So yeah. Nokia reported today (as did LG). And Nokia gave even less data this time than three months ago in Q4 results, as it has now shifted the handset business to Microsoft last week.
We know really little 'for a fact'. We know the handset unit overall reported 30% decline in revenues vs same quarter one year ago and 27% decline in revenue vs Q4 of 2013. Nokia gave that number for us, it is 1,929 Billion Euros.
Nokia then gave a few summary statements about how those numbers came to be. Nokia writes in the Q1 2014 results:
The year-on-year and sequential declines in discontinued operations net sales in the first quarter 2014 were primarily due to lower Mobile Phones net sales and, to a lesser extent, lower Smart Devices net sales.
On both a year-on-year and sequential basis, our Mobile Phones net sales were affected by competitive industry dynamics, including intense smartphone competition at increasingly lower price points and intense competition at the low end of our product portfolio. Our Smart Devices net sales were affected by competitive industry dynamics including the strong momentum of competing smartphone platforms.
On both a year-on-year and sequential basis, discontinued operations unit volumes declined in the first quarter 2014. The year-on-year decline in discontinued operations unit volumes was due to lower Mobile Phones unit volumes, partially offset by higher Smart Devices unit volumes. Sequentially, the decline in discontinued operations unit volumes was primarily due to lower Mobile Phones unit volumes and, to a lesser extent, lower Smart Devices unit volumes.
Discontinued operations Average Selling Price (ASP) declined on both a year-on-year and sequential basis in the first quarter 2014. The year-on-year and sequential declines in discontinued operations ASP were due to lower ASPs for both Smart Devices and Mobile Phones.
Ok. We know some limits. Unit sales of smartphones were definitely more than 6.1 million and definitely less than 8.4 million. We know dumbphone sales were definitely below 55.8 million and total handset sales definitely below 75.0 million. We also know that part of the revenue decline was due to lesser unit sales but part was due to lower average sales price (ASP) across both dumbphones and smartphones.
Well, we do have the elements of a multidimensional optimization problem. And I did some modelling and came with a 'solution' that fits all the above. And it comes with very 'reasonable' assumptions too, I assigned the revenue decline evenly, half coming from ASP decline, half from unit sale decline. I made sure every statement in the above paragraphs is fulfilled. And I find these numbers for Nokia Q1 results (vs Q4 of 2013 for context)
Nokia Handset Unit Results Q1 2014 (estimate by TomiAhonen Consulting)
ITEM . . . . . . . . . . . . . . . . . . . Q1 2014 . . . . . Q4 2013 . . . . Percent decline in one Quarter
Total Handset Unit Sales . . . . . 65.2 M . . . . . . 75.0 M . . . . . 13%
ASP of all Handsets . . . . . . . . . 29.60 Eur . . . . 35.11 Eur . . . 16%
Revenues of Handset Unit . . . . . 1,929 B . . . . . 2,633 . . . . . . . 27%
Total Smartphone Unit Sales . . . 7.1 M . . . . . . . 8.2 M . . . . . . 13%
ASP of Smartphones . . . . . . . . 117.10 Eur . . . . 141.95 Eur . . . 18%
Revenues of Smartphone Unit . . 835 M . . . . . . . 1.1 B . . . . . . 27%
Total Dumbphones Unit Sales . . 58.1 M . . . . . . . 67.0 M . . . . . 13%
ASP of Dumbphones . . . . . . . . .14.40 Eur . . . . . 21.99 Eur . . . 35%
Revenues of Dumbphone Unit . . 1.09 B . . . . . . . . 1.49 B . . . . . 27%
The above analysis by TomiAhonen Consulting may be freely shared
Note the exact math does not 'add up' totally as this is result of 'best fit' multidimensional optimization of the known data points. It is accurate within a few percentage points on every item.
I can not be certain this is the 'only' solution to this problem but this is very 'realistic' in that all the variables are similar in size and consistent with the above (so one is not only 3% while the other parallel data point would be for example 57%). I of course welcome anyone else who might find an alternate but still reasonable solution. I think this is maybe as good an estimate of the division-specific performance we'll ever get from Nokia in its last quarter ever as a handset maker.
