Some Symbian Sanity - why Nokia will not join Google Android or Microsoft Phone 7

I had a great meeting with my dear friend Ewan MacLeod the editor of Mobile Industry Review and a deeply insightful commentator on the mobile industry, as he visited Hong Kong last week. We had a good discussion about smartphones and both were astonished by the continuing rumors about Nokia operating system future options. All that speculation about 'when' or 'if' Nokia will migrate its smartphones to Google's Android operating system or to Microsoft's Phone 7 (the successor to Windows Mobile). This is ridiculous. Nokia is executing a migration strategy from dumbphones to smartphones - excellently, one might add, and has the best strategy of any handset vendors, for its smartphones.

Yes, you read it right, Nokia does not have 'an adequate' strategy or a 'plausible' strategy, it has the best strategy of any handset vendors, including Apple, HTC, RIM, Motorola etc: the best strategy into smartphones. Its central element now, is Symbian, and its Nokia-controlled evolution path, meaning Ovi store, MeeGo operating system and QT application development environment. And before you can say 'but' - let me add, Nokia is also the most successful legacy dumbphone maker, to migrate into smartphones.

COMPETITION IS NOT APPLE

So, lets first tackle the Apple argument. Nokia is not competing with Apple, much to the chagrin of US investors and analysts. Apple is a computer giant migrating into mobile, where its inevitable future lies. The PC industry has matured into the 'box mover' stage, where there are slim profits on thin margins. The profits are in smartphones. Its rival traditional PC makers all - all - HP, Dell, Lenovo, Acer, Toshiba - they all are on the path to smartphones. Apple is executing that migration path perfectly, from PCs to smartphones, far better than its rivals. Apple's competitor currently is not Nokia, nor Google, nor AT&T. Its competitors are HP, Dell, Lenovo etc, and against those rivals, Apple took an early stab at pocket computing with the Newton (and failed with a brilliant device), but now has returned with a vengeance, with a second attempt, and is leading the pack. And to show how much they are ahead, their integrated strategy with the iPod Touch and iPad on the iOS, iAd and App Store, are brilliant execution of a mobile strategy - for a PC maker.

Apple is a luxury brand, it cannot compete in the box mover races, and Apple understood this years ago, not attempting to fight against HP and Dell and Compaq, but rather focused on the luxury end of the market. Its like Porsche, who know they can't compete with Toyota or Ford for the mass market cars. Like Porsche in cars, Apple takes a disproportionate share of the total profits and because of meticulous attention to quality and detail, it has incredible customer loyalty. That is typical of success in the luxury segment of any industry with luxury goods, look at Swiss watchmakers vs Casio or Seiko or Citizen or Timex, the mass market watches.

The analysts want to position Nokia against Apple, it makes for good drama and a fun parlor game. But then they don't do fair analysis of Nokia. Nokia is not competing against Apple. Nokia's business is the phones business. The PC industry sells about 300 million personal computers of which Apple had about 4% last year. Most of the computer industry last year was not 'mobile'. The mobile phone industry sells about 1.3 Billion handsets globally, and Nokia had about 38% of that last year. Yes, Nokia alone sells more mobile phones than the total global size of the personal computer industry worldwide. Most of the mobile phone handset business was not 'smartphones' ie 'computers'. There is overlap yes, between Apple's and Nokia's businesses, but only covering a small part of the businesses - of either rival.

REAL COMPETITORS TO NOKIA

Nokia's main rivals are the other 'big 5' handset makers, which used to be Motorola, LG, Samsung and SonyEricsson (about 18-24 months ago, just in the last year, RIM, ZTE and Apple have been juggling to fit into the Top 5). The other former Big 5 handset makers were all big giant makers of 'dumbphones' before the smartphone was invented (by Nokia). So that is where Nokia's main competition is. If Nokia focused only on its smartphones, Nokia would abandon 300 million basic phones per year to the competition - notice, that amount of Nokia branded 'dumbphone' devices is as big as the global PC industry. This is the size of Nokia's 'non-smartphone' side. And in the 'real' PC industry, Apple had 4%.. Lets keep this story in perspective. What any dumbphone maker has to do - has to do, during this decade - is to migrate its customer base from dumbphones to smartphones. Nokia does not need to focus on the 'pure smartphone makers' like HTC, RIM and yes, Apple - who all counted together, account only for about 7% of the total handset manufacturing industry. But Nokia's biggest rival, Samsung sells 21% of all phones! That is where the competition to Nokia comes from, not from Apple or RIM or HTC, no matter how much a USA based 'analyst' may love his cute touch-screen smartphone today, or play with his brand new fart-app downloaded for free from the app store.

NOKIA STRATEGY

So, lets start with Nokia's original strategy in smartphones. Nokia was the world's biggest mobile phone manufacturer over a decade ago, when they decided to launch Symbian. They could have done it alone. Nokia invented the smartphone. Instead, Nokia went to its direct rivals at the time: Motorola, Sony, Ericsson, Siemens, Samsung, etc and asked them all to join Nokia in co-developing one smartphone operating system for all, that would be the same, so there would not be unnecessary fragmentation and the eco-system of the applications would be easier to the developers.

Note how radically different this is from say Palm or Apple or RIM, all who developed only proprieatry operating systems, only for their own handsets and not licencing to others. Nokia was the biggest handset maker, they could have easily created the OS for themselves, and without partners, could have evolved it to Nokia's particular strategic interests - including any later touch screen evolution much faster than with their partners. So the solution Nokia selected put the interests of the industry and the community, ahead of the interests of Nokia itself, and helped reduce the amount of confusion that a dozen operating systems in the last decade would have created if every maker had developed their own. By making it a Symbian Partnership with rival makers as part-owners, there was no one ruler, and while committee work is slow and consensus-building is tedious and costly, and bureaucratic - to try to resolve the at times opposing needs of different handset makers, Symbian held the world lead in smarttphone operating systems and still last year shipped as many phones with it, as the nearest rivals numbers 2, 3 and 4 added together.

