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:

(Deleted comments will appear here shortly)

 

Comments July 22

Mark: 

Good analysis, Tomi.

Sadly, even though you've explicitly stated the topic is share and unit sales, you're going to be bombarded with posts about profits and revenue. Such is life.

Anyway, it's not bad - handset and services made $830 million profit - but it's clear that they have nothing to offer at the consumer high end... which given the N97 is a year old isn't really a surprise. The N8 may change this, we'll see.

OW:

Nokia has never created one single smartphone before. Their decline in profit absolutely Retorte that


Reda:

 

Wanted to comment on this post and the previous post (actually I was more compelled on the other one because I disagree on most of the points), but I’ll make a summary here as its newer although I appreciate there won’t be much “conversation” due to the number of comments and due to the fact that in past I noticed that if somebody disagree with your points you tend to show the apple-syndrome (one-way, highly directional communication). Anyway, most of the points I’m not making here have been said by others already.
So, you often say that this “blog is NOT a financial analysis blog. This analysis is about market share, And Apple is losing, Nokia is winning the battle”. But then “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.”. I’m afraid you have to make up your mind, you either talk about it or don’t talk about it. You cannot just say when looking at nokia’s profits, “ah but here we are only talking about mobile market share” and then comment on wall street and their analysis when it suits you the most. I’m sure you know, wall street cares about profits not mobile market share. Companies issue profits warnings, as nokia did, not market share warning.
Second point, we are comparing apple with nokia mobile market share but then in OPK’s post, you say we cannot compare apple with nokia because they are from different niches. Then ok, you must be wrong in one of the posts (either in OPK’s Obituary or this post).
You say apple has changed the battleground and it’s winning with its new “marketing-hype” strategy but say it’s not OPK’s fault? Eh? If you start with the assumption that the marketing strategy is how you win nowadays, it’s only a logical conclusion that if you are not that kind of person you are in the wrong place and therefore should stand-down. Did OPK do that?
Regarding symbian and nokia’s strategy, I wanted to write a counterargument to a lot of what you said but I think facts (the haemorrhage of developers from the ecosystem) are a better counterargument and shows the flaws in your analysis.

Having said all this, it's your blog anyway and you write and say what you want ;-)

Sorry, cannot end or share a positive note at the moment. Perhaps my mood will change when I’ll see some real change in nokia


July 23

Leebase

I just don't get it. Nokia's profits fall -- and you think they are rocking the world because they have essentially flat market share?

Nokia is supposed to have everything vastly superior to the iphone -- and have the features years in advance -- but they can't sell their phones for good money while Apple can?

And not just in the US. All across the world people are buying Apple phones at premium prices. Are those folks just plain stupid? I though only American consumers are stupid? Why can't Nokia sell it's far superior phones at superior prices in the parts of the world where you don't have stupid Americans?

HTC and Samsung have no problem selling phones in the US -- why can't Nokia?

And by ANY measure you use -- it's clear that Nokia "smart phones" aren't being used like "computers that happen to be phones" in the way the iPhone and Android phones are being used. Not even CLOSE.

Clearly Nokia agrees with Tomi that the epitome of smartphone use is being able to text with the phone in your pocket. Texting -- THAT'S where the money is at.

Course -- any old dumb phone with a keyboard can text...and the average dumb phone owner uses just about as many apps as Nokias smart phone users use.

Blood bath. That's the whole controversy. It's not controversial to state that Apple will never sell the most phones of any type. But to paint the company that is the MOST PROFITABLE, is showing fantastic yoy growth -- sells every phone it can make -- is the most desired phone in the world -- sold at the highest price -- and claim that it's days are over and it's a victim of the 2010 bloodbath -- is ludicrous.

To paint Nokia with no answer for the last year to the iPhone or Android as king of smart phones? Ridiculous.

If NOKIA thought they were doing well they wouldn't be replacing their CEO.

Android as a platform -- that's the real story of the year. There's no way that Apple selling a single model of phone is going to outsell Android which is made by 20 some phone companies.

Truth to tell, though, in a year or so those manufacturers are going to look on Nokia with envy wondering how Nokia managed to make even the slim margins it does. Android is going to be the best thing ever to happen to companies that don't want to make any money in phones. Me too. Me too. Buy my Android phone which is just like every body else's -- I'll make them cheaper. No -- I'll make them cheaper. No me. No ME!

While Apple will blood bath itself all the way to the bank.


HCE

 

@wansai

What is so difficult to understand about "This is a marketshare blog"? Yes sometimes he mentions financials but they are miniscule
to the focus which is marketshare. ...... The discussion is about losing and winning marketshare, and you guys are trying to change
the subject for which the blog simply was never meant to be. get over it.

Why do I talk about financials? Because, in this case, it is intimately connected to market share. Any market share won by constantly dropping your prices and lowering your profits is not sustainable. If Nokia had somehow managed to find a niche where they were able to maintain a certain level of profitability while growing or maintaining market share, you could make a case that profits are irrelevant to this discussion. That, however, is not the case here. Nokia's profits have been falling, the average selling price of its phones has been dropping. All that this strategy does for them is to buy them is time to get their mobile platform of the future finished up. They still have the task of making that platform a success. If they do not, their prices and profits will continue to drop and they'll reach a point where they cannot drop them any further - at which point they will either lose market share or lose money or both.

