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June 14, 2012

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J.O. Aho

Thanks for the excellent sum up of the Elop-effect, it's horrifying to see a sum as big as 4 milliards.

Quite expensive to be part of the "3rd ecosystem".

bjarneh

Although the Elop legacy speaks for itself, the board of directors are responsible for hiring this guy. The sudden shift on Nokia's part from their home grown Symbian/Meego to Windows Phone, had to be their idea, Elop has not gone rouge, he has just failed to implement their strategy.

At some stage this probably sounded like the safe choice; Meego would leave them all alone, while Windows Phone could potentially become a big platform since plenty of others (at least at the time) had promised to make Windows Phones.

One aspect of the N9/Meego saga which I have not seen discussed on this blog is that Meego sales could have been much stronger, if the device was launched when it was ready. A friend of mine (who works at Qt/Nokia) had at the time been working on Qt/Meego for 2.5 years, he and his team was expecting the N9 to be launched in April 2011. Note that most of the Meego/N9 team was fired in February, so there was no ongoing development holding back the N9.

Nokia then manages to wait for another 6 months while the device is ready, and while they have no Windows Phone alternative ready, before they launch the N9. They basically wait until they have their own Lumia 800 ready before they start selling it (1 month before I think), i.e. they wait for their own competition before they launch it, this obviously hurt the N9 sales, since it missed out on its spot alone in the limelight.

Tomi T Ahonen

Hi JO and bjarneh

JO - very good point yes.. Not only do you have to pay a license to Microsoft, but yeah, it might cost you a couple of billion in profits per year above that..

bjarneh - very good point and even I have not covered that dimension of the MeeGo fiasco. There was also the first MeeGo handset ready to launch in February at the Mobile World Congress which Elop killed just days before (and again someone over at MeeGo Nokia resigned in protest) - so this was the original launch phone for MeeGo which was totally terminated by Elop. They could have had two phones to sell in the Spring..

Thank you both for comments

Tomi Ahonen :-)

nokdown

Dear Tomi,

I only hope for Elop to announce his resignation today.
Unless, someone sends the Finnish police to arrest him before he makes further statements to damage Nokia :)

I agree with all of your analysis, I like the way you make it very explicit with facts to back up your statement.

However, today's announcement will be nothing new.

If Elop is to make the announcement, there will be nothing new.
Do you expect Elop to announce his own resignation?
Do you expect Elop to announce his repentance ?

I hope only for Elop to announce his resignation:
- that is the only best event that can happen to give us a sign that Nokia can get better.
- Nokia is resilient, mainly due to (I was at Nokia for 7 yrs and left 10 yrs ago) internal process and corporate culture is geared to change
- Nokia still have capacity, hardware designs, source code base, products, intellectual property.
- distribution channels will certainly get back to work with Nokia, if they jumped quickly to Samsung (mainly due to Nokia abandoning the market) the distribution channel can jump just as quickly back to Nokia.

Dared

Great article as always Tomi :)

Like Bjarneh said - Elop killed more potential profits by killing the N9. One interesting point to consider also is that the profit margin (so i've heard) was much higher on the N9 AND it sold more than the lumia (with its lower profit margin) in its first quarter. So that in itself goes to show Elop's incompetence at running a company (company = a firm realising profits for both the firm and its shareholders)

Given the fact that Elop clearly mislead the shareholders with his burning platform memo - and that we have the proof here, this might make the court case against Nokia/Elop very interesting!

nokdown

OMG

Elop to announce withdrawal of Nokia 808 PureView, with the strategy to move PureView Technology to Lumia effective immediately!

Tomi, pls make sure Finnish police have an arrest warrant for Elop, to be delivered before he makes any further announcements.

There is no need for Elop to announce his resignation (to all Nokia employees in Finland), any other board member or exec can announce Elop's resignation.

nokdown

Any sane judge in Finland should find your information as sufficient grounds for issuing an arrest warrant.

Think about Finland's economy.
Tomi, you still have family in Finland, do you want to send them food parcels from Hong Kong ?

Think about all the unemployment in Finland, economy will be back to soviet collapse era.

ps: Sorry for the multiple posts.

Tomi T Ahonen

Hi nokdown and Dared

nokdown - haha, yeah, me too (hope Elop announce his resignation effective immediately). I am afraid its going to be massive layoffs (possible ending of Nokia operations in some big Nokia towns like Oulu or Salo). Might be Nokia HQ move to America too (next to Microsoft). He might try to sound nice by promising to take 1 Euro salary for next year (meaningless gesture, as he already took that 8 million Euro salary and bonuses last year)..

but I totally agree with you, if Nokia had management that employees trust, and a CEO that the carriers/operators and retail channel trust - and it made some sensible moves like reducing its focus on Windows for now - Nokia could recover fast. With this CEO and his strategy, Nokia dies..