And Symbian again, in Nokia philosophies of openness and cooperation, was even open to non-handset makers, like Japan's biggest mobile carrier/operator, NTT DoCoMo (which is still using Symbian today).

If you examine this with hindsight, was Nokia's strategy bold, brave, and forward-thinking a decade ago? Yes. Was it the best long-term, guaranteeing the dominance of Symbian, thus guaranteeing Nokia's own R&D efforts, on a platform sure to  win - if all your rivals are with you, you know it will be there. Will it be the fastest to evolve, of course not. Will this be the cheapest way to go, no. Is it best for Nokia's long-term interests, yes. Is it best for the industry's best interests, yes. (Remember, if you think fragmentation today is a problem, it would be at least 10 times worse, if there had been a dozen more smartphone operating systems being developed over the past years)

BETTER THAN ORIGINAL iOS

So, then there is the conventional wisdom, that the Apple iPhone came along and Nokia "lost it all", and Symbian is "outdated" and Nokia is falling so badly behind, and now playing 'catch-up' to Apple - and the evidence seems overwhelming, even the newest flagship handset, the N8, is 'clearly' a 'clone' of the iPhone. The evidence is so obvious, even an idiot like Tomi Ahonen has to see it now. The Ovi store is a pale copy of the App Store, etc. Nokia is clearly playing catch-up to Apple. Nokia is on the brink of collapse. ...Or is it?

Lets go back to Symbian. Symbian was developed from the ground-up to be a phone operating system. Apple's iOS was not. It was evolved from the Macintosh OS/X. So Apple took an existing (excellent) PC operating system, and adapted it for mobile. What it did, was two things - clearly, the iPhone would have an OS which was very well suited for 'computer-like' activities (like all the apps we now see, or like internet surfing) but also, being a compromise, it was not well suited for 'traditional telecoms' type of needs. It was not designed to work as a phone operating system. Symbian was.

The original iPhone with its intuitive iOS operating system and touch-screen interface, was truly revolutionary. It truly changed the whole industry. We measure time in two stages, before the iPhone and after the iPhone. And the iPhone allowed us to do many thing so much better than ever before - looking at photographs on the phone for example, flicking them and zooming them etc.

But for all its brilliance, the iPhone iOS showed its weaknesses when the iPhone was used as a phone. How very clumsy that the original iPhone did not support multitasking (Symbian had done that for years already). So the inevitable conflicts between apps or what if some urgent telecoms traffic came in - a call for example interrupting our game. The original iPhone didn't support MMS picture messaging (the world's second most used data application, more users than total users of the internet). Again, coming from the computer industry, Apple arrogantly announced that the iPhone user didn't need MMS, they could send emails with attachments. That changed in a hurry, the industry taught Apple how much traffic is generated by MMS, how much money and profits it earns, and that the iPhone has to support MMS (it does now).

And folders, and office suite application support, these were standards to Symbian, that Apple didn't offer. Adobe Flash support, again something Symbian had and Apple argued for years in public that they didn't want to offer. Who had the advanced and well-developed OS, and who had the weak, incomplete OS. And most of all, the original iPhone did not even let users install apps! So it was not even a proper smartphone. That didn't come to Apple until a year later, in 2008. But Symbian had supported user-installed apps for a decade.

There are all those who say that Symbian is old - it is old. There are those who say it is poor at touch-screen interface (it is getting better). But there are those who say it is obsolete, and those are simply wrong. Symbian is a rich, powerful and mobile-specific OS, very competent, if elderly, operating system. It is far from dead. And of the improvements (some say bug-fixes) that Apple has done to its 'revolutionary' iOS over the past 3 years, almost every change that Apple did, was copying existing Symbian standard elements. Who is ahead, and who is following?

SYMBIAN EXECUTION

So if Nokia strategy was right, was it then, that Symbian execution was wrong? They missed out on the touch screen preparedness in 2007. Fine. That is only software, it will be fixed, and by now, it is mostly fixed. Those using the latest Symbian on say, the N8, are totally happy with it. Its not anything better than Apple (but who does anything better than Apple, in any area?) but its far better than most others, compare Windows Mobile or RIM Blackberry etc. The reason it took long time for Symbian to evolve, was that it was done in partnership with so many players in the industry. But it is still evolving.

I am not saying Symbian is the best operating system today. It cannot be, when totally new, mobile-optimized, new-from-the-ground, open source, Linux based operating systems for smartphones are now being developed, like Google's Android or Samsung's Bada etc. These are the new generation, taking operating systems beyond what Apple showed was possible, and Symbian will struggle to remain viable into that competition in the years to come. But today there are operating systems that are obsolete - witness Microsoft's defunct Windows Mobile - and there are operating systems which are still viable - like Symbian and iOS. But the future belongs to Linux based, open source, touch screen and smartphone optimized 'next generation' operating systems. Symbian is not one of those, but neither is Apple's iOS.

BUT SYMBIAN IS DYING IN THE MARKET

Is it? If you look at Nokia and Symbian market shares of all smartphones in 2006, before the iPhone launched, Symbian had 67% of the total market. We don't have Q4 numbers for 2011 yet, but if we take the last 12 months up to Q3 of this year, Symbian is 42%. So Symbian has lost 4 out of every 10 customers it had. Thats nearly half, that is catastrophic, over just a 4 year period, isn't it. It sure looks like that, doesn't it. So lets first have a bit of context. In 2006, of the world's giant corporations, those in the Global Fortune 500, only 8 were manufacturing mobile phones. At the start of this year, that had exploded to 23 giant corporations. The battle in smartphones has intensified by 3 fold. Then operating systems. In 2006 there were 5 smartphone operating systems worldwide. This year 2010, we have seen phones sold with 11 different smartphone operating systems on them. So the smartphone operating system war has intensified, ie more than doubled in intensity.

