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« Undesirable at Any Price? What happened to Nokia, who invented the smartphone | Main | Return of the Jedi: Nokia can be saved, here is the how »

January 28, 2011

Comments

L4D

Did I miss some part but didnt you include Nokia's component shortages as one reason for the market share drop? There would have been more demand for N8 for example but they couldnt produce them fast enough or they didnt have the components?

zombie shareholder

Wow.

My take-home from your analysis is that Nokia's smartphone business has been sicker and for longer than outside analysts have suspected. Is Nokia in even worse shape than the naysayers have it, a Greek tragedy unfolding, as an above poster stated?

- New smartphone customers: not enough choosing Nokia
- Current smartphone customers: no reason to switch to Nokia, diminishing number of loyalists sticking with the brand
- Dumbphone customers: marginal revenue, minimal profit, diminishing chances to upsell to a Nokia smartphone

Very curious to see what Feb. 11 holds, Nokia presence at US GSM carrier retail stores is about nonexistent. At least my stake in Nokia isn't that much, but a 50% loss is still a loss.

Laskentelija

Gartner added Others to market share, before pirate phones like Nookia made in Asia haven't been calculated ?

Are pirate shoes or pirate clothes calculated shoes/clothes sales ?? I hope nobody makes pirate cars!

Ajit Jaokar

Interesting .. but still .. when you say ' I think the evidence is overwhelming and the pattern is perfect. OPK had been buying market share into early 2010, by propping up an un-sustainable level of market share - by heavy discounts and/or marketing support of carriers/operators.'
Is there an evidence for this?

secondly, is there an evidence for the coresponding drop with carriers?
ie tie the cause and effect together. So in one quarter the sales are high with specific carriers - and after two quarters they drop with specific carriers

kind rgds
Ajit

Mike

Great post Tomi!

One thing I was wondering. You didn't mention the component shortages issue in your analysis.

How much of a contribution do you think component shortages made to the decline in market share (and also the direction to abandon market share in favour of increased ASP)?

Onno ter Wisscha

Tomy, great post. Lots of insight.
But still: you analyze effects and not the cause.
Having to buy market share is caused by something.
And the cause is simple: Nokia does not make smartphones!
What Nokia calls smartphones are not considered smartphones by consumers.
Put differently: consumers looking for a smarter phone are hardly considering Nokia.
So thank you for the very interesting analysis of how Nokia is dealing businesswize with this problem, but the cause is one step deeper:
Nokia is not making desirable smartphones any more.
Not since the N95 basically, which by today's standards is not a smarthone at all. .
Consumers had to end their contract. Some tried a new Nokia, but none of them were really happy. At least not as happy as the consumers who switched to Blackberries, Androids and especially iPhones.

MeeGoFan

Might have been a smart strategy if it were true, especially if you consider that the objective is to connect as many people as you can as long as you can do it profitably.

Nokia definately deserves more credit from the US press & blogosphere. I remember hearing Arrington from TechCrunch saying 'nokia is roadkill' in front of a microphone at le Web in Paris. I guess Nokia beating Motorola in this field in the past, the Quallcomm court case, GSM vs. CDMA have not made it easier to make new friends and give it a history where everything nokia does is being badmouthed and talked down upon one way or the other. It makes me sad for it is the greatest brand in the world, in good and in bad times. Largest installed userbase on the planet for any product maker ever?

Was Nokia not also the first company to have sold over 100 million smartphones in 2010? Any company who reaches that milestone first must have done at least something right, no?

People's perception can be changed, capabilties to meet peoples demands can not. I see 453 million Nokia customers being served in 2010 and still nobody else getting anywhere near. Android is a grab-bag of different manufacturers of which the largest (Samsung and HTC) seem to have other plans in mind for their OS further down the line. I see apple being excuberent with serving only the affluent in this world. Yet I see nokia helping people in egypt getting connected and changing their future. Do you have an app for that?

IF anything, nokia has and always will help to connect the unconnected, making services like free mobile email (witohut ads) available to people all over the world. The credit it deserves for that is paid in full by it's 1.3 billion or more customers who use their product every day. This number grows every year again faster than any competitor.

