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

[Tomi T Ahonen]

(I had posted some replies yesterday which got lost due to my slow connection. So having to try to repost the comments now.. its frustrating haha)

Am on comments from July 22

Hi Mark, kevin, Timo and wansai

Mark - thanks for the directed comments. We agree

kevin - good points but there are 2 other reasons. First is the 'employee phone' which is majority of Blackberries and Nokia E-series and many Windows Mobile smartphones - they usually have limitation on use of open internet sites and consumer apps. That doesn't mean they would 'not' be used like 'proper' smartphones - they have almost universally enterprise apps, and these are installed by the IT department. But they are not 'consumer apps' ie they don't show up in 'app store' stats. Same for corporate intranets, often behind VPNs and firewalls, which are just as valid internet use as someone who goes to the Weather Channel or Amazon or Google or Playboy. Its the same internet use, but these are business phones used for business internet uses.

The other thing is all-you-can-eat price plans which tend to be features in the most expensive mobile phone markets and only slowly spreading elsewhere. So the usage is at least partially related to what data prices are in effect, not just what type of phone you have.

Timo - fair points. Note first my reply to kevin in the above, and the Nokia installed base is currently about 300 million not 400. But yes, valid point. Now, note that the Ovi store is only ramping up and already doing over half a billion downloads per year. It is growing and as the gap between the Apple App Store and Nokia Ovi store diminishes - over time this is most likely, as most who have any kind of successful app will then seek variants to the other App Stores and the big platforms will get there faster than the small stores - soon most app stores will be 'cookie-cutter' copies of each other. Like a real store sells both Pepsi and Coca Cola. As the difference diminishes, the Ovi store gets ever more similar usage to the Apple App Store (and Android too). This big difference today is a factor of who launched first, not a sustainable qualitative difference.

wansai - thank you!!!

Thank you all for writing, I will return with more comments

Tomi Ahonen :-)

[Timo Koola]

Thanks Tomi for comments.

I agree on your basic assumption about appstores: eventually there will be perhaps 5 or 6 of Wal-marts (and perhaps couple of smaller more specialized boutiques), but all of them will carry Pepsi and Coke. And there will be no major differentiating factors among the Wal-mart. I find it hard to imagine that appstores will be major source of income to anyone, but any dollar they produce is good money, because it is from a device that is already out there.

I slightly disagree on Ovi's ramp-up. Nokia has had an appstore ever since 2002 (or was it 2001), couple of rebrandings and resets don't really hide that that Nokia's been pushing apps to consumers far longer than anyone with pretty poor results so far.

[kevin]

Tomi,
- Good point about employer-constrained phones, and slow spread of all-you-can-eat data plans. Didn't think of those 2 so thanks!
- Disagree that all app stores will be copies. The store linked to the phone that is innovating with easy-to-use experiences, will get new innovative apps first. Six to 18 months later, the remaining stores will likely add those apps when the phones catch up, but the first store and phone will be moving on to the next innovation. It's not static; it's as rapidly changing as the smartphones themselves are changing.

[Tomi T Ahonen]

(am on July 23)

Hi Less, Travis, Arief, John, kevin, Matthew

Less - I am sure there are many who think like that, and why not? The user has personal experience using that technology, and in this case has tried a 'rival' product or service and loved it. Of course its easy to then think the old brand is rubbish and has bad management etc. I'd think so too haha.. I would suggest this is happening even more with Apple than Samsung..

Travis - the annual cycle worked in slower moving industries like the PC business. But in mobile there are two further problems making it far worse - the second phone phenomenon - so if the world average replacement cycle is 18 months, for those with two phones - more than half of Europeans now have 2 phones already - the effective replacement cycle is 9 months. And the other factor, even worse, is that with most other tech, it is the older people who have the best tech (up to a point). But in mobile the best tech is with the youth, down to teenagers. Global stats, totally consistent stats, the best and most expensive phones are used by the youngest users and the older you get (on average) the lesser phones you are satisfied with. So if Apple does one phone per year, it is abandoning the whole second phone market and much of the youth, who go by 'whose birthday is next, what is the coolest phone we can next ask for, from our parents..'

Arief - thanks, very good info from the Indonesian market. And that obviously spells big trouble for Nokia who used to be the big market leader in Indonesia.

John - thanks haha, yeah, I totally agree..

kevin - thanks for that personal and detailed comment. And I appreciate getting to know you better as you are often here on the blog. Hey, about market share and financial performance. I have been editing down a big blog article about what the battle is all about. I hope in that blog to explain clearly to all, why there is a short term battle and a long term war, and that is the 'mother of all wars' haha. That is what I am tracking, but to understand who is gaining and losing, I do have to look at individual members.. So I hope to post that later today or tomorrow, please take a look at that and I think we'll have a different way to discuss this matter (and hopefully more of my readers will understand why I obsess about the market shares for this battle but not other tech haha)

Matthew - THANKS ! That is exactly what I mean. I have written a blog I hope to post today or tomorrow that talks about those issues in detail. You and I see the big picture exactly in the same way. There are little battles or 'skirmishes' for a given brand in a given quarter for some profit (or not). But they are part of the big war, the 'world war' if you will and that is for all the marbles... That is the really big game where Nokia is playing it more-or-less right, as is Google Android as the dangerous rival and Samsung woke up to it and is a late but strong challenger. That is the big battle. I think you'll enjoy that blog..

Ok, I will continue with more replies soon.

Tomi Ahonen :-)

[Iain]

Is Nokia losing marketshare? http://bit.ly/dbANlF

@wansai A balanced view of a companies performance should include both marketshare and financial data. As Nokia so painfully demonstrates, marketshare dominance does not automatically translate into financial success.

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