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Understanding Smartphone Market Share? Battle not for phones, is for platform!

Why care about market share of 'smartphones'? This is the ultimate platform war!

I was stunned last week to see how many readers on this blog site were insisting to bring the profits and revenues discussion of Apple vs Nokia, into the 'market share' analysis. And I was puzzled why something that seemed 'obvious' to me, would bring so heated arguments. I have thought about it hard, and I believe we have a misunderstanding. Most who thought profits were a valid argument, were thinking of Apple or Nokia smartphone sales as a brand of phones, against other brands of phones. Similar to cars (Ford vs Toyota), or TV sets (Sony vs Samsung), or soft drinks (Pepsi vs Coke). Yes, if that was the 'race' that you considered, yes, profit is a very valid consideration. But that was not what I meant. I was talking of something else.

PROFIT AND MARKET SHARE INVERSE PROPORTION

So yes, if you think of a handset manufacturer brand, like Blackberry or iPhone or Nokia or HTC or Samsung or Motorola or whoever, and you consider 'only' the race against other similar brands of devices, then yes, profits and market share tend to have an inverse relationship.

What do I mean? I mean that 'ceteris paribus' ie 'all other things being the same' if you and only you lower your price in the market (rivals do not change their prices) then under normal economic laws, you gain sales. In other words, your market share grows. But also, ceteris paribus, if nothing else changes in your company and you just lowered your prices, then you have cut your profits. So yes, economic theory suggests that if nothing else changes, then lowering prices should increase market share but reduce profits; and conversely, if you raise your prices, you also raise your profits but it will hurt your market share. We saw both of these in this past quarter. LG gained market share in all mobile phones but went from generating profits to making losses. And Apple lost market share but grew profits. If we consider an individual mobile phone handset maker, then yes, increasing market share usually eats into profits and decreasing market share usually increases profits.

This is all fine and well and I agree with all those who wanted to make that argument. Yes, I agree with you. But that is not what I was talking about. I am not talking about individual handset maker market shares, in the "Smartphones Bloodbath" of 2010. Yes, I follow all major smartphone brands yes, but the race that I am interested is not between individual phone makers. There is a mega-race going on. It is about the platforms. I have been trying to say that time and again, and some of my less-frequent readers seem to be missing it. I am focusing on the platform battle. What makes it confusing, is that Apple is both a smartphone maker and a smartphone operating system maker. RIM is both as well. So is Nokia. So is now also Samsung. But not every smartphone maker has an operating system (like HTC, Motorola and LG for example) and now that Google and Microsoft have ended their short-lived smartphone projects, Google and Microsoft provide smartphone operating systems, while not being handset manufacturers anymore. So its easy for an occasional reader to be confused about what I mean, when Tomi is talking about Apple iPhone 'smartphone' market share vs Nokia 'smartphone' market share, and to think that Tomi is talking of phone market share. I am not, I am analysing the bigger pircture of the platform market share battle - and the phone makers play little part sin the big war.

PLATFORM RACES ARE RARE

In cars, for a hundred years we've seen major car manufacturers compete for market share against each other. There was no 'platform' war in cars. Rarely do we see a major battle of rival new technology platforms aiming to serve the same need. But every now and then we witness a 'megabattle' that determines winners and losers for that given technology platform for decades to come. We had a platform war in the Video Cassette Recorder (VCR) wars in the 1970s and 1980s. VHS won that and Betamax was defeated. We had a platform war on PC operating systems that Microsoft Won and Apple's Macintosh lost. We had a short-lived platform war in the BlueRay vs HD DVD standards that has gone and BlueRay won.

These are far more relevant as a technology race, as the platform decides a whole 'family of winners' and a 'family of losers'. If your tech brand supported a losing side, no matter how great your product (and how profitable your company), you end up disappointing your customers and abandoning the long term gains to your rivals. The worst humiliation comes when (or if) you are forced to join the rival standard - like when Sony started to sell VHS based VCRs (or, arguably, when Apple joined the Intel CPU based computers and made Macs 100% Windows Compatible).

PHONE RACE IS THE ULTIMATE RACE

So lets understand this platform war. The smartphone race is not a race to win the current smartphone market. In 2009 the smartphone market was about 175 million handsets. What makes this battle an enormous one is far exceeding the current market size of 'smartphone sales' and their immediate projections of sales over the next few years, into the 250 million - 500 million range. The smartphone is not the start of the mobile phone industry. The mobile phone business is the most dynamic, most competitive race for the soul of the future of the most widely spread consumer technology ever. Televisions sell 300 million units per year. DVD players sell about 250 million units per year. Personal computers including laptops, netbooks, tablets like the iPad and desktops - sell about 300 million per year. Videogame consoles sell far less than 100 million per year. Mobile phones sell more than all of those - combined! Mobile phones sell 1.3 Billion units this year. To put it another way, more new mobile phones sell this year, than the total worldwide installed base of all personal computers in use worldwide.

There are 5 Billion mobile phone subscriptions in use on a planet of 6.8 Billion people. No other technology comes close to its penetration rate, not wristwatches, not FM radios, not cars, not TVs, not PCs, not even the 'plastic' we have in our wallets - even the total user base of all forms of plastic money, credit cards and all banking cards, is far smaller than the spread of mobile phones.

And even that is not the full story. Mobile phones are now the focal point of all forms of digital convergence. You remember reading 'the internet changed everyhing'? It didn't. The biggest internet giants like Google and Yahoo are now saying the future of the internet is on mobile phones. The PC industry giants like HP and Dell say the future of the computer is on mobile phones. The media giants from TV (BBC) to music (Warner) to videogaming (EA) etc are saying all future media content will be available on mobile phones. The future of the digital car is on phones. The future of digital money - is on mobile phones (Kenya became the first country where more than half of all bank accounts are now mobile, that happened earlier in 2010; meanwhile Sweden has started the debate of when should they get rid of cash money and use only mobile payments). And thats before we add all that is coming in mobile advertising and marketing too - yet another industry that is running to get into our pockets. Its time to smell the cellphone.

If you think digital convergence is a major trend in your business, whatever that business is, then mobile is at the center of that convergence. While smartphones today form only 19% of all phones sold, most major analysts of mobile believe that the majority of all mobile phones will become smartphones before the end of this decade. Many think that all mobile phones will be smartphones by then. And the relentless advance of Moore's Law certainly suggests its likely that most 'dumbphones' will turn into smartphones by the end of the decade.

FIRST BIG PLATFORM WAR

So lets take a few lessons from history's most famous platform war, the so-called Betamax vs VHS war in VCR's. Sony's Betamax was actually not the world's first home video cassette recording system. Two years before Betamax launched, in 1973, the world's then-biggest home electronics giant, Philips of the Netherlands had launched their VCR 1500 system. This early monster home gadget (it was the size of a small suitcase and weighed as if it was made of bricks) had a monster price - in Britain the cheapest new car cost the same as Philips's brand new N1500 home video recorder. The first video cassettes had recording lengths of either 30 minutes or 45 minutes. But home video recording had arrived, to Europeans.

In Japan Sony designed a far more advanced system, based on the professional U-Matic video recorders, and launched it as a consumer VCR system branded Betamax in 1975. Right from the start, Betamax tapes lasted the full hour. The devices were smaller and far more reliable than the clunky huge Philips units. And Sony was not alone making Betamax recorders. They had a 'family' of vendors who made Betamax recorders, led by Japanese electronics giant rival, Sanyo. Smaller Japanese electronics makers Toshiba and NEC were among the other Betamax manufacturers. Where Philips mainly sold only in Europe, Sony brought the Betamax to all continents.

But then in 1977, the Victor Company of Japan (we know it as JVC) launched an even more modern system, VHS, where the design was optimized for lower costs. The tape mechanism allowed longer tapes. VHS introduced 2 hours recording time. And JVC had signed up a whole army of home electronics makers including Matsushita (ie Panasonic), Sharp, Hitachi, RCA, Zenith, Magnavox etc etc etc. The VHS family of VCR makers was by far the biggest. The VHS system was also brought to all continents.

While all makers would release upgraded devices that used the same cassettes to record longer times in 'LP' Long Play versions (with a clear loss in picture quality), Philips's VCR 1500 system was soon outclassed and they discontinued that system. But Philips was not done, they came back with European partner Grundig to launch the V2000 system that offered 8 hours of recording time. The V2000 system was launched in 1979 but by then the Japanese had built such a strong presence worldwide, that the V2000 system only sold modestly in Europe and Latin America and was eventually withdrawn. Both Philips and Grundig would then join the VHS family making VCRs on that standard.

After the two Philips led systems were eliminated, the final battle, or the title bout for world dominance, ended up being between VHS and Betamax. And without any doubt, Sony made the better devices. For every generation, the Sony led Betamax family had better quality video, better quality audio, better quality still image, better quality editing etc. The Sony machines were simply better. They were also more expensive. The Betamax recorders were more expensive, the Betamax tapes were more expensive. Movie rentals were more expensive on Betamax tapes (and had less variety). And eventually even Betamax repairs and spare parts were more expensive.

Meanwhile due to mostly its lower prices and longer tapes, VHS rapidly took the market lead. By 1981 in the world's biggest VCR market, the USA, VHS had taken 75% and the battle was clearly being won by VHS. The video rental stores offered more movie titles on VHS than Betamax, soon rental stores stopped carrying Betamax titles altogether, and then rare Betamax rental stores were left. In 1988 even Sony admitted the loss, by starting to make Sony branded VCRs using the VHS system.

The race was not won by the best technology. Both Philips V2000 and Sony Betamax were far better technologies than JVS's system, VHS. The race was not won by the most profitable maker of VCRs. Due to its high quality products and superior features, Sony had the highest prices and could command the highest mark-ups and made the best profits. But while it won the profitability battle, Sony lost the platform war. Then JVC as the license owner collected billions of dollars of royalties in the next two decades of VHS video recorder devices made, VHS tapes sold, VHS camcorders produced, and various follow ups of special variants to VHS like VHS-C and Super VHS.

What do we learn from this?

1 - That it is only scale which will win a platform war.

2 - Having the best technology is not in any way relevant to winning. You have to be good enough, you don't have to be best.

3 -  Price is a major key to scale so your technology has to reach low price points to win the platform war. Being the most expensive is a guarantee you cannot win the platform race. And..

4 - You need partners on your platform to get scale. And with those partners, again their scale is the relevant point. One Panasonic or RCA as a partner to JVC in VHS was worth much more than several Toshibas or NECs for Sony (or Grundigs for Philips).

SMARTPHONE TECH WARS

And in mobile phones we now have the smartphone OS tech war, that has been running for a decade and in the past few years has seen more new OS platforms emerge, not less. Today we have ten global contenders and pretenders in the smartphone OS battles of 2010. They are ('Nokia's') Symbian (actually Symbian Foundation nowadays), Google Android, RIM/Blackberry, Apple iPhone iOS, Microsoft with its older Windows Mobile and its newer but incompatible Phone 7, Samsung Bada, HP's newly acquired Palm WebOs, and Linux Mobile. There is a new OS coming from Nokia and Intel called MeeGo (and it supercedes Nokia's short-lived Maemo). Thats it, Ten Little Operating Systems.

Currently their markets shares (Q2) are as follows:
Symbian ................43%

Android .................19%

RIM .......................19%

Apple .....................14%

Windows Mobile .....2%
Linux Mobile ...........1%

Bada .........................0%

Palm .........................0%

Phone 7 ..................(not launched yet, expected Q4 2010)

MeeGo ...................(not launched yet, expected Q1 2011)

IS RACE TO CAPTURE DUMBPHONE MARKET

And then this tech platform war is significantly different from the VCR battles in one crucial way. We have a huge existing market of dumbphones, which is in the process of migrating to smartphones. So the winner of the smartphone bloodbath won't just capture a 250 million annual sales unit market of smartphones, towards the end of this decade, the winner of the smartphone wars will capture the dumbphones market of 1.3 Billion handsets sold annually. THAT is what we are fighting for. This is the biggest technology prize of any consumer electronics, ever. The grand race for the grand prize.

Consider the Top 10 handset makers and their market shares, and what platforms they support:

Nokia................ 33% ........(Symbian, MeeGo)

Samsung .......... 19% ........(Symbian, Android, Windows Mobile, Bada, Phone 7)

LG ...................... 9% ........(Android, Windows Mobile, Phone 7)

ZTE .................... 4% ........(Android)

RIM .................... 3% ........(RIM)

SonyEricsson ..... 3% .........(Symbian, Android, Windows Mobile)

Apple .................. 2% .........(Apple)

Motorola ............. 2% .........(Android, Windows Mobile)

Huawei ............... 2% ..........(Android)

Sharp .................. 2% ..........(Symbian, Linux Mobile)

That is why it is so important to compare current smartphone performance to the dumbphone market. That is why the smartphone market share is not enough, we have to also consider that brand's presence in the dumbphone side of the business. And I have done some preliminary projections of how that future market share might look like, if all dumbphone makers manage to migrate all their customers to smartphones (not in any way a certainty, Nokia has been doing it well, Motorola very poorly)

And for those who think the cheap 'Africa phones' market is not worth pursuing, or has so cheap basic phones, it cannot be converted to dumbphones, please consider this. Moore's Law tells us that the integrated circuits will double in capacity in every 18 months, or to put it another way, we get the same performance for half the price every 18 months. So take the awesome iPhone 4 of today. It has a real 'street price' without subsidy of 2 year contract, of about 600 dollars. That is what AT&T acually pays Apple for every iPhone they 'sell for 199 dollars (plus 2 year contract)' haha. So its price is pretty much the same as a Samsung Galaxy or Nokia N8 or other 'superphones' at the high end of the smartphone price points.

Now take Moore's Law for this decade. By 2019, that exact same iPhone 4, its exact specs and parts, retina display, 5 megapixel camera, 3G and GPS etc - in end-user 'street price' would have fallen to... 10 dollars. Note I am not saying selling a used 2010 phone in 2019. I mean to manufacture and sell that iPhone 4 nine years from now, means its price has fallen from 600 dollars to 10 dollars.  But that is Moore's Law. So today if they sell 25 dollar basic phones in Africa, then yes, by the end of the decade, igh performance touch screen 3G 'superphones' that match the iPhone 4 today, can be sold for 10 dollars. Yes there will be a cheap computer even for every child in Africa, but it won't be a Negroponte 100 dollar laptop. It will be a cheap smartphone.

We are now fighting for the control of that market, where all digital convergence is headed. Where the internet is headed, where media is headed, where computers are headed, where digital money is headed, etc. The mobile phone of the future will be a smartphone, and then, towards the end of the decade, there will not be 10 operating systems. It may not be down to 1 or 2, but it will be only a handful at best. And that fight is the megawar. The 'smartphones wars' of our times.

WHEN EVERY APP STORE SEEMS THE SAME

Today the Apple iPhone App Store is clearly the best of the several dozen app stores that have launched. Apple has most apps, it has most downloads, it generates the most revenues. It has a good system for discovering apps for consumers and a good system for paying the partners who deploy the apps. By almost any measure, the App Store is the best store out there for smartphones.

But nothing that Apple does with the App Store is unique to Apple. Meanwhile the other app stores keep getting better. They are adding apps. And in the digital world its easy to copy what works on one rival and bring it to the other. Its like almost anything in the digital space. Yes, Amazon is the leading bookseller online, but if you go to another major bookseller, it seems very similar to Amazon and carries most of the same titles too, at about the same prices, and the shopping experience is similar, to the point of reader reviews, ratings etc.

In a few years all app stores will be cookie-cutter copies of each other with 90% overlap of content and apps. Just like almost any supermarket today will sell you both Pepsi and Coca Cola.

Today there is a heated argument on the tech review sites about which app store is best and who has the most of what. Soon that is irrelevant. Soon the app store is not the deciding factor, but the overall reach of the platform is. And the reach of the platform will also ever more guide the development decisions in the future. Think about the PC vs Mac environment. Few PC software app developers 'start' with the Mac version - unless its for an industry where Macs are the predominant PC, like in advertising or multimedia. Most app developers on the PC will of course make their new app first for the Windows PCs, because of the reach of the platform.

DATA PLANS SOON FOR EVERYONE

And we have the amazing adoption of data services by iPhone users. Then there is the 'surprising finding' now, that Android users actually produce very similar usage numbers (Motorola Android phone users generate more data traffic on Verizon and HTC Android phones more data traffic on Sprint, than iPhone users on AT&T, by latest Q2 numbers of 2010).