It is all about the people. So is 'marketshare'. So Tomi, when will you look at and provide us some numbers for the installed userbases for each of the mobile platforms?

And then, lastly, I have a secret to share. Don't tell anyone you got it from me because if it is true it would cause a revoltution, but the word on the street is that smartphones don't really make you smarter ;-)

 Tomi T Ahonen

Am continuing (from Jan 29 replies)

Hi Nuno, Nemus, Romain, Baudrillard, Bob and kevin

Nuno - first, thanks for great answer to HangLoose. Secondly, very very good point about the delusion and delays and resulting disillusionment of Nokia supporters. Totally agree.

Nemus - I agree the Q1 results can well be even worse than Q4 was, that is what the early signals from Nokia suggest. I was not very clear in the blog that the 28% current level is by no means the definite bottom, but its pretty sure that the ceiling for Nokia today cannot be better than 28% (not like 33% a quarter before or 39% half a year before). So my case is the 'best case' haha.. And yes, I am now pretty much convinced that it was a self-inflicted wound.

Romain - Yes, I think there is nothing wrong in theory with using all marketing methods - including pricing - to fight for market share. But pricing is the last resort and the move of the weak, a strong player has always other options in the marketing portfolio, so a price war is a desperation move to my mind (or that of someone who utterly does not understand marketing). Now, the US market haha, that is where Nokia is 'desperate' and it would make sense to do drastic prices there - a very isolated market where essentially four big carriers control it all. Out of Nokia's smartphones sold, only about 1% are sold in North America, they could have sold them for free - haha - and still not cause the damage to the average sales prices and profits - if that strategy was only used in the USA. I do think Nokia should have more options than price cuts - but also - the US carriers know Nokia is desperate and could have insisted on the price cuts - which in turn they could use to squeeze lower prices from their other suppliers.. Its always action & counter-action in market share wars under real competition.

Nemus - on MeeGo for the USA, I don't see that as a viable strategy either, sorry. MeeGo is built to be for very advanced and powerful handsets, big memory, fast CPUs, touch-screen etc. It would require very expensive handsets - the kind that the US carriers are refusing to subsidise on Nokia branding. I believe the way in, is a portfolio of products mostly on the low end of smartphones, and build from there. Find a hit product at the very low cost end of basic touch screen smartphones, probably near the youth segment, and that will then be a modest power phone in features, and will run Symbian. I don't see the US carriers taking suddenly a 'Samsung Galaxy S' class style offering from Nokia as the come-back, which is what MeeGo devices would be. Maybe one Meego device but then its a high price handset which would only do a modest entry perhaps on one carrier. That is not enough. MeeGo will far more be launched in Europe and Asia where the customers are far more willing to pay premium prices for Nokia premium phones.

Baudrillard - oh, yes, very good point. Yes, there is an 'enemy' attitude to Nokia the nasty European (nasty Finnish, how bizarre a concept is that haha) company now that the US wireless industry is threatened not unlike how cars still are and how TV sets once were etc. And very good point that the US tech blogs will get huge coverage and echoes in the digital media, so their views help color the views of the rest of the world (even in Finland haha)

Totally agree about part of the blame is Finnish management style and culture. They really need a North American style CEO who can fight back and is not 'brainwashed' by the system never to brag, always let the actions speak for you, never dare to raise an argument or fight etc.. Very true. I hope we will hear a more proud voice from Espoo, not the timid whimper we used to hear from Nokia..