So how have the others done in this space? Microsoft was second largest OS in 2006 and had 14% market share for the full year. What happened to them? Over the latest 12 months, their market share has crashed to 4%. They lost 7 out of every 10 customers they had, far more than half! What of Palm? Palm had 5% in 2006. They failed so badly in this new competition, that they failed in the market and were bought by HP. In terms of market share, theirs is about 1% today (with HP's deep pockets) so Palm lost 4 out of 5 of their customers. But Symbian actually weathered the storms of trippling rivals and doubling competition, and lost less than half of their customers. That alone should say something that Symbian is actually doing quite well.

Except, that it is not the 'truth, the whole truth and nothing but the truth'. If you look at the fall in Symbian market share without looking at Nokia and Japan, then you are going to misunderstand what has happened. There has been a deliberate migration of some of Nokia's former partners, away from Symbian. So if Symbian partnership with Motorola, SonyEricsson, Samsung etc had 67% market share in 2006, and those partners left the partnership, that is not a fair measure of how is Symbian doing with Nokia, is it. What we should look at, is how was Nokia doing before and after the iPhone. And for this, we have to include those manufacturers in Symbian who have not shifted away. Note, Nokia knew fully well that if Nokia took control of Symbian, the rival handset makers would depart. Even then, over time, this would be a better strategy, with hindsight, than Nokia fighting against a dozen rivals with their proprietary OS's over the past decade. Even so, Nokia wins.

So for you, the reader, to understand 'fair comparison' of what happened to Nokia and Symbian, 'because of the iPhone and new rivals' that means you exclude the 'deserters' and only examine the 'loyals'. That is Nokia and the Japanese. Nokia and the Japanese had 52% of the total smartphone market in 2006. How badly has Symbian suffered over the past four years since the iPhone launched, if we only look at the loyal Symbian family, Nokia and the Japanese? The last 12 month market share for Symbian Nokia and Japanese is 45%. About one in five of these Symbian customers had really 'abandoned' Nokia in favor of the newer handsets, 4 out of 5 have remained loyal to Nokia and the Japanese.

That puts the whole Symbian market in a totally different light. So American Apple came along (and later came another American, Google's Android) and radically shook up the market. Who did they kill? They killed American Microsoft Windows Mobile and American Palm. But they only caused the Symbian partnership to split apart, and of the real superpowers of smartphones - Nokia and Japanese carrier NTT DoCoMo, they only hit 1 out of 5 of their smartphone customers. If the competition grows by 3 and the rivals by 2, and you only lose one fifth of your customer base, you are FAR ahead of the game. Symbian is proving incredibly robust, able to sustain enormous challenges and still survive.

So how strong is Nokia's own Symbian part today? (ignoring Japan) Taking the last 12 months of smartphone sales, Nokia alone outsells all smartphones sold by Apple, by RIM and HTC, the biggest rivals numbers 2, 3 and 4 - combined! Do not misunderstand, that the 'departing family members' of Motorola, Samsung and SonyEricsson, when they departed Symbian and their numbers would be reflected, means any disaster at Symbian. You need to look at Nokia's market share, and yes, it has fallen but it has only fallen by a small portion - they are doing far better than any rival dumbphone maker - in this situation. And considering how many new rivals have entered the market, it is a small miracle Nokia's market share has not been cut in half.

There is the 'conventional wisdom' that Symbian is failing in the market place (it isn't). There is the conventional wisdom that Nokia is copying all of Apple to desperately stay alive (it isn't, Apple is copying Nokia far more than Nokia copying Apple). There is the conventional wisdom that Symbian based smartphones are not viable today and into the future (not true). The reality is, that Microsoft Windows Mobile was a casualty, and Palm was a casualty, both USA based non-modern smartphones on obsolete concepts. But Nokia and Symbian had fore-seen consumer oriented smartphones long before the iPhone launched. Nokia had fore-seen the touch screen long before the iPhone launched. Its only that they move with meticulous, methodical and yes, at times slow pace. The industry analysts claimed Nokia dead many times before, supposedly for missing the hottest new thing - remember Razr, just before the iPhone?

And still today, who sells more smartphones four years after the iPhone launched? Nokia, twice the level of iPhones. Nokia is not struggling in any place except the fantasy-land of US based clueless analysts who think the smartphone is the same as a pocket computer. They should go study the previous Apple pocket computer, the Newton, and why it failed, but why Nokia invented the smartphone and has dominated the smartphone space ever since.

LOW COST MARKET

So then there is the reality. The reality is, that in most markets, the end-user surveys say that the most desirable smartphone is the iPhone. Sure, so too in cars, the Porsche is more desirable than the Toyota. But the iPhone is, and will always be, a luxury phone, only for the very rich. The average household income of iPhone owners in the USA is 100,000 dollars, far above the second highest, which is the Blackberry. The iPhone costs, when you remove the handset subsidy (2 year contract price) about 600 dollars. The average of phones sold on the planet is about 120 dollars. Apple's brand is by far the most expensive by average price, of any mass market phone maker, nearly twice the price of its nearest competitor, RIM.

Nokia's average phone price is under 100 dollars. Nokia is not in the business of connecting only the rich people. Nokia slogan is connecting people. All people. They want to bring phones to everybody. It means cheap smartphones. It means a robust, mobile-optimized but efficient and 'cheap' smartphone operating system for the mass market - this is Symbian, not iOS. All analysts of the industry state that the growth in the market is not at the luxury price end, the growth is all in the low-price end of the market. Can Apple sell a 100 dollar iPhone profitably? No. Can Nokia? Yes. It has the reach, the distribution, the scale, and the production capacity to do just that. So can Nokia capture this growth opportunity? Yes. Will it mean low-profit phones, yes. So don't expect Nokia to suddenly take half of the industry's profits. That is as unlikely as Toyota taking the majority of the car industry's profits. The luxury end takes a disproportionate share of any industry's profits. Again, look at the Swiss watchmakers.

But Nokia cannot contemplate a shift away from its mass-market strategy, into a luxury-only strategy (something Motorola and SonyEricsson have both tried and failed miserably in so doing, while abandoning hundreds of millions of customers and annual sales in the process).