Why is that? Because the iPhone in most markets on most mobile operators/carriers was sold with an 'all you can eat' data plan. These are typical for very high cost smartphones (like iPhones and early Android smartphones). Then there is the migration of those data plans to cheaper phones. In Japan where the all-you-can-eat data plan was invented, today more than half of all mobile phone users are on such plans which includes a lot of 'feature phone' users too on all-you-can-eat data plans. Soon that is true of Europeans and Americans too. The concept that an iPhone user is somehow exceptionally heavy user of the mobile internet (or apps) will soon be forgottten. Its not the phone that is the key, it is far more the data plan.

THE ONLY THING THAT MATTERS IS SCALE

In the tech platforms you have to be biggest. As long as you are viable you can hang on. The longer a losing platform fights it, the more it creates resentment among its users to the brand, and long term bleeds support. The biggest platform always wins.

In mobile it is far too early to decide who ends up winning, because smartphones are still such a small part of all phones. But this year we'll sell about 250 million smartphones. Thats nearing the level of total global PC sales including the new netbooks and tablet PCs like the iPad. By next year smartphones will sell more than all PCs made and about a quarter of all phones sold will be smarpthones. Even as the 'end-game' for smartphones cannot even be seen, early strong contenders are emerging.

THE iOS FAMILY WITH iPAD AND iPOD TOUCH

Then many Apple loyalists are sure to remind us that with the iPhone we also have the full family of iOS devices. For every 3 iPhones sold, there are a further 2 iPod Touch devices. And now there is the new hot must-have tech gadget, the iPad.

Here we have a 'different' story. I am not dismissing the iOS platform. It is very important to Apple, and is driving its profits now. It is a very clever strategy of synergy. And yes, it expands the total reach of developers from just considering iPhones to typically launch their apps also for the Touch and iPad (and perhaps in the future, even more iOS devices). But a Playstation Portable, with a WiFi connection - is not a mobile phone. Neither is an iPod Touch. Even if you use Skype on WiFi, it is not a mobile phone.

Similarly a Kindle is not a mobile phone, and neither is the iPad. There are many synergies that Apple and its developers can find from expanding their iOS family - but a Touch or iPad is not a smartphone - just like Honda makes cars and motorcycles (as does BMW). But when we count the global market for cars, we only count those Honda motor vehicles that are 'automobiles' and we do not count Honda motorcycles.

The iPod Touch is part of the portable stand-alone media player market, like other iPods (and the Playstation Portable and Creative Labs and other media players) which has a total global market size of 195 million units sold annually. So if you want to debate how relevant the iPod is to that portable media player market (where Apple's iPods have a combined 28% market share globally) - feel free. But don't do that related to this blog article. The most used service on mobile phones is the voice call. The second most used service on mobile phones is SMS text messaging. Together these account for 90% of all services consumed and all revenues generated by the mobile industry in 2010. Your stand-alone Touch or iPad won't accept traditional voice calls and SMS text messages ('everywhere' ie beyond a WiFi hotspot). So they are not viable substitutes. Just because they can do Skype or instant messaging or email - means that they are capable of cannibalizing fixed telecoms services - not mobile services.

But yes, each major platform is likely to support some other devices, not just phones. Android has for example already been installed on some premium TV sets. So while the iOS is interesting to Apple as a company and its partners, only iPhone devices from Apple are relevant in this smartphones bloodbath, not the other iOS devices, just as I will not be counting Android TV sets either. But to be really clear - even if we added the total installed base of iOS, then Apple's global market share of 'mobile phones' would go from 2% to 3%. It is not in any way enough to 'win' the platform race. Yes, it extends very powerfully the reach of iPhone developers, but in the big picture, going from 2% to 3% when the market leaders have 19% or 43%, that is simply not enough.

IS WORTH $10B DOLLARS ANNUALLY BY DECADE-END

This is not a race to earn millions. This is the big war for the billions. Google yestereday valued its potential out of the Android platform to be worth a cool $10 Billion dollars annually towards the end of the decade when they hope to have 1 Billion users of Android devices (not just on phones, but also on other devices like TV sets etc). Ten Billion dollars annually, if you have a platform that has a Billion users. Note that even Microsoft has not achieved that level yet in the installed base of Windows operating system on personal computers (but are slowly approaching the level). And Microsoft has been able to turn its global platform lead in PCs into Microsoft being the most profitable tech company for more than two decades now.

Google's Android is taking its first tiny steps today, having less than 20 million active users of Android devices. Nokia does have a little over a Billion active users of various Nokia phones worldwide, but most of those are basic dumbphones. The whole Symbian family has a little over 300 million active users today.

But the billion smartphone user vision is not that crazy. Take the 'worst case' for the Nokia vision and the Symbian family. If Nokia loses all its Symbian partners, and only converts its own Nokia branded dumbphones to smartphones during this decade, and again, under worst case scenario, if we take the lower number, that of Nokia's total phone market share, not its better smartphone market share - even in this case, Nokia will sell roughly 450 million smartphones per year and have an installed base of about 1.2 Billion smartphone users worldwide, by the end of the decade. Bear in mind that so far, Nokia is doing far better - it is gaining market share as it migrates users from dumbphones to smartphones.

Or if things go well for Nokia, and they maintain the current level of Symbian partnership adoption in the migration to smartphones - and assuming they manage to migrate Symbian users to MeeGo, then Symbian/Meego would sell more than 600 million smartphones annually and have an installed base of over 1.5 Billion users worldwide.

And Google tells us a Billion smartphone users will be worth a bonus 10 Billion dollars of premium and related services that they will deploy during this decade. Whatever Google does on Android, Nokia can rather easily copy onto Symbian/MeeGo.

I hope you now understand what we are talking about in the smartphones bloodbath. This is the race 'for all the marbles'. The ultimate contest for the biggest prize.

IS NOT SAME AS IN PC WAR

Its easy to look at past platform battles and think this will be the same. The smartphone OS battle has similarities to the PC wars, but there are a few dramatic differences. First of all, in the PC world, the OS market grew from zero as the PC market grew grew from zero. In the mobile phone market, its not a question of smartphones growing from zero to 250 million today, but rather of the existing 'dumbphones' migrating to smartphones. And only 19% of those dumbphones have migrated to smartphones so far.

What is also important to understand, is that while 'pure' smartphone makers like RIM, Apple and HTC are indeed relevant in this early stage of the smartphone market, of all smartphones sold in Q2 of 2010, they have been pushed to the periphery. Already 65% of all smartphones sold worldwide, are sold by the big traditional 'dumbphone' makers like Nokia, Samsung, LG, Motorola and SonyEricsson. That is rapidly shifting - as their market share is rapidly growing - and will soon be more than 80% of all smartphones sold.

HAVING THE BEST PHONE DOES NOT MATTER

The second very important factor to bear in mind, is that in the PC market and the VCR market, and most other consumer goods, more or less 'normal' rules of free market economics applied. If you made a good product, on a good brand, sold at a good price, available on a wide distribution network, you could expect a 'fair' performance in the market. That applies in most technology space once they are mass market goods, like in cars, television sets, videogaming consoles etc. Most markets are 'fair' in that the best product/price value proposition will win in the market.

But that is not how the mobile phone market works. In mobile phones, the market is severely distorted by 'carrier relations' - what a mobile operator/carrier like AT&T or Vodafone or T-Mobile or Telefonica or China Mobile will decide for its market, that is what happens to phones. So for example, Google's Nexus One was rated by many analysts as a viable contender to the iPhone and should have sold well. But the early US carriers decided not to carry the Google branded smartphone - and within a few weeks of that announcement, Google had to discontinue its product.

So in selling any kind of phones, but even more so the most expensive kind, the smartphones - it is absolutely vital to have the full support of the carriers/mobile operators. This is an expensive lesson that Lenovo, Dell and Acer are going through right now. And the pricing decision of the carriers, in countries where there are handset subsidies like in the USA for example - will pretty well make or break a given phone model. When Microsoft's Kin phones were not priced competitively under their contracts in the USA, the whole Kin smartphone strategy was destroyed.

Good evidence of the carrier relationships come from Apple, who only offers the iPhone through AT&T, and whenever a rumor emerges that Apple might end the exclusive deal with AT&T and offer a Verizon version of the iPhone - Apple's evaluation on Wall Street jumps. In Asia, Blackberry is the most popular smartphone of Indonesia and a big hit in Thailand and India and many other markets, but it is not successful in China. Why? Because the Chinese carriers hadn't supported the Blackberry there (until now). And Nokia, the world's most successful smartphone is an utter failure in the US market. Not because Nokia has bad phones (and it has recently had some bad phones yes) but because the US carriers haven't offered Nokia phones with the kind of subsidised prices that they sell the iPhone, Blackberry, Motorola Droid, etc.

The world has about 600 mobile operators/carriers and roughly speaking about 70 mobile operators of the world have about 10 million subscribers or more and these 70 will pretty well decide which phones are going to be a success or not. The majority of the 600 carriers/mobile operators tend to fit into families of carrier groups, where the top 20 carrier groups account for about 75% of all mobile phone subscribers on the planet. The smallest of the top 20 carrier groups has 75 million subscribers. When we consider AT&T (the 16th biggest carrier group and largest based in the USA), the US exclusive carrier of the iPhone having 85 million mobile subscribers at the end of last year, and it accounted for a third of all iPhone sales worldwide, we can start to understand why these carrier relationships are so vital. China Unicom had 140 million subscribers but its rival China Mobile had 510 million subscribers. When the iPhone is only offered on China Unicom's network, and mean while Nokia branded smartphones are sold on both networks - its clear to see why Nokia outsells the iPhone in China, by a big margin too.

There are three finer elements of the smartphone market as it relates to the carrier relationships. I have written a long blog explaining it in detail so I will not repeat it heer. The main point for readers of this article is to get it in their heads, that you will not win only by having the best phone. It is pretty much meaningless (the Palm Pre was highly praised as the first true 'iPhone killer' with very competitive design and with competitive pricing, but it didn't have the carrier relationships to get the sales). The global race goes to the phone maker with the best carrier relationships - not to the phone maker with the best phones or the biggest app stores or the best customer loyalty - which is why Nokia and Samsung are doing so much better than LG, Motorola, SonyEricsson (or RIM or Apple or HTC). If you want to read how you win globally in smartphones, here is my long article with all the facts.

Remember this is not a fair fight. It is not a question of who has the best phone or the best OS or the best app store or the best usage. Apple iPhone is by far the best smartphone today. It is the most desirable phone and has by far the best customer loyalty. It is seen as very advanced and gets press accolades daily (excepting now the temporary bad press about the Death Grip).

Yet the world's favorite smartphone by far, the iPhone lost unit sales while the smartphone market was exploding. Apple's world-beating smartphone has been losing market share from its peak in Q3 - thats now four quarters and counting. Apple lost market share while it was undisputedly the world's best smartphone. Having the best phone is good for profits in the short run, but having the best and most expensive phone will not win you the platform war. Sony had the best VCR in its Betamax in every single generation. Apple's Mac has been the best PC in every single generation. Being best will not get you the market. Being best if you do it well, may make you the most profitable company yes, but then you limit yourself to a niche, just like the Mac has been a niche PC for its whole life.

There is nothing wrong with having a niche market, if you are very profitable at it. BMW has done that successfully for decades in the car market. Nothing wrong with it. But this is not about one company making profits out of phones in 2010. This race is for control of the ultimate tech platform of this decade - and the next.

PROFIT IS ABOUT TODAY. THE OS IS ABOUT THE NEXT DECADE

Profit is about today. Profit is a very valid consideration and a good company has to deliver profits. But the smartphone market space is treacherous. Some can't cut it and are unable to get a fair price for their phones (Motorola, Palm, LG). Others are barely profitable and struggling to hold onto market share (SonyEricsson). Others explore the market, get burned, and run away (Google, Microsoft). Others think they understand the technology, release phones that have a Death Grip problem (Apple). Still others come at the phone market from an adjacent industry like the PC market, think a smartphone is a tiny pocket PC and attempt to get into it, to devastatingly bad profits (Lenovo). Others have learned how to fight in this market, make smartphones that keep growing unit sales and market share - while making profits (Nokia, Samsung, HTC).

Market share in a platform is all about the future. There are 10 major smartphone operating systems supported today. That is far too much fragmentation. Today when there is astronomical growth rates in mobile (the smartphone market is growing at 45% annual growth rates currently), we are seeing several OS platforms continuing. Over time it becomes impossible to support all. The costs of maintaining a proprietary smartphone OS will become prohibitively expensive over time, as ever newer features are added to phones but trying to maintain backwards compatibility with older phones, and providing support to the developer community. Microsoft already took a severe hit when it decided not to make Phone 7 compatible with Windows Mobile. In that transition Microsoft lost a vital soldier in its army - the second biggest handset maker supporting the Microsoft platform - Motorola.

The very big phone makers like Nokia and Samsung can afford to maintain their own operating systems (Symbian and MeeGo for Nokia, Bada for Samsung). Nokia sells more than a million phones every day and Samsung sells three quarters of a million daily. Recognise that the total global shipment number of Windows-compatible personal computers never shipped a million computers per day for any quarter. This is the scale we need. Compare that with the likes of SonyEricsson, Motorola and Apple who sell about 90,000 new phones daily. At those levels the development costs associated with an operating system are very steep. Yes it can be done, if you are very profitable, with a very desirable superphone - like Apple with the iPhone or perhaps like RIM with the Blackberry - but for how long.

SO WHO WINS?

I am not saying we'll know the winners in this year or the next. But I do suggest that the battle for the smartphone OS today, is a battle for this decade and the next, not just for this quarter and the next. There will be winners, and the power of an Android or Symbian (and Nokia's evolution path to MeeGo) or Bada is far far more than that with Palm/HP or RIM or Apple iOS or even Microsoft Phone 7. This battle did not start in 2007 when the iPhone launched, nor in 2009 when Android launched. The battle started a decade ago. The iPhone is a blip on the radar and is meaningless in the long war for the OS. We have recently seen newcomers join the battle, but there was a time when Microsoft's Windows Mobile powered 3 out of every 10 smartphones. There was a time when Palm was the world's second bestselling smartphone. There are new rivals today, but the smartphone was invented by Nokia. The giant of smartphones, when Palm challenged it was Nokia. Palm died in that contest. The giant when Microsoft challenged for the smartphone market was Nokia. Microsoft lost its 2nd place and is today lingering in 5th place. The giant when RIM challenged for it, was Nokia. RIM growth has stalled and is now on a plateau or even declining. The giant when Apple challenged it, was Nokia. Apple's iPhone reached its peak market share in 2009 and is now in decline. Now the newest challenger is Android.

Differing from Palm, RIM and Apple, Google has built an army to challenge Nokia's Symbian army. Android has a far better chance than Palm or RIM or Apple did, when taking on Nokia and the Symbian army, by themselves. Android has a legitimate chance and is showing its muscle today. And Microsoft is trying desperately to make a return to the battle - the first Xbox was not a big global success but Micrsoft stayed in the game and the second generation Xbox did a lot better. Microsoft Phone 7 also has an army of manufacturers supporting it. Don't count Microsoft out of it.

The world undefeated heavyweight champion of the smartphones market share world battle is Nokia with Symbian. They are the champion who has to be defeated if you want to take the heavyweight 'belt' of the champion. You have to knock them out to take it. Apple, RIM, HP/Palm and the Japanese Linux Mobile platforms don't have any chance of the scale to even step into the title bout (and Microsoft's Windows Mobile has bowed out of the contest). Sooner or later some of these proprietary platforms will be terminated as too costly to maintain and develop. These makers will sooner or later join one of the major platforms.

The three real contenders to Nokia/Symbian/MeeGo throne are Google Android, Samsung Bada and Microsoft Phone 7. The size of the mobile phone market is so huge and growing so fast, that its quite possible to be viable for several years with just a fraction of the global market. But the phone makers will also make their bets and are likely to reduce the number of platforms they support, rather than increase the number. Motorola has already cut its support away from Microsoft (and focus on Android). SonyEricsson is said to consider a similar cut (to quit either Microsoft or Symbian or both, and focus on Android). Samsung will probably put most of its efforts to support Bada (and try to recruit some partners to the platform). Meanwhile Nokia will struggle with a complex dance of migrating Symbian smartphones to MeeGo, similar to how Microsoft shifted from DOS to Windows in the late 1980s and early 1990s. This transition will be costly and Nokia will be vulnerable in that transition which will take half a decade in time, probably.