Bob - Excellent examples yes again, case studies of why market share is important, with Microsoft Windows and Office. About the 100 dollar smartphone, they already exist, but to reach that price point, you compromise just about everything, that it will truly be seen as a 'bargain basement' phone and I think it would hurt Nokia's brand image even more. If you can get an Apple iPhone 3GS for 99 dollars with contract, and Nokia would try to peddle a smaller phone, with smaller touch screen, weaker camera, no WiFi etc - what you'd end up with the 100 dollar device - that would not really do any big sales either - most of all, because of the near-criminal US carrier practises of not discounting their contract prices if the consumer brings their own phone! I have been arguing for a long while now that this practise should be reviewed by the US Congress and discontinued. It is totally anti-consumer and anti-free markets. The carriers are actively colluding to damage the consumer's best interest in the USA. If the consumer is rewarded with a cheaper monthly telecoms service fee for using their own phone, that would open a door for unsubsidised phones to also succeed in the US market. Then a 300 dollar Nokia phone would have a reasonable chance, and Nokia could easily sell an unsubsidised 300 dollar phone that was roughly on par with the iPhone 3GS on all specs, exceeding it on some. And then if your monthly phone bill was far less than what you have to sign for with the iPhone contract, now the option might become attractive - for some, not all consumers. But its not even plausible today, not with the carrier archaic practises.

kevin - great point that yes, it is both for smartphones and for dumbphones. For Q1 I do think Nokia expects further market share losses, so yes. On RIM - there is an element of price wars - but this was launched by Nokia if you remember when they did several across-the-board price cuts about this time a year ago. On Android, I do think the Android pattern was to invade the USA first, with Motorola and HTC especially focusing early Android action there. It wasn't really until Samsung came strong into Android and spread the Android footprint strongly to Europe and Asia. So that I think wasn't so much the factor, I think it was the native strong markets - Nokia wasn't a factor in North America so it didn't matter in the first half of 2010 in North America where Moto and HTC took early Android wins.

Thank you all for writing, I will return with more comments, please keep the comments coming, I am enjoying very much reading the intelligent discussion here and learning much!

Tomi Ahonen :-)

Ryan Ferguson

I am glad someone took the time to figure this out and did not take the easy way out by jumping on the common band wagon of attacking Symbian OS or OVI. I did take the time to read the whole article and this makes perfect sense. I was wondering why AT&T dropped the awaited Nokia X7 and T-Mobile simultaneously dropped the Nuron 2, more evidence that this is in fact the case. Thank you Tomi (AKA Sherlock Holmes) for this scoop. Well done my good man, well done!

patrick bosteels

I am not so much into the marketing, market share etc. We develop on all platforms for the moment and what we experience today is that Qt is surely not "finished" yet and although promising is quite a challenge for us. We started with the SDK from Apple, then Android, Titanium for cross platform, SDK for Blackberry (what a nightmare with the different form factors) etc. For us the succes of Apple with iPhone was that the phone is granny-proof, always works, always same UI and off course an immense hype around developers whom could now create something DIRECTLY to an audience that was the user. Everybody that came after was always second and to complex. Android is suffering from a clutter of versions and shells and UI's etc. When we started with Qt we saw an unfinished platform, but very promising. But off course, without the hardware the platform can not deploy. So I truly wonder what is now key, get the the hardware right or focus on the platform/software. So I read your post twice as we, as a company, will focus on Android and Qt by Nokia. Both because of the penetration and our believe that the platform/store are the most "open". No marketeers in the future will accept the way Apple is treating them, like children whom do not know always why they are punished or when the candies are distributed. On top of your remarks I would like to indicate also the huge opportunities Nokia is missing not to support more actively the local markets. They are present in all countries with PEOPLE but still they run around like chickens shouting that we should all develop on Qt and get apps in the OVI store. Why would we ? They could start by listening and support in a rapid and clear way the marketeers with brands, the companies with content, the game makers with opportunities. And the developers? A platform that is complete and well documented. But get first to the business, do not try to copy Apple/Android focusing on apps, copy cat will not bring the solution.
Thanks Tomi for your insights and most of all for sharing them !

VEO

Hi Tommy,

Thanks for great analysis always. Just want to contribute some of my thoughts and hopefully you may consider this as a valid point.

Another reason why Nokia smartphone number came down is the success of Nokia C3 model. Remember Nokia put a lot of efforts in terms of marketing it to the querty market but only that as entry level "smartphone". I said smartphone because while it is a feature phone it is capable of all the functionality of a smartphone. Email, web browsing, facebook, twitter name it and it has all the features in a very affordable price in india, china, indonesia, phillippines and all billions of people around the world. Average people does not care of the software whether it is a smartphone or not as long as it serves it purpose.

