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« iPhone Second Quarter 2010 in Bloodbath: Market Share is Declining where All Big Rivals picking up | Main | Mid-Year point for Nokia next, in Bloodbath Update. And they DID grow smartphone market share (again) »

July 21, 2010

Comments

em

@Randall Arnold

The carrier-driven model is actually prevented by legislation in many countries. For example, in Italy it is prohibited to subsidy phones. Ultimately it is the government that guarantees the competition in the markets of different utilities, and this applies also to wireless communication.

@Sam

Nokia has one model coming (N8) that looks like an iPhone. Nokia has tens of phones out there and if one announced model looks like an iPhone, I wouldn't say it is working hard to make its PHONES to look like an iPhone.

Roger Johnson

Nokia should take the Apple "false need" product differentiator by the horns and directly address why touchphones are a solution looking for a problem. Why would I give up hardware buttons and tactile keypad feel for a touchscreen that , 4 years on, still doesn't even have haptic feedback (incidentally, even the cheapest resistive touchscreen phones from Samsung and Nokia have haptic feedback, ex: N5800XM). I've been asking Apple salesmen since 2007: "why would I not want to use hardware buttons and keypads?", and no one has given me a cogent answer. I would argut that given the same Apple-style disingenous marketing propaganda, Nokia can push QWERTY smartphones to get the most market share overall. Just look at most of Asia, especially the English-speaking, messaging-addicted markets, and you'd see that QWERTY smartphones are outselling touchscreens by a huge factor.

Maybe Nokia can start their marketing agit-prop with: "Nokia QWERTY smartphones: because our target customers are smart enough to utilize an electronic device with more than one hardware button." :P

Tomi T Ahonen

Hi Charles, Ewan, Janne, andraz, Andre, brad, Randall, Mario, Blahblab, Guillaume, Timuke, Sam and Roger

Thank you all for the kind comments. This was a particularly emotional blog for me to write (I think it also shows reading between the lines) and for me personally, 'fairness' has always been a particularly high value - I tend to stand up and fight 'unfairness' haha... So yeah, many of you were very kind in the comments and let me just say thank you. I will address only a few of your comments personally where there was a particular question or comment that was not directly supportive or in agreement, ok?

Charles - the share price equals Wall Street so its a moot point. The whole point of the blog (if you had bothered to read it) was to discuss WHY Wall Street ie stock price is punishing Nokia. Profits? If you compare Nokia to its nearest rivals (not Apple obviously) ie Samsung, Motorola, SonyEricsson and LG - then Nokia's profits, reveues and profit margin has been better in OPK's reign than the rivals. Pls read the blog haha..

Janne - good points, I've also observed that since the 6000 series, there seems to have been an erosion. A few top phones were good but it was more sporadic.. And usability, haha, I have so many experiences of disappointment and frustration with Nokia until I then try by chance a phone by some friend, and it seems to be far worse haha. But like you say, the iPhone is the exception. It is that easy, even our grandparents can use it haha.. As to Nokia abandoning Symbian/MeeGo - is not going to happen, try to get your head around it, no sense to wish for something that is totally implausible. The strategic right choice is how Nokia did with Symbian/MeeGo. That it takes time for Symbian to be evolved, is a price they are willing to pay..

andraz - I hear you, and MMS is far too much a mess yes, especially international interconnect wise. But I don't see that particularly as a Nokia-caused problem, do you?

brad - haha yeah, am an ex Nokia dude and being a Finn it would be treason not to support Nokia haha.. great national pride.. But the one point about fashion items and flash - I think you should accept that this is reality for roughly speaking 10% of the total market, its a very big part of the population who think that way, and its even more pronounced with young people - more likely to buy a smartphone. Don't pose personal judgements on human behavior, accept the facts and then consider how you might make sense and use the facts. Its a fact many think of the phone as a fashion item and many very proudly show off their latest phone...