The key point to remember is that we are examining a battle royale among smartphone platforms, not among individual phones. It matters not one iota who makes the best single phone at any one point in time. Profit matters only to the degree that the platform supporters are able to generate profits to some degree to remain in the race - the question of who makes the biggest profits is irrelevant. Remember the Sony Betamax lessons with being best and being most profitable.

What matters is scale. Scale driven by low price. Scale driven by an army of partners and suppliers. If you have an installed base of dumbphones - you have to be successful in converting dumbphone owners to buy your smartphones. And as this is not an open contest with 'fair rules' where the best value to the consumer will win the market success - this is an 'unfair' contest where carrier relationships will determine disproportionately who wins and who loses. In this race the handset makers have to cater not to consumers, but to the carriers. They are very few, they have all the power, and they will punish you for years, if you anger them now.

That is why I am following the smartphones bloodbath with such interest this year. This is the most dynamic time in smartphones, when for the first time ever we have 10 platforms for smartphones and at one point in this year we had 24 Global Fortune 500 -sized companies committed to offering smartphones. I said the the competition would be too intense, that the blood would run and we would see many twists and turns in the wars this year. So far Palm went bust, and so far Google, Microsoft and Vodafone have quit the smartphone manufacturing business. But the platform war continues. I will keep you posted.

 

 

Another Casualty in Smartphone Bloodbath! Vodafone pulls plug on 360 smartphones

I did suggest this would be a bloody year for smartphones but honestly I didn't expect this many casualties. Its only July and we've seen 4 deaths already. Palm (but re-birth via HP), Google Nexus One, Microsoft Kin and now Vodafone.

Vodafone had earlier launched some cheap featurephones for emerging world markets like India. Then they announced Android based smartphones for their Vodafone 360 service environment. Now this week we heard that there won't be any Android smartphones on the Vodafone brand. Thats the 4th major Smartphone player, and the third of Fortune Global 500 rivals to quit the smartphones race.

Also this highlights how incredibly rare that success by Apple was with the launch of the iPhone and how exceptional - truly excellent - their entry was into the smartphones space. Notice that after 'learning Apple lessons' giants like Google, Microsoft and Vodafone - have not been able to crack their way into this market.

Its very very bloody in the smartphone wars. LG made losses with its phones business. Motorola reported a surprise profit in its handset division, but that was a one-time gain out of a lawsuit settlement with RIM. Without that money, Moto would have lost money again in its phones business. The competition is so tight that competitors are dropping like flies. And managements at very big global corporations do make investment decisions and product commitment decisions based on some very serious calculations. Google, Microsoft and now Vodafone have decided that the phones race is too costly to join (or to remain in). I think this suggests the times are so bad, that we will still see more casualties this year. Whose next to quit? Yahoo?

Lets talk inputs: Touch Screen and QWERTY

Lets talk about inputs, touch screens and QWERTYs and T9s and hybrids.

We heard earlier this week that Motorola has found 30% of consumers are not willing to consider a phone that is a pure touch screen phone. This number is growing. A few years ago it was mostly only older teenagers and young adults, of whom about half (in the USA, 42%) were so addicted to mobile messaging, that they could send messages 'blindly' ie with the phone hidden in their pocket or behind their back or under the table. That portion (heavily SMS-addicted, tactile text input obsesed) was only about 13% of the total population a few years ago by my measurements worldwide - ie roughly half of the 16-30 year old segment of the total population. But the 'I must have my physical text input' customer segment is growing, and it is now 30% according to Motorola.

SO TO START WITH NUMBERS

Yet statistics also tell us that the sales of touch screen phones are growing faster than QWERTY keypads, and in the top price ranges, in the smartphones - touch screens now outnumber QWERTY inputs according to Canalys. Their numbers tell us that of the 'primary input' of smartphones now Touch Screens are twice the size of QWERTY, while QWERTY are twice the number of basic T9 among smartphones. Both QWERTY and Touch screen keep growing, but in this price range, touch screens grow much faster. I wish Canalys would include the hybrid number (how many have both QWERTY and Touch, because obviously that is a significant number and we don't know where they allocate those. In 2009 NPD told us that 20% of all phones with advanced inputs had both Touch Screen and keyboard. It seems to me, that this form of input is becoming more popular, not less).

But that is the top range of phones. Among all phones, QWERTY is still the primary form of advanced input. I have not seen public domain numbers recently for both, but NPD gave US numbers for 2009, where 26% of all phones had a touch screen input and 35% had a QWERTY input. My company, TomiAhonen Consulting has been tracking these numbers globally, of course, and I'm happy to provide to you my company's current breakdown for end of 2009 is as follows:

All mobile phones sold in 2009 by input method
Touch screen input only ..................11%
QWERTY input only .......................13%
Combo input Touch and keypad .........3%
Basic T9 keypad only .....................73%
Source: TomiAhonen Consulting 2010

(As people have been asking for that number, I will be adding it to next year's TomiAhonen Almanac. The current 2010 Almanac did not have the number as the total number was still so small in 2009 compared to other features of phones that have far larger numbers like color screen, camera, media player, bluetooth, memory card, etc, which I report in the TomiAhonen Almanac 2010)

These numbers are fairly consistent with the tidbits that are coming out like Gartner telling us 184 million phones sold in 2009 were touch screen, and the Indian government saying they have 9 million 'chatphones' ie locally made cheap QWERTY texting phones, LG reporting they sold 18 million QWERTY phones in 2009 etc. Those proportions (13% pure QWERTY, 11% pure touch, 3% combo) are very similar to NPD numbers and also are in line with how Blackberries outsell iPhones; and how Nokia's E-Series (ie mostly QWERTY) now outsells N-Series (ie mostly touch screens)). RIM is the world's bestselling QWERTY phone maker with the Blackerry selling 17% of all QWERTY based phones worldwide in 2009. Samsung is the world's bestselling touch screen phone brand, selling 21% of all touch screen phones. Apple's iPhone took 13% of all touch screens last year.

Touch screens are the hot story now. They also 'seem' more 'modern' and touch screens allow bigger screens in classic candybar phone form-factors (remember, the iPhone is also considered candybar form factor, ie it is not a 'flip phone' or a slider..). So any web browsing and screen-intensive experiences like watching pictures, videos and playing videogames are all experiences more vividly with larger screens. So lets explore this a bit deeper.

We had basic T9 keypads from 1979. It was the only way to control our phones and early mobile web surfing was even driven by the numeric keypad, the numbers on the keypad offered shortcuts to various links on the WAP page. We got the first full QWERTY keypad in 1996 with the Nokia 9000 Communicator. A cheaper and simpler QWERTY layout was introduced by Blackberry and most QWERTY keypads today are of the 'Blackberry style' including many Nokia E-Series phones. Then we had the touch screens. There were modest attempts to introduce touch screens before the iPhone, but we can say that it was not until the iPhone in 2007, that touch screens became commercially viable and popular among users. If it took QWERTY 14 years to reach 16% of all phones sold, and only 3 years for touch screens to reach 14% of all phones sold, it is clear to see the hottest idea in phone inputs today is touch screen.

AGAIN I THINK ITS SIMILAR TO CARS

I do think we have a good analogy from cars, and from PCs. Cars analogy first. The earlier, simpler and more 'labor intensive' way to control the speeds of a car, was a manual transmission. And then a newer, more user-friendly, simpler-to-use, but more expensive way to manage the gears of the car, was the automatic transmission. And a kind of hybrid solution is now the high end automatic transmissions which allow the driver to select the gears, most typified by premium sports cars like Ferraris and Aston Martins having the 'Formula 1" style 'flappy paddle' automatic gearbox operated while holding onto the steering wheel, like a racecar driver...

So which is better? If you 'hate to drive' or are not very well coordinated, then definitely the simple use of an automatic gearbox is far better than attempting to learn to coordinate the clutch pedal and gear lever movements to change gears dozens of times in typical driving situations. If you are a 'real driving enthusiast' like say the reviewers of the Top Gear car program, then they will always prefer a 'real' manual gearbox for real driving pleasure, and most sports-oriented luxury cars tend to offer the manual transmission as an option for this reason. But globally there is a clear gradual decades-long trend where cars are shifting from manual gearboxes to automatics. In the USA most cars sold are automatics and Europe is well on that path too. In cars the automatic option tends to be the more expensive way to do the gear selection (vs manual gear shift) and thus cheap basic cars tend to be sold with manual gearboxes, which is of course the majority of cars sold worldwide, where many of the emerging world markets are the big market opportunities for cars, like China, Brazil, India, Russia etc.

Meanwhile we have another similar shift in the PC world. Originally the PC was controlled by the alphabetic keyboard layout taken from the typewriter (that is where we get our QWERTY style of layout for the keys). The PC added a numeric keypad to the side - early PCs were very heavily used in the accounting and business uses where numeric entry was very important, and the keyboard added the function keys (on top of the alphabetic keys, F1 through F12) which were an early way to offer advanced controls to complex computer programs like WordPerfect. That resulted in the 'classic' 101 key keyboard of the IBM PC and its compatible siblings. Our current laptop computers have keyboards that attempt to mimick that 101 key layout with some size-related compromises (the numeric keypad being 'embedded' into the alphabet keys of UIO, JKL, M<> for example.

Imagine how cumbersome internet surfing would be today if we didn't have the mouse, and had to surf the web using the keyboard only. Or worse, try to edit photographs without a mouse, only using a keyboard. It would be hopeless.

So in 1984 it was Apple who brought us the Macintosh which did change everything about the PC, in terms of how it was used. Among its many innovations, the Mac introduced us to the mouse as an alternate input method. And today all PCs have some kind of mouse input.

But the mouse didn't kill off the keyboard. The mouse and ever more clever on-screen navigation, and context-sensitive menus with programs, did make the function keys almost obsolete but even though the mouse is a great way to navigate websites (or edit photographs), we still use the alphabetic keys of our PC keyboard very happily to do our emails, our blogs, our Twitter comments etc.

Now we are witnessing another dawn of perhaps another era, with the iPad. It has no physical keyboard at all, but offers a virtual keyboard. I am not convinced this will replace all keyboards but it may well become one major alternate way to control our computers.

PHONE INPUTS COMPARED

The three major types of inputs for mobile phones have their own merits each. The T9 form is very simple and cheap. If the user really does not need internet use or any major uses beyond voice and basic text entry, a T9 keypad is perfectly fine. Remember that 74% of all mobile phone subscribers on the planet do NOT use the internet on their phone in any way. If they have a camera on the phone, they won't do significant editing of the pictures, and basic navigation of an image (ie 'zoom' etc) can be done very comfortably with the T9 keys. It would be foolish to attempt to force these customers to accept very expensive touch screen phones to replace their basic phones, before they express an interest and willingness to migrate their phone behavior to more advanced features.

T9 has another benefit, it is very easy to learn. If you have never learned the bizarre order of keys on a QWERTY keyboard - remembering the keys are not in an alphabetic order, so new users have to 'learn' where the given alphabetic keys are - and early use of such a keyboard can be slow - the T9 is very quick to learn. All keys are in alphabetic order and you only have to memorize the location of 8 keys to have the full alphabet. There are many teenagers who are faster at typing on a T9 keypad than they can on a full PC keyboard with its full-size 'comfortable' and dedicated QWERTY keys. This may seem odd, but remember, these are the same kids who can master a videogame with the simpler controls of a Playstation keypad than using the same game on a PC keyboard or for example a 'real steering wheel' for a driving game etc. Simple has its benefits.

QWERTY FOR THE HEAVY SMS CROWD

So then came QWERTY. The early heavy users of QWERTY were wireless email users, as the early QWERTY phones were almost all smartphones, and tended to be very expensive ones. These were used often for email. That then migrated to SMS use and now also for various social networks like Twitter and Facebook, and of course instant messaging users, in particular those using Blackberry messenger. This is what that Motorola finding is all about. Roughly speaking half of older teenagers and young adults are so addicted to mobile phone messaging, that they send over 50 messages per day (a third send more than 100 per day from the USA to UK to South Korea) and at that level, users become so powerful and fast messaging users on their phones, that they learn to send messages blindly, almost without thinking. Many heavy users are able to carry on two separate SMS conversations on two phones using both hands, simultaneously.

These are the seriously heavy users of mobile, and I would say these are similar to the 'serious' drivers of cars, who insist on a manual gearbox even on their premium BMW or Audi. They want to be in full control of their driving experience. So understand this point. QWERTY is not demanded by wireless email users, or of corporate/enterprise business phone users. They could very well adapt to virtual keyboards on touch screen phones. But the current QWERTY addiction is directly related to SMS and mobile instant messaging addiciton of the youth and young adults. While the input method is 'older' than touch screen, and is not as versatile as touch screens can be, for the use of messaging, QWERTY is far better. Like a racing car driver, who wants to be in control of shifting the gears. And then, consider the magic of mobile messaging. Mobile messaging is powerful not only because it is fast, it is powerful even more, because it is so secretive. You can send messages secretly in class. You can send messages secretly from the dinner table, with your hand hidden in your pocket. If you are a teenager and make a call, your mom or dad, or your brother or sister, might be listening to what you are talking about. But with SMS and mobile instant messaging, nobody gets to 'eavesdrop' of to 'snoop' in your communications. This is FAR MORE important than the 'optimal' internet surfing experience.

TOUCH SCREEN

The touch screen, as finally solved by Apple iPhone with the multitouch capacitive screen technology, has now enabled convenient internet surfing on a small screen phone, without a stylus, without a mouse, and without cumbersome keypad navigation tricks. The 'mobile web' use has experienced steady growth since NTT DoCoMo of Japan launched the first full intenet service on mobile in 1999, but the usage was never explosive. Not until the iPhone came along. Today touch screen smartphones, usually combined with all-you-can-eat data plans - are driving internet adoption and use among mobile phone owners. The phenomenon of the App Store and billions of downloads is related to this. It would have been far more subdued if there was no touch screen interface to the iPhone. While the touch screen alone is not as good as the traditional PC with both the full 101 key keyboard and a mouse, the touch screen alone is far better for internet surfing than a keypad or even QWERTY keyboard alone, on a phone.

As we see the mobile internet adoption increasing, that will help drive the demand and appreciation of the touch screen interface.

The touch screen also became the easy way to look at photographs on a phone. Remember again, that for 90% of the population of the planet, who have ever used any kind of camera, the only type of camera they have ever used has been a cameraphone. Don't think of yourself and your luxurious lifestyle who also own a stand-alone digital camera (or if you're older like me, you've also owned many film based cameras). That is a tiny minority of all the camera owners on the planet. The world has now over 2.5 billion cameraphones in use, vs under 250 million stand-alone digital or film based cameras. Touch interfaces are better also for manipulating photos, so as the basic picture editing applications on the cameraphones get better, then here too the users will appreciate the touch screen interfaces to adjust and alter their photos.

The touch screen definitely offers better ways to explore existing pictures but the touch screen is also cumbersome as a camera operation interface. Most touch screen cameraphones offer at least some controls on separate 'dedicated camera buttons' on the side of the case, like the shutter button. But for things like zoom and flash setting and lighting control etc, touch screen controls are a severe compromise when compared to dedicated camera buttons. This is where 'general purpose' cameraphones will be hurt and 'serious' cameraphones will offer more dedicated buttons and controls. Its one reason why 'slider' form factors for advanced cameraphones with touch screens are very viable.

So with cameras its a mixed bag. A pure touch screen is not optimal for taking pictures, but large screens are better for watching pictures and pure touch screens can be excellent for the sharing and definitely touch screens better for exiting photos than non-touch screnes.

The virtual keyboard on the touch screen is also good enough for most users. Remember that even the heavy SMS addicted part of the population is only 30% of all consumers, so we have 70% of the population who are not that bothered. If they need to send a message, the virtual keyboard is definitely 'good enough'. For many who have learned to type of a PC, when 'upgrading' from basic T9 to a good touch screen virtual keyboard like that on the iPhone - they experience a significant increase in typing speed. The virtual keyboard is better than basic T9, and that is most definitely good enough for most typical users.

But the virtual keyboard obivously consumes a large part of the available visible display. That means that the available display is limited, so the users see far less of the messages or twitter feeds or emails or blogs etc that they are reading about and writing to respond to. It is a compromise. The more severe problem comes from 'single handed' operation. Most users of touch screen virtual keypads are not dexterious enough, with very fine-tuned muscle memory, to be able to type on the virtual keypad single-handed. The virtual keypad is designed to be used on a stable surface (like the table at a Starbucks) and with the typing done with both hands. T9 and most QWERTY physical keyboards can easily be operated single-handedly.