So Nokia's Symbian? It is being aggressively rolled out into lower cost phones, that previously used to be 'featurephones' for India, China, Africa, Brazil, Russia, Indonesia etc where there is a huge market for smartphones, but most of those will be mid-tier priced, not luxury premium phones. Is this the right strategy for Nokia? Of course it is. Are they executing it well?

MARKET SHARE VS DUMBPHONES

Here is the ultimate proof that Nokia is executing perfectly. Please remember again, that the rivals to Nokia are Motorola, Samsung, SonyEricsson and LG. Their mission, for all 5, is to take their global markets in cheaper dumbphones, and migrate those customers into the more expensive and capable smartphones. Who is doing this the best? Well, the only one of the top 5, who has consistently maintained a better market share in smartphones than dumbphones - is Nokia. The only one! So Motorola, SonyEricsson, LG and Samsung, when migrating customers from dumbphones to smartphones - have LOST customers. That is failing execution. But contrast Nokia, for every quarter since the iPhone launched, Nokia - and only Nokia - has GAINED customers in migrating them from dumbphones to smartphones! Yes, every single quarter Nokia's market share in smartphones has been better than its (world-leading) market share in dumbphones. This is what you want as a Nokia executive or investor. To successfully transition from the old technology to the new, and to be best at that transition. It is what Nokia has single-mindedly focused on. Not on copying the fashoniable phone of the day, whether that is the Razr or the iPhone. Nokia has focused on ensuring it gains customers, as it migrates from dumbphones to smartphones. This is perfection in execution of a smartphone strategy - by a legacy dumbphone maker. Nokia is as far ahead of the pack against its true rivals, the top 5 legacy phone makers, as Apple is ahead of the pack among its traditional rivals, the PC makers.

DONE IT PROFITABLY

And only Nokia has done this transition profitably. The past four years have seen the introduction of the most desired tech brand, Apple, into the smartphone space (something to hurt every legacy player), and the explosion of smartphone makers from 8 to 23, and the explosion of smartphone operating systems from 5 to 11, and the abandonment of most of Symbian partners leaving Nokia alone with it. This had been the bloodiest time of any tech industry, ever. The most competition in the smartphone space than any technology ever, among Fortune Global 100 players - with major companies utterly bloodied in just the past year (Palm died, Google Nexus killed, Microsoft Kin phones killed). Yet in this bloodbath, Nokia is the only one of the classic Big 5 phone manufacturers, that has reported every single consecutive quarter of profits in its handset unit! LG, Moto, SonyEricsson and Samsung have all reported losses in their handset units for at least some quarters in the past 4 year period. Only Nokia did this incredible balancing act, profitably! And this, while the global economy suffered its biggest crisis in our lifetimes. A time when dozens of global giant corporations went bankrupt, and most industries lost money, and most companies reported losses - including each of Nokia's real rivals. But Nokia reported consistent profits in its handset unit, quarter after quarter after quarter.

Is this not the perfect execution of a smartphone strategy - for a legacy dumbphone maker - and compared to Motorola, LG, Samsung and SonyEricsson - isn't this a 'night and day' comparison? But no, the Apple-obsessed analysts cheer how big profits Apple makes and ridicule Nokia 'for having lost the plot.' All the while ignoring the facts, that Nokia keeps increasing unit sales every single quarter-on-quarter (something Apple has not been able to do). And still today Nokia towering over its rivals, the numbers are clear that for the full calendar year 2010, Nokia will sell at least as many smartphones as its next biggest rivals number 2 and 3 (Apple and RIM) combined. Nokia was 'failing' in the market, exactly how?

OVI STORE - IS A SUCCESS

And then the Ovi Store. There are those who say Nokia lost it when compared to Apple's iPhone App Store. First, obivously, Nokia had an app store before the iPhone. Nokia's first consumer-oriented app store - where apps were not sold via the carriers/operators, was created for the N-Gage. It failed in the market, not because it was bad, but because the carriers/operators hated it that Nokia, a handset maker, was introducing an independent app store. They would not help Nokia sell the N-Gage handsets in any way. But Nokia had seen this opportunity - what Apple then did - of offering consumer apps in an app store - long before we had seen an iPhone. And Nokia was brave enough to launch it too. And was severely punished by the carriers/operators of the world for doing that. So Nokia withdrew its N-Gage store.

Don't say Nokia didn't see this coming. And then Ovi. Nokia waited until Apple had its App Store up, and then Nokia came back. If Apple is allowed to do this, then Nokia can also. But this time, Nokia did it with the operators. Not against the operators, like Apple.

Nokia went through the trouble of getting operator billing for its Ovi Store (none of the major rival apps stores have operator billing). Nokia has negotiated the operator billing portion for over 100 carriers/operators already! Ask any experienced developer, would they prefer operator billing rather than credit cards or Paypal - they all say they prefer operator billing. Who is giving it to the app developers? Not Apple or Android. Its Nokia again. What is best for the whole eco-system. Not the easiest or fastest, but best.

Meanwhile how is Ovi doing? Of the handset maker or OS maker app stores, Ovi is now second best-selling behind only Apple's iPhone App Store. If you cannot - as Apple forbids it - use Apple's own App Store, then if Ovi is the second best performing app store on the planet, you'd have to be a fool to abandon that, in favor of Android or Phone 7 or any other app store, wouldn't you? Nokia is still building its Ovi store, it is gettting better by leaps and bounds, and will reach a far wider range of total Nokia phones than just 'Symbian' phones. Many simpler S40 phones can use the Ovi store, as can soon the MeeGo handsets. After all that investment in Ovi, and the considerable success - second best-selling manufacturer app store only behind Apple - this alone is reason for Nokia to continue on its path, not shift to Android or Phone 7.