Randall - about that migration from cheap phones to premium phones. I recognize that isn't happening with Nokia phones in the US, but its because Nokia's premium phones are not prevalent in the US landscape. In the rest of the world it is exactly as you ask for - Nokia knows fully well, that the typical phone owner, when replacing the phone, will seek to get more/better features. A basic phone owner moves up to a featurephone. A featurephone owner moves up to basic smartphone. A basic smartphone owner moves up to premium smartphone. And Nokia is the world's second best brand with phone loyalty (behind only the iPhone). So Nokia is benefitting from this transition on a daily basis globally, except not in the USA..

And I like the thought 'if you can make it there, you'll make it anywhere' haha for the USA, like in the Sinatra song... But of the iPhone clones, I think its fair to say the N8 is a total iPhone clone. There was also a cheaper touch screen phone from Nokia earlier this year which was a similar touch screen only tablet candybar phone, very much looking like an iPhone clone. I forget its number..

Mario - great idea! I have actually something in development which kind of addreses that need, but yeah.. Keep reading the blog, I hope to announce something you'll love in about a month perhaps? You'll spot it immediately as 'oh, wow, this is cool, this is what Tomi meant' haha..

Blahblah - thank you for visiting and I appreciate your sentiments and read a lot between the lines too. Thank you so much. I also can very well recall from my time (so long ago) working at Nokia HQ, yes, there are those matters of middle management, and the strategy thinking usually is very solid for Nokia, but sometimes the middle management execution may suffer (in some units and departments, not others obviously). I totally hear you. And if you want to write to me off line via email, you know my email is obviously tomi at tomiahonen dot com. Cheers!

Guillaume ! Haha ! Loved it!

Timuke - great observation, yes, if Nokia was US company, it would be cherished and cheered.. (as we do in Finland haha)

Roger - thank yeah, thats Jobs vs Woz definitely and yeah, I really like the Reality Distortion Field concept that is often used with Apple..

Thank you everybody for very kind and warm comments! Please post more.

Tomi Ahonen :-)

Timuke

Listen to this what Steve Jobs said at his invitee-only 'press conference':

"I guess it’s just human nature, when you see someone get successful you just want to tear it down. I see it happening with Google. Google is a great company. Look at everything they’ve created. Would you prefer we’re Korean companies? Do you not like the fact that we’re an American company leading the world right here?"

http://live.gdgt.com/2010/07/16/live-iphone-4-press-event-coverage/#11-01-58-am

What a weird thing to say isn't it? It's actually incomprehensive. But then again we must understand the US in a huge crisis. Technological leadership happens to be an integral part of the US National Security agenda. So that says everything about the US market sentiment. It's a national interest in the land of the master spindocters that brought us the .com bubble, Enron, the Iraqi & Afhanistan War, Credit Default Swaps and High Frequency Trading.

Again, can anyone name 1 successfull internet company in the states that was not a local startup?

Randall Arnold

Tomi,

I was a Nokia employee from 2005 to 2009, here in the US. As an enthusiastic evangelist I tried to convert friends and family to the fold. But again, Nokia had done too good a job selling into the low end-- that's how people here associated the Nokia name. Nokia=cheap. True, carrier issues at the high end didn't help, but Nokia was also largely to blame there as well. We had great shots with the N80 and N75 but blew them by screwing up during R&D (it was way too hasty) and pushing showstopper defects down to the factory... where we were helpless to fix them but right in AT&T's firing line anyway.

I still think Nokia should do better at separating the low and high ends with sub-branding. It certainly can't hurt...

PhoneBoy

I agree that Nokia's biggest failure was not following through on their promise to increase their market share in the US. However, their second biggest failure is their seeming inability to ship a high-end device without serious defects. When you also take into consideration it often takes two, three, sometimes four or more firmware revisions before a Nokia device is actually stable and relatively bug-free and US variants often went months without updated firmware, it's surprising there are any US-based fans of high-end Nokia devices at all.