This is not a big factor if you are using your phone primarily in a seated situation, like in meetings at the office or in yes, coffee shops and the airport lounge. These are typically not the young addicted users (called 'digital natives'), they are typically the older 'digital immigrant' type of users who are trying to shift their experiences from the PC and internet world into the mobile world. For those who are fully addicted to the phone, they use the phone continuously - young adults will look at their phone more than once every 5 minutees of every waking hour of every day - and will be using the phone while walking. So the user will have other things in the other hand, like the bag with the school books, or a brief case, or an umbrella, or the grocery shopping bag, or perhaps holding the hand of the child on the way back from kindergarden, etc. These users keep using the phone in one hand while they move about in their day, and they will want the ability to fully control the phone single-handedly. A pure touch screen phone will be cumbersome, and at times impossible to use this way.

BOTH INPUTS

Like the flappy paddle 'professional racing driver' control of modern top sports cars, that allow both an automatic transmission and the control by the driver, a phone input where both touch screen and keyboard entry are used, is the ultimate top-of-the-line that answers both needs. It allows totally dedicated keys for keyboard-intensive uses like text entry or camera operation; while including touch screen use for internet surfing and picture viewing. This is the most expensive solution obviously, it means the phone software has to understand both forms and most applications on the phone have to recognize both types of inputs (logically, consistently, intuitively). The input methods will have a lot of overlap, so there is redundancy here that is perhaps even unncessary costs for some users, and the technical solution means the phone will be far larger physically than one with only one or the other.

The form factor means either a severe compromise on the screen size (to maintain candybar form factor) or else a more expensive and bulky design with a flip or slider configuration. A physical keyboard added to a touch screen means that your phone will not be as slim as the current iPhone model for example, and for many that bulkiness is a sign of being old-fashionied. It also adds weight and cost. But inspite of this, I am confident this category will grow to take a far bigger part of the total handset space, because many SMS addicted users will want to 'also' have a big touch screen, and then, perhaps less so, some existing touch screen users will develop a desire to have a dedicated QWERTY keypad as well.

WHAT OF SWYPE

And yes, just like we had the predictive text innovation to try to solve the 'problem' of T9 text input (heavy users tend to turn predictive text off, so its a typical crutch for those who were not born into the digital world), we now have the great idea of Swype, as a solution to allow 'lazy' touch screen text entry, swiping, with approximately the right characters, and Swype will use its intelligence to guess what word you meant. This is another very intelligent solution to solve a problem using automation. Some will like it, others will hate it, just like predictive text. The problem with Swype is that you have to learn how to use it. It doesn't take long to learn but you have to go through that process. Many who have gone through it, say their text entry is lightning-fast and accurate on the touch screens. Fine. My gut says, we won't get everybody to bother to learn a new way. It is a nice crutch, but my guess is that for the heavily addicted texting users, they won't bother. They use so much of the cryptic shorthand of SMS communication culture (and the ever-changing jargon of the youth and pop culture), that they'd need to be constantly updating and correcting the library for Swype. Maybe I am wrong, but we have to see, I am not expecting the world to start to use Swype, but I do see it as a good solution for many who do have a touch-only smartphone and want to get faster typing on it.  

WHAT OF VOICE INPUTS?

Yeah. That old story yeah.. I do think that in the long run we'll get to major voice inputs of all of our digital devices. The intelligence of voice recognition is getting better, but its slow going. Note that for most uses of our phones, voice input is actually not optimal. If you are sitting in the Starbucks, how quickly will your neigbors get annoyed if you try to navigate your mobile phone activities (or your laptop or your iPad) using voice inputs. How many times would you get errors of inputs in loud places like the airport or train station. How many times do you want to control your phone quietly - sending a discrete message to your wife from the meeting, that you are running late.. So even if voice inputs were to be perfected (they are nowhere near there yet), then voice inputs are going to be only a partial solution. So think of the user in the car. If you commute to work every day in your car - alone - then it doesn't matter at all to you, if you speak to the phone and it speaks back to you - reading your messages to you etc. But if you are car-pooling and there are 4 colleagues in the same car, it would be pretty impossible for all 4 professionals to use speech controls on their phones in the same confined space of the car. Or consider the train or bus, even more of a hassle.

I do believe we will get ever more clever uses from voice controls - and from text-to-voice reverse uses, of voice as the output (great when driving a car, when you can't take your eyes off the road to read messages, but you can listen to messages if they are read to you). But at least for the near future, next several years, I do not see voice inputs or outputs as the main inputs and outputs of your phone behavior. A growing area yes, but a minor solution to inputs (and outputs), not the 'ultimate' solution. Just look at Star Trek, with their clever talking computers haha, even there the crew regularly had to input commands using the touch screen keyboard entries, where a voice communication would be far more complex than simply touching with your fingers..

THE CASE FOR THE CASE 

We do also have the curious case of the case. The iPhone Death Grip antennagate brought to light the issue that many iPhone owners buy their smartphone with a case (and now the official Apple solution to iPhone 4 Death Grip is to give away a free case with a new purchase). This to me was something I never appreciated, as I have never particularly liked cases with my phone(s). I carry my phone in my pocket. But it occurred to me a couple of days ago, that since I use my Nokia E90 Communicator as my primary phone - and it is a 'palmtop' style flip phone (ie wide flip) - that is not suited for most basic cases. A case is most suited for a candybar form factor like on the iPhone. The same is true of many of my past phones like the N93 contortionist phone or the N80 slider, and obviously all my previous Communicators too.

MANY FORM FACTORS TO CONTINUE

In the laptop PC world, the original Toshiba T1000 laptop from 1985 is very clearly the forefather of modern laptops, notebooks and netbooks. There was never a major rival form factor (until now, with the iPad and tablet PCs). Fro 25 years the laptop has held a very standard flip laptop form factor, the big screen on the lid and the full QWERTY keyboard on the bottom part of the flip construction.

In mobile phones we sell numerous popular form factors today. We sell the basic candybars, sliders and flip phones, with T9 inputs, QWERTY inputs and touch screen inputs, or a combination of the above. This reflects the different major types of customers of phones, and the major 'primary uses' of phones today. For some it is primarily an internet access device. For others its primarily a messaging device. For others still it is primarily a camera. And for many older users it is still primarily a (voice) telephone. How you use the phone - and your previous history with other inputs like using a PC or using a Playstation - determines what kinds of inputs you will prefer. There won't be one overriding form factor for phones. Not for many years to come. But expect touch screens to grow the fastest right now, as the phone makers learn from Apple on how to do touch screens well.

Thats my thinking about Touch versus QWERTY today. I am interested in your views and this is obviously an area that is evolving.

At Last Confirmation! 'Missing Million' iPhone Surge Sales Q1 Was in China

I have been waiting for the confirmation and CNBC just said that the total cumulative sales of iPhones on China Unicom has passed 2 million. It was 400,000 by the end of 2009. As regular readers know, all analysts who offered a forecast number of iPhone sales going from Christmas Quarter Q4 sales of 2009 to the Jan-Mar quarter of 2010 (including me) had forecasted a decline in sales. Absolutely every analyst expected a decline (because previous years there was a clear decline after Christmas). And even the USA sales of AT&T showed that exact pattern again in 2010, so it was a 'reasonable' expectation. But there was a mystery 'missing million' iPhone sales in Q1 which was obviously international sales.

I took it to task to study where it was and did some math on Apple's results and its published China numbers. I concluded that missing million was China sales related to Lunar New Year / Chinese New Year sales. I also then found that Nokia reported a Q1 'Chinese New Year' related gift-giving period bonus sales (Nokia Q1 China sales were strongly up, and now in Q2 it was China which is strongly down, also showing a big seasonal jump). The reason we haven't seen this before in China in smartphones, is that it was only in 2009 that China started its 3G networks and the iPhone was introduced late in 2009 for China.

So I promised I'd track the industry and wait for the numbers. Now today CNBC has just said China Unicom cumulative sales of iPhones has passed 2 milliion. As the international sales of iPhones are down 14% from Q1 to Q2, its fair to assume the majority of the new Chinese sales of 1.6 million iPhones were in the first quarter, not the second quarter of 2010. The 'missing million' has been found and now verified.

So now we know there is a 'new' pattern of iPhone sales. Big growth Q3 when the new iPhone has been introduced. Roughly similar level sales in Q4 for Christmas (Western country gift-giving season) and perhaps similar level sales in Q1 of the next year for Chinese New Year gift-giving season. And then a decline of sales in Q2 before the new iPhone model is released.. 

And who told you first haha.. (yet once again, they again ridiculed me..) 

A Week is a Long Time in Smartphone Bloodbath - AT&T, HTC, Microsoft

We had the quarterly results from Apple and Nokia which were the big news in the Smartphones bloodbath for last week. Both companies had further bad press, Apple around Antennagate on which I did some math about the real scale of Apple's numbers, and Nokia around rumors that the CEO may be replaced. But there was more news in the 2010 smartphones bloodbath.

AT&T

AT&T reported numbers that for Q2 there were 3.2M iPhones activated (which is up 19%) leaves only 5.2M for rest of world (which is down 14%). The big reason why the rest of the world is down in Q2 is that the new iPhone 4 was only launched in 5 countries, so the AT&T proportion will be more than normal. This is not a sign of problems for the iPhone abroad.

We also learned from Yankee Group that the average household income of iPhone owners is 100,000 dollar household vs 85,000 dollars for other smartphone owners (the US median household income is 52,000 dollars according to US Census Bureau). No big surprise that the iPhone has highest earners, but note that the Blackberry is by far the most common US employee phone smartphone, for mostly mid and senior management. They are well paid. So with that in mind, yes the iPhone is in a very high price bracket as a luxury good, and far from a mass market consumer device.

Death grip - Switzerland becomes second country to delay iPhone 4 launch until Antennagate is fixed. And IDC survey from Friday of Apple's Antennagate press conference reported that 2/3 of existing iPhone owners will delay iPhone 4 purchases until antenna is fixed. Bad news for Apple as most iPhone 4 sales were to existing customers. They still say all phones they can manufacture are sold, and there are week-long waiting periods, but that is temporary and now diminished. They might have had 3 week waiting periods through to October haha, now the waiting periods will soon subside as Apple ships its next batches to stores, if existing iPhone owners stay away. Meanwhile Apple continues to keep the Death Grip Antennagate in the news. After its press conference Apple added a Nokia and a Motorola smartphone to its video collection, which to me seems like a bad strategy of remining users of Antennagate and keeping it in the press.

(Personally I think Apple will bring a new variant of the iPhone 4 which will be called something clearly different, to try to move away from the Death Grip problem very soon and bring those customers back who are waiting).

Microsoft

Microsoft revealed the launch partner phone makers for its new OS, Phone 7. The phone makers are Samsung, LG, Dell, Acer and HTC. Only two of the five are major handset makers, as Samsung and LG are numbers 2 & 3 among the world's top 10 biggest dumbphone makers. The maker conspicuous in its absence is Motorola, which did provide Windows Mobile smartphones but has apparently abandoned the Microsoft family. Samsung, LG and HTC all provide Android phones already so it remains to be seen how eager they are to provide major support to Phone 7. As Samsung has its own Bada OS, don't expect huge effort by Samsung to support Phone 7. And HTC is the bestselling Android maker so it would seem they would put most their effort to retaining the lead on the fastest-growing smartphone OS platform. But it is also possible especially for LG to do a differentiation strategy against SonyEricsson, Motorola and ZTE, by focusing on Phone 7. We have to see and monitor the developments.

In other MS news, it was revealed (but not confirmed) that AT&T has committed to selling 8 million Phone 7 smartphones from Microsoft. But while that number may seem big, remember that AT&T sells more than 12 million iPhones annually, so it does not yet spell awesome success for Phone 7. 

HTC

HTC has said they will launch 6 more smartphones before the end of 2010.

RIM

Blackberry maker RIM Admitted it didn't see the kids coming.. That it took RIM by surprise to find all the youth around the world falling in love with the Blackberry.

That is the rest of the news in the smartphones space. We will keep monitoring the Bloodbath wars here at the Communities Dominate blog

The Potential for Smartphone Platforms if All Phones Become Smartphones

Now that Microsoft has released the supporters of its Phone 7 platform for smartphones, we can do a bit of mapping of how the different smartphone operating systems might fare, if all of the current mobile phone makers, migrate all of their customers to smartphones. While Nokia has taken an aggressive path to migrating all of its users to smartphones, most of its traditional big 5 phone maker rivals had been slow to do so, and only got energized recently with Google's Android platform.

Note that there is an increasing body of opinions and forecasts, that in the mid to long term view, like towards the end of this decade, all phones would be smartphones. I think that is a very plausible view, considering the relentless pace of Moore's Law. But if so, which platform is strong and which is weak. Even if not all phones go to smartphones, its very likely that most phones in Europe, North America and the wealthy countries of Asia-Pacific will soon be smartphones. So this analysis is an early indicator of what platforms would emerge as major players.

Lets examine the Top 10 phone makers globally, and calculate what is the maximum potential of the platform, if all phone vendors of the Top 10 that have picked it, decide to support fully only that given platform. In some cases this is obvious, like RIM only supports Blackberry its own phone and no other providers support the Blackberry OS. Same for Apple. But in the case of Samsung its a bit of everything. Samsung has its own Bada operating system, but Samsung also supports Symbian, Android and the old MIcrosoft platform, Windows Mobile. So lets plug in the numbers and see what is the potential. Remember because I am assigning maximum support to each OS, that means our totals are far more than 100% - so in reality someone like SonyEricsson will probably continue to support a couple of platforms like Android and Symbian, so then these maximums will need to be adjusted downwards. But I think this is indicative of the 'upside potential' of each platform. I am ranking them in order of their currently stated support.

Symbian Foundation (closely linked to Nokia): 58% (currently 49% of smartphones)
from Top 10 supported by Nokia, Samsung, SonyEricsson, Sharp
Biggest current manufacturer: Nokia
Note Symbian without Samsung: 38%

Android (Google): 40% (currently 22% of smartphones)
from top 10 supported bt Samsung, LG, ZTE, SonyEricsson, Motorola, Huawei
Biggest current manufacturer HTC (not a Top 10 sized manufacturer)
Note Android without Samsung: 20%

Old Windows Mobile (Microsoft, discontinued): 34% (currently 12% of smartphones)
From top 10 supported by Samsung, LG, SonyEricsson, Motorola)
Biggest current manufacturer HTC (not a Top 10 sized manufacturer)
Note WinMo without Samsung: 14%

MeeGo (Nokia + Intel): 33% (not launched yet ie 0% of smartphones)
from Top 10 supported by Nokia

Phone 7 (Microsoft) 28% (not launched yet ie 0% of smartphones)
from Top 10 supported by Samsung, LG
Note Phone 7 without Samsung: 8%

Bada (Samsung): 20% (currently 2% of smartphones)
from Top 10 supported by Samsung

Blackberry (RIM): 3% (currently 20% of smartphones)
from Top 10 supported by RIM

iPhone iOS (Apple): 2% (currently 14% of smartphones)
from Top 10 supported by Apple

Linux Mobile (LiMo Foundation) 2% (currently 6% of smartphones)
from top 10 supported by Sharp
Biggest current manufacturer Fujitsu (not in Top 10)

I think the above shows clearly why Samsung decided to go with Bada and why Nokia would be foolish to abandon Symbian or its MeeGo platform to go Android.

Also note how big part of Android footprint is Samsung (also for Microsoft Phone 7), once Samsung shifts full attention to Bada, Android will be far weaker (as will Phone 7)

I think if you examine the full potentials of Symbian and Android, they are clearly the big players. Samsung will battle with Microsoft for runner-up role. RIM and Apple are far too small to have a chance once the transition is in full swing.

Mid-Year point for Nokia next, in Bloodbath Update. And they DID grow smartphone market share (again)

So next in line we have Nokia's quarterly results out today. And how did Nokia do? As always with this series of the 'Bloodbath' series of articles - remember we are looking at smartphone market shares in this discussion, not revenues or profits... 

Nokia reported 111 Million total phones sold (up 5% sequentially from Q1) giving Nokia a market share of all phones of 33%. This is down from Q1. The average price was flat at 39 Euros.