NEXT OS

But obviously Symbian is still old. It is ever more costly to maintain and develop. It has a broad global developer community who hate developing for the very old system, and find it far easier to develop for the iPhone or Android. So what, if Nokia once did have the right strategy, it needs something new for this new decade. Ok, I agree with you on that. But that 'something new' is not Android or Microsoft Phone 7. It cannot be. And here is why.

Nokia's nearest three rival smartphone manufacturers - Apple, RIM and Samsung - all have their own OS. Nokia also has its own OS. If your nearest rivals have full control of their destinies, and are not dependent on an outsider like Google (Android) or Microsoft (Phone 7), then in an ideal world you - Nokia - should also maintain control of your own destiny, and develop your own smartphone OS.

The ideal solution for Nokia is to create a new operating system, from the ground-up, optimized for touch screen modern smartphone apps oriented uses. Like the Android and the Phone 7 (and iPhone iOS). And it ideally should be Linux based like Android (but not Phone 7 and not iOS). And ideally it should be open source like Android (but not Phone 7 and not iOS). And ideally it should not be solely proprietary, it should be developed together with the industry such as with Intel (unlike Android, Phone 7 and iOS). And ideally it should be developed with a compatibility level built in, to allow developers to continue to develop for Symbian while the work could be used simultaneously for the new OS (unlike Android, Phone 7 and iOS). And finally, Nokia should make the new OS available for multiple manufacturers, like Android and Phone 7 (but not iOS). And the new OS should be compatible with the current app store and the current OS like Android and iOS (but not Phone 7 vs Windows Mobile).

That would be 'perfection' in a new OS, it would encompass everything that is excellent in iOS, adding everything that is excellent in Android, and adding everything that is excellent in Phone 7. But it would be even better than any of those 3 rivals.

This is Nokia's MeeGo (formerly Maemo) strategy. It is a totally new, from the ground-up, brand new touch-screen optimized Linux based smartphone operating system. The newest on the planet, first phones on it will only ship next year. It is open source (something iOS and Phone 7 are not).

This develpment path is not easy or cheap. It will require 'parallel' development of two expensive smartphone operating systems, but this will be best for the end-users (consumers who already hold hundreds of millions of Symbian phones by Nokia); it will be best for Nokia distributors (mobile operators/carriers); it will be best for Nokia apps developer community. This is the best solution, if not the easiest, fastest or cheapest. And compared to joining Android or Phone 7, only this, the MeeGo strategy, would allow Nokia to maintain control of its own destiny.

If you think Symbian is too old, and must be discarded for a more modern OS, then yes, Nokia is doing that. But it is doing it the best possible way for Nokia and all its existing developers and customers (and investors). That strategy is the new OS, MeeGo. And then Nokia has gone through the extra trouble of branding its app store separately, as Ovi, so that when the migration happens, Symbian developers won't feel their store is closing (look at Windows Mobile) and the new MeeGo developers can find their store with much business (vs Bada, Phone 7 today). Then Nokia went through the extra step to ensure backwards and forwards compatiblity, by creating QT the development environment. Today all Symbian and MeeGo development goes through QT, which means that one development environment can truly provide 'create once, publish twice' solutions to create for both Symbian and MeeGo - and better yet, QT can be used to develop for Android and iOS and Phone 7 too. This was a costly extra step for Nokia, but again, isn't that the best step, considering the developer community? Microsoft simply abandoned Windows Mobile, no migration path whatsoever. Apple has said its backwards compatibility will not be extended to earlier OS versions. Nokia doesn't think that way. Nokia looks after its developers - but this is costly and takes time. But over time, it is the best way for all.

If you subscribe to the theory that IBM, then the world's biggest PC maker, abdicated control of its own destiny, when it allowed the small outsider company called Microsoft to produce its operating system for PCs, called DOS, and allowed Microsoft to sell that to other hardware vendors - then you can see a parallel to LG, SonyEricsson, Motorola and HTC, where they do not control their own destiny anymore. They are dependent on the whims of the operating system makers (Google for Android and Microsoft for Phone 7). Nokia has taken control of its own destiny with Symbian and is in control of it with MeeGo.

If you subscribe to the theory that box-movers in the PC world are in diminishing margins, ie Dell, HP, Acer, Lenovo etc, and the only way out of that conundrum is up the services and apps ladder via software - like Apple - then again, most of the 'second tier' handset makers are in that situation - Motorola, SonyEricsson, ZTE, Huawei, HTC etc - and only a few like RIM, Apple, Samsung and Nokia - are making both their own OS and their own handsets.

IN SUM

Nokia has had the best strategy of any traditional dumbphone vendors, to shift from featurephones to smartphones. Its strategy is in many ways far better than what Apple among PC vendors or Google among internet companies have managed. Those who have complained that Nokia somehow 'lost the plot' have only obsessed about touch screen phones - but even there, have not done a reasonably accurate analysis of that small market-segment (roughly as many QWERTY phones sell globally as touch screen phones, why is Apple not accused of stupid strategy for abandoning this market segment, all 5 of its big rivals in smartphones, Nokia, RIM, HTC, Samsung and Motorola, offer QWERTY based smartphones as well as touch screen smartphones). And if the future of smartphones is cheap 'Africa' and 'India' smartphones costing under 100 dollars, why is Nokia not cheered for the right strategy, and Apple accused of missing out on the obious trend where the market is shifting. No, there is more to the market than just touch screen phones. But even if you believe that the 'only' future of smartphones is touch screens - then Nokia N8 and the latest edition of Symbian prove, that Nokia has adjusted to this challenge well - better than say RIM or Microsoft.

But the future for Nokia is a Linux based totally new operating system, optimized for touch screen smartphones. It will be an open source OS, developed with giant IT partner Intel. That is called MeeGo. It will be one of the best OS's out of the box, and it will be developed with a mobile phones type of mindset, rather than clumsily adapting from the PC world like iOS from OS/X or the defunct Windows Mobile. Nokia has executied its smartphone strategy the best of all dumbphone makers. It also has the best strategy for the future of smartphones, of any current smartphone maker. MeeGo has everything you could want for in an OS, and has several items that none of its rivals can match. Nokia would be utterly crazy to abandon this path, and join Android or Phone 7.