Look how Nokia have highlighted the success of its C3 in Q4 report:
On the Nokia C3:

"In the low-to-mid-range, the attractively-priced Nokia C3 QWERTY device continued to see strong demand in Q4, and was one of the top contributors to our overall revenues and gross profits. We estimate that we have the leadership position in global QWERTY volumes, driven primarily by the C3, which also contributed to solid uptake of our messaging service."

In a year which called to be a year of a smartphone Nokia manages to have a very healthy number in mobile phones. A 3% YoY loss is very promising where the number in the likes of motorola, LG, SE could be very disappointing. I can only attribute this success on a strong Nokia product porfolio in this category naming C3, X3 which are all smartphone capable yet it is a feature phone. Smartphone sales increased 63% YoY but the devices sales (feature+smartphone) only increased 13% which by mathematical calculation feature phone should shrink by at least 10% to get the smartphone numbers right.

So there you go if Nokia made C3&X3 in a symbian SW and delivered the the same price points and capability Nokia could end up maintaining the same (or near =/-) smartphone market share a year ago. Nokia was not beaten by the competition but rather Nokia has other things in mind. By the end of the day all it matters is the number of devices/services sold not by how much smartphone you gain and dumbphone you lose.

Cut from Nokia Q4 report:

In 2010, our total mobile device volumes reached 453 million units, representing an increase of 5% year-on-year. The overall industry mobile device volumes for 2010 reached 1.43 billion units, based on Nokia’s preliminary market estimate, representing an increase of 13% year-on-year. Based on our preliminary market estimate, Nokia’s market share decreased to 32% in 2010, compared to an estimated 34% in 2009 (based on Nokia's revised definition of the industry mobile device market share applicable beginning in 2010 and applied retrospectively to 2009 for comparative purposes only).
Of the total industry mobile device volumes, converged mobile device industry volumes in 2010 increased to 286 million units, based on Nokia’s preliminary estimate, representing an increase of 63% year-on-year. Nokia's preliminary estimated share of the converged mobile device market was 36% in 2010, compared with an estimated 39% in 2009.

From Nokia Q4 report:
Volume and Market Share. The following chart sets out our Devices & Services volumes for the periods indicated, as well as the year-on-year growth rates, by category.
DEVICES & SERVICES MOBILE DEVICE VOLUMES BY CATEGORY
million units

Mobile phones1
352.6 -2010
364.0 -2009
YoY Change -3%

Converged mobile devices2
100.3 -2010
67.8 -2009
YoY Change 48%
Total
452.9
431.8
5%
Note 1: Series 30 and Series 40-based devices ranging from basic mobile phones focused on voice capability to devices with a number of additional functionalities, such as Internet connectivity, including the services and accessories sold with them.
Note 2: Smartphones and mobile computers, including the services and accessories sold with them.

 Tomi T Ahonen

(am still on replies from Jan 29)

Hi SoVatar, Brian, em, Baron, Nikhil, Bharadwaj, MeeGoUser

SoVatar - on your point about car industry - no. The comparison in any industry, whether it grows fast, or grows a little, or doesn't grow, or shrinks - the standard by how your company is measured, is whether you perform better than the industry average. This applies to all markets. In this case yes, Nokia grew, but from Q2 to Q4, Nokia was not able to grow anywhere near the speed of the industry, far less rapidly - in fact, of the Top 10 makers in handsets and top 6 in smartphones, Nokia grew at the worst rate. That is not always true, from Q1 to Q2, Nokia grew faster than the industry and picked up market share. So it is a recent problem (and now we know, it is the symptom of buying market share previously)

We agree about US analysts (not all though, some are very good). On execution this is a standard complaint about Nokia, has been for the whole decade but it also means, Nokia does not usually pursue silly fashions (Razr and flip-phones for example). In general they are not badly off, but have picked up very bad habits in the past few years - I have a separate newer blog where I explain how I would fix the problems (see Return of Jedi from 31 Jan)