So is Nokia still shifting more of its customers to smarpthones? Sure it is. Once again, Nokia's market share in smartphones is better than its market share in dumbphones. Nokia sold 24 million smartphones in Q2, up 12% from Q1 and giving Nokia once again also growth in market share, pushing it to 41%

I do have to make a mention of this point, as so many clueless tech and business press reporters keep saying that 'Nokia is losing market share to Apple' or that 'Apple has been taking market share from Nokia'. Now lets examine the past 12 months. Here are the four quarters from Apple's peak market share in Q3 of 2009 and please compare and then go listen to the press.

Apple.....Q3 17%...Q4 16%...Q1 16%...Q2 14%
Nokia.....Q3 38%...Q4 39%...Q1 40%...Q2 41%

The popular myth for all of 2010 has been that somehow Nokia is losing smartphone market share to Apple. The truth is exactly the opposite. Apple is consistenly losing market share to Nokia. That is now four quarters and counting.|

(and yes yes yes, Apple gets 600 dollars per iPhone sold, Nokia gets about 200 dollars. Apple posted huge profits, Nokia posted modest profits. I know. As a corporation, Apple is currently vastly more profitable than Nokia, but this blog is NOT a financial analysis blog. This analysis is about market share, And Apple is losing, Nokia is winning the battle.)

Also Nokia is at the brink once again of so utterly dominating this field, that it is as big as the next 3 biggest smarpthone makers combined. Consider. Nokia's Q2 smarrtphone sales = 24.0M units. Then RIM + Apple + HTC = 24.1M units. That is market dominance. Sadly the only market where this is not true is the North American market, so US analysts tend not to see this in their home market, and they have to just believe  the reported numbers, that in Europe, Asia, Australia, Latin America and Africa - Nokia is the bestselling smartphone.

Meanwhile Nokia's Ovi store is up to 13,000 items of content and apps, and is generating 1.7 million downloads per day, which is a rate of about 620M per year.

Nokia also announced that the N8 has started shipping.

And two Nokia related news items. Motorola sold its networks division to NokiaSiemens Networks. And the financial press has been gossiping that Nokia CEO Olli-Pekka Kallasvuo may be replaced. But nothing confirmed.

So my quick comment? I suggested at the start of the year that the Bloodbath would be bloody, many rivals would rush in, and the big incumbent smartphone makers would have to yield some space to the newcomers like the Android smartphone makers. Nokia has been incredibly resilient and feisty. Since the start of the year even as Android grew from 5% in December to 24% global market share today. You would expect that to hit all major smartphone brands. Yet in the same period - Nokia grew from 39% to 41%. I think that is very good performence in the smartphones bloodbath. And this was clearly not something I had expected..

UPDATE JULY 23 - The market share analysis I have in the above is now independently verified by Strategy Analytics and Reuters has a good graphic which shows the market shares.

CLARIFYING COMMENT from Friday - I notice we have 32 commments added in one day, which is very much at this blog which is not a commercial blog (we have no advetising, I do this as a hobby only, purely out of my passion to share, and I do have a real-time job as a telecoms consultant that keeps me very busy). Many in those comments have been critical of me, that I don't discuss the financial side. So. To be very clear. This is not a financial analysis blog. Inspite of that, I have made clear mention here at the Nokia quarterly sales blog comment, that Nokia's profits are down; and I also mentioned in the corresponding Apple quarterly results blog that they had a phenomenally good quarter on their financial performance.

Why does this blog 'bother' with market share of smartphones? It is of interest to me, that is the only reason. I have been monitoring the smartphone market share for a decade - find any other published author or expert who has published such data in his books and blogs - as an individual analyst, not a market research analyst house like Gartner or IDC or Canalys whose job its to sell market analysis. I don't sell any smartphone market analysis reports. This is a hobby for me, and along with my personal motto - in a connected age sharing information is power - I post my obsevations on this blog. The financial performance is not of interest to me. I have a Finance MBA from St John's University in New York City, the second biggest private university in the USA and a huge MBA factory - and I worked on Wall Street early in my career. I couldn't care less about financial performance metrics. I find it utterly boring and nobody can force me to waste my time doing that as a hobby. Something I hated doing as a job. I like the mobile telecoms industry and I analyze that industry for the industry platform metrics - how many subscribers, how many unique users, how many multiple SIM cards, how many mobile phones, how many smartphones.

If you find value in understanding whose smartphone platform has most market share - and this tends to be of interest to companies developing services and apps to smartphones, as well as to those component makers who provide components to smartphones - then there is no other blog currently that does this type of deep analysis of whose smartphone platform is performing how. Then you may find value on this blog. If you want to do financial analysis, this is not a financial analysis blog. Go somewhere else! 

I am not going to respond to any comments of any readers who mention financials as an issue. I was very clear in the original blog entry here, that this discussion is about market share, not about profits. So I will delete every comment posted here that went into the financial discussion even if that comment had any other 'valid' comments. I will - however - maintain all those comments and post them here, as a one extended history of what was said by others, so if you did post a comment, yours will not be 'eliminated'. But I will not respond to them. Go to UBS or Deutsche Bank or Citibank or whoever financial analyst you want, and have your financial argument there. I am not wasting my time on something - that I said openly this blog is not about. There are enough blog entries on this blog about the business of mobile telecoms - like just a day before my blog about Nokia CEO, where you can post about business performance including profits to your heart's desire. We have over 1,400 postings here and most of them deal with business and money. We also have over 4,400 comments posted on this blog, and you will find that I respond to every comment, in detail. But this blog series - the 'bloodbath' - has nothing to do with profits, and all to do with market share. Its my blog, my rules, and no financial discussion about it, this is about market share - to those who care.

Deleted comments are here after this link:

Obituary for OPK: Wall Street is a Cruel Mistress - Nokia searching for CEO

Wall Street is a Cruel Mistress. The business press are buzzing with the rumor that Nokia is searching for a replacement for Olli-Pekka Kallasvuo (OPK) their CEO who has only run the company for 4 years following Jorma Ollila who is now the Chairman.

Nokia is the world's bestselling mobile phone brand - selling more mobile phones as numbers 2 and 3 combined. Nokia is also the world's largest smartphone maker - selling more smartphones than numbers 2 and 3 combined. Nokia is profitable where most rivals are struggling to make profits. None of Nokia's big 5 global handset makers have managed to migrate customers to smartphones in meaningful ways, while Nokia's market share in smartphones is better than its market share in dumbphones. By all measures Nokia is executing well. Why is Wall Street demanding his head on a plate?

I think its a combination of 6 factors. There is Apple's iPhone of course. Then there is the question of Nokia's profits. There is one particular Nokia phone model, the N97. There is the smartphone operating system Symbian. There is OPK's promise to investors that he would restore Nokia's market share in the US market. And lastly - but very importantly - there is the relative lack of sophistication and knowledge of the US based analysts who are far more familiar with the easier and simpler PC industry than the complex mobile industry. This is another very long article, so please bookmark the page and read it when you have good time. Grab a cup of coffee to go with it.

WHAT DID OPK INHERIT

OPK took over from Ollila to run Nokia in the summer of 2006, four years ago. What was the mobile world like back then? Nokia was the world's bestselling mobile phone maker. For the full year 2005 they had achieved 35% market share. Their big rival was Motorola who was nearing 20% market share with their surprise hit phone 'Razr' and many analysts were accusing Nokia of having missed the boat on flip phone design - thinking the world would soon all have Razr look-alike phones (how quaint, isn't it. Today most phones are still candybar phones - the Nokia staple - even Apple's iPhone is a candybar form factor, not a flip phone, as are most Blackberries and most Androids..).

In addition to Motorola's Razr surge, the two big trends in mobile phones in 2006 were 3G phones and musicphones - and in both, Nokia was accused of having falled seriously behind. SonyEricsson was launching Walkman phones, Motorola its Rokr. And in 3G Nokia had only about 25% market share vs 35% in all phones where the South Koreans LG and Samsung had taken a surprising early lead.

In 2006 the tech world was not very impressed by 'smartphones' - the category of superphones that Nokia had invented exactly 10 years before - and most analysts felt that the very expensive smartphones would only sell to enterprise/corporate users with business-oriented smartphones like the Blackberry and various Palm, Windows Mobile etc devices. US analysts didn't even believe in mobile data services in 2006, as the USA was the last country to discover SMS text messaging and didn't really believe in SMS until the Obama Presidential campaign of 2008. And here was Nokia with its crazy notions of expanding the expensive smartphone market to consumers - the N-Series - with the cameras and music players and user-installed applications and video recording and forward-facing second cameras for 3G videocalls and internet surfing and picture messaging - all that was seen as a dangerous and costly gamble by many analysts.

But Nokia believed in its views. It had set up the Symbian partnership with its rivals (something we don't see Apple or Microsoft or RIM even trying today) where all of Nokia's biggest rivals - Motorola, SonyEricsson, Samsung, Panasonic etc were invited to join as part of the Symbian family - as co-owners! By 2005 there were 60 different smartphones manufactured by ten major phone makers using the Symbian OS, which powered almost 7 out of 10 smartphones. Nokia was the biggest minority shareholder in Symbian - but only minority, it couldn't dictate Symbian development. The OS was being developed to meet the varying demands of the partners, including Motorola asking for improvements based on the laggard USA market, to NTT DoCoMo asking for improvements based on the world-leading Japanese mobile market. Nokia was there in that mess, but determined to keep it a partnership that helps all, rather than having the mobile phone industry fall into an all-out war of a dozen duelling smartphone operating systems and immense fragmentation.

So when OPK took over, Symbian powered most smartphones in the world. Nokia's market share in smartphones was a fraction of that, obviously, being 48% for the full year 2006. Microsoft Windows Mobile based smartphones were the second biggest platform behind Symbian with 14%. RIM's Blackberry had 8% of the market and Motorola who made both Symbian and Windows Mobile smartphones had 6%. Previous global number 2 smartphone maker Palm had fallen to 5%. The total worldwide smartphone market in 2006 was only 80 million handsets, about 8% of all mobile phones sold. Of the world's Global Fortune 500 brands, only 7 were involved in manufacturing or selling smartphones, so the competition was not very fierce.

ENTER APPLE

The first thing that happened during OPK's reign and changed 'everything' in the phones market was Apple entering the phones space, with Steve Jobs demonstrating his prototype iPhone in January of 2007. OPK had only had half a year in control, when the whole mobile world changed forever. And all the rules changed too.

Up to 2007, the best marketing machine in mobile telecoms had been Nokia, hands down. It was loved by the tech media and had the best customer loyalty in the world. But Apple is far better than Nokia in marketing. And Apple's customer loyalty is legendary. A new kid was in town. Steve Jobs is the master showman even back home in the USA, where marketing and presentation is given far more relevance than in OPK's home country of Finland, where you are expected to conform to the rules and stick to the facts. Not to brag, not to show off.

The iPhone 2G was not the best phone in the world. Apple has since made 15 major technical improvements to the original, over the past 3 years, and Apple itself has celebrated those 15 changes as radical and important. Nokia's flagship N95 which was being sold before the iPhone 2G even launched in 2007, had 14 of those 15 technical abilities as standard features. And the N95 had tons more features and abilities that even the latest iPhone 4 does not support. By every reasonable comparison, the N95 was the superior phone in 2007. Except for one very visible drawback - the N95 didn't have a touch screen. And most head-to-head comparisons of smartphones by international reviewers in 2007 found that the N95 bested the iPhone 2G.

But somehow with Apple, the facts no longer matter. The iPhone was the ultimate best phone ever - according to Steve Jobs - and because Steve Jobs says so, that started to become the storyline. The truth didn't matter. That the iPhone 2G was not even a proper 'smartphone' - it didn't even offer users the ability to install apps (this ability came a year later) and didn't support industry standards like MMS and even today doesn't support Adobe Flash. The iPhone 2G was not a 3G device, making it instantly obsolete for example for the Japanese market and didn't have such abilities as GPS and stereo bluetooth. But that didn't matter. If your smartphone didn't have the one cool thing the iPhone did - a touch screen - it seemed that your phone was old-fashioned.

Nokia was manufacturing over 50 phone models when OPK took over. The iPhone was outrageously expensive and with that price point, it could 'afford' to install a touch screen. Nokia sold a wide range from superphones more expensive than the iPhone (yes thats true) to far cheaper dumbphones with basic T9 keypads. It would have been prohibitively expensive to abandon the existing product lines of its existing 50 or so phone models at Nokia in 2007 and migrate them all with reckless abanbdon to touch screens (and a dumb move too - even today in 2010, more QWERTY based texting-oriented phones are sold than touch screen phones; and more basic T9 keypad based phones than all QWERTY and touch screen phones put together).

But it was not only about the phone with Apple, ie the hardware. And no, I'm not talking about the UI or the apps or the App Store or the iOS eco-system. Something far more devastating changed with Apple's entry to phones. For Nokia, someone changed the rules of the game in January 2007 and didn't bother to tell Nokia. Because Apple was in the game, now anything Steve Jobs said was the word from god. And no matter how severely deficient the first iPhone models were, because they were Apple phones, that meant they were the world's 'leading' phones. And if you didn't match the current iPhone model with a potential 'iPhone killer' - then you were obsolete. Suddenly in 2007 Wall Street lost its respect for facts, and started to believe Apple's version of the story, ignoring the truth. And most analysts who would study the iPhone would come from the PC side of the tech industry, far more familiar with the relatively simple and easy PC industry than the remarkably complex mobile telecoms industry. Those PC industry experts were very familiar with Apple's accolades and could see in the iPhone the long-held promise of the pocket PC. Again it didn't matter that Nokia was the first phone maker to boldly call its smartphone a 'multimedia computer' - the truth no longer mattered in 2007, when all stories were now spun by Apple's PR machine. Besides, with Apple's touch screen, the 'pocket PC' metaphor seemed far more compelling than with Nokia's early smartphones with keypad based navigation.

I do not mean this as a criticism of Apple, I mean it with admiration. Apple are masters at marketing. They know how to wow the investors and Wall Street. They know how to play THAT game. So for example, RIM has sold more Blackberries every single quarter since Apple launched. The past 3 quarters when Apple's iPhone unit sales have been flat or declining, and the iPhone market share has shrunk from 17% to 14%, in the same time Blackberry's unit sales have grown and its market share has grown. How does Wall Street report the story? They keep repeating the factually opposite from the truth story - they keep repeating the myth that RIM is losing market share to Apple's iPhone. The exact opposite is the truth. Apple is losing market share to RIM! But with Apple, Wall Street is hypnotized. Facts no longer matter, it is what Apple says.

So suddenly the rules of the game changed. Now its the ultimate game of hype and spin-the-story. And Nokia was Finnish to a fault, being the 'stick to the truth' very honest and open story, any problems too, bring them into the open and volunteer as much truth as possible. This had been a good strategy back in the Era Before the iPhone - when the rivals were other very engineering oriented, facts oriented rivals like Motorola, SonyEricsson, Samsung etc. Now there was a new kid who seemed to play 'unfair' and start to distort the market opinion with all sorts of bizarre claims and facts and 'innovations' which certainly were not invented by Apple and often were simply established industry standards. Look how Apple handled the Death Grip problem. First, it denied the problem and told customers to hold the phone differently. Then Apple said there is no hardware problem, there was a software bug in the display of the phone. Only after Consumer Reports verified the problem, did Apple do a formal acknowledgement of the issue, but then, Apple blamed the press (for supposedly  spreading a false story) and then took the child's excuse - everybody else is doing it too (which turned out not to be true) and then finally said the problem is miniscule (again not true). This is the modern spin-doctor way to handle a crisis. That is the Apple Way. Fight the story, control the story, deny it all, change the story, blame the reporters, blame the rivals. Spin doctors that Donald Rumsfeld and Dick Cheney would be proud of.

When facing a rival like Apple, what Nokia needed from a CEO, was a showman and a brawler. OPK is not that showman and its not in Nokia's ethos to go out and fight. What Nokia needed was over-hype and super-celebration of its huge legacy of achievements and every possible new tidbit it was doing. Nokia has a trophy cabinet full of innovations and patents and true world leadership it could celebrate with every major phone launch, but Nokia doesn't do that well. It is understated. It is the wrong rival to Apple, Nokia can't win in a marketing-spin game. Not with OPK in charge. That is not his style (nor the style of previous CEO Ollila either). It is anathema to Finnish management style. They want to 'do it' rather than 'say it'. They want actions to speak rather than words. They believe in cooperation, not competition. They want to work with their rivals, not fight with them in public like Apple does with Adobe and Microsoft and now HTC and Samsung etc. And then Nokia are bewildered why is Apple getting all the accolades for deploying solutions and systems that are industry standards and Nokia has had on its smartphones for years already.