NOTE - any of thse people are very welcome to post their 'market share relevant' comments again and I will respond to those.

Comments

[Eric]

Hi Tomi,

Thanks for the fast update, I was waiting for your comments! Will you make a separate article about revenues and profits, since you decided not to cover this issue in this article?

[Timo Koola]

Just a quick comment on N8. I pretty sure what was said about it is that it is coming out in September.

[Szabolcs Horvath]

"We plan to start shipping the Nokia N8, the first Symbian^3 device, towards the end of the third quarter 2010."

[cycnus]

Hi Tomi,

Great to read your view on Nokia Q2 earning. I just hope the american media would learn to grow up and be better.

It seems to me that the quality american journalist depleting more and more. It's really hard to believe CNN or any other journalist when they talk about non-american company or anything.

[Ian Mackay]

Hi Tomi,

A lot of people seem to want to talk about profits and revenue here in the comments, so I was wondering if you had any plans to write an article on why it is that market share is the key metric for success in your view?

[Alex]

There is a problem with this analysis. The Nokia smart phones sales are pumped up with low end S60 phones which by most people's definition are not smart phones at all.

[Anders S. Løvlie]

"Android grew from 5% in December to 24% global market share today." Could you tell us where the 24% number comes from? Is that your own estimate, or are you quoting someone else's figures? Just qurious. It seems high as an estimate for q2, as google said in may they were activating 100k devices a day - that is roughly the same as iphone, which had 14% in q2... the 160k number came some time in june, towards the end of the quarter.

[Jan]

Please list Q2 2009 as well.

Nokia's converged devices sale was up 41% YoY, Apple's iPhone sale was up 61% YoY and RIM was up 43% YoY.

The sequential change from last quarter might be larger than Apple's (many are waiting for the iPhone 4) but YoY Nokia is growing slower than the rest of the industry thus losing market share.

[Phil]

Hi Jan,

Here is a graphic from Reuters that shows the opposite of what you just said:

http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0710.gif

[kevin]

Jan is right. If Nokia is correct that total smartphone sales in the quarter is 59m, then year-over-year, Nokia is off its peak of 44.5% (using IDC/Canalys numbers). Go back 2 years, Nokia is off its peak of 45.5% Go back three, four, five years, Nokia is off its peak of over 50%.

The more pertinent issue, which Tomi doesn't report on, is that Wall Street is correct that Nokia has lost the high end consumer. In its quarterlies, ,Nokia broke out N-series and E-series sales from 2006 through 4Q09, then it stopped. Why? Because it would be embarrassing to show N-series phone sales which had already dropped from 11.4m in 4Q07 to 4.6m in 4Q09, and for sure, is less than that now. So Nokia is selling more phones like Expressmusic and less N-series. That's the concern - once the brand is viewed as cheap, then it's a race to the bottom.

So Nokia's smartphones (or what they call "converged devices") is increasingly lower-end phones that compete less and less with iPhone and Android-based phones. (And that's why the Board is considering firing the CEO). For confirmation of this, Nokia reported these facts which Tomi doesn't include. Nokia's converged devices average selling price (ASP) is down to 143 euro from 181 euro, down another 21%. That's just "smartphones and mobile computers, including services and accessories sold with them" (from Nokia's press release; doesn't include Series 30/40 featurephones. Ugly. Really ugly.

Maybe Tomi can explain why Nokia can include "mobile computers" in its count (though it must be quite small), while Apple can't.

[Jody]

@Alex. The problem with all the Apple fanboy whining is that the price of a smartphone doesn't affect if it is a smartphone or not. It is the feature set that determines that. And get ready for the flood of USD100 smartphones from Nokia and Android based ones from China.

[kevin]

"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."

Note that Ovi store "content" includes music, video (including trailers and podcasts), themes, wallpapers, and ringtones. So that 1.7m downloads per day includes all that stuff besides apps.

For context, a month ago, Apple's App Store was averaging about 17m downloads a day and music-only was averaging about 10m downloads a day.

[Timo Koola]

@Kevin Ovi Store's numbers seem even more bad if you consider that Nokia is serving a bigger crowd (and not just smartphones). Let's make some assumptions (you are welcome to challenge the numbers). There are roughly 80 million devices that support iOS and they generate that 17 million downloads a day. Nokia sells 400 million devices a year. Of those perhaps half support application downloads (native, Java, Flash or widgets). So let's say that Nokia sold 400 million devices during last two years that support application downloads. To have exactly as good (or great) app store as Apple Nokia users should generate five times the downloads Apple users do. Instead they generate 1/10th of Apple's numbers. Is 1/50th of great really that good performance? With these numbers you get every Apple user downloading something every 5th day. At Nokia the number is every 250 days.