On Maemo - you would have had more Maemo devices but Nokia found the opportunity to join with Intel and do Meego, that is understandibly taking some time and we'll get MeeGo devices this year. About a real flagship, I totally agree (see my newer blog)

Brian - haha, thanks. I can't really take the time to edit these down, nobody pays me for the blog, there are no ads, I have a real day job too. I am sorry for the time it takes for my readers but I believe that the readers get exceptional value and often find insights nobody else has yet offered..

em - you are right, that was not the only reason, but remember, the culling of the product line happened well before June, what I was trying to find out, in this blog, is 'why June'. What happened in June to cause the sudden catastrophic decline that is I believe a world record for destroying your own phone market share in a period of 6 months, its that bad.

I agree about the difficulty of managing a near 500 million unit sale annual market but still, a sudden total loss of a quarter of your market, that is inexcusable, don't you agree. Nokia has been incredibly stable across the whole past decade, both in dumbhpones and smartphones, by far the LEAST volatile of any of the big brands. Suddenly total crash. I do agree with you that who you see as your rival will also change how to approach the market (and Google should be seen as a major rival to Nokia, far more so than Apple for example, but not in the class of Samsung).

Baron - wow, thanks haha.. :-) About your theory for the accomplices, good thinking! I see yes, there is plenty of merit on that, if we take the non-US growth of Android, iPhone and RIM, they do mirror rather strongly Nokia's decline (and previous US growth didn't matter to Nokia because it wasn't meaningful in the US). But.... there is also the 'chicken and egg' situation. Who is cause and who is effect. If Nokia removes subsidies quite suddenly in the summer of 2010, then what will the carriers do? They still want to sell the projected premium phones that previously were 'allocated' to Nokia - they go upgrade their orders with ... Android, RIM and Apple of course haha.. I like your thinking and no doubt there will be part of it, but part is probably the cause and effect, that we saw so strong growth in particular for Android, is due to the fact that Nokia took such a clear dive in its market share (not unlike how the rapid growth of the iPhone in 2007-2009 was eating most of Palm and Microsoft in smartphones and SonyEricsson and Motorola in featurephones). But good point, I see where you're coming from and I like that thinking that its the international side..

Hey, your prediction on Android vs Symbian, first - the Canalys report today, is obviously bogus math, it hasn't happened yet (in Q4) but after the Nokia Q4 numbers and its steep crash-dive, I am now totally convinced Android will pass Symbian and if not in Q1 then definitely by Q2 of this year, Android will be the biggest OS. And your 'ominous' for Nokia - yes, very very true. I see announcements every day about hot new smartphones coming with pico projectors, 3D displays, dual core processors, who just now announced a stereo camera (3D camera) tablet, we'll see stereo cameras shortly on premium phones too. Plus every Android existing provider studies why HTC and Samsung are so successful - and will learn and adapt. The army grows bigger and stronger. And in one corner, a new iPhone comes in June. In another corner RIM keeps getting better. In yet another corner is the sleeping giant of HP with its Palm. Who knows when Sharp gets serious about its world domination plans (3D displays, pico projectors already launched in Japan as Android devices) and so forth..

It gets far bloodier for Nokia in Q1 and into Q2. Now today we hear from the UK that the E7 is delayed from February to April. When will they learn? This is disasterous news and reinforces the image that Nokia is the new Microsoft, they just delay and delay, and when they launch, its lousy disappointing products.

Your forecast for Nokia is very much in line with how I see it, but I'll do a fresh Blodbath 2, Electric Boogaloo review after I've done my final Year 2010 bloodbath final count haha.. And I'll commit then more fully.

On Elop, I hear that he is a smart guy who comes without preconceived notions and listens. My gossip tells me that Nokia middle management has been paralyzed in the past. I would think, that Elop will have taken very open and honest and wide-reaching discussions internally with staff. They all know what is wrong and how it can be fixed. Finns are nothing if not brutally honest. There can be disagreement on what should be done, and there will be internal factions believing in one or another path, but all good ideas for Nokia are well known by many good execs at Nokia HQ. They really are not dumb.