So I say this: shifting away from Symbian/MeeGo would be suicidal for Nokia. If they do that, it is a sign that Nokia is throwing in the towel, admitting defeat. If Nokia abandons Symbian/MeeGo and joins Phone 7 or Android, that is the time to immediately liquidate all Nokia shares, it is a sign that Nokia HQ has gone berzerk and truly mad. But they won't do that, I trust the Nokia HQ is occupied by execs with brains far bigger than mine, and they can see the big picture - and the long game - far better than I can. They have built meticulously a strategy, to take advantage of Symbian, to not forget their developers, to have a migration path, to have an app store, and a future-proof new OS for their smartphones, allowing today's developers to develop for both Symbian and MeeGo, using QT, and selling on the Ovi Store. This is the best strategy in phones - proven not only by Nokia's giant lead in smartphones, but by the fact, that only Nokia manages to gain customers as it migrates from dumbphones to smartphones. And even as its margins have been hurt in this economic global situation - whose hasn't - Nokia has not reported one quarter of losses in its handset unit, that is how good they are in execution.

Don't belive the hype or hysteria, that Nokia might abandon its Symbian and MeeGo strategy. It is truly the best in the market. Nokia will have more than a third of the total smartphone market in 2011, and in 2012, and in 2013... mark my words.

Two comments about 2 hours later: - first, later this week I will have the pleasure of announcing my 10th book. Please come back towards the end of the week for it.  UPDATE - the 340 page book has now been announced, it is called 'The Insider's Guide to Mobile' and best of all, this is the first time a book of mine is available completely free for download. See here for link Tomi 10th book.

Secondly, Robert Scoble (Scobleizer) gave a quick comment, a bit tongue-in-cheek, saying no matter how many words I write, Nokia is still doomed. His rebuttal is here: Why Nokia is Still Doomed, no matter how many words Tomi Ahonen writes  - please go read his reply and I will meanwhile write my response to his posting. He makes good points but, Nokia's strategy and execution is sound, even if the Scobleizer doesn't meet Nokia execs that he might like.. Please read his response first, then read my reply to his blog here: Nokia strategy is right, even if the Scobleizer can't find developers who say they like Nokia.

Comments

[Hyoun Park]

I think Nokia's strategy is true if the goal is to control the future of mobile from a global subscriber perspective, but this is a very long-term perspective. Over the next 3-5 years, an Apple-like strategy of skimming the top 5% of users will provide more profit than Nokia's current strategy and I think that will lead to continued questioning of your assertions.

However, the real question about Nokia's ability to migrate to MeeGo. We're seeing RIM trying to do the same thing with QNX and Microsoft making a similar migration to Phone 7. How will Nokia be more successful when Apple and Android won't have to go through the same growing pains? It'll definitely be interesting to see how this launch goes through in the next year, as it seems to be a critical leap for Nokia to be competitive at the high-end or to bring high-end functionality down to the "dumbphone" more quickly than Android.

[Antoine RJ Wright]

A few questions while reading this Tomi;

- in an economy where data is just as important as communicating, is it important whether the platform (and its enablers) start from a communicator/phone mindset (Nokia/Symbian) or a communicator/consumption one (Nokia/MeeGo, Apple/iOS, etc.)?

- your paragraph at the beginning of "But is Symbian Dying in the Market" is too important, and yet so many people glaze over that point.

- you mention that it is Apple copying Symbian, could you dig a bit more into that (I don't agree; Apple seems to be copying Palm with better platform value and integration efforts/execution because of iTunes); Android seems to be copying Symbian, and doing so quite rapidly in markets where many of those entrants who weren't in that "8 in 2006" segment want to have a piece of the pie; can Nokia hold off its competitor in Google in that respect?

- in your section "Done It Profitably", you were careful to note that Nokia's handset division was profitable - quick readers will rebuke you a bit for that; but those who read won't - nice touch; question is, can Nokia maintain that with fewer products in the pipeline (for execution's sake) and its larger emphasis on Ovi as a profit driver?

Nice piece; and I got through it all before my tea got cold. You must be doing something different when writing :)

[Dardo]

Although Nokia is a good mass market smartphone maker, it is undeniably a terrible high end smartphone maker. While their Symbian smartphones might be great 100-300$ smartphones, their 400$+ smartphones are god awful and underpowered! Even the new Symbian 3 handsets are awful to use, I've tried them first hand.. the software is nowhere near a finished product, to their promise the hardware is amazing and Ovi Maps is what's saving them! The fortunate thing for Nokia is that non of their rivals are anywhere near of catching up to Apple with their wonder iOS product. This gives Nokia time to adjust.

However I will say this, if Nokia's new high end OS, MeeGo, isn't a smash home run hit they will remember the moment they passed on webOS, a great fluid OS that had potential to be on par with iOS. Just imagine a Nokia N8/E7 or C7 running on webOS right now.. I bet you it would be a smash hit home run. They're doing decently right now but no where near the level of the iPhone or the legendary N95 a few years ago.

We'll see how it pans out.. all I know is that if Apple released a stripped down 300$ iphone running iOS and keeping that beautiful screen it would double or even triple its sales. What if Apple brings out a $300 iPhone? All dynamics of the mobile industry would change.

[EagleEye]

Thanks for the great read and top notch analysis.

[mirmit]

Why Symbian OS is taget as Old from anybody, including you Tomi?

Linux has started in 1991 and is the adaptation of the old Unix started in 1969.

iOS is a derivative from BSD dated back 1977.

QNX to be used by RIM's future devices date back from 1980.

Symbian OS development started in 1994.

I would be happy to see how the most recently developed system is already taged as old.

Additionnaly, Symbian is the sole OS of the list to have been started from day one with mobile devices in mind. The others have been adapted to cope wit hmobile phones constraints.