Dared - totally true yes. I calculated the same myself but haven't seen the profitability estimates in the public domain by anyone for the N9. It does make sense, it was built in Nokia factories (early Lumia was built by Compal of Taiwan) using all Nokia standard parts (vs Lumia) and N9 was in every market highly rated and did not need big discounts to sell whereas Lumia prices collapsed within weeks of launch. By all logic - not to mention higher sales price too - N9 should have far better profitability than Lumia line.

nokdown - don't say that! (PureView) - gosh, I almost had a heart-attack haha.. Yeah, I wish I could somehow influence the Finnish media to at least cover the story, I doubt the Finnish police much care what this guy in Hong Kong writes haha...

(PS am wishing 15 minutes before event starts, we hear its going to be by Nokia's new Chairman - and Elop won't be seen - and he'd announce Elop has been fired effective today...)

Thank you all for the comments

Tomi Ahonen :-)

nnine


Hi Tomi,

thank you for your analysis!

Personally, I care less about Nokia, but I am angry because of Maemo/Meego. That is a real loss.

A smartphone, which I carry around everywhere where I go and which has GPS and always a network connection, which can access my private wireless lan, my contact list, family photos and other stuff, which has a microphone, camera, and other sensors, should - in my opinion - be controlled only
by me and not by some third party. Especially not third parties whose business it is to spy on me or to control what content I can access and how. While not perfect, compared to all the alternatives, Meego was the only platform which was not completely hopeless in this respect.

Not even to speak about the community around Meego/Maemo or other cool stuff like this:

http://www.engadget.com/2010/03/19/niko-the-n900-powered-lego-robot-looks-poised-to-take-over-twi/

http://graphics.stanford.edu/projects/camera-2.0/


Compared to all this, I wonder what kind of shallow person one has to be to get excited about tiles
(really just icons which can be updated icons remotely).


Two suggestions:

I think you should show a graph with unit smartphone sales for all vendors which goes back further in time similar to this (but updated):

http://www.yugatech.com/mobile/recent-smartphone-shipments-show-gainers-losers/

That graph makes it pretty obvious that Nokia was shipping smartphones before apple came along and that it was still doing well until Q1 2011.

And I would prefer not to have linear interpolation between the points when showing data which refers to integrated sales for each quarter or market shares derived from such data. (Because if you draw a continuous curve, then it would make sense if the area under the curve corresponds to the integrated quantities.)

Olaf

Hmmm, Tomi, got my problems seeing you taking Q3/10 to Q4/10 as the only truth. The step between Q3 and Q4 is usually the highest for each market. Later you take that excuse for the higher sales in 2011, so you should be fair with this in 2010 too. So it doesn't make sense to take that highest one and extrapolate this to all quarters of 2011 then. You should have compared year to year. Of course you should also look at other things (incl. competitors activities) in that time - it's a changing market...

Did that memo called any sleeping dogs? I guess so. On the other hand, it clearly shows that these analysts basically buy everything that has a management summary.

So the real question is, what was necessary. As far as I remember, there was a change going on in the mobile phone market and it still is. The question is, how well did Nokia by that time and how well they would do in future. If you realize at a point, that you need to change your strategy completely, then communicating this will always somehow hurt your existing business. On the other hand ear to the street said already for some time that Nokia is loosing ground, it was not considered competitive in the smart phone market. And if your customers think this, you _will_ lose. Maybe a year later, but you will. So it is important to make the change early enough to not lose ground completely, like now RIM does.

Also my impression of Nokia was that of a huge, slow, self picturing something, that lost contact to the outside world. It would spit out device after device, but was not able to compete in the upcoming battle that would soon reach the whole world. Yes Elop could be North America focused, but hey, this is where the strongest competitors started and it gives you a look into the future.

So I'm sure there were enough mistake done, however I considered that memo first of all as a wake-up call to each and everybody in and around Nokia, that times have changed and there's no way to move on like before. And I think that was totally the truth.

nodevel

Sorry, I messed up the fields - I placed my e-mail address instead of the name. It should have been just 'nodevel'. Please, remove or edit my previous comment. Thank you! (And Thank you for analysis too).

JD!

I dont see tomifan posting today! He must be hiding under his bed tonight.

Lavv

Truly a sad day for Nokia.Job cuts can reduce costs but to an extent only beyond a certain point they are detrimental to the companies effort to stay alive and produce.
Salo is down and out,No more Made in Finland Nokia phones,it seems Compal it is for Nokia manufacturing.sad very sad

Although lets for arguments sake assume that Nokia wanted to move away from Symbian desperately and had no Meego/Maemo stuff ready(which was actually claimed but look what a stunner N9 is). Even then Elop's decision is plain and utter stupidity.WP was around in Feb 2011 and any one serious enough would have told you how much WP lacks in basic functionality as compared to Symbian.

Replacing Symbian with WP7 is like replacing a well functioning Honda Car with Ford Model T.

A much much better choice would have been Android(Assuming of course no Awesomeness we have seen in Meego/Maemo was there,the closest in terms of functionality to Symbian.

It seems like Nokia would be gone before Dec 2012 or on life support by MSFT to keep WP alive,but by then BB10 device would be there(which has N9 like interface) and Tizen the successor to Meego would have at least one device plus the iPhone 5 and some upgrades to S3,so no matter how we see it,it is curtains for Nokia as an "independent" company and very soon to be an OEM/factory for WP and shortly thereafter DEAD!!

