert it from developing mobile phones.

Tomi T Ahonen

Hi Buttface, Gino, karlim, tcb and bjarneh

Buttface - totally agree with you. Right from the start, the Microsoft partnership came with a bad Microsoft brand combined with the horrendous Windows brand known for bugs, delays and software crashes. Microsoft had far better brands it might have brought to the partnership, like Xbox or Zune or Office etc.

Gino - Thanks. And yes, the apps space is again further hindrance of this strategy overall, and in particular with tablets. We just heard from Rovio - maker of Angry Birds - that they were not going to make Angry Birds for Windows Phone, explicitly because WP does not have the market size to make it worthwhile - for Angry Birds! And at their hundreds of millions of downloads level - if even they think WP is pointless, what do regular smaller app developers feel? Of course Microsoft panicked about Rovio's statement, came in with a ton of cash, and bribed Rovio to produce an Angry Birds version after which Rovio agreed. But it goes to show, the realistic 'ecosystem' argument doesn't even work for developers, and if not developers, then there won't be apps.

karlim - you make good points, yes, its still early with tablets and I agree Apple is the king of the hill. I don't agree its the only success, globally Samsung is also a big success in tablets - both are legacy PC makers so they have the hardware, the distribution channel, the retail, the brand, the pricing etc competence for the PC side to make tablet PCs work. As to definitive claims who can and who can't win, you are right, we cannot determine that at this point. But it is CERTAIN that for a legacy PC maker like Apple or Samsung, it will be less expensive to expand their existing laptop portfolio into tablet PCs, than it is for a company that never sold in that market, like a legacy phone maker. So for whatever costs are involved in general to develop a new tablet and its support (sales, marketing, tech support, supporting documents, language versions, repair centers etc etc) - that will be MORE EXPENSIVE for a company that isn't set as a PC maker, don't you agree? So whatever costs it took Apple or Samsung, it would take more for RIM or Motorola - or Nokia. Thus the costs to launch a tablet are FAR more than those for Nokia to launch another smartphone - and for Nokia, more expensive than the first tablet launch was for Apple or Samsung. If Nokia was healthy and profitable, this would not be a severe cost. At this perilous state Nokia is in, this is a suicidally stupid move.

tcb - agree, all the evidence on every decision Elop has made, is that he priortitizes Microsoft's best interest ahead of that of Nokia. A classic conflict of interest - something that is forbidden on New York Stock Exchange rules as well as in Helsinki Stock Exchange rules. He can be - and should be - investigated for breach of fiduciary duty, and fired, and fined, and for such blatant breach of his fiduciary duty as CEO of Nokia, to put another corporation's interests ahead of his own - he should also be expelled from corporate governance and given a lifetime ban from holding corporate officer status.

bjarneh - very VERY good point, that of trust. It is absolutely vital for customer loyalty and it is being destroyed right now. It is alos vital for carrier relationships (ruined by Elop), for developer and partner relations (ruined), and for employee relations (morale at Nokia is at an all-time low).

Thank you all for the comments, keep the discussion coming

Tomi Ahonen :-)

Asko

I participated to Nokia's shareholder meeting so few comments.

According to Elop Lumia is selling best on Finland. Actually that is not surprising for Finnish company. You can see nowadays lots of Lumias at meetings, transports and on street at Espoo city. Also Elop was admitting that only other country where Lumia is selling at "reasonable" levels is USA. There AT&T set the initial expected sales' levels & orders and they have exceeded those AT&T's estimates. I got the impression that Elop tried to make it more important that is actually is. Only other thing Elop said as indication for how well Lumia is selling at USA was the Amazon rankings. He also said that they mispredicted which color variants would sell the best at USA so they are having delivery problems.

About Skype Elop said that Nokia, Microsoft and some carriers are having meetings where they try to find a way for carriers to accept Skype. Basicly the goal was to make Skype chargeable (non free) for the carrier networks. For example giving bad normal service for free Skype at the carrier networks and so forcing Skype customers to buy premium service for using Skype.