This was a total change and it hit OPK and his team hard. There was an unreal aspect to the coverage of the phones market, in particular the smartphones market, after the iPhone launched. Nothing was the same, and still up till today, Nokia has not adjusted to the press relations and analyst relations and investor relations side of the new world order in the iPhone Era.

Consider how unfair this issue is. Apple has today 2% of total phone market share. Nokia has 34%. Apple has 14% market share in smartphones - and has lost market share now for 3 straight quarters. Nokia has 41% market share in smartphones and has been growing market share in the same period. Of Apple's flagship phone the iPhone 4 - with its 5 major improvements now in 2010 - Nokia has had 4 of those in its phones long before 2007. Why is Apple given any credit as the 'leader' and Nokia accused as 'having lost the lead'?

But Nokia doesn't know how to sell itself to Wall Street. Not to match Apple's amazing PR spin machine and Steve Jobs's stage presense.

Apple yes is the most profitable phone maker (it is the most profitable tech company too) but it is 100% certain that Apple could not sustain that level of profits if it sold 20% of the world's phones. That is classic 'niche' luxury bracket market share profits - its what Porsche does in cars. Nokia is not a Porsche, its more like Toyota. Nokia's motto is not 'connecting rich people of the West'. Nokia is connecting people. Period. All people including the poor in Africa. Selling new phones as cheap as 25 dollars, unsubsidised. Selling 3G smartphones as cheap as 100 dollars, unsubsidised. Thats one sixth the price of an iPhone, yet its a 3G smartphone. And Nokia is still doing it profitably. It is patently unfair to do any financial comparisons of Apple's niche smartphones-only luxury goods strategy to Nokia's mass market strategy.

Apple will never, ever, have 20% of the global mobile phone handset market. Never. It cannot hope to have it, why? Because Apple has a huge investment in its design and look and feel, which is expensive to maintain with its expensive California based designers. Apple's price points are far above the industry average in anything it does. Look at the Mac line of PCs. The Macs have always been premium priced PCs. The Macintosh sells in the 3% or 4% market share globally. That is what Apple is good at. The Mac has never had even 15% of personal computers. Never, not one quarter in 26 years since launch. That is Apple. It is a luxury premium design brand. That is not a true rival to Nokia! And if Nokia abandoned its 35% market share in the mass market, and put all its effort to win some share in the small 4% luxury bracket where Apple currently is, I'd get a shotgun and go shoot the CEO myself. No, Nokia has been doing the right strategy (for a mass market brand). It has had to manage its global dumbphone market share (profitably) while migrating its customers to smartphones (profitably) and has been able to do that, where Motorola, Samsung, SonyEricsson and LG have been spectacularly unable to do that.

But now that Apple is in the game, and as Apple is the master at stealing the spotlight, suddenly Nokia is being compared to Apple! How unfair is that? Its like comparing Toyota's total range of cars and their average engine performance, to the performance of the Porsche! Giving no credit that some Toyotas have four doors or big cargo ability or diesel engines, etc. Just on Porsche's particular one advantage! Come on, Toyota sells taxis and family sedans and rugged off-road vehicles and cheap city cars and luxury sedans and hybrid eco-cars and minivans - and some sports cars too. Porsche cannot offer anything in almost any of those other categories. Porsche is pure performance at luxury niche prices, profits and markets. Toyota cannot be compared to Porsche, not fairly. Compare Porsche to Ferrari or Aston Martin, and compare Toyota to Ford or VW or Nissan. But no, Nokia finds itself now constantly compared to Apple.

And then that bizarre and cruel twist of the facts. While Nokia's market share in smartphones is growing and Apple's is declining, the storyline for nine months now and counting, has been from Wall Street - that Nokia is 'losing market share to Apple's iPhone'. This is absolutely categorically factually untrue! For the past year the exact opposite has been happening. Apple's market share peaked in Q3 of 2009 and is in decline. Nokia has turned its market share decline back into growth. And with any other tech brand as Nokia's rival, there would be sanity with the tech reporters and business press. But its Apple and their hypnotic way to change the perception of reality.

PROFITS

Which brings us to OPK and Nokia profits. When he took over, Nokia had 21% profit margins. Last quarter (Q1) Nokia reported 4% profit margins. During his tenure Nokia reported for the first time in more than a decade, a quarter of making losses (last year). And twice this year Nokia has already issued profit warnings. This is a very valid Nokia investor concern and the CEO has to take very strong leadership in profits.

So again, the nemesis. Apple makes ever bigger profits one quarter after the next. But Nokia is in three businesses, in the 'dumbphones' business, in the 'smartphones' business and in the networks business. In the dumbphones business, since OPK took over, almost for the full 4 years Motorola has reported losses. SonyEricsson has reported losses about half the time. LG has reported losses several quarters and even Samsung reported losses a few times. Nokia's handset business has never reported a loss! Does Nokia master its core business? Yes. Does it get credit for it? No, because a luxury niche smartphones-only maker called Apple makes tons of profits.

In smartphones Nokia has been making profits too. Not all its rivals do that. Yes, Apple and RIM make profits, but HTC and Palm have been making many quarters of losses, Palm did them for three years straight until bought out by HP. The smartphones business is no guarantee to make money - witness how quickly Google pulled out of the market with its Nexus One 'superphone' and even more astonishingly Microsoft, who pulled the plug on its own smartphone 'Kin' project in only 6 weeks. Nokia keeps making profits in the smartphones space - a market it invented and it utterly dominates - selling more smartphones than Apple and RIM combined. But because Apple makes massive profits, and Nokia only modest profits - Nokia is punished. It is not compared to the other major handset makers like SonyEricsson, LG and Motorola who have struggled deeply in attempting to shift to smartphones.

In networks the story is truly bleak. Ericsson has been barely profitable countless quarters and making lossses in many more. Alcatel has reported many quarters of losses. Canadian Nortel and American Lucent were making losses and were sold. Motorola's networks division was deeply in the red until sold to NokiaSiemens Networks now. But Nokia's networks division has been on the threshold, making mostly slim profits, but falling into losses several quarters. Is it fair to compare Nokia's brave and mostly successful performance in this deeply unprofitable industry against Apple's niche smartphones performance? I think not. But networks do about a third of Nokia's total business and is a heavy drag on its profitability. To put it another way, the handsets business (dumbphones and smartphones) are far more profitable than Nokia's corporate profitability. But the networks unit has hurt Nokia's corporate performance.

Is that the responsibility of the CEO? Yes, definitely. Is it something OPK could have done and fixed? Yes, he could have sold the unit or spun it off. Or he could have instituted severe staff cuts to reduce costs. Or he could have increased networks division prices trading NokiaSiemens Networks market share for better profits. Yes OPK could have been a more ruthless CEO and made painful cuts and forced the networks unit into better profitability, helping Nokia's bottom line immensely. He didn't do that. He was a more 'Finnish' CEO respecting the individuals and giving the division time. Was he too soft? Its a tough call, but this is management difference very strongly between US and European managements. OPK is definitely a European manager.

SYMBIAN

Then we have the Symbian operating system. The analysts seem to hate Symbian. There are continued calls for Nokia to abandon Symbian and adopt Google's Android. There were many who suggested Nokia should have bought Palm to get its operating system and replace Symbian with Palm.

Here life is utterly cruel to OPK, to Nokia and to Symbian. A decade earlier, Nokia could have very easily developed its own OS for use with only Nokia branded smartphones. That would have been the better thing for Nokia but not for the industry. Nokia has believed in open systems, partnering and industry standards (where Apple, RIM, Microsoft and Palm have all been pursuing proprietary solutions that create industry fragmentation). So rather than create only its own OS, Nokia invited its rivals to join in the Symbian Partnership: Motorola, Sony, Ericsson, Panasonic, Samsung, etc. Who does this? Especially where Nokia had invented the smartphone and had a huge lead in smartphones, and Nokia very much in public said it believed that in the future the smartphone market would be enormous? Why 'gift' this advantage to rivals? But that is the Nokia Way. They believe in cooperation with rivals, especially on standards. Nokia wanted a global standard OS. They had 10 handset manufacturers providing Symbian phones by the time OPK took over Nokia in 2006.

So what did Nokia and Symbian do when the iPhone appeared? They first started to develop a touch-screen oriented Symbian evolution. Note that if you compare the 'advanced' Apple OS/X or iOS of the iPhone 2G in 2007, Symbian was MILES ahead of it in 2007, in everything else except touch interface (and please please remember, even today in 2010, the majority of all phones do not use touch screens, not even smartphones). In 2007 Symbian supported apps (Apple added app support in 2008); cut-and-paste (Apple added in 2009); folders and multi-tasking (Apple added in 2010). Even today, Apple doesn't support Adobe Flash, the internet industry standard which Symbian has supported for most of the decade. Why is Symbian 'accused' of being old fashioned and Apple's iPhone OS 'celebrated' as being modern?

But the Apple interface looked futuristic, and its touch interface was 'intuitive' and definitely modern. Far more modern than keypad navigation. But this is only one aspect of the OS. By any other measures, Symbian was ahead in 2007. But this was now the Era of Apple's iPhone, and nothing mattered except Apple. So no matter what else you had, if you didn't have touch interface, you were obsolete. That was suddenly the new thinking in 2007. No matter how unfair, that is how the world reacted to Apple's spin.

Yet consider what Nokia did. Symbian was a partnership. Nokia spent a billion dollars to buy out its partners, and then Nokia would have owned Symbian to do anything with it. What did Nokia do? This is totally Nokia philosophy - the best thing for the industry, not just for Nokia's short term interest? Nokia turned Symbian into a Foundation and made it fully open source. Apple's iOS is not open source. Microsoft's Phone 7 is not open source. Neither is RIM's Blackberry OS or HP's Palm. Who is 'advanced' and who is retarded? Who is the true leader? But this is how Nokia does things. The Symbian OS is still used by leading smartphones made by Samsung, SonyEricsson, various Japanese phone makers - and of course Nokia. Apple, RIM and Palm do not license their OS to anyone else. Is this the 'right thing' or the 'wrong thing' for Nokia to do with its smartphone OS strategy?

If you were Nokia with Symbian after Apple's sudden success of its App Store in 2008, what would you do? You'd want an app store, wouldn't you? The Apple iPhone App Store has received all the big press and attention. Did you know Nokia launched its first app store in 2003? Yes, five years before Apple's App Store. And then while Nokia was carefully working with its carrier/operator partners - where Apple rudely bypassed the operators/carriers and deployed its App Store to bypass the carriers/operators - Nokia still was able to build an app store - with operators/carriers. Again that Nokia mindset of cooperation, not abuse. And how is Ovi doing? It was the world's third most successful app store behind Apple's and GetJar's. Still, where is LG's app store? Samsung's app store? Motorola's app store? SonyEricsson's app store? Nokia has the world's 3rd most used app store and gets no credit for that, while Nokia started before Apple and works through its partners, not against them. And Apple gets all the accolades as it thumbs its nose to the industry and bypasses the chain. Yeah I like Nokia's approach more, even if it takes more time.

And the first Symbian touch screen version was not very good. Nothing first generation usually is (remember all the missing 'standard' parts in Apple's iPhone OS in 2007). But what is Nokia and Symbian doing with it now? They do as they always do, keep improving. The touch interface is getting better. It need not be as good as Apple in the touch department, as long as it is good enough. Nokia is not trying to become a Porsche of supreme performance only in one type of vehicle; Nokia does the full line of phones to all market segments. So as long as its 'sports car' is reasonably good, if that same platform (Symbian) also supports business phones and youth phones and cheap Africa smartphones, etc, then it is far more suited for Nokia's vast market - and its partners who make smartphones for other markets! And you know what? Nokia is now selling more touch screen phones than Apple does. Yes.

Then if you were Nokia, what is the perfect strategy? Seeing the new operating systems like Google's Android and Samsung's Bada and Microsoft's Phone 7 - all operating systems developed after the iPhone - what would you want in an ideal world? You'd want Nokia to embark on its own super OS for 'modern' touch-enabled smartphones. But not to do it like Apple or Microsoft with proprietary systems. And you'd want Nokia to license the new OS to rivals, not like Apple and Palm and Samsung, but more like Google's Android and Microsoft's Phone 7. And you'd want Nokia to use Linux as the basis of that new OS, like Google Android.

Better than that, you'd want Nokia not to abandon its vast Symbian developer community. So you'd want the tools to be made compatible for Symbian developers also to be able to develop on the new OS,wouldn't you? That is opposite of what Microsoft did, when it abandoned Windows Mobile developers when switching to Phone 7. And where there is a Linux heritage to Google Android and Japanese Linux Mobile phones and Nokia's new OS, you'd want Nokia to pursue 'compatibility' into the future, among all Linux OS platforms including Android, wouldn't you?

And if you could ask for one more thing, a partner, a global giant partner, so Nokia isn't doing this alone. That theoretical smartphone OS strategy is 'everything you have in Google's Android' - but more and better and even more kind to Symbian partners and Nokia's heritage.  That is not the quick solution and not the cheapest solution, but it is by far the best solution for Nokia, its developer partners, its handset manufacturing partners and Nokia's future - as well as the industry. When Apple and RIM and Palm and Samsung all selfishly release smartphone operating systems only for their own platform, that only hurts the industry with unnecessary fragmentation.

So now Nokia. This is exactly what Nokia is doing with MeeGo, the Linux based totally new smartphone OS, developed together with Intel. They have over 20 manufacturers already signed up to release devices using the MeeGo operating system. The development tools for Symbian will be harmonized with MeeGo to allow smooth migration. This is Nokia's future smartphone OS. Isn't this the 'perfect' strategy for Nokia?

You didn't know all that, did you? Isn't this a very prudent, well thought out, strategic path for the brand whose smartphone OS (Symbian) in Q1 of 2010 still sold more than Apple and RIM and Android - combined! Give the developers a growth path into a cutting edge touch-oriented Linux OS, but along the way, don't abandon the Symbian platform and the Symbian handset partners and developers.

Because Nokia has a strategy already in place for MeeGo, there is utterly no point in even considering going Android. Buying Palm would have been idiotic in this environment. But then consider true Nokia rivals SonyEricsson, LG and Motorola - they do not control their destiny. They don't even make a smartphone OS. They are utterly dependent on Google or Microsoft (or Symbian or MeeGo) for their smartphone future. Which is the right strategy? And what of Samsung? Nokia saw smartphones as a strategic direction in 1996. Samsung launched its own smartphone OS, Bada, now in 2010. Is Nokia not miles and years and yes, lightyears ahead of its real rivals, Samsung, LG, Motorola and SonyEricsson, when it comes to smartphones? But no, now there is an Apple in the market, suddenly Symbian is 'obsolete' and Nokia is 'lost' in its smartphone strategy? No, OPK, life is not fair. Wall Street is giving you no credit for the best strategy in smartphone OS's and is rewarding Apple for very sub-optimal, proprietary, industry-dividing, hurtful, excluding smartphone OS strategies that even refuse basic internet standards like Adobe's Flash being supported.

With Symbian, Nokia has failed in communicating clearly its strategy. It didn't defend Symbian's reputation when it should have. It has ignored Apple's 'improvements' and let them enter into the folklore of Apple's supposed leadership. This is as much OPK's and Nokia's PR failure as it is a failure of Wall Street in understanding Nokia, Symbian and MeeGo. If more QWERTY phones still are sold in 2010 than touch screen smartphones, then isn't there at least some merit in saying that Symbian will allow excellent QWERTY use, for enterprise/business phones - where Apple utterly fails - and for the youth segment that is addicted to SMS. No, Nokia doesn't know how to fight a PR war and with a better OS and a far superior OS strategy, they lost the perception war. Now all think that Symbian is a dinosaur in its death-struggles..

US ANALYSTS

So then there is that aspect, that the country where there are more Nokia investors than any other, is the USA. It is Wall Street which decides what the majority of Nokia investors feel and think, not Helsinki or Stockholm. And American analysts are very knowledgable and have high standards of reporting and analysis. They have excellent tools and there is a huge resouce of various tech analysts who support Wall Street bankers. The USA tends to lead most industries of high technology so there is an abundance of competence to do deep analysis of computers and rocket science and nanotech and microbiology and home electronics and automobiles and the internet industries and almost any other, including the fixed landline telecoms industry. As it happens, the one technology area, where the US domestic market lags the world leaders by many years is also one that is evolving currently the fastest - and that is mobile telecoms.