They have veered off the right path, partly due to the economic crisis, focusing on survival - Nokia hates nothing more than layoffs haha, so they've all pulled together on making sure to do severe cost cuts to survive - that has ended up hurting the quality, but its been kind of 'for good cause'. During that phase, the accountants and bean-counters have gotten too much control haha. And the company will often make at the senior level moronic engineering-led decisions that hurt the marketing side, ie customer-orientation and focus. I am hopeful/confident, that Elop will see with clear eyes the countering arguments, and make mostly the right choices.

He will also make mistakes, of course. He has to make big changes, some will work better than others. Some changes will not be seen as the right choice (but will end up being right because Elop will have had more real factual insights into the real problems he is trying to solve, than we can know as outsiders..).

On Symbian - I do think they are now something like 80% 'caught up' to iPhone and Android. They can never catch 100%, but by the time they are near 90%, for most consumers, it won't matter. The nerds will always know. The loyal iPhone users will immediately see the difference. But the average person won't. They still do today, but they don't 'hate' the latest Symbian the way they hated it two years ago haha, compared to the iPhone. But MeeGo.. That will take off like a bat out of hell.. Look at bada, they had the most successful new OS launch ever, on minimal branding, minimal apps, minimal features, on low cost modest phones. When Nokia goes MeeGo, they will have Ovi and Qt support already, and be at the top end of Nokia phones, they will easily - easily - have a 1 to 1 transition of Symbian to MeeGo, at the high and mid-end phones. Just the feedback from Maemo and N900 users shows how good that was, and it was pretty much a 'beta' version and kind of advanced prototype. MeeGo will be fine, and doesn't need to be rushed. What Nokia needs to do, is to return the overall phone satisfaction, so that Nokia owners can proudly again show their Nokia phones in the company of friends with iPhones and Androids. And Nokia is not at that point today. Today Nokia owners are ashamed of their phones haha.

A US strategy using anything other than Symbian or MeeGo would be immediately be interpreted as the new CEO will abandon Symbian and ditch MeeGo and kill both. I can't see that happening. And remember the US market, no matter how good Nokia's OS would be, that won't sell one unit in America - remember the Nexus One and the Microsoft Kin - its all about the carriers. And the carriers generally would prefer Nokia's way - Ovi with carrier billing remember - rather than Android or Phone 7 bypassing carriers... No, its up to carriers and the OS is irrelevant to them, they are currently punishing Nokia for whatever past sins they see, and no matter what OS, won't matter one iota on whether carriers will subsidise Nokia smartphones...

But I am curious about what comes in February at that announcement. I am thinking it is only explaining MeeGo (which is a partnership with Intel and an eco-system with multiple vendors supplying devices) but it could be somethign else. We'll see.

Nikhil - it depends per country but in very many countries, also the majority of unsubsidised phones are sold in operator stores. On Android - yes, but Android was growing from Q1 to Q2 and from Q2 to Q3. Why if Android grows from Q1 to Q2 - and Nokia grows market share, and then Android grows from Q2 to Q3 and Nokia market share crashes. Android did not change from spring to fall, but Nokia totally changed. Android cannot be the cause because we didn't see the effect in the previous quarter - then both Android and Nokia grew. It cannot be the cause if the effect is opposite on two following quarters.

But good point on the matter that Nokia fans were waiting in vain for the new flagship, which was delayed and delayed and delayed.. About Symbian, it keeps evolving. Its not as good as the iOS - but neither has Microsoft Windows ever managed to match the Macintosh - at some point the difference becomes nuances. Its not there yet, but for the first time with S^3, many analysts and reviewers of neutral phone review sites and magazines, rate the latest Symbian 'good enough'... The gap is closing. And Ovi - come on, its the second most used app store, its tons ahead of Phone 7 or RIM or Palm etc..

Bharadwaj - haha thanks. The Greece of phones, gosh, you know, it really MIGHT be.. If this is only the tip of the iceberg and there are more skeletons in the closet and the market share continues to crash-dive Q1 and Q2, it could be. I am hoping the worst is over and Nokia can now start to turn it around. But gosh, we have to see haha..