Elop was advertaising that Nokia is trying to differentiate itself from competitors with location based services and augmented reality.

And Elop's initial speech for shareholders where he should have introduced annual report and results for 2011 was basicly Lumia, Asha, location and so on marketing presentation in the style of Microsoft's product launches. You could see how ignited the Elop was when presenting Lumia and Asha marketing stuff, especially for Lumia.

Asko

And one more thing, Elop said that they would have more ways to differentiate Nokia products with future versions of Windows 'Phone' operating system but didn't give more solid information about that.

zlutor

Here it comes: "On May 3, 2012, Robbins Geller Rudman & Dowd LLP filed a complaint alleging violations of the federal securities laws by Nokia Corporation and certain of its officers and/or directors"

http://www.rgrdlaw.com/cases-nokiacorp.html

Not all shareholders sit in silence...

Lasko

I actually wonder why Elop should be working in the interest of Microsoft instead of Nokia. Microsofts interest _is_ Nokia.

If Nokia is going down the drain as it looks like we won't read and hear "There was a clash of interests between the carriers and the company, which resulted in a sales boycott, mostly because their business model was subverted by integrating a piece of voice over IP software", no, we will hear "Focus on Windows Phone killed the former largest mobile phone company within just two years."

Why would any sane customer buy Windows Phone then, if it obviously has to be that bad that it killed Nokia?
Why would any sane mobile phone company support Windows Phone then?
Why would any sane carrier support it then?

The end of Nokia is the end of Windows Phone, because it will be a red rag for everyone then, the customer, the companies, the carriers. Much more than it is right now.

JJ

I don't get it. If Skype in WP is so bad for the carrier business why don't Nokia Board just stop Elop? Elop may be Microsoft puppet who doesn't understand telecom business at all but Nokia as a company has extremely strong telecom history and they should know what is important for the carriers. It just can't vanish like that.

Tomi T Ahonen

Thank you zlutor for finding that story about the lawsuit. I immediately updated the blog and of course thanked you for finding the development.

(and if I may say so, its about time haha.. I know there have been complaints made against Elop and Nokia in the stock exchanges but so far, this is the first formal evidence of shareholders taking action against Elop's mismanagement of Nokia).

Please note, as that is a 'class-action' law suit, it means if you own Nokia shares in the NY Stock Exchange, you may be entitled to join the class-action and seek damages. See the link for more.

Tomi Ahonen :-)

K1ko

Hi Tomi,

It seems you predictions are going to be correct. I still expect a better result in 2013, but it can't be worse than 2012 (right?) if Nokia survives this year that is. I just hope that Meltemi is the golden ticket altough Elop probably doesn't allow it run in the same segment as Windows phones. It's probably targeted at 100-150 euro device's.

You actually are missing one important point about Microsoft and it's carrier relations. MS has heavily invested in to corporate communications technology and has been quite succesfull. Their push is in Lync suite (previously Microsoft Office Communicator) that is essentially VoiP service. MS has bundeled this communications suite along if you invest on some of their other could based systems (Sharepoint). So this basically is Skype for corporations. As you were well know corporate customers are important to carrires as their users are the heaviest voice users around.

Not only are they using Skype in consumer space they are allready in corporate space with Lync. Lync client is available on all major smartphone platforms.

Stephen Reed

I wonder when Nokia passes the point of no return on the road to certain death. What is the last date by which Nokia could be turned around given the firing of Stephen Elop?

In a second scenario, I wonder if Nokia could recover after bankruptcy given the firing of Elop?

And in yet a third scenario, I suppose that if Microsoft bought Nokia, Elop could stay and that Nokia could withstand large losses indefinitely, because Microsoft has been willing to subsidize large losses for Bing - its search product that is chasing Google.