That, and I hate to say it, but Apple is the king of user experience. I used to hear people say "copy with pride" when I worked with Nokia. I have yet to see anything close to Apple's user experience, not just with the phones themselves, but the entire ecosystem the phone works with.

Timo Koola

I think there are couple of things you forgot:

* Navteq purchase with that price. I don't think I've met anyone who thought the price was right.
* Market share in Europe has come dwindling down as well. Samsung is already pretty close in total market share here.

ArbitRabbit

Tomi

First, congrats for a really nice and in-depth piece of analysis. I agree with most points you make however as a long time Nokia customer and with some experience of running hi-tech companies, I can say there are many things that are not quite right about Nokia strategy.

1. You compare Nokia to Toyota, but even Toyota has Lexus. Yes, Nokia's margins are low but even their high end phone margins are lower than Apple. So I don't think market share can be considered a valid reason for Nokia's abysmal share of the top end smartphone market. Yes, they invented the market but then let others take over.

2. The reason analysts like Apple, despite its smaller market share (and a declining one at that) is because even though their market share is reducing, their profit share of that market is increasing. As anyone who has studied economics would tell you, if the demand is inelastic, you can increase the price, which would increase your profit even if you lose some market share.

3. Yes, Nokia has PR issues but maybe someone from Nokia should visit talk.maemo.org, the website where many users and developers of Nokia's cutting edge smartphone OSes converge. Ask them how many would recommend Nokia to their friend and families (or do simple poll to measure the Net Promoter Score) and you would find that the sentiment is highly negative, and that is for the following reasons that Nokia totally got wrong

A. Communication: It is not only the PR but also the communication with its users where Nokia is far behind its competitors. Most of the people on Maemo thought that they were part of Nokia's future, only to later find out that Nokia is moving to Meego and their device won't be officially supported. Additionally, the so called future devices lack basic features which the Symbian devices have, but Nokia has never confirmed whether the Maemo device would get those features... an absolute and deafening silence...and these are early adopters we are talking about, many of whom were Nokia fanboys (or as I like to call them, Net Promoters), but thanks to the silence of the company, most of these people won't recommend Nokia to anyone.

B. Afraid of commitment: Again, similar to the point above, a lot of people (that includes me btw) were hoping that with the N900, Nokia would hopefully finally get the new dynamics in the post iPhone world that it is not about hardware anymore. With Apple supporting its two year old phones in the new firmware upgrade, not only fixing bugs but also adding features, I think people find Nokia's contrasting attitude very disappointing.

C. Selective open source adoption: Nokia adopted open source when it suited them i.e. getting a lot of pre built software and application echo system without having to do the work themselves. However, they left the other half out about open communications and transparent roadmaps. Again, as anyone who has studied economics and Nash equilibrium would tell you that open roadmaps are actually great for both customer retention and also to make sure your competitors don't enter your markets. That is one of the reason Apple announced the features of their next OS as many of the Apple loyalists had started cribbing about lack of multitasking etc. Nokia however are all about keeping mum. There are genuine reasons for that as that gives you more flexibility, but in this case that is causing more harm than good

I do realise that there are overlaps in what I have said but basically it boils down to lack of communication with its users and lack of commitment on Nokia's part. This seems to extend all the way to the top. If you look at Anssi Vanjoki's blog post titled "The fightback start now" and look at the comments, you will see that Anssi selectively replied to the comments praising Nokia and wishing Nokia all the best, but carefully avoided answering/reassuring comments, many of which raised genuine concerns about the company's strategy. I do hope I am reading too much into it, but again this culture of silence (maybe it is a Finn thing, I don't know) is not doing any good for Nokia.

So I am sorry to say that I don't share your optimism for Nokia. This is a company which is on a slipper slope right now. I think if I looked at your analysis and replaced Nokia with IBM and change the timeline to early 1980s, most of it would hold true for PC market back then. However, we all know what happened in that market. Nokia needs to make changes and make it soon, and a good starting point would be to listen to its customers.