MeeGoUser - so totally completely right! Totally agree. Culling the product porfolio was a moronic move. We completely agree!

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

Tomi Ahonen :-)

maxxfi

Thanks Tomi for this post! Very "provoking" theory...
which to me makes sense. And also I think it would match with the
news/rumor that I read when Nokia results were out that one
of the major share holders (Fidelity?) was quickly selling in Q3/Q4 all
its participation in NOK stocks.
(I was reading the news in a hurry and I can't find it anymore now)
So did they know from the board what was going on and they wanted to
be out of the game before too late?

Ste

Buying market share may be one reason, but in the middle of 2010 I started to notice that friends and family (in central Europe) started replacing their Nokia and SE phones with smartphones, mainly iPhone and Android (HTC, Samsung). If there existed any competition from Nokia it was invisible.

"Flooding every market with 200 models" in 10 colors and 4 operator brandings/modifications? All of these 200 x 4 models could have slightly different features. I would discourge anybody to buy any of them. Probably no (timely) updates/bugfixes for the OS, few well adapted apps.
Buying a smartphone is buying (longtime) into a software / infrastucture platform, the hardware is a comodity which gets exchanged every 1-2 years.

kevin

"The comparison in any industry, whether it grows fast, or grows a little, or doesn't grow, or shrinks - the standard by how your company is measured, is whether you perform better than the industry average."

The bottom line comparison for any company in any industry is how much operating profit you make. If it is both positive and greater than your competitors in your industry, you've won the battle for that quarter. That's the final score at the end of the football (soccer) game.

Comparing market share is just one of many indicators, like time-of-possession or #-of-shots-on-goal or #-of-corner-kicks in football, that might give further information on how well you played the game, and give some indication as to how well you will play in the next game.

kevin

"It cannot be the cause if the effect is opposite on two following quarters."

Not true. The effect might not be seen until a tipping point is reached.

Another stray thought: it possibly might be because Android is not a monolithic entity. Android growth in the first quarter might've been high end, higher cost phones, while in the second quarter, it might've also included mid-tier, lower-cost phones, which hit Nokia's market. Those second quarter Android phone sales might've been catalyzed by the "branding" and perception of value created during the first quarter.

Another thought: Nokia's brand might've also hit the tipping point in the second quarter, when it reached a large enough mass of people saying that Nokia was no longer a high quality, highly valued phone. That might've started the ball rolling downhill.

Eero

@VEO Very good point about C3-00. If this single model would have been S60 instead of S40 it would have ment many millions more to Nokia's reported Q4 smartphone sales. Exact numbers are not known but it must have been many millions during Q4 as it's contribution was separately mentioned in earnings call.

Actually, some shops are selling it under smartphone category. It is only 5-10 euros cheaper than the cheapest S60 devices (counted as smartphone). Propably 99 % of the people who bought it never think about the issue, they just bought a phone which fit their needs. And they can download and install apps from Ovi store for it, although it is not counted as a smartphone.

Nokia's own reporting for Q4 was 28 million sold smartphones, but Canalys says 31 million, where the difference comes from ?

Whether it could have been an S60 device with same pricing (would it have e.g. needed some more expensive HW), that I'm not aware of.

This example shows that the boundaries are somewhat fuzzy when smartphone market shares are being counted and you can't be dead serious about every quarter's numbers (it's a good show though ...). As more and more phones are smartphones, it becomes gradually pointless but some more subcategories are needed.

 Tomi T Ahonen

More replies to comments from Jan 29

Hi Phil, Mark, Rafe, Jouko, Carlos, Ola

Wow, some big hitters in this group, hello to you all!

Phil - I love finding someone who is seemingly more of an optimist than myself haha.. That was an awesome observation - yes, the silver lining is, that if the market share was artificially propped until it crashed - then the real consumer preference had been falling gradually for a while - and therefore, the current steep dive is nowhere near as disasterous as it seems. Haha, I honestly hadn't been able to see that angle, and it is very merited. Once the bottom is reached, the recovery could seem surprising (while also, at best a mild growth, it cannot be as dramatic a sudden climb, as its now been a crash haha)

On the profits, the up and down were comparing to last quarter and the same quarter a year ago..