Narkor

The fantasy carriers have is that Google isn't going to exterminate them. Choosing Android is like trying to cure influenza with cancer.

zlutor

@Tomi: you are welcome! I've got my "15 minutes"... :-) (http://en.wikipedia.org/wiki/15_minutes_of_fame)

@Asko: if Elop himself admits Lumia is relatively successful in Finland (not a big surprise) and in the USA _ONLY_ why on Earth they just accept the facts and sell something else in the rest of the World?

Maybe Nokia has nothing else to sell? :-(

- N9/N950 - Elop effectively killed it with his famous DOA statement. Can it be recovered? Not so easily. Developers got sacked, HW is getting outdated, boosting production takes time/money, etc...
- Symbian - the whole brand killed, almost impossible to sell anything connected to it. See even N808 PureView, Nokia tries to avoid any reference to Symbian Belle - but use 'Nokia Belle SP1' as OS... :-(
- Meltemi is not released. Even if it is released what about the 'War of Ecosystems' BS? Maybe QT can save it but when will it be releases?!
- S40 is getting old, loosing gradually against Android. At least, it seems to be not so trendy any more - regardless whatever fany brand (Asha) is tried to be built around it...

So, future of Nokia is not so sunny... :-(

Tomi T Ahonen

Asko, also thank you to you! I updated the blog to reflect your comments from the Shareholders' Meeting (see above). Very useful information which was not covered in the reports by HS and YLE. Thank you very much.

Tomi Ahonen :-)

TheOneThatGotAway

Asko - essentially there is only Nokia left, so whatever features is/will be supported by Microsoft is for Nokia. In fact there is no point at this moment for microsoft to spend energy on any other OEM than Nokia.
Tomi - Nokia is not capable of supporting a wide portfolio. There is simply not enough 'product development slots' available anymore - it can't go back to Sammy strategy (which is basically old Nokia strategy). Spending ressources on tablets only adds to this problem.
Tomi - one major mistake Elop made was a profound misunderstanding of Nokia's composition/organization. Nokia was formed by extremely fast organic growth recruiting at different locations to support business with competence. This caused a fragmented organization in terms of geography. Elop has 'site focus' which is theoretically understandable - but in practice you need to move people far distances in order to retain competences. If you have a hard time moving people from Oulu or Salo to Helsinki, how do you expect them to move to Beijing ?
Elop is a change manager with poor cultural insight and a CFO box thinking leadership style, shuffling the org like it was SW modules.
Virtually all competent Nokians with ambitions are just looking for an escape.
Nokia org is a shadow of its former self and ability to invent and to make wide a portfolio is gone.
Most former Nokia sourcing execs are gone along with the setup for true economy in scale and logistics.
So apart from the market implications you so well cover, R&D capabilities, Sourcing capabilities as well as a lot of competences are equally history.
It renders Nokia incapable of competing in the Smart phone segment AND the 'dumb phone' segment.
I am truly sorry to see this - if Nokia is to survive it has to do so from a blue ocean strategy and not the red ocean with-arms-chopped-of-strategy that Elop has chosen.
Why team up with a defensive, controling and reluctant giant like Microsoft, when you need agility and speed of execution to support the challenger position you are in ?
One can argue that when the decision was made to partner with Microsoft, Nokia came in with the definite leadership position and that could act as the base for transformation.
Now this invalid and you play the challenger game from a position resembling Zero in terms of market share. This calls for a strategy change - as this is not coming from Elop, the board has to act and install a CEO capable of taking leadership in the new situation.

zlutor

Shares are in free-fall... :-(

http://www.4-traders.com/NOKIA-OYJ-439932/news/

JD!

Why do I see "ECOSYSTEMS BURNING"!

Eurofan

@Asko: Thank you for your report from Nokia's annual meeting for all the rest of us who weren't there.

@Hoista: I agree, a Meego phone with a Pureview camera.