American domestic mobile industry analysts are very much behind the times, when it comes to mobile telecoms. This is due to no fault of their own - they are very competent and hungry for information and are doing a professional job. But it is the US domestic market which has stagnated, fallen years behind the world leaders, driven now by true industry dinosaurs like the carriers Sprint, AT&T, Verizon. Note that almost all traditional major mobile tech vendors from North America have gone bust including Palm, Lucent, Nortel and now Motorola which was in the process of splitting into two. American mobile telecoms is so far behind, it took outsiders like Apple and Google to come and revitalize it. The US domestic mobile industry is a corpse, rotting.

Now understand, I am an ex Nokia executive and a Finn. You might forgive me for arguing that Finland leads the mobile world (and indeed there would be plenty of evidence to suggest that) but I do not claim that. The world's leadership in mobile has shifted from Northern Europe to Northern Asia, where Japan leads closely followed by South Korea, Taiwan and Singapore. And note, I live in Hong Kong, so I am not somehow championing my new home country either.

Very quick evidence. Those cool things you liked about the iPhone? GPS? 3G? WiFi? App Store? 5 megapixel cameraphone? Touch Screen? Games? HD video recording? Video calls? - those were all invented and done first on mobile phones in Japan, years and years before the iPhone (obviously all done in Japan before Nokia did it too).

Or consider the carriers/mobile operators of America. That 'all you can eat' data plan you like on the iPhone? Invented in Japan. The 70:30 revenue sharing that Apple's iPhone App Store offers - was invented in Japan but they offer a far better deal: 90:10. Mobile wallet/mobile payments? Invented in Japan. 2D barcode based coupons you see now on Times Square? Invented in Japan. The mobile internet? Invented in Japan. Idle screen services. Invented in Japan.

It is very clear that Japan is currently the world leader in mobile. And South Korea, Taiwan, Singapore come far ahead of Europeans, who come ahead of the USA. So take your 'superphone'. The top Samsung Galaxy from South Korea that went on sale last week - offers a built-in pico projector! For the same price roughly as the iPhone 4. Think about that for a moment. Where was that first sold? In Singapore. And HTC? Based in Taiwan. Apple manages one new smartphone model per year, which it doesn't have time to test well enough, that it fails the Death Grip test by Consumer Reports. HTC is releasing 6 new smartphone models mroe this year before Christmas of 2010. HTC does have time to rest its smartphones well enough, that it gets on average 2 complaint calls per day. Apple's iPhone 4 generated 750 complaint calls per day in its first 3 weeks and growing.

If you wanted the world's best analysis of a rocket program, whether by a company or a country, you'd go to NASA or any US based aerospace analysts. While Iran also has a rocket program, the world's best rocket science analysts are not in Iran today. So similarly, the USA is behind in mobile telecoms. Not all telecoms, but yes, in mobile telecoms. Years behind. And yet, Wall Street has tons of analysts who specialize in mobile telecoms (ie 'wireless telecoms' haha). They do their best, but they are guided by what they know, and what they can see in their own market. They cannot know how outdated some of their views are, because those analysts don't get to make pilgrimages to Japan or South Korea etc to study the most advanced mobile markets.

Now, which was the Western smartphone maker who first put a camera on its smartphone? Not RIM, not Apple, not Palm, not Motorola - it was Nokia - based on studying Japan. What was the first Western smartphone maker who first put a 2D barcode reader on its smartphones? Nokia again. TV-out? Nokia. App store? Nokia. Touch screen? Nokia. Etc. Nokia has been tracking the most advanced markets and brought innovations to the smartphone space for the whole decade, but the US based tech press do not know this, and do not understand this.

The problem is made worse, by the fact, that most US carriers/mobile operators do not carry Nokia's top phones. They were seen as too expensive. It wasn't until the iPhone came along, that US carriers were willing to accept that consumers would be willing to buy 'expensive' smartphones. Up to then, the most expensive phone for consumers in America was the Razr. It was a mid-price phone in Europe and advanced Asia at the time. But an 'expensive' phone in America.

So in 2006 Nokia had a true superphone, the N93. By many features it was equal to the iPhone 4 of today and beats it with many features (but was not a touch screen phone obviously). In 2007 Nokia introduced the N95, far better than the iPhone 2G and in most tech specs matches or beats the iPhone 4 today (except not touch screen obviously). In 2008 Nokia brought us the E90 Communicator - the most awesome Nokia superphone ever, and the last Nokia phone to regularly defeat the iPhone of that time (the iPhone 3) in tech press comparisons (but the E90 was not touch screen). And fast forward to 2010, now we have the N900, again a master class of superphone design (which now is touch screen). But these smartphones are not carried by US carriers. The US carriers will not offer subsidies so that US consumers could pick one up for 199 dollars on a 2 year contract (European and Asian carriers/operators offer them!). So is it no surprise, that Nokia's reputation in almost all of the rest of the world is one of a superphone maker of very high quality premium luxury phones, but in the USA, Nokia is thought of as a garbage brand of cheap phones?

So the US analysts had no 'heritage' of comparing Nokia's best with those of the US domestic smartphone market like say the Blackberry Bold or Palm Pre or Motorola Droid or Apple iPhone. The Nokia flagship models were all missing from the US. So the US analysts were very easily convinced that the iPhone was the best phone on the planet. Also that as it looked like all phone makers were now ape'ing Apple (based on premium phones released in the US market recently) and as Nokia didn't release an iPhone clone, clearly Nokia had 'fallen behind'. And as the US analysts would read each others' thoughts (and not tend to read Japanese or Korean or Finnish or Swedish language analysis of the market haha) - some 'group think' emerged, where if the other US analysts also thought so, then it must be true, that the iPhone is the world's most advanced smartphone. This is for example the fallacy that follows RIM analysis time and again - even though Blackberries are growing unit sales and growing market share, while Apple is losing unit sales and losing market share - the madness of Wall Street thinking is that RIM should abandon its brilliant QWERTY oriented messaging phones, and try to copy Apple's touch screen. Lunacy! RIM is not losing to Apple, RIM is pulling away from Apple! If Wall Street analysts got their heads out of their behinds, they'd look at the facts and insist Apple launch a QWERTY phone to reverse the Apple decline in market share and catch the big growth wave that propels Blackberry.

But no. The US press were hypnotized by Apple to obsess about the iPhone's multitouch screen and if you didn't have it, you were rubbish. Even though QWERTY outsells touch. No, if you're not touch, you are 'not modern'. But again, this is something OPK could not control. Nokia sells its shares on the DOW and therefore it has to live by US analysis.

But this is something Nokia could have tried to influence at least. The N-Series HQ was moved from Espoo to New York. Anssi Vanjoki, Nokia's most charismatic senior exec has been based out of New York for some time. Nokia should have been educating the US media and analysts. I do not know to what degree they have been doing that (and I am sure they have tried) but clearly they have failed, if today in 2010, the US tech press says 'Nokia is falling behind Apple' (when facts show the opposite is true). Nokia have failed, not in the technology race, but in the perception race. And truth be told, they have been taking a black eye from the masters. Apple had been doing the same punching of Microsoft for decades now haha, and beating up Sony pretty badly for a decade now starting with the iPod. So small solace, but at least Nokia wasn't losing to a marketing novice. They were beaten in the PR game by the best. With Apple laughing all the way to the bank.

TAKE BACK US MARKET

So if the US analysts were a fact Nokia HQ had to deal with, and suffer the consequences, there is one self-inflicted wound which hurt OPK dearly, and more quarter after quarter, as time went on in his stewardship. It was OPK's promise to shareholders when he took office, that he would restore Nokia's market share in the US market. This has been the most dismal failure of Nokia in what I really think has been a very solid run of management. There is no Apple effect here, there is no 'reality distortion' here, and there are no mitigating factors. This is OPK's fault on a personal level, and his very visible commitment. Utter failure.

OPK promised that Nokia would regain its market share in the USA. The opposite has happened. Almost every quarter since he took office, the US market share of Nokia in mobile phones and in smartphones has declined. Think how bizarre this is. 93% of the world's mobile phone accounts are outside of the USA. In that market, when OPK took office, Nokia had 35% market share in all phones, and about 50% in smartphones. Today outside of North America, Nokia has about 36% market share and about 52% in smartphones. It is only in North America where Nokia is a failure (apart from Japan and South Korea where domestic standards and domestic phone makers rule those small markets).

In the US market Nokia has suffered continuous losses in market share. This to me is unacceptable and since the new CEO committed to regaining US market share, OPK should have achieved it. No matter how. If that meant creating CDMA phones for Verizon and Sprint, then be it. If that meant creating USA-only iPhone clones, then so be it. If that meant (remember the commitment was from 2006) creating Razr clones to match Motorola's US success, then do it. And Nokia had huge profits back then - bankroll that US invasion. If it meant Nokia's US sales had to be subsidised from other markets, no biggie, its only 8% of the world market. Nokia EASILY could have afforded to do this.

But yes, change the leadership. OPK should have taken personal responsibility, and talked to the CEO's of Sprint and AT&T and Verizon and T-Mobile USA, to find out why they are not selling more Nokia, and then appointed the type of manager to the US project, that gets the job done. Hire someone from one of the US carriers to do it, someone universally respected by the US industry. And keep meeting with those CEO's every quarter, fly to their HQ's and bring them every year to visit Nokia's fantasyland, the special Nokia private lab and future showcase they used to call Generation Nokia (I think it was recently renamed, I forget what its called now, but this is like the Disneyland for telecoms engineers, where only 2 visits are arranged per day for VIP guests, to showcase Nokia's view of the future; its a truly breathtaking place, I've seen it once..)

There are reasons why US carriers do not support the world's bestselling phone brand. There are reasons US carriers won't support the world's bestselling smartphone brand.

There are reasons the US carriers don't support the mass market phone brand that generates the most SMS text messages - where carriers make most of their profits. There are reasons of history and of politics and of personalities. Nokia know this, but OPK was a new CEO, and he was the boss, and he could have - and should have - made all the personnel changes (and policy and price and design changes), until these 4 US carriers were satisfied. Nokia needed the US market to experience Nokia's best, not Nokia's worst phones. And Nokia needed US carriers to promote its phones, so US consumers would adopt them.

But instead of going the carrier route, humbly, and accepting the bizarre, often archaic ways of the US market, Nokia went defiantly its own way. For the N97 Nokia decided since US carriers would not sell its flagship phone of 2009, Nokia would sell it online, directly to consumers. If you recall, Google tried this trick too, in 2010 with the Nexus One. Both were marketing disasters. You can't bypass the carriers. And Google can be forgiven for not knowing this. Nokia knew this, they were stupid to do this. That would not get them the US market and Nokia knew this. Yet they did it, including the flagship store on Manhattan's Times Square etc. All blatantly fighting the US carriers, rather than humbly working with them.

The US market recovery was botched totally by Nokia. And for that OPK has to take personal responsibility. He did promise this to shareholders and Nokia was unable to execute. This is his personal failure. And this point does surprise me, that OPK did not force this to happen. There is ample and intimate Nokia knowledge of the US market, Nokia has been there for decades already. But newcomers like South Koreans Samsung and LG are the ones who are now bestselling phone brands in the US market and Nokia is ranked something like 6th or 7th..

THE ONE ROTTEN APPLE - N97

Then we get to the straw that broke the camel's back. High tech is difficult. All tech companies stumble at some point. Mercedes Benz once made a car unsafe at any speeds (remember the launch of the A-Series which tipped over when it turned around corners?). Toyota was making cars recently which didn't seem to have any brakes. And even Apple failed in phones now with the first phone ever in history, that Consumer Reports tells us the iPhone 4 has such a bad Death Grip problem that it cannot be recommended. So yes, in tech there will be the occasional failure. And while Nokia has had a great hit parade of awesome flagship phones, during OPK's short reign, there was one failed flagship, the N97. The N93 was superb in 2006. The N95 was a technology showcase in 2007. The E90 was so far ahead in 2008, it still today beats most smartphones. And the N900 of 2010 is highly praised and the early previews of the upcoming N8 are also highly positive. In that string of superb hits, comes one blemish - the N97.

And the problem is, that the N95 and the E90 Communicator were never even suggested as 'iPhone killers' and were not touch screen phones. They were in a different class, like comparing a Range Rover to a Ferrari. But the N97 was offered to the world as an iPhone beater, being Nokia's first touch screen flagship phone (with a slider QWERTY as well). On paper compared to its contemporary iPhone 3G and the later iPhone 3GS, the N97 seems to tower and indeed 'devour' its rivals (as from the LL Cool Jay rap lyrics). The specs sheet is impressive. But the N97 is not. It was a dud. A rare failure in Nokia's long history of premium phones, but one of its worst. And Anssi Vanjoki even openly said so.

When any analysts, not just US analysts, were offered the side-by-side comparison of the N97 vs the iPhone, the faults and shortcomings of the N97 become blatantly clear. Most of all, its touch screen (resistive and not multitouch) is slow and non-responsive. The touch screen Symbian OS seems slow and counter-intuitive. And then there were bunches of other technical faults and this flagship smartphone from Nokia's N-Series was indeed a flop. Nokia did as it always does, it kept fixing it, better software and hardware, and the final N97 version is not bad, but even then, its no match to the iPhone 3GS.

When Nokia finally did an 'iPhone killer' - that project failed. And this falls onto the feet of OPK. The N97 was a rare disaster phone for Nokia and with hind-sight, its clear to see, Nokia would have been better served by delaying the N97 until it was more-or-less bug-free, than hurrying the phone to the market. The lessons from the N97 were very painful to Espoo and no doubt those lessons are why Anssi Vanjoki delayed the N8 launch now, knowing its not good enough yet, and wanted to refine it before releasing it.

But for most US analysts, the 'current' flagship smartphone from Nokia is still the N97 and the 'next' flagship will be the N8 (they mostly have not taken notice of the N900 which obviously is not targeted nor sold to the US market but we have for example here in Hong Kong as the current flagship Nokia smartphone). So the more the iPhone gets amazing news stories from Apple's PR machine (how many billion apps downloaded or how awesome is the iAd platform or the new version of the iOS operating system etc), the US press is reminded that Nokia's entry in the touch screen smartphones is that expensive and failed N97 with the old Symbian OS and its lousy touch screen. If the N8 had been released for Q2 (and assuming it was not very flawed haha) probably OPK would have survived, by the skin of his teeth. But that the US market still thinks in July 2010 that the N97 is the best Nokia can do, that was too much. The straw that broke the camel's back.

WHAT IS FAIR?

So we have 6 major faults that are assigned to Olli-Pekka Kallasvuo. Apple was one of those 'once in a decade' types of events. Think about it. When Sharp introduced the cameraphone in 2000, it didn't change everything. When RIM introduced the Blackberry in 2001, it did not change everything. When Motorola introduced the Razr in 2004, it did not change everything. When SonyEricsson introduced the Walkman phone in 2006, it did not change everything. When Google introduced the Nexus One in 2009 or Microsoft the Kin in 2010, these did not change the whole industry. But when Apple entered the phone industry, suddenly not just were phone expectations changed permanently and thoroughly - the way marketing and PR to the investors and shareholders changed permanently and thoroughly.

But 'unanticipated' changes like this are what nimble managers are needed for, and executive wisdom to see when such a strategic change happens, and to adjust. Yes, Nokia was hurt and this media/marketing/PR side of Apple's influence has hurt OPK's reign and reputation. They should have fought back like Adobe fights with Apple or Microsoft fights with Apple etc. Now you have to put on a show and you have to brag about your greatness, else you will lose. Its no longer a 'lets build it together' world of cooperation, it is now a dog-eat-dog world of zero-sum: 'for me to win, you have to lose'. That is the game Apple brought to town. And Nokia did not learn that lesson and did not adjust to it. The next CEO has to be far more brazen and bold - and vocal.