Thanks MSFT for killing the world's most trusted brand in mobile.

JD!

Its either RIP Elop or RIP Nokia.

Just hoping its not too late :-(

Alin

@Lavv, for Microsoft was an easy thinking : force the biggest mobile brand to sell WP or kill it!

Nuno Brito

We can make a difference if we all post comments on google+ using these tags as sign of protest:
#FireElop
#SaveNokia

We need to save this train from wrecking.

WarOnMicrosoft

Lets hijack Elop and shit on his face while we play loudly some Microsoft elevator-music into his ears, HaHa also throw him with rotten eggs from Central Market Place, Helsinki its near his resident and douse his clothes with water from Cholera-basin near said market place, HaHa

That will teach him!

jcamdr

From http://press.nokia.com/2012/06/14/nokia-announces-executive-changes-renews-leadership-team/ I get the feeling that Elop is acting like a dictatorial king, changing his staff as soon as there don't magically brings to his the unrealistic goals he set to them. he can't admit that his strategy is doomed and will scarify everyone to save his life. Can't believe that this can continue this way legally.

Saitonne

Wow as a Kenyan... Nokia lost it.. they fired their whole Kenyan team and have a skeleton team. HTC and Samsung are busy eating up Market share that was easily Nokia's. If they lose us the rest of the emerging markets will be fast on our trail...

Nokia Fan

Sad to say this, being an ex-Nokian myself and don't wish to ridicule the situation. I think the WP team made a record today and the headline should be - 10K Nokians smoked by Windows Phone.

Ex-Nokia employee

As an ex-Nokia employee, I am very sad to see this downward spiral. I left Nokia one year ago when it was clear to me that the things are bad, but I didn't think that Nokia is going to commit suicide and that's exactly what happens to the company now.

Earendil Star

@ Olaf, are you kidding? Did you go and see the graph posted by nnine?
http://www.yugatech.com/mobile/recent-smartphone-shipments-show-gainers-losers/
What are you talking about? Your claims are totally baseless and almost offensive.
Please stop repeating false tidbits prepared by MS' marketing department, OK?
Tens of thousands of people are suffering just because someone in Redmond is trying to ruthlessly promote a crappy OS to people who do not want to buy it. Do you get it?

On a different note, and as I said previously, the hype on Nokia being a takeover target was just that: hype.
Nokia is firmly in MS' hands and no longer on the market. Only what is of no use to MS (or already licensed to MS) will be sold.
The rest is just spreading false news to speculate on the share price by insiders. Possibly people with knowledge of the situation wanting to get rid of their stock before it cratered (strangely these rumors emerged one week ago... often coincidences are... not coincidences at all!) Yeah, regulators should do something about this, but apparently they are no longer interested in what their duty should be. So don't hope they will do anything about it. Unless some class action really gets traction in the US. But I doubt it.

As for the Nokia board, in calling THT Elop, I see only two alternative explanations.
The first was that they were really convinced that teaming with MS they would -yes- have sold their soul, but that things would have turned to the benefit of both in the medium term. In this scenario, they just showed no pride nor courage plus total failure in understanding: a) their new partner; b) their own market. In this case, their previous errors with OPK and AV were just slight oversights compared to the catastrophe that ensued.
Unfortunately, a second scenario looks much more plausible: they were forced or bribed to go the MS way.
The reason why the first scenario lacks credibility is that it is totally unbelievable that JO was so incompetent not to understand the implications of the terms forced by MS in its agreement with Nokia. Furthermore, the board would have already fired THT Elop after realising the damage being made. Would not have been unprecedented (for much, much less: just look at HP...). So, no, scenario n. 1 is not credible.
I just hope some whistleblower will one day leak the truth. It could be a fantastic plot for a criminal movie.

Joki

"Yes. Nokia's strong profits in its smartphone unit - Q4 of 2010 Nokia smartphone unit profits were 510 million Euros or 637 million US dollars in the quarter. Multiply that four times and Nokia's smartphone unit was producing profits at an annualized level of 2.5 Billion dollars just before the Burning Platforms memo."

This I find a bit misleading.

It must be noted that Nokia allways does better in their christmas quarter (as does all mobile manufacturers) so looking at growth from Q3 to Q4 is misleading. Multiplying Q4 x 4 to calculate whole year profit makes little sense to me.

More importantly, you should also consider that Research in Motion presented a stunning quarter ending December 16th 2010, with y/y earnings growth of 60%. Significantly better than the previous quarters. Using the same calculations for RIMM we could say they would have made $4B in profit in 2011 (multiplying the christmas quarter profit four times).

The truth is that it has gone downhill as much with RIMM as with Nokia since february 2011. Both stocks are down about 80%.

Rob Merhar

I bought a nokia. It was a N6 or N8, can't remember which, but the first one had to go back, due to freezing, touchscreen isues, and the replacement was horrible as well, unusable. So that was another problem. My new smartphone has a capacitive screen, not that resistive garbage they used.

SiliconValley

Sorry to see you guys in this situation.

This is a very common approach that Microsoft takes with companies.

Embrace, extend, extinguish.

Nokia never stood a chance.

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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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