So Nokia Q2 results are out and the earnings season gets into gear. We heard the carnage. Looking at it from the Digital Jamboree angle (smartphones market share bloodbath, year 3) we get the following findings
Nokia unit sales of all smartphones fell from 11.9 million in Q1 to 10.2 million now in Q2. The decline is 14%. This while the industry is expected to grow this quarter. My preliminary market share for all Nokia smartphones is 6% now, down from 8% just three months ago.
We heard right at the top of the Q2 results, that Nokia had shipped 4.0 million Lumia smartphones in Q2. While that is not the same as sales, lets not be picky, it is clearly doubling the sales of Lumia from Q1 when the level was 2 million. And so did we have a monster AT&T powered USA surge of Lumia? ...No. The total Nokia USA handset sales in units last quarter (Q1) was 600,000 total handsets which was dumbphones and smartphones, and smartphones both on Symbian and Windows Phone (Lumia had launched on T-Mobile). Now how much more do we see in Q2? Try none. Yes, the total sales of handsets by Nokia in the USA, in Q2 was.. 600,000. The only thing the AT&T massive launch marketing blitz achieved, was some transfer of previous Nokia dumbphone and Symbian smartphone sales to Lumia. Even if somehow all Nokia dumbphone sales had ended, the absolute maximum Lumia sales in the USA would be that, 600,000. Not the millions many analysts were expecting when they ooh'd and aah'd over the Amazon sales rankings haha. And this should put an end to the hype about AT&T PR people spinning the story that Lumia sales were somehow good. No they weren't. Not unless you think Nokia's recent Symbian and dumbphone sales in the USA have been 'good'.
Lumia was designed to be US consumer-friendly. It is on two networks, carriers. Last month I did some price/sales modelling and estimated Lumia 710 sales on T-Mobile at 290,000. Now how has AT&T managed with the more expensive Lumia 900, adding definitely not more than 310,000. That is your 'success' right there. And now, after the Lumia series is Osborned by Steve Ballmer not letting the Nokia smartphones be upgraded to Windows Phone 8, we see the prices slashed (and some carriers already refusing to sell any more Lumia like T-Mobile Germany which cancelled the Lumia 900 launch altogether).
Well. But globally Nokia doubled Lumia sales (shipments) in one quarter, from 2 million to 4 million. And that migtht seem good, if you are growing organically from a clean slate, like say Apple did early with the iPhone. But Nokia is not a newcomer to smartphones. It is migrating its massive existing loyal customer base of smartphone users from Symbian to Windows Phone (Symbian's installed base - that is yes, customers currently using a Symbian based smartphone was - get this - 300 million at the start of this year. That is the customer base we are dealing with). How's that going?
I said last summer, before we had seen Lumia, that I expected Nokia to produce such a good first series of Windows Phone based smarpthones, that all during 2012, Nokia would be able to migrate customers 1-to-1 from Symbian to Windows Phone. How did Lumia fare? Not so well. All along its existence, the ratio has not been anywhere near that, Nokia is bleeding customers to rivals when Nokia attempts this transition. And again, in Q2, we have 3.7 million lost Symbian sales in exchange with the 2 million gained Lumia buyers. That means that still Nokia is losing customers and the 'exchange rate' is 1.85 to 1. So yes, two customers walk in to a store, holding old Nokia Symbian smartphones. The sales people do their thing, and in almost half of the cases, the customer won't take the Lumia, but goes to Android or iPhone or whatever rival smartphone they prefer over the Lumia.
This is disaster. And this was before the Osborning now of the whole Lumia line. But yes, lets be clear, the non Windows smartphone sales at Nokia (Symbian and MeeGo) fell quite dramatically from 9.9 million in Q1 to 6.2 million now. That is a fall of 37% in just three months. And yes, for Nokia to just have been competent in the transition, 4 million Lumia sales now is nowhere enough. Just to cover the loss of Symbian customers, Nokia should have now sold 5.7 million Lumia - and note, that would not be any kind of gain for Nokia, only holding steady. Elop's Lumia series, on the Windows Phone platfrom, is now underperforming at 30% from where it should be for an 'ok' performance level !!!
And again, this is the peak of Lumia, in this current edition. Nokia already warned that Q3 will be bad. We already hear from all kinds of markets that the early buzz around Lumia is over and the series is turning into a dud. Not to mention Nokia halving its prices etc.. So going forward, we won't see significant growth in Lumia sales into Q3, we may very well see a decline already!
To understand the context, when Elop took over, in the first full quarter he was in charge, Nokia's smartphone unit sold 28 million smartphones and had 29% market share. Nokia was twice as big as Apple and three times bigger than Samsung. Nokia's smarpthone unit was growing sales strongly - the year 2010 Nokia had seen bigger growth in units sold of its own smarpthones than Apple had with the iPhone! And Nokia's smarpthone unit was profitable, and again, the first quarter Elop was in charge, Nokia's smartphone unit generated a Nokia-record jump in its profits.
Now the unit sells 10.2 million smarpthones, the market share is down to 6%. While the industry grows strongly, Nokia's smartphone sales shrink. Nokia is now one third the size of Apple and one fifth the size of Samsung in smartphones. Nokia's smarpthone unit just generated the biggest loss Nokia has ever seen, and the guidance for Q3 is that the handset unit will have as bad a quarter if not worse!!!
I told you last summer that Nokia would hit 6% market share in Q2 of 2012 and that Nokia's Lumia series would only sell 4 million smartphones this quarter. I have since actually made a more pessimistic forecast (and luckily things weren't quite that bad) but remember - last summer many big analyst houses were promising you that Nokia and Microsoft would become the third ecosystem and have over 20% market share this year haha. That won't be happening. I said in that forecast that Nokia ends this year, in Q4, at 3% market share. Now with the sudden and totally unexpected Osborning of the whole Lumia line, I am certain Nokia's market share will be 2% at the end of the year, not 3%.
Needless to say, the fall from 29% to 6% in 18 months is a world record in collapse of a market leader of any global industry leader, ever. Nokia has thrown away 4 out of every 5 loyal customers it held only a year and a half ago! Yes, we are witnessing history being made - history of the worst CEO of all time (And it will only get worse in Q3). Pay attention to this, this is the classic case study for MBA's of the future to study how not to destroy your company, using methods like the Elop Effect.
I will be returning with more analysis later, I now gotta go catch my plane..
UPDATE 20 July - I have just posted the follow-up blog, with deep analysis including regional splits of smartphone vs dumbphone sales, average sales prices, an estimate of AT&T USA Lumia sales, the regional split of Lumia etc. See the deep analysis for more.