Above all the OSes a UI layer have been adapted and from this standpoint, S60 is the oldest as first put on the market in 2002. But when the transition from S60/AVKON to QT will be completed by Nokia, then it will be on par with Meego/Linux.

Symbian will remain a central piece of Nokia's strategy, as it can run on half of the power or even less than any Unix derivated system. You don't need 1Ghz Cortex with 512+ Mb of RAM for a Symbian device, even if it would benefit from this amount of horsepower. This lead to devices less hungry in batteries with a lower BOM providing the same level of services as their competitor and will address all the markets needs.

[Gerd]

Nokia could conceivably use Android or Phone 7 to gain a foothold in markets they have currently no presence, such as the US or the global CDMA market.

However, they would probably make sure that such a phone would ship with Ovi services instead of Google's or Microsoft's. That would make an interesting not-quite-Android phone, as my understanding is that Google does allow access to Android market without Google approval (=Google apps).

It would probably be hailed by the market as the weird-shit-suicide move of the century, but in some cases I would certainly see it as a simple money-making opportunity.

[Tomi Ahonen]

Hi Hyoun, ARJ, Dardo, EagleEye, mirmit & Gerd

Thank you for the comments. I'll respond to each individually

Hyoun - I think we agree on the potential of skimming the customers, that an Apple-like strategy is possible for Nokia, but focusing only on the top end of the market, while giving short-term profits, would plunder Nokia into a global market share tailspin - exactly like SonyEricsson in 2006 and Motorola in 2008 - one which is almost impossible to recover from (witness SonyEricsson and Motorola haha). There is the real biggest rival to Nokia - Samsung - waiting for Nokia to make any market blunder, and take over. So I think Nokia cannot indulge in that short-term opportunity, else they will be a history lesson of how another tech giant fell and died.

I totally agree with you that the critical challenge for Nokia is the migration to MeeGo and it has to be done while rivals don't have the same problem, its similar to how Microsoft had to migrate its market leading DOS market share to Windows, while Apple's Macintosh didn't have to do that shift. It can be done..

ARJ - good points. On your first, I am still 100% convinced that communication does currently - and always will - trump the need to use data. It is why we carry smartphones today, not PDAs, which gave us data services more than a decade ago, and did it better in our pockets than early smartphones. So I do think any smartphone OS, that is from the start built on telecoms needs, ahead of data needs (Android, Phone 7, Bada, MeeGo) will do better than those that are ported or old.

On Apple copying Symbian, I had a blog posting here about 18 months ago or so, that showed the first 12 things that Apple copied from Nokia legacy phones and Symbian. Now that we have iPhone 4, we've seen that number grow to 15. If you could search on the blog for Apple and 15, I do think you'll easily find the article. As to Android vs Nokia - I do think the current trends suggest Android will pass Symbian next year. The primary driver to when that will happen is how rapidly Samsung starts to migrate its Android phones to Bada.

As to profitability, I am confident the Nokia sourcing channel management is also the world's best, meaning they can handle the inevitable bottlenecks etc, and use their size as clout, to get supplies when there are shortages, etc. That is why the biggest tend to have the best profitability in most such manufacturing industries, the benefits of scale go to the biggest. Its not a guarantee, but they are the 'most safe' in this way.

Dardo - I hear you, but I am guessing you live in North America and have not been exposed to most of Nokia's top phones over the years, like say the N80, the N93, the E90 Communicator, the N96 etc. Their last flagship, the N97 was a very rare failure as a top phone, but those other phones have regularly been rated among the best phones of their period - the E90 Communicator beat the current rival iPhone 3G handily in most comparisons in Europe - and the N93 would have easily beaten the original iPhone 2G (but was superceded a bit before the iPhone launched, by the N95). Please rememember that different consumers want different things on their phones, so for example the top-end Nokia phones have always had far better cameras than the iPhones - more people desire a good camera than a touch screen for example - and Nokia has had always a long series of premium QWERTY phones - again, more people on the planet buy QWERTY phones than touch screen phones - and the Motorola study this year said a third of consumers will not consider a pure-touch phone that doesnt have a real keyboard/keypad, for they need the ability to send SMS text messages with the phone hidden in one-handed operation.. But if you want to argue best touch-screen phones, yes, Apple totally re-invented that, and has by far the best touch screen phones today. In that area they lead, no question. But its only one part of what people buy in premium phones.

As to the rivals, haha, you did get my point. Its not that Nokia is racing Apple, Nokia is racing far bigger handset maker rivals (in volumes of handsets, obviously, not in profits) and there is where Nokia leads by a mile. We agree. And I agree with you that MeeGo is critical, and that Apple could easily double its sales if it released an iPhone Nano in the 300 dollar range (as an unsubsidised price). But even then, Apple's total sales would only be about 8% of all phones, being far smaller than LG for example..

EagleEye - thanks

mirmit - haha, thanks. Ok, I hear your point, but as a phone OS, Symbian is the oldest still running haha.. But you make a great point about the power consumption. Symbian has always been designed to be very power-efficient and has apparently (I am not a programmer, but what I hear) been far more efficient than its contemporaries, thus also able to run on less-powerful CPUs, using less electricity, giving better battery life - the real bottleneck in phone design.

Gerd- you make an interesting argument. The point, however, in the USA, is not the availability of an Android or Phone 7 OS based phone, it is that Nokia is not liked by the carriers and they won't support Nokia phones come what may. They wanted flip phones like the Razr a few years ago, Nokia refused, but LG and Samsung were happy to comply (and Moto). And the US carriers wanted Nokia to cripple its WiFi and Bluetooth, so that users couldn't use alternate wireless networks - Nokia refused, Samsung & LG & Moto too happy to comply. And Nokia wasn't producing CDMA phones (in its top lines), the rivals were. So the US carriers just started to hate Nokia. Now Nokia needs to make peace with the carriers, its not a question of what OS to use.