Juan

I really hope that all the so called "gurus" (symbian´s included) could read this before start crying on Nokia/Symbian.

Very nice read, congrats!

Varun

Hi Tomi,

Great points. Nokia does not need a new CEO. But don't know if the management knows the ground reality.

In India , entry level phones were a are great market and still is for Nokia. But their delay in introducing Dual sim phones was a major blunder.

Several brands have hurt Nokia's sales in this segment.

In the high end also, brands like Samsung, HTC , Sony Ericsson are selling handsets here valued at over Rs.25000(500 USD approx) pretty well. The iPhone was a big flop here in the official route but is still doing great in unofficial channels. Nokia does not have any thing in over the Rs.25000 mark here and that's where they are missing the profits.

Nokia is playing the volume game and other are playing the margin game. Only time can tell who will in the long term. But in the short term Nokia is loosing,

I have been a Nokia user for almost 10 years now and can't ignore iPhone and Android now.

Shared my thoughts here.

http://www.fonearena.com/blog/20563/does-nokia-need-a-new-ceo.html

George

Apple has $45.8B in cash. Nokia's market cap is $33B. Everything you said about the past is probably pretty true but ultimately irrelevant. NEW GAME, NEW RULES, and if Nokia isn't up for a new fight how much longer before they're gone?

HALF of Apple's revenue is outside the US so let's not pretend this is a US bubble. Volume is ONE measure and ultimately not that important if you don't have the money to back it up.

You're definition of Nokia leading in "smartphones" is defined by the previous generations definition of "smartphone". Redefine it using modern terms, iOS, WebOS, Android, MEEGO/MAEMO and you will see that Nokia has a fraction of 1%. THAT's the reality.

Timo Koola

I think you are underestimating how bad Symbian really is. It might tick all the boxes in the feature comparisons and there is still lots you can do on Symbian and can't do on any of the other systems. However the productivity hit that you take when you choose Symbian is unbearable.

And it is not just external developers (which are deserting Symbian fast) that suffer from it, it also affects the phone development. N97 is not an exception in that it came out with completely broken firmware (and still late), the same is true even for N95. Many of the major features on it including the GPS were unusable before the second firmware release. Symbian phones hit the market almost always late compared to even publicly communicated schedule on the launch. Just see how many high-end Android devices HTC has been able to roll out since last summer. In the meanwhile Nokia's Symbian flagship is still the N97. Ever since iPhone came out we expected multitouch on Symbian. We will finally get it this fall, it took almost two years to push it through.

cycnus

Hi Tomi,

I'm one of the nokia's fan.
I really think that nokia/samsung/htc/motorola need to fight back apple NOW.
If they didn't point out that apple is lying, then people will think that apple is telling the truth

Haha Hehe

As shareholder of Nokia, I am happy that Tomi is "ex-executive" of Nokia. Seriously.

Nokia's biggest problem is not too much modesty but incredible arrogance. "We know it better" attitude. Tomi's blog is so clear proof of that attitude. What did Nokia's CFO tell when asked about the product portfolio? Humble, down to earth Finnish way to answer with facts? Really? haha

It is such a BS to write that Nokia is some kind of Samaritan of telecom business. But it is the hardest and the cruelest partner in the industry (as a shareholder I am pleased of this). Making Symbian open source was not service for human kind but only sensible thing to do. Cooperation in standardization is in fact co-opting competition, ensuring ownership of essential patents.

Nokia have lots of innovations but many are missed opportunities; nothing to brag about. It is silly to list missed opportunities...I could mention that Nokia had touch screen version of Symbian almost ready in 2004. So what?

I have had Nokia phone since 1994; including "superphone" E90, which stopped working in less than 1 year, and E63 (the worst phone ever). I have iPhone now, which is not perfect but quality is outstanding compared to Nokia. (not to mention user interface).