Profits is a fair point but an unfair judgement. Yes, Nokia's profits are down, drastically, from 2006. But the market is fiercely competitive, and against Nokia's traditional rivals, those who sell mass market phones to the world - Motorola, SonyEricsson, Samsung and LG, during OPK's rule, Nokia has far outperformed these true rivals. The unfair part in profits is that the analysts are comparing Nokia to Apple and nobody can touch Apple's profits. Not in PCs, not in musicplayers, not in tablet PCs like the iPad, and also no, not in smartphones. Its an unfair comparison. Apple is an aspirational luxury brand. But profits are a valid concern even without Apple. Motorola made losses and replaced its CEO. Nokia made its first-ever quarterly loss last year, and since then its profits have been very slim. This is an honest shortcoming of OPK. I would argue that the market has been fierce - the worst economic downturn of our lifetimes - and Nokia weathered that storm far better than its traditional rivals. But yes, its profits are down, and unfortunately now for Nokia, it is compared to Apple who reports ever stronger profits.

Symbian is not a fair accusation of any failure of Nokia's CEO. He did not design the OS, he inherited it. Symbian was in 2007 - now with hindsight - actually a far more potent and mobile phone-optimized OS than Apple's iPhone OS - and Nokia has played its Symbian global market share leadership brilliantly with the upgrade evolution path to Symbian - including touch screen now - and the future OS of MeeGo with Intel. Ovi and Nokia's software strategy was in place long before Apple's and Nokia has been patiently building this too. Its the world's third best-used application store, where again Nokia is miles and years ahead of its real rivals Motorola, Samsung, LG and SonyEricsson.

And for the future of its OS, Apple's iOS is proprietary, using its proprietary tools, tightly controlled by Apple and only working on Apple devices. Palm's is exclusive as is RIM's and Samsung's Bada. Microsoft is licensed to others but is using Microsoft's systems. Google's Android is the most open using Linux. Nokia's new MeeGo is also fully open source and using Linux and licensed to rivals, but it is developed with Intel. And Nokia went through the trouble of ensuring a migration path with common tools to support current Symbian developers into MeeGo, and also is working to bring harmonization among other Linux OS tools like Android. Isn't this the best possible smartphone OS strategy. But its a 'complex' story. Its 'easier' just to hear that Symbian is old and fragmented and difficult to develop for and its touch screen interface is cumbersome. The lazy story is to take the superficial and just say, Symbian is dead. This is not a fair criticism of OPK's rule. Nokia has by far the best smartphone OS strategy of any in the industry and in the past 4 years Nokia has executed brilliant and elegant migration decisions on its two operating systems.

Then there is the issue of US analysts who live in the laggard US market and their views of advanced phones is very outdated. This is a 'reality of life' and Nokia is fully aware of this. There is no excuse that Nokia couldn't navigate in this environment, knowing the landscape. But yes, it means that if Nokia introduced widgets or near field or FM broadacast or some artifical intelligence elements into its new phones, Nokia has a far bigger job of educating to do with the US based analysts. Nokia knew this. There is no excuse. Nokia failed its PR efforts with US analysts and journalists.

And finally the N97. OPK could not go personally test the phone. He should have been personally interested enough in its launch - as it was so critical also for the US market - to pay attention to final testing etc. He should have known as the N97 neared launch that there were problems and halted its launch. Or else, the moment the world started to complain, he should have stepped in, apologized for a bad phone, and fixed the issue. That N97 should not have remained long on the market as Nokia's primary proof of leadership (ie lack thereof) as its 'flagship'. Nokia could have taken an older world-winning superphone like the N93 or E90 or some other recent platform, slapped a few updated parts onto it, and launched that as the N98 and quietly discontinued the N97 - very quickly. This is what Apple will no doubt do very soon with the iPhone 4 - Apple cannot let the 'Consumer Reports cannot recommend' iPhone 4 to remain as a stain on Apple's reputation. It will be replaced by a newer iPhone long before June of 2011, mark my words. Probably still during 2010 haha..

Similarly Nokia should have issued a new flagship quickly to replace the flawed N97. It didn't and the N97 still today continues to stain Nokia's leadership reputation, in particular in the US market.

Its a cruel world, Charlie Brown. OPK got to dance with Wall Street for four years as Nokia's boss. He would have done fine were it not for the best dancer ever, Fred Astaire stepping on stage in the form of Apple. Now OPK is remembered for losing to Apple. This even as Nokia's market share in smartphones grows and Apple's share shrinks. Life's not fair..

Incidentially. Four years ago, Nokia's global mobile phone market share was 35%. Since then the number of rival handset makers has doubled. The market shares of the other top 5 makers have shrunk from 48% to 40%. Did Nokia do well? Before OPK took charge, Nokia's smartphone market share globally was 48%. Since then the number of smartphone manufacturers has more than tripled. Nokia's market share is still 41%, bigger than numbers 2 and 3 combined. And Nokia's smartphone market share is better than its dumbphones market share - as the only one of the Top 5 phone makers, Nokia is able to improve its market share, as it migrates customers from dumbphones to smartphones. And is doing it profitably. Of its major smartphone rivals just four years ago, Palm died and Motorola's smartphone market share was cut in half, Microsoft's Windows lost three quarters. Nokia weathered the influx of over 30 new rival smartphone makers by only losing a couple of market share points over a 4 year period. Did Nokia do well?

Of the challenges he inherited, Nokia did not foolishly retool for all flip phones in the Razr craze and that was the right call. In the transition to 3G, Nokia's market share in 3G is now the world's best, so Nokia did not lose out in the migration from 2G to 3G. Nokia led the smartphone revolution, then the migration of smartphones from business phones to consumer phones - both initiatives Nokia started long before the iPhone. Nokia set up its app store with partners, and all along the way it is connecting people also for the very poor, and even manages to win consistently Greenpeace's award as the greenest phone maker. While Apple uses Foxconn as its supplier, a manufacturer some accuse of being a sweatshop, Nokia set up the world's largest handset factory into China so it can control the handset manufacturing process itself. Is this all good management? I think it is.

But OPK failed the US market, he presided over the launch of Nokia's worst flagship phone. His rule coincided with the moment when Apple came to disrupt the phone market and his PR people didn't adjust to this, nor to US analysts and their lack of understanding of the finer points of modern premium phones. And yes, Nokia's profits have declined from the good old days. These are valid reasons why Nokia shareholders demand a change in management. The Symbian story is not fair, but it is not an easy issue to understand adequately either, so I can see why the lazy analysis says, Symbian is not good in touch screen, therefore Symbian is obsolete. Thats not true, but I can see why that argument is easy to make.

Sorry OPK. I think you did do a competent job steering Nokia through very tough times, and in all other markets of dumbphones and smartphones - except the USA - Nokia has shined. Unfortunately the US based analysts, press and investors will not prioritize the rest-of-the-world performance ahead of that within the US market. I think its clear your management was far better than those at Palm or Motorola or SonyEricsson or LG.. But it was not perfect and now Wall Street is demanding your sacrifice. Its a cruel world out there..

iPhone Second Quarter 2010 in Bloodbath: Market Share is Declining where All Big Rivals picking up

The Second Calendar Quarter ie April-June Quarter for Apple has been bad in the bloodbath. And this was before Antennagate.

Apple has just reported its Quarterly numbers. iPhone unit sales were 8.4 million, which are down severely from Q1 (8.75M) and down from Q4 of 2009 (8.7M). Apple market share is down again, now to 14% - it is down from the peak from a year ago, in Q3 of 2009, when Apple's smartphone market share peaked at 17%. Since then its clear that Google Android has picked up a lot of market share. But the really bad news is that all of Apple's rivals have been growing since Apple's peak last year. HTC has grown and now is starting to near Apple to rival for 3rd place among biggest smartphone manufacturers. RIM has grown unit sales and market share - ie RIM is pulling away - since Q3 of 2009, Apple has NOT been catching up to RIM. And Nokia is far-and-awawy the planet's best-selling smartphone, which up to Q1 of 2010 had been growing unit sales and market share (and is likely to grow both again this Q2, but we have to wait now a couple of days until Nokia reports its quarterly numbers).

The global smartphone market grew 10% over the past 6 months. Nokia and RIM have grown unit sales and each quarter been flat or grown market share. HTC, Samsung and Motorola each has grown unit sales and market share. Of the major manufacturers over the past 6 months, only Apple has lost unit sales and lost market share. Its peak was 17% a year ago, it is 14% now and falling. Lets see how many 'analysts' report on this fact.

While the gossip in America is that Apple is somehow 'winning' in smartphones - it is gaining in the US market yes, but globally Apple is falling behind. Apple is indeed the most proftiable smartphone maker and its app store has most apps and there are a lot of web views reported by Admob etc. That is all smoke-and-mirrors. The big number that matters - is market share. And Apple's market share peaked in Q3 of 2009 and has been in free-fall since. This is now really dangerous, as there is Apple's Antennagate and Death Grip  hurting this current Q3 (July-Sept) quarter, as IDC reported, two thirds of Apple current iPhone owners are delaying iPhone 4 purchases until Death Grip is fixed, and operators are starting to delay iPhone 4 launches - South Korea's KT was first to do so,. The prognosis for Apple's market share in 2010 is dire.  

Please all who comment - this blog is NOT a financial analysis blog. We don't 'care' about who makes the most profit - so yes, Apple is the most profitable tech company. And we don't care in the 'smartphone bloodbath' about iOS - yes, for Apple it is great news that they have iPod Touch and iPad, but when you consider 'smartphone market share' then the only valid number is number of smartphones sold. That is not some 'weird' Tomi Ahonen outrageous view - all major analyst houses who report on mobile phone market shares and smartphone market shares - that is IDC, Gartner Dataquest, Strategy Analytics and Canalys - they ALL count only iPhone, not the other iOS devices. So don't write the comments here that I should include iOS market share. Yes, that is important to Apple investors but this is not a financial site, we report on the smartphone bloodbath for 2010, and in that race, we can only count real smartphones. Like in cars, Honda makes motorocycles too. If we measure market share of cars, we can't suddenly include Honda motorcycles in counting market share of cars.

And the unrefuted fact is, that with 8.4 million unit sales, down from 8.75 million in Q1, where the global smartphone market grew, Apple's market share has been declining. That is a fact. Apple's iPhone is losing market share. Down from its peak in Q3 of 2009 at 17%, it has been declining and is now at 14%. And this was before Antennagate. Now we start to wait how Death Grip hits Q3 unit sales and market share for Apple over the next 3 months.

So the Reality Check on Apple's iPhone Complaints Numbers and Dropped Calls

I really thought the iPhone Antennagate was over Friday. Now thanks to Apple's dumb move to antagonize all rivals, already 5 handset manufacturers have had reason to jump in and point out they don't build antennas outside the phone cases, they don't need cases to fix antenna problems and they don't have death grip problems. So Apple also said on Friday that the problems with the iPhone have been totally blown out of proportion. It certainly sounded reasonable, when Apple said only 0.55% of iPhone 4 users had called Apple to complain about the Death Grip.

So Tomi, what is the truth about these Apple claims. Lets take those numbers apart and see what they mean.

THE COMPLAINTS OF 0.55%

Apple said 0.55 % of iPhone 4 users have called to complain about the antenna problems. Across 3 million sold iPhones, that is 16,500 people who have called Apple to complain. So my first immediate screaming observation is that this is perceived as a connection problem - the network connection was dropped, a call was dropped. Who do you call to complain about it? The first point of complaint will be the mobile operator (AT&T etc)

But yeah, 16,500 people have called Apple to complain. Is that a big number or small? Remember a car maker called Toyota? They had this nasty problem earlier this year, called 'unintended acceleration' which seemed to trouble several Toyota and Lexus models. It was really big in the news, as 52 people were killed in accidents involving those vehicles. How many total complaints have there been about Toyota and Lexus venicles in America in the full duration of that problem, from January to June? According to the US highways safety board, the NHTSA - the total number of complaints about Toyota and Lexus vehicles was 1,500. Thats it. Over six months, its an average of 8 per day.

Now fast forward to July of 2010. Apple says that in 22 days, they have received 16,500 complaints about iPhone Death Grip! Thats 750 per day! This is nearly 100 times more complaints daily, than the most famous consumer product failure in recent memory! Is Apple's problem 'real' or is it 'imagined'? Is it trivially small, or is it enormous? Obviously it is one of the biggest consumer product failures in recent memory. And by a mile, the worst phone launch. These 16,500 complaints were generated in the first 22 days, where it will easily take many days for a consumer to notice the problem - then to observe it is a 'pattern' rather than a one-time random event - and then to go call AT&T first, and then after those moments to turn to Apple and call. The real problem is FAR bigger than this what Apple now kindly reports to us.

How does that compare with the industry. HTC has provided its complaints level of the smartphone Apple mentioned in its press conference, the HTC Desire/Legend/Nexus One. How many complaints? Try 0.016%. Or one complaint per 6,250 phones.

Meanwhile Apple who tries to say everybody has the same problem, also told us that 20% of iPhone 4 buyers had a case or band. These won't be able to experience the problem. How bad is Apple's problem. The 0.55% is not from 100 phones, you have to remove the 20% who have the case. So its from 80 phones. So Apple has one complaint call per 145 iPhone 4 models sold!

Is this a fair comparison? As HTC says, Apple has 35 times more complaints than HTC. And HTC's product has been on the market for 9 months, so there is plenty of time for buyers to examine the product and find out all possible problems - still only one complaint per 6,250 smartphones. If we assume HTC has sold 3 million of those devices (to keep the math the same as the iPhone, probably HTC has sold less than this number) - that would be 480 complaints in total over 9 months, or 2 complaints per day.

In just 3 weeks of use, Apple owners have already found so much of a problem, 1 in 145 will call Apple to complain. And yeah, it is 750 complaints per day!. Apple problem is nearly 400 times worse than that of HTC's smartphones.

DROPPED CALLS 1 OUT OF 100 MORE THAN 3GS

Apple said its dropped call ratio is 1 per 100 calls 'worse than 3GS' on AT&T's network. We do not have the 3GS drop call ratio on AT&T, but from the FCC Report from this May, we know AT&T's total dropped call percentage, which is 5 calls out of 100. The iPhone 3GS will be in that range, more or less around 5 calls per 100. And now we know iPhone 4 has 1 more dropped call per 100.

So we have the number on a rough level, that 3GS drops 5 calls and iPhone 4 drops 6 calls per 100. So, first of all, we know the iPhone 4 has 20% more dropped calls than 3GS. Secondly we know that the iPhone drops one out of every 16.7 calls made on average, across all AT&T customers. That is a very large number. And then we also know, when we use CTIA average call minute volumes and average call length statistics, that the average US mobile phone owner makes 6.2 calls per day. So now we know that the average iPhone 4 owner will experience a dropped call every 2.5 days or almost 3 dropped calls per week.

The problem of iPhone 4 dropped calls is VERY significant, and the typical AT&T customer will experience a dropped call with the iPhone 4 every few days on average. The problem is 20% worse than with the previous iPhone. This is very significant and will of course be noticed by many users.

For Apple to suggest the problem is trivial, and to blame the press for sensationalizing this issue - is totally uncalled for. The problem is huge, it is 100 times worse than Toyota's problems; is 400 times worse than HTC's - where Apple very unprofessionally tried to deflect their own problem - and it is so much worse than previous iPhone owners, that typical iPhone ownes experience it several times per week - and loyal Apple owners find 20% more dropped calls with the iPhone 4 than with the 3GS.

This is the truth of the iPhone complaints and dropped calls. Lets be honest about it, Steve Jobs. Don't try to hide from the facts or blame other handset makers. No other handset maker has taken this crazy design option of putting the antenna around its casing. No other handset creates a Death Grip problem in usual ways to hold a handset - like Nokia said, they test their phones on both right-handed and left-handed users, and they tend to have 2 antennas, one on the top of the phone and another on the bottom - specifically to prevent dropped calls almost whatever way you try to hold the phone. And no other phone needs an optional case to prevent dropped calls.

The problems are real. You admitted the problems are real and that you knew of them (and that you are trying to fix them). But you won't get away with attempting to claim these are trivial numbers, or that the same problem infects other smartphones. As Consumer Reports clearly reported - the Death Grip is a problem unique to Apple, that stems from its unconventional antenna design.

By the way the first serious casualty has already happened. The South Korean exclusive carrier of the iPhone - KT - which sold 1 million iPhones so far since November, has now said they will delay their iPhone 4 launch by up to 2 months, to give the device enough time to test it thoroughly.

And the bad news is coming in also from the first consumer survey. IDC interviewed Americans on Friday, and found that two thirds of existing iPhone owners will delay their iPhone 4 purchase because of this problem.

Those are the facts about the magnitude of the Death Grip problem. Antennagate could have been solved Friday. Now it has returned, and the story is getting worse by the hour.