Congratulations Nokia ! For achieving the 40% market share target

Congratulations Nokia!

Nokia is a good customer of both Alan Moore and myself and have bought tons of our book Communities Dominate Brands and featured both of us at various Nokia Marketing events around the world, etc. We enjoy the Nokia way of working and both love our Nokia phones. We greatly appreciate it that Nokia has embraced philosophies from our book and blog and we have lots of friends at Nokia. So just that alone is reason to join in and celebrate this milestone as Nokia reaches the 40% market share level.

But this story goes much deeper for me. I was there employed by Nokia back in February 1999 when the story broke that Nokia had passed Motorola and become the world's largest handset manufacturer. That was amazing news for Finland which did not have a reputation for high tech in the IT/telecoms sector. Many of our readers will know the importance of Nokia to the Finnish economy as by far its largest company with a legitimate ecosystem of supporting companies and vast employment in Finland today, around mobile phones. Yet it was only nine years ago that Nokia achieved that milestone, passing the global giant handset maker, Motorola, and snatching the number one position. That was in a market where total global sales were 162 million units and Nokia's market share hit 22.9 percent.

I remember the celebrations at Nokia back then. It was a huge moment for the company and a huge moment for Finland.

Let me give a little side story on Nokia history. Nokia the company takes its name from the town of Nokia (in inland Finland in the SouthWestern sector, near the city of Tampere). Nokia the company started out as a woodmill and then added a rubber factory. So the original Nokia made wood and pulp products, like toilet paper (yes this is true) and rubber products like tyres for cars and rubber boots. Eventually Nokia was looking for new areas where to expand, and found new needs for its rubber. The cold goods that desperately needed rubber coatings - cabling. So Nokia got into cables - wire that is rubber coated. After that, eventually Nokia noticed that there was more profit in the small ends of the cable (the connectors) than miles of wire. So Nokia got into cabling components. And soon after that, got into the electronic circuit boards that are components of electronics. Again moving on that path to finished electronic goods, by the latter half of the past century Nokia was selling home electonics and telecoms switching equipment for the fixed telecosm industry (Nokia Networks).

Only after that came mobile phones (and mobile networking infrastructure). There was a time I think mid 1980s that Nokia was on the brink of bankruptcy and sold most of its assets and units to survive. It decided to focus on telecoms. No more toilet paper, no more rubber tyres, no more home electronics etc.

With that, its a very recent shift in direction for a historic Finnish conglomerate. So now back to our regularly scheduled programming..

So yes, in 1999 Nokia overtook Motorola. It was neck-to-neck briefly, but soon Nokia took off (as Motorola was very slow to shift to digital handsets). Then, still as I was with the company, Jorma Ollila the then-CEO, announced that Nokia's goal was to achieve 40% market share. This was early Spring 2001. We were in the low 30% market share range, and I remember the mild panic that this announcement created at Nokia HQ. We could see Samsung and the Asians coming. We could see the competition getting tougher. Motorola had recovered and now was focused on digital handsets. And it was not enough to hold onto the number 1 position, but we'd need to grow the overall sales dramatically by winning even more market share. All this while the industry was rolling out WAP and GPRS (2.5G) technologies and the whole company was shifting into the 3G era.

Nonetheless, that 40% was now the stated public goal, and Nokia moved decisively to pursue that aim. For a while there was growth and the market share got somewhere near 37% or so I recall, around 2002, but then came 2003, the Razr and the simultaneous backlash by mobile operators against Nokia's Club Nokia and N-Gage initiatives. Nokia phone market share started to decline and conveniently the Moto Razr was the hot new kid on the block. Many analysts said around 2004 that Nokia had missed out on the clamshell style and even expected Moto to recover its number one position. Well, as I've told many over the years, the clamshell was a total red herring, the myth of the Razr revenge. No, it was a temporary setback to Nokia, as it reacted to the strong statements from the operator community, and withdrew the N-Gage and refocused Club Nokia to be no threat to the operators. The operators returned to Nokia in 2005 and within a few quaters the temporary Moto revival was over, and Nokia was again marching to growth.

Now the past year has seen Samsung surge past Motorola. SonyEricsson has finally gotten the Japanese-Swedish collaboration to work and are again growing ever stronger. LG is not giving up the fight. The clear loser is Motorola whose market share is in a tailspin (and their handset unit is not profitable). Samsung and SonyEricsson have profit margins in the 12%-14% range, but this last quarter against that kind of competition, Nokia grew market share, grew overall shipments and sales, and simultaneously grew profit margin for its handsets to 23.8%. Amazing performance !

And for those eager to mention the iPhone or Blackberry in this context to try to rain on Nokia's party, note that Apple sold 4 million iPhones in a bit over two quarters last year. Counting only its N-Series phones, many which cost much more than the iPhone, Nokia sold 11 million N-Series phones in only the last quarter. As to Blackberry? RIM sold about 2-3 million Blackberries last year (might be 4, I don't have last numbers) but Nokia sold 2 million E-Series (Blackberry rivals) in just the last quarter. Very impressive.

So in the global market for mobile phones, that shipped 1,140 million (1.14 Billion) handsets last year, Nokia has 40% or 456 million phones. So for every calendar day of the year Nokia now ships 1.2 million phones. Or if counted by weekdays, they ship about 2 million phones from every Monday to every Friday of the year.

And yes, now there are 1 billion people on the planet with a Nokia branded device in their pocket. Better than one in every 7 people worldwide have a Nokia device. Wow. There has never been any branded technology with this level of global penetration. Sony Walkman in its peak never was in every seventh pocket. Sony TVs or Playstations, not even close. Ford Model T car was once the predominant car on the planet, but there was not a Model T parked in every seventh yard. I wonder if any branded product has had this kind of global market share. Perhaps Levis jeans might been in that kind of penetration at some point perhaps gracing every 7th rear, I don't know. But at least nothing in the technology space anywhere near that level of global success.

And in a related story, there is good news about the Nokia Siemens networks collaboration, apparently they have already turned the corner and are on the side of making profits as well.

So, to all my friends, old and new at Nokia (and on behalf of Alan and all his friends there) and all our fans and readers of the blog who are with that giant handset maker, or partners of Nokia supporting it - CONGRATULATIONS !!!  This was a day very long time coming (not really in human years, only 7 years, but in mobile/internet years - or in dog years - that is a lifetime ha-ha), but it was a worthy effort. With its ups and downs, that incredible goal has been achieved. That has been done with a lot of innovation, listening to customers, maintaining quality and customer satisfaction.

Keep up the good work !  We love our Nokias.  Congratulations to all Nokia employees on this major milestone.

Comments

[alex]

Hi Tomi,

nice post, but you got the Blackberry numbers wrong.
They sold 3.9 M devices during 1.9.-30.11., and 3 M in the quarter before. So about double than Nokia E-Series.
However, due to RIM's strong concentration on US/Canada, it may well be the case that Nokia E-Series is selling stronger in all other geographical regions.

Alex

[Tomi T Ahonen]

Hi Alex

Thanks for the numbers. I wasn't aware of that, very nice growth with the Blackberry very recently, they were in the 1-2 million new users levels still in 2006 and 2005, so they've picked up a lot.

Tomi :-)