So with the above, lets assume those numbers are real. Obviously we know the losses worsened in the quarter compared to Q4 so yeah, Nokia is not a beloved handset brand currently. Unit sales are down, average prices are also down, while lossed grew. That is the unholy 'trifecta' of market failure. (it is also what Microsoft now takes over pretty much a disaster, thanks to Stephen Elop's utter demolition of the Nokia handset business over the past 3 years until Nokia removed him from the post of CEO)
What do the above numbers mean from the Smartphone Bloodbath point of view? Nokia smartphone sales are down to 7.1 million units in Q1. That is down 13% from Q4 and Nokia's prelimary market share is now 2.5%. Note that the Nokia Q1 results specifically mentioned the issue at the smartphone unit where sales were down being "affected by competitive industry dynamics including the strong momentum of competing smartphone platforms."
(BTW what bullshit is that? platformS. S!!! Not 'platform' but 'platforms' plural? Strong momentum of competing smartphone platforms? We just had Apple Q1 results and iPhone sales are DOWN 14% from Q4. So who else? Blackberry is down 21% from Q4. bada has ended production. Tizen only appeared on a pair of smart watches and nobody suggests there is any 'strong momentum' in smart watches at this point. The ONLY platform that shows strong momentum is obviously Android. I HATE it when people use such sloppy reporting)
But yes, the smartphone unit is severely struggling right now. A unit decline of 13% in smartphones when the overall handset division reported revenue decline of 27% from Q4, that is very consistent with the reported performance. Note that this is the big China sales quarter (Chinese gift-giving is not at Christmas, it is at Chinese New Year which is in the first calendar-quarter of the year). China obviously is the world's largest smartphone market by a huge margin and Nokia very recently owned 70% of that smartphone market. Now the latest Kantar data for Q1 fo 2014 finds total Windows Phone market share in China to be between 0.7% and 1% over the three months of the Quarter (OUCH !!!). Some Windows Phone 'success' in Argentina or Australia will not come close to covering the losses in China.
7.1 million smartphones leaves Nokia ranked 10th of the Top 10 largest smartphone makers in the world now that Xiaomi of China has leapfrogged Nokia too (Xiaomi sold 11.0 smartphones in Q1) but at least Nokia sold more than Blackberry or the Motorola unit of Google that Lenovo has now bought.
Oh and Nokia X running Android? We don't have any data points to even attempt to model that. We can be sure that some units of 'Nokia smartphones' were running Android but Nokia gives us no clue what that might be. I can't even speculate...
Now. What about Windows Phone? If we ignore the Android based Nokia X, and just for the sake of simplicity (And the absolute best-case scenario for Microsoft) we assume all Nokia smartphone sales were on Windows Phone, and if we also assume that the pattern holds that Nokia sells 90% of all Windows Phone smartphones (HTC and Samsung most of the rest) then Windows Phone has again also fallen in market share obviously and their total sales would be in the range of 7.9 million total smartphones and 2.8% market share now at the end of Q1. Yeah. It is technically the third 'biggest' but at 2.8% can you really call this a 'third ecosystem' or - remembering all Windows Phone smartphones are sold with huge subsidies and marketing support - and still at massive losses - isn't this a failed experiment by now?
(I did say that once Nokia is removed from the 'good cop/bad cop' routine of Microsoft and Nokia (Microsoft being the bad cop) now the sales will continue to decline... It seems I've been again right on the money...)
Ok. That is Nokia. I'll think on this a bit and write a separate blog about Microsof't's chances into the future with this Nokia asset (spoiler alert - there aren't any chances, but I'll explain why). Meanwhile, lets look quickly at LG
LG reported 12.3 million smartphones sold in Q1. That is a decline of 7% from Q4 (and well below the rumors of a hot LG quarter based on rumored strong China sales). LG's market share is now preliminarily about 4.3% and the Top 10 rank in the range of 5th to 7th for the Quarter.
Ok, thats the update for now. We'll do more as data comes in and yeah, I'll do a deep analysis of what chances Microsoft has in mobile (ie none).