A Meego phone with a Pureview camera and modern innards would be the next logical top end Nokia phone after the Windows phone and tablet experiment proves a total failure in 2013. I'm sure the development costs for such a modernization of the N9 would be on par or less than the total costs of Nokia's new tablet. But a tablet will get made, unfortunately. It will get made, it will fail, and it will bankrupt Nokia in the process.

Amazon's tablets are sold at a loss so Amazon can own the content sales channel. Apple tablets are sold at a nice profit because of the rich apps environment and the desire of wealthy iPhone owners to have an even bigger iPhone in their lap when they are in public waiting areas, like airports, dentist's offices, and meetings. No one else has made any money on tablets or is likely to for the next few years, the clear lesson of the last two years in tablets.

Meanwhile, RIM may well emerge from the ashes of analysts' low expectations by persevering in their original plans to develop an in house successor OS. I saw their BB10 PR video showing touch keyboard typing prediction and it looks really nice. They have decided to refocus on business users and have never publicly disrespected their most affluent fan base as Nokia did when they pulled the plug on Meego. I agree with Tomi: messaging is the number one use for smartphones. For business users, number one/two is email. If RIM solidifies its position as the most powerful messaging and email phone maker while providing an up to date browser experience, I think Blackberry will start to claw back sales from IPhone in the business world where email is still king. I really like RIM's chances now. They are going again after the most lucrative market, their original market, high value professionals that need to be in constant messaging and email communication with each other along with having access to the web.

In contrast, what is Nokia's plan and outlook? Hope and pray that the W8 ecosystem provides a heretofore missing halo around Windows phones and tablets.

Imagine where RIM would be today if instead of pouring the effort they put into their Playbook tablet, they put that effort into developing the next BB10 phones. They'd be further along and in better shape, that's for sure. But they learned from their tablets. They marked them down 60% and cleared out stocks, fired their co-CEO's and kicked them off the Board. And now in less than half a year they have a viable path to recover the high ground in the message and email heavy world of business based on BB10 phones. Tablets may some day be a profitable sideline but the phone comes first as Apple has shown. First perfect the phone ecosystem. Then introduce the tablet.

RIM and Nokia have been equally impacted by the market disruption of iPhone and Android, but RIM, despite their Playbook misadventure, will be the more successful of the two. Because they were first to jettison incompetent CEOs and return to their root customers with a highly competent in-house solution to their customers' needs in an iPhone dominated world: BB10. If BB10 succeeds on phones, Playbooks will become a more viable sideline.

Nokia has a similar in-house solution waiting in the wings, Harmattan as in an N10 with Pureview camera. It meets the needs of Nokia's core customers far better than any offerings based on Microsoft software. Will Nokia ever get there? The next 12 months are going to be horrific for Nokia. Competence to produce a N10 has been savagely cut at Nokia and is likely to be cut further as Elop husbands resources for his pointless Windows tablet exercise amid anemic sales of WP7.5 and WP8 phones, both sold at a loss.

HP, RIM, Motorola, Samsung, and how many others have tried and failed in tablets? And Nokia will succeed because of the halo of W8? Just ridiculous. At the very least, a competent Board would demand the postponement of any developments of a Nokia tablet until profitability is returned to the smart devices division based on WP sales. Nokia's crown jewels are the software knowhow embedded in the N9. Nokia must preserve a plan b against the possibility that Nokia discovers an ex-Microsoft manager turned CEO and his Leadership Team are incompetent.

BB10 video: http://www.youtube.com/watch?v=JEPYYo0-gfc

Teppo Q.

HARHAHAHAHA, Nokia is going below 2 euros per share. DIE NOKIA, WE ALL HATE YOU AND YOUR ENGINEERS !!!

I have been working in NSN when I look those engineers I see people with lunatic gaze. All nokians are just the same. burntout fucks.

Pureview is just scaledup 5 megapixel. Downscaled for market hype.

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