But the scenario you do map out, would indeed be seen by just about everybody as weird-shit-suicide, for both Symbian and MeeGo, and a clear sign Nokia is going to end that development. Then all Symbian and MeeGo partners would vanish, leaving Nokia high and dry. It would indeed be the dumbest move by a handset maker in history and would seal the fate of the company.

Thank you all for writing.

Tomi Ahonen :-)

[mirmit]

Tomi, in fact Symbian OS is the oldest as the sole smartphone OS still running ;-). The others are PC/Mini/Mainframe OS put in a pocket. And on dumbphone/featurephone, we are talking about VxWork, OSE and Nucleus which are older than Symbian.

[mirmit]

About App Store, does anybody remember Preminet, launched October 2004. It was an app store with operator billing for applications and contents distribution for Java and Symbian based phone. It's sure Nokia waited for Apple to have the idea to launch an appstore.

I guess Nokia has alway been too keen with its main customers - the operators - and tried to not disturb them, at Nokia expenses. Thanks to Apple, we have now data rate much more reasonable, making web surfing from a phone realistic for a lot of people, but before 2007, every single bytes was accounted and billed.

[Dietrich]

Good Lord.
Put a sock in it.
That was the most verbose article I have ever read.
I will never come here again.
Seriously, I get it--you like nokia and so do I.
They will prevail.
Peace out.

[new era hat]

thanks for sharing

[Rob]

Excellent article and understanding of global strategy

[Geraldo]

Hi, great article, thanks. I'd like to say that developers generally refer to the framework as Qt (Q upper - t lowercase) not QT (all upper), maybe to distinguish from QT (Apple QuickTime).

[Billy]

Just to say that Nokia did not create Qt, they bought the original developer Trolltech in what may eventually turn out to be the bargain of the century and what really saves Nokia's skin.

I also don't agree that Symbian is making way for or being replaced by MeeGo, I think the two will co-exist far into the future as they target completely different market segments - Symbian the low-end to mid-range and MeeGo the high-end smartphone and mobile computing markets. With Qt sitting on top of everything.

The biggest problem with Nokia, and this has always been their problem, is not so much their lack of vision or strategy, but their execution in terms of software. This has to change if they are to succeed longer term - hopefully Elop will see to it that the necessary changes come into effect.

[arg]

I can't see a single reason why MeeGo would be any superior to either the iphone or android platform, sorry.

[Billy]

@arg - being a truly open OS would be just one reason (as Android is only psuedo-open and developed behind closed doors, while iOS is entirely closed/proprietary).

[shuffer]

This doesn't really stack up, I'm afraid. The supporting arguments are taken from too disparate a field (using iOS from three years ago when it suits; using WinMob from eight months ago in the next example). You can make any argument when you scatter your focus in this way, as per the 'Magic Bullet' theory. Conflicting opinions about who is leading who in the technology aside, the prevalent market trend for Symbian and Nokia is down, and very fast. I predict that their market dominance will be eroded within the next two years unless they can gather a focused effort in their marketing and operational strategy. The main reason will be the gradual assimilation of the 'dumb' phone market into the smartphone field, facilitated by Android; if you can have an Android phone that is superficially simple and easier to use at the same price, who would bother with a Series 40 type device on either side of the market? Another reason is that the US market doesn't seem to want to adopt either Symbian or Nokia devices in any real numbers and while that is not devastatin in terms of numbers at the moment, the mindshare and promotion that the US media and web presence can offer to the rest of the world is going to be seriously missed. iOS is another matter, and perhaps not a significant one in this context.

There really is no way of explaining a massive market share loss and the retraction of the major partners as a positive thing for Symbian or Nokia. The confused open-source strategy didn't help, either (although I have to say, Meego does look interesting.) And I say that as somebody that used to use Symbian in all its forms and held a real affection for the system and its proponents (it has its roots in Britain, after all;). As far as the technology goes, there is a real difference between raw features and the modern feel of an OS. I has all the things you mentioned in your article when I used Nokia Symbian phones (folders, multitasking, Flash) and yet to this day, Symbian feels like an out-of-date system compared to iOS and Android. As for the iPhone fundamentally changing the way smartphones are designed and marketed, it is really difficult to argue with that, as in this example, Nokia never made a phone that resembled the iPhone before, and now they make many, with a lot of the same technologies.

[shuffer]

And: I would love to know the source of the statement that the average iPhone owner has an income of $100,000! I suppose all it would take is for a couple of dozen billionaires to swing it either way, but even so, the figure is utterly ridiculous.

[Phil W]

@shuffer, there's the problem with all these blogs. they keep repeating things even when not true. There has been no massive market loss for Nokia. Nokia has lost a little it is true, but it's hardly massive. There has been a bigger loss for Symbian and that tends to get confused with Nokia, but in fact most of the loss for Symbian has been because Sony Ericson and Sampson have pulled out of producing Symbian phones.

[Jontte]

Tomi,

I am a bit puzzled by your analysis and choice of some numbers. You claim Symbian share in Japan is 45%. I have seen reports, for example in BusinessWeek last spring, that iPhone’s share in Japan is around 70%. One of these numbers must be wrong.

Also, when comparing Nokia share to biggest rivals you choose 12 months, but fail to mention that during that time RIM, Apple and especially Android (from several manufacturers), have grown faster than market, and that Nokia is having hard time on the most profitable segment.

USA may be quite a small market unit wise, but money wise and mindshare wise (both media and developers) it is not. Remember the Ballmer dance, Developers, Developers, Developers. Apps are the future of smartphones. No apps or poor apps equals an uninteresting platform, for which you can not charge premium and to which the users are harder to bind. Android and iOS are leading the pack, by a long margin, here.

I still fail to see why number of sold phones is the most important thing for you? Companies live to make money, if they are not profitable they cannot live. If they have problems with margins (Nokia is in the danger zone) they may be incapable to invest enough in R&D.

Sure, Nokia is trying to be green, ethical and everything good and fluffy, none of that really matters if you lose developer support, or get in trouble with margins.