The Financial Times just wrote a story about how Nokia is now pursuing a new strategy in attempting to achieve exclusive deals with some carriers, who are famously hostile to supporting the deeply flawed and unloved Nokia Lumia smartphones, running on Windows Phone. I was flabbergastered. I wrote a rant quite angry and hostile, even by the standards of this blog with often a sharp-tongued edge. The Finnish business weekly, Taloussanomat entitled its story about my blog story as me freaking out so badly as having gotten what they call a 'hepulikohtaus' in Finnish. That is a difficult term to translate, but I think a close meaning is with the American term 'conniption fit' (my Finnish readers, feel free to suggest better translation haha..). I couldn't even imagine anything similar in the Queen's English (haha, the British would never stoop to such level of loss of self-control and respect).
Is it just me? Am I wrong? Or is it truly madness, for Nokia now, to pursue a strategy that reduces sales and increases losses to its handset unit? So lets not listen to Tomi. Lets listen to the experts looking after the interests of Nokia's owners, the shareholders. What did the three ratings agencies say when they advised Nokia on when they cut their ratings over the past 15 months or so, since the Elop Effect.
Did the ratings agencies, Moody's, S&P and Fitch, call attention to the troubles at the NokiaSiemens Networking unit, one that is perennially a risk of producing losses. Or did they downgrade Nokia due to bad naming of Nokia products. Or because Nokia doesn't have enough imaging software competence? Or did they downgrade Nokia because it didn't sell enough of its factories, or hadn't fired enough of its staff? None of these were even once mentioned as the most important reason which is driving Nokia's owners - the shareholders - to lose the value they have invested in Nokia. These were, however, activities that Stephen Elop has engaged in. He was hired to fix execution, he has not done anything in that area, rather he's made Nokia execution dramatically worse - each of the four Lumia phones for example shipped with major mechanical and software bugs, some so severe they required total reinstalls of the operating system etc (losing often valuable content and stored files).
Lets see what the ratings agencies told us was the primary reason for each of the downgrades. Remember that the ratings agencies loved Nokia under Elop's first 5 months, and Nokia held the level of one notch below perfect by each of the three agencies at that time. So lets listen. Elop, can you hear me? Nokia Board, can you hear me? Nokia institutional investors, can you hear me? Nokia consumer investors, can you hear me?
THE TALE OF THE ENDLESS ECHO
On March 30, 2011, S&P downgraded Nokia giving as its reason "Nokia’s smartphone portfolio will make further significant market share losses"
Moody's downgraded Nokia on April 7, 2011 telling us that "The rating downgrade primarily reflects Nokia's weakened market position in its core business, mobile devices"
Fitch on June 7, 2011 downgraded Nokia and explained "The pace of deterioration has picked-up since Nokia decided to switch to an alternative operating system, and it appears consumers are deserting these legacy handsets for cheaper Android versions or high-end Android or Apple smartphones"
Moody's Downgrade Nokia again on 27 July 2011 (two notches at once) and gave the reason for this extraordinarily big drop: "Visibility for Nokia's future operating metrics such as mobile phones sold or average selling prices is currently very low."
S&P downgraded Nokia again on August 2, 2011 "primarily due to lower revenues than previously anticipated for Nokia's Symbian-based smartphone portfolio and declining revenues from traditional mobile phones because of continually fierce competition."
S&P downgraded Nokia further on March 2, 2012 telling us "The rating action reflects limited earnings visibility in Nokia's smartphone sub-division"
Moody's downgraded Nokia once again on April 26: "due to a severe decline in Nokia's mobile phone sales"
S&P told us the reason for their April 27, 2012 downgrade "The rating action reflects a downward revision of our expectations for revenues from Nokia’s devices and services division"
Fitch explained of its July 20, 2012 downgrade of Nokia "Fitch had previously guided that it would take a negative rating action if it was not convinced that Nokia could stabilise the revenue declines and be capable of generating positive single digit operating margins in its Devices and Services division. The release of Nokia's Q212 results indicate that the company is currently not near this position and Fitch is not convinced that this can be attained anytime soon"
And now, Moody's on July 23, 2012 downgraded Nokia a further 2 notches because "Nokia’s transition in the smartphone business will cause deeper operating losses and consequently cash consumption in the coming quarters than we had previously assumed"
WHAT AM I NOT HEARING?
Nokia was one notch below perfect in early 2011. Then came Stephen Elop and the Elop Effect. Today each of the three ratings agencies have downgraded Nokia so much, they all now rate Nokia stock as 'junk'. Elop could have fixed things, if he had focused on 'execution' but rather he played around with Ballmer, plotting about buying RIM and Elop sold some factories and bought some sofware houses, and signed up patent trolls and sold some assets. None of these were the causes of Nokia's catastrophy.
Every single downgrade - every single downgrade - has mentioned directly market share, or sales, or revenues (as coming from sales) of not networks or navigation or services - but of the handsets business!
When Nokia handset business sees a decline in unit sales, it means a decline in market share, it means a decline in sales revenues. And EVERY TIME when Nokia has been downgraded, it has been the primary reason why. EVERY TIME !!
Now Nokia CEO is pursuing a 'new strategy' of shifting away from selling on as many carriers/operators as possible, and going to an exclusive deal with only one carrier/operator. This is exactly the same strategy that Apple wanted desperately to get away from and has grown strongly in every market where it broke away from this path (in some markets Apple immediately was offered on all networks). This is a path that Samsung wisely is avoiding. This is a path that killed Palm. And Nokia's CEO now looks at ten - TEN - separate downgrades - TWO of them so severe, that Nokia was dropped two notches at once. And every SINGLE time, the primary, often the only reason was the declines in handset sales and market share (and related handset revenues).
I told you, this is the biggest error Elop has made yet. Please if you do not trust me, read through those statements and go to the original sources (I'm sorry I don't have links for them, as I have been collecting this stuff to a word doc file ever since the Elop Effect, but am sure if you Google the date and ratings agency, you get that downgrade immediately). If not once, not twice, not three times a lady, but ten separate times over the past 18 months, that Elop has been given a warning by those interests that protect Nokia shareholders - Elop's bosses - he has been told, focus on the market share! Focus on unit sales! and he refuses to do that, he plays with all sorts of other things he'd rather do. And now we hear of this madness. An exclusive deal? To then cut Nokia sales dramatically again! As Public Enemy asked in its famous rap tune, How Low Can You Go? Please Nokia Board, fire this Microsoft Muppet Now!
If you still are not sure, here is my rant that I posted earlier today, in my 'hepulikohtaus' state of a Conniption Fit. And if you still are not sure, here are the Nokia Q2 results as an overview, and here is the true dirt of how bad it is. And finally, here are the 19 strategic mistakes Elop has already made, earning him the dubious title of worst CEO of all time, not just in mobile or tech, but in any business.