[Mark]

"The Nokia smart phones sales are pumped up with low end S60 phones which by most people's definition are not smart phones at all."

Really? Says who? Not the big analysts which is what matters.

If you disagree then set up your own monitoring company or write to Gartner to try and get them to change the definition. Until then they're smartphones.

"If Nokia is correct that total smartphone sales in the quarter is 59m, then year-over-year, Nokia is off its peak of 44.5% (using IDC/Canalys numbers). Go back 2 years, Nokia is off its peak of 45.5% Go back three, four, five years, Nokia is off its peak of over 50%."

Well, yes, if more competitors enter the market then they lose share. Apple weren't in the market four years ago, Android weren't there two years ago.

However for the last four quarters Nokia's share has increased.

Jan is also wrong because he ignores absolute unit sales. That's the danger of quoting relative percentages - product growth rates - out of context - total market.

"So Nokia is selling more phones like Expressmusic and less N-series."

Probably because the last N series was the N97 mini released nearly a year ago. At a stretch you could include the N900 but even that's 8 months old. These phones simply do not have the enduring cachet of the iPhone and have much shorter shelf lives.

Nokia do not have a challenger to the iPhone and high end Android sets just now. The N8 is the next one. Are you really surprised at the balance of sales?

"Note that Ovi store "content" includes music, video (including trailers and podcasts), themes, wallpapers, and ringtones. So that 1.7m downloads per day includes all that stuff besides apps."

Note that the App store includes widgets and web launchers aplenty. Also note that Nokia permit downloads from other repositories includign GetJar - the second biggest app store - for which they account for about 40% of downloads.

Come on, Kevin. If you're going to compare downloads you need to consider all available channels.

[Timuke]

Somehow funny how Android is measured in market share but will not make a single phone anymore.

Regarding backwards compatibility of iOS4 for 3G:

http://www.techradar.com/news/phone-and-communications/mobile-phones/how-to-downgrade-iphone-ios-4-to-os-3-1-3-704705

Funny thing, my sister just walked in and is trying to call her boyfriend on the hand-me-down iPhone she got from him. Her call just got dropped 2 times in a row and then she stepped outside to get better reception. Now she just came in to borrow my E90 so she can have a normal conversation. Not implying anything, just sharing a personal experience in a regular day.

It does have a beautiful pink case though.

[kevin]

@Mark

My response was to Tomi's tone and criticisms, whereby he takes Apple to task and puts them in a bloodbath even though others are having serious problems as well.

So as for your comments:
"Well, yes, if more competitors enter the market then they lose share. Apple weren't in the market four years ago, Android weren't there two years ago."

Well, then, why doesn't Tomi just write that Android is the new competitor, and Apple is losing share along with everyone else (other than some Android-based phone makers, obviously)? But that's not what his articles have done.

"Nokia do not have a challenger to the iPhone and high end Android sets just now. The N8 is the next one. Are you really surprised at the balance of sales?"

I'm not surprised. Tomi is saying Wall Street is wrong, but what you wrote is exactly what Wall Street is concerned about. The lack of a challenger, and little confidence that the N8 will be a success given the experience of the past 3 years. Do you have confidence the N8 will revive the N-series line? If so, why?

[kevin]

At Apple's conference call, it said iPhone 3GS was up 90% year-over-year until June 7th (when they announced iPhone 4). Then it fell off a cliff for 17 days (about 1/5 of the quarter), and the iPhone 4 sales of 1.7m in the last 3 days of the quarter kept it from falling below 61% y-o-y growth.

So we have some insight into the impact of the transition on the numbers. Tomi is right that until Apple shifts to multiple models, this will continue to occur. My only point here is that one needs to be recognize what can cause these unit sales numbers to misrepresent what is actually happening.

[Mark]

"Do you have confidence the N8 will revive the N-series line? If so, why?"

I think it'll sell OK but nothing like the N95 did. I think the point is that Nokia have nothing compelling in that range at all at the moment.

Nokia need some credibility in this segment. The N8 needs to shift in the region of 3-5 million to do this (about the same as the HTC Desire) - it doesn't have to beat iPhone sales but it needs to show that Nokia are beginning to release competent phones at the high end.

[vvaz]

@kevin

For Nokia "mobile computer" is N900, for Apple it is MacBook. Can you spot 4 differences between those two and understand why Nokia can include it into their convergence devices while for Apple it is rather pitiful number tweaking?

ps. I will help you: those key differences are - width, height, thickness and weight.

[kevin]

@vvaz: I was just tweaking Tomi, "haha", since N900 sales are likely very small. In any case, for Apple, mobile computer is iPad 3G. Yes, it's not a phone, but will all Nokia mobile computers have to also be phones? If so, why not call them computer-phones?

On a separate but related topic: Google keeps saying they are activating 160k Android-based phones per year. My question is does that include Chinese Ophones, which are using Android, but are not really part of the Android ecosystem? Ars Technica weighs in - see here: http://arstechnica.com/gadgets/news/2010/07/androids-ascent-in-china-is-not-elevating-google.ars