Mark - good point. I think the guidance is more a sign of the tough market right now, with Nokia phones delayed and rivals showing a lot of hot phones and launches. And after the Christmas season, usually there is slack in the distribution so phones are moved with after-Christmas discounts haha, cutting profits..

Rafe - haha, could count on you being in with the facts haha! Yeah, I think Q4 numbers with S^3 and N8 etc will have helped boost the ASP but that is only incremental gains - the previous flagships were selling in Q3 (ie N97 etc) so its not that all 5M S^3 devices were additional sales, they mostly replaced top-line Nokia smartphone sales which should have had similar prices.

The Android argument I think (I hope) I argued here in a recent reply, that its partly a chicken-and-egg situation. If Nokia is suddenly no longer perceived a great value, and is compared 'apples to apples' for the real price, then the new Androids (and iPhones and Blackberries etc) will seem 'more competitive' than before and where Nokia loses, the others will gain. Yes, I am pretty sure part of the cause is Android, but probably part is the effect of Nokia abandoning its price war strategy haha.. Remember that the Android family will offer far more wide a range of comparable devices across the spectrum against Nokia than what Apple or RIM can do, so they should also be able to take up far more of the 'slack' if Nokia diminishes its marketing efforst (in this case, the misguided price discounts)

BTW - I obviously agree with your numbers at the level of plus/minus a few here and there. And we both agree the drop for Nokia is enormous and the situation is very serious. If you didn't notice (I know you must have haha), I did write my 'how to fix' blog as follow-up, and would enjoy your opinion of it (The 'Return of the Jedi' blog - its hideously long, sorry..)

Jouko! Hi! - thanks, yeah, good points and good analogy with coming electric cars. And I am of two minds in this thing as a strategy. If it was, for example that Nokia saw it was about to suffer severe market losses, major customers might abandon it (meaning operators/carriers) etc - then a price cut as a last resort makes sense, especially for the short run. But its not sustainable, and it inevitably cuts into profits. Nokia had better profits than most dumbphone makers but nowhere near as good profits when this started, as Apple and RIM, so even going in, Nokia CFO and CMO should have seen that they had no possible chance of 'winning' a price war. The only conceivable opportunity to win is if you have deeper pockets than your rivals and clearly Nokia did not.

But as you write, I am reminded of some of the frustrations I felt back when we both were still employed at Nokia - at times there is a massive lack of understanding of the basics of marketing. Marketing even on the basic 4 P's is more than price alone. There is product design, promotion and 'place' ie distribution. Marketing should be a mix of those (according to classic 4 P's thinking and I know I know there is far more than the four today, but lets keep this simple). So - my worry is, and this may well have been again evidence of it, that if the management is not competent in marketing skills, they have relied ONLY on price - that is always the easiest to do, the fastest change, and 'everybody understands' price cuts. So it becomes easily the 'first step' or even worse - the 'only step'...

Carlos - first, yes, so true, the iPhone is typical Apple, it is a 'sexy' and popular story. And there is the impression among tech writers that Apple is the perennial underdog (something that could be challenged with the iPod and iPad haha) and where Nokia is the gorilla in the room, the 'story' is very easily david vs goliath, and it makes for better storylines to tell the story of the underdog, Apple, beating the mighty dominant Nokia who 'is about to fall..'

On buying market share - good point - see what I wrote to Jouko in the above. If price is one of the elements in the marketing mix, nothing wrong with it. If price becomes the only argument, that pushes the brand to be a discount brand, and then it cannot sustain the innovation (R&D budget which for Nokia is enormous) nor the efforts to create customer satisfaction with excellent products..

Ola - thank you so much, Ola for the kind words. And true, good quote by Nietzche!

Thank you all, I will return with more comments

Tomi Ahonen :-)

jason

I had been buying Nokia phones since 1999. After the n97, I moved away.

backpack

I recently came across your article and have been reading along. I want to express my

admiration of your writing skill and ability to make readers read from the beginning to the

end. I would like to read newer posts and to share my thoughts with you.

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