It does not really help Nokia, if only CEO is changed. Middle management and those who are suppose to be in charge of execution need to be changed. I do not see evidence of this kind of change. I tested this: posted several different and perfect (fake) resumes in Nokia's career page. My alter-egos never got any reply. This is an evidence that same arrogant failures are job-rotating in the company.

As a shareholder, I want changes: new CEO, changes in divisions, changes in middle management, new ideas for value-chain, profitable services, humble attitude at front of operators, better design, user-friendly GUI.

Lars

Hi Tomi:

An epic post - at about 10,500 words - even by your own standards! Far too much to comment on so will offer just 3-key points:

1 - The Japanese have also been hit by this apparent 'marketing over merit' in new (mobile) world order. Just like the Finns they have long-held traditions here relating to action over words, and increasing noise about how Japan failed 'win' the global game.

2 - It strikes me that the co-op nature of Symbian is a super 'Communities Dominate' approach and again the standard path to mass adoption of platforms here, such as FeiiCa and 1-Seg., bringing all parties together for the greater good.. the famous win-win-win.

3 - Mainstream media, and indeed the financial industry in general both have so many fires burning under their roof that it's rather 'interesting' to see them pointing fingers at other industries which they know even less about.

Playing the cards we're dealt.. will continue to plow forward fighting the good fight!

Yap Choon Hong

Tomi, I can understand that this is a business and marketing blog, and hence market share and feature list are very important to you - quite clear to those who have been following your blog.

I suppose then I might not be qualified to make any comments here, because as a user (of both Nokia and Apple) I don't care so much about market share and feature list, but rather that my phone is a pleasure to use and serves me well.

To a user that is very important. I enjoy using iPhone a lot more than Nokia phones - in a lot of ways. The iPhone is just a lot more responsive and intuitive and easy to use. Before I used an iPhone, I was unapologetically defending my Nokia from my iPhone using colleagues. But after switching to iPhone (my last Nokia was N97), I can then see it why iPhone captures the heart of the user. I don't have to tell you in what ways are the iPhone more responsive and intuitive, you don't even have to acknowledge my point, since as a user I have experienced it myself and am determined to make it personal (i.e. as long as I know it myself it is enough for me as a user).

I know it is not a good way to put forth an argument, perhaps I am not trying to argue anything here (especially with your fact based emotional article), except that maybe you should also look at what is important to a user before saying that things are unfair. For sure things are unfair, for sure PR and marketing is very important and Apple is better at it than anyone else. For sure it feels painful to see all your hard work not appreciated.

I don't know, maybe I don't have any business posting here. But I would say that Apple cares more about it's users, and this would explain a bit on the brand loyalty it commands (in addition to marketing and reality distortion fields). Maybe I don't care about how well they can do PR and marketing, maybe I don't even care about whether their reality distortion field is distorting my perceptions. Heck, I don't even care if they are open sourced or they have the best OS strategy, or how well they treat their developers and competitors. What I care about, as a user, is that my phone is a pleasure to use, and it serves me well.

I'm not saying that Nokia phones are not a pleasure to use, nor it does not serve its user well. But I am saying that as someone who has used both Nokia and Apple, I would choose Apple any time. I don't know how, but they have captured my heart. Marketing and RDF be damned, I just feel happiest using my iPhone compared to other phones. Not only the iPhone, I have since purchased an iPad and a MacBook Pro, and I love them.

Anyway, I suspect that if iPhones were to be priced more competitively, it would have taken over the world already. But like you said, this is not Apple's way.

Sorry, I know this is a marketing blog, but I'm posting from a user's perspective.

Yuri

I am a little surprised you didn't mention Nokia's purchase of Navteq (and I am quite curious what do you have to say about it). I find this to be their most brilliant move in the last several years. I don't think they are playing that card aggressively enough though.

