The picture today is simple. Revenues. The blue part is smartphones, the green part is dumbphones.
This picture may be freely shared
So yes, Elop inherited a handset-manufacturing giant, which in dumbphones was 50% bigger than its nearest rival and in smarpthones more than TWICE as big as its nearest rival. The revenues in the handset unit were growing very strongly (as the period from 2009 to 2010 was still the tail-end of the worst economic recession in our lifetimes). Nokia's handset unit saw 5% total revenue growth, powered by the smartphone unit which saw 17% revenue growth but tempered by the decline of revenues in the dumbphone unit of 5%. Every industry analyst in 2010 was already of the consensus view that smartphones were the future of the industry and the dumbphones business was living on borrowed time, to be replaced eventually 100% by smartphones.
Then Stephen Elop had his moment of Microsoftian madness, and issued his silly memo and caused the Elop Effect, the costliest management mistake of all time. Since then, he compounded his strategic fiasco with further silliness such as refusing to sell his popular MeeGo based smartphones in Nokia's major markets that were desperately begging for them, and further by launching a still-born bug-ridden Lumia series on a highly undesirable and incomplete Windows Phone operating system - to Nokia record return rates and by latest measurements 2012, loyalty so lousy six out of ten Lumia owners want to buy any other smartphone than another Windows based smartphone. What has been the result? Nokia revenues fell 49% in the next two years - this, while the global industry for handsets doubled in revenues. In a period of hypergrowth, Nokia managed to wipe out half of its business. No wonder Nokia has been firing tens of thousands of employees and selling factories etc.
And lets be clear about 'core business'. When Elop took over as CEO, he was tasked by the Nokia Board to sell the NSN business unit, the NokiaSiemens Networking unit of telecoms infrastructure (a unit that was perennially delivering losses or very slim profits in a good quarter). Elop proceeded to try to sell the NSN unit, but couldn't find a suitable bidder and then ended the task of trying to sell the NSN unit as a whole. Since then he's been selling it piece-meal, part by part. So while yes, the NSN unit delivered 'surprising' profits recently, this is not a core part of Nokia's business, and Nokia is clearly continuing on its quest to get rid of all parts of NSN by selling them off. And the mapping unit, Navteq, is trivial in size compared to the core business, the handset unit.
Mind you, there is no business failure of legitimate Fortune 500 size company business (by legitimate, I am excluding the actual crimes where management issued fraudulent statements and went to prison for the fraud and crimes, like Enron and Worldcom). So think of the biggest most famous corporate disasters in recent memory. The Exxon Valdez oil tanker disaster, the Toyota Brakes recalls, the New Coke launch, the Mercedes A-Series, the BP Oil Spill. No market leader has wiped out 49% of its core business revenues in a two-year period. CEOs are fired for far less than this. (Why is Elop allowed to remain in control of Nokia? Why is the Nokia Board asleep at the wheel. When will Nokia owners - shareholders - take the Board to task and fire the Board as well? This IS a World Record in management failure.)
Oh, while its not the topic of today's picture, let me just mention - Nokia's handset unit was very healthy and delivering high profits and profitability when Elop took over - in fact, the first full quarter Elop was in charge at the end of 2010, Nokia set a record for profits in the handset unit and its smartphones. So the company was very healthy and - improving from that - when Elop destroyed it all.
Immediately after the Elop Effect, the Nokia smartphone unit became unprofitable. It has been unprofitable since. The last Quarter for which we have the data today (thats still Q3 of 2012, as we await the Q4 results) Nokia's smartphones were so hideously undesirable, they were being sold making a 49% loss per smartphone sold !!! 49% loss per phone sold !!!
The dumbphone unit hasn't fared as poorly. It did plunge into losses but less than those at the smartphone unit, and then recovered back to profitability. However the self-induced damage at the smartphone unit and the utterly unsellable Windows Phone based Lumia series (with massive price dumping too) were producing so giant losses, that the total handset unit has been making losses up to now. For Q4 Nokia said they might break even. So no, there is no silver lining to this. The downsizing was not done for some noble profit motive for example, on the contrary. The situation is - if possible - even worse than the picture here. But even, just looking at revenue collapse, this is a world record in destruction of a company's core business in only 22 months.
And yes, more pictures coming in the sad Nokia saga. If Elop had only made one mistake, I wouldn't need to do this so often, but Elop has precided over a cavalcade of catastrophies as CEO. So we have to examine them in detail. This cannot be a sign of anything other that total management incompetence - no wonder for example MSNBC listed Elop among its 5 finalists for worst CEO of the year.