They can introduce a whole new line of devices targeted at outdoors use. Rugged, water-resistant, navigator phones with bundled maps, e-ink display for long battery life. Multiply this along the various screen sizes and key-board types, do an e-book reader version, a walkie-talkie version...
Then there is the ultimate tourist device - a combination of powerful camera phone with zoom lens, bundled tourist maps / guides, car-kit. Nokia Navigator and Ovi Maps are a far cry from what they can be doing.

Nokia has all those abundant possibilities and it is better positioned to deliver them than all its competitors because it owns Navteq. May be they'll eventually do that, but right now they don't seem to be the thought leader they can be. All their latest moves seem to follow Apple's and Google's lead. I don't think they have a choice - they have take part in the touch phone revolution. But they should do more than that - bring in innovative products that put them in the leadership position and push others in the position of chasing their offers. And I agree that they should invest more in advertisement and PR.

murali

Happy to see atleast one true journalism. today mobile journalism is abt trying to invent whats wrong, about copying west, misquoting facts, and arm twisting!

I have true respect for some WSJ given its history of what they have exposed to america and what kind of journalism they can dom but unfortunately they are americans and will love only american brands. For rest of asian press, they are very happy copying.

Its important for Nokia to understand its core competencies, its important to make decisions quicker inside Nokia organisation, pump innovation faster into products and give tougher messages to organisation heads who don't churn in profitability.

You cant even find list of icons being used for a device (this shows how severe information flow is) let alone any other UI strategies being successful.

That said, every company goes thr ups and downs, its downs that act as inflection points where you can innovate more and challenge the status quo, it does good for company in long term.

For me what I get for money i spend is more important. I lone Nokia's openness and N900 device launched,Ui is very intuitive, however they made it bulky and battery sucks, apps drink battery as if they have starved for a month!. Pls put more research efforts into battery technology and avoiding fragmentation. If my next phone is a N8, i should have too much of a learning curve adapting from my N900.

Andreu Castellet

Nice post, Tomi, as usual. Lots of insights.

My view: despite all the mistakes, Nokia is the ONLY European company that keeps analysts and stock traders in the US holding their breaths when issuing quarterly results or doing a conference call. You just have to ask any Wall Street employee about it.
I am not even a Nokia customer but as European citizen I would regret seeing Nokia failing to keep its leadership.

Further than that, I would summarize pointing two things that have damaged Nokia the most: bad product marketing -you have to offer the right stuff at the right moment, not just the newest one-, and a bad management of the whole Symbian-Ovi thing.

Tomi T Ahonen

Just a quick comment here

I am humbled by all the kind words and very deep, insightful and often very personal comments. THANK YOU ALL

I am now holding my breath almost, waiting for the Nokia Quarterly results out shortly, because obviously if Nokia reports a disasterous quarter, my blog is instantly obsolete haha. So guys, lets wait for the Nokia Q2 results. I will then twitter and blog about those - and then come back here to continue the discussions

A few very quick observations. I totally admit, Nokia has not executed perfectly, so many here who have said for example that Symbian is still horrible to develop to, and Nokia phones have become ever more difficult to use (especially vs iPhone) - I agree! I hope I didn't come across saying Nokia had executed 'perfectly' or even 'very well' during the past 4 years, but that Nokia's management has handled very challenging conditions and compared to its main rivals, has 'outperformed' those - and mind you, Motorola and SonyEricsson especially have been very poor competitors recently....

And on Apple, I think a couple have mentioned that the iPhone is itself a brilliant phone, and it is. The original iPhone changed the whole industry in 2007, and since then the 4 evolutions have each just become better and better. I am not in any way claiming any current Nokia phone is as good to use, as delightful and as intuitive as the iPhone - but remember, this is like comparing how good a Porsche is to drive.. an 'unfair' comparison if you consider the CEO of the world's biggest dumbphone maker haha..

Ok gang, the Nokia results are coming. I will be back here later, but please keep the comments coming

Tomi Ahonen :-)

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