Noki-Soft Windfall - who wins most when Micro-Kia hand away lucrative smartphone empire bigger than Blackberry, bigger than iPhone

The Smartphone Market Bonanza - Who Takes Most of Nokia's Cake in 2011

EXECUTIVE SUMMARY

Even more than being an 11x bestselling author of mobile telecoms and a consultant and ex-Nokia executive, I am more than anything else, an industry analyst for the mobile industry and one of its leading statisticians and forecasters. I am known for deep and insightful statistical analysis articles of the industry and its market such as this final review of all the stats and major players in the year 2010 in smartphones. So I have done a thorough analysis of all rivals who stand to gain from the loss of market share, that Nokia's sudden Microsoft partnership announcement will create.

I have counted the total market size that Nokia will gift to its rivals to be worth 50 million smartphone handsets in 2011, with an average sales price of 292 US dollars, for an aggregate value of this windfall gift being worth 14.6 Billion dollars. If it was a company, it would sell more smartphones than Apple, it would make revenues almost as much as RIM and it would be as big as HTC and Samsung smartphone units combined. The sales of those Nokia smartphones, if it was one company, would not just have been the second-biggest smartphone maker last year, but the sales would almost break this 'virtual company' into the Global Fortune 500 in size. It is such a huge 'gift' that Nokia is now bequeathing to its rivals.

I have analysed the markets by regional market shares, by market segments, and by average prices. Based on that, I find that the big winners of the Nokia Microsoft Windfall will be RIM, Samsung, Apple and HTC in that order. I have projected their market share gains in the windfall 'ceteris paribus' ie 'other things remaining the same' which obviously won't actually happen this year. The smartphone market is particularly fluid this year facing dynamic changes. But it is a starting point.

I also give specific advice to all the major players, on where to focus to capture the most of their own slice in this race. The biggest upside is with Apple (iPhone Nano, iPhone QWERTY) with RIM and Samsung also having strong upside potential for maximizing their Nokia windfall gains.

UPDATE - I have created a graphical image of the change with a preliminary market share picture of Q4 of this year 2011. This is not my formal projection for the year (because many other factors have to be considered). It is only the effect of allocating the Nokia windfall to the rival competitors. But this projection illustrates clearly what is the effect of this gift to the industry:

 


(you may freely use the graph if you want, as well as quote from anything in this blog article..)

The projected market share changes are as follows:

Brand . . . . . . . . . . . Q4 2010 . . . . . . . . Q4 2011
Nokia . . . . . . . . . . . 28% . . . . . . . . . . . 12%
Apple . . . . . . . . . . . 16% . . . . . . . . . . . 19%
RIM . . . . . . . . . . . . 14% . . . . . . . . . . .  18%
Samsung . . . . . . . . 11% . . . . . . . . . . .  14%
HTC . . . . . . . . . . . . 10% . . . . . . . . . . . 12%
SonyEricsson   . . . .   5% . . . . . . . . . . .   6%
Motorola . . . . . . . . .   5% . . . . . . . . . . .   5%
Others  . . . . . . . . .  11% . . . . . . . . . . .  13%

Please understand, the above change is ONLY related to the Nokia Microsoft announcement and how its 'windfall' market share gift would be allocated to the major rivals. It is not my forecast for the year 2011, I will return with that a bit later when I do my full forecast for the year factoring in all the other news we have from SonyEricsson's Playstation phone to HP's re-entry to smartphones to Apple's iPhone Nano etc.

If you want to know why the above market shares were so drastically changed, the following blog of about 7,500 words will go into considerable detail into the finer points of the markets, average prices, customer segments and competitors as they make their dash to grab as much of Nokia's abandoned market share as they can.

IS PART THREE OF NOKISOFT MICROKIA ANALYSIS

This is the last of my three-part series examining the Nokia Microsoft partnership. In part 1, I looked at the past, how the decision was made and when. In part 2 yesterday, I started to look forward, and did a deep analysis of the market potential for the Nokia Microsoft partnership in 2011 and 2012. It is not pretty. Now in this, part 3, I will examine the rest of the competitors. There is clearly going to be a Nokia Bonanza bonus of market share to be grabbed. Who is well poised to take much of it and where and how and why.

First, on the size. What are we looking at? I explained in my blog yesterday that even in the most optimistic scenario for Nokia, its market share in smartphones will crash from 28% at the start of the year, to 12% by the end of this year, when it finally may find some recovery when the first Microsoft Phone 7 based smartphones might appear for sale.

For the full year, I am cautiously modelling a decline from 28% market share to 18%. So about 10% or market share points are 'up for grabs' for the full year. How big is that? Well, it depends on the size of the smartphone market, but last year the industry grew by 71% and reached 298 million smartphones sold. This year I am projecting the smartphone market to grow strongly, but not quite that fast, at 67% and reach roughly 500 million smartphones in total shipments.

So we have 10% of 500 million which is roughly what Nokia is now gifting to the industry as the 'Microsoft Windfall' prize. How much is that - yes, 50 million smartphones. That is more than the total Apple iPhone sales last year! That is more than all Blackberries ie all of RIM last year. It is as big as all smartphones sold globally by HTC and Samsung.. combined! It is bigger as all smartphones made by Motorola and all smartphones made by SonyEricsson - not just added together, but that total still doubled! That is how much is at stake. This is a huge gift to the market, which Nokia is simply giving away, not fighting for it anymore. Its a second Christmas and Santa Claus from Finland makes a new trip to give away more gifts. It is candy that is being given to the competitors, up for grabs. Who moves first, who is fastest, gets the most of this true 'windfall' gain that has never happened before in the industry. The number of smartphones that Nokia now gives away to its competitors - is so big - it would have been the second-biggest smartphone maker last year. This is not big, it is huge.

ALMOST EXACTLY A RIM IN SIZE AND VALUE

Lets then measure how big this gift is in value. I used the price pyramid in the TomiAhonen Phone Book 2010 to do a model of how Nokia's current portfolio was selling in Q4 of 2010, to tell us what is the split of Nokia's current smartphone offering. The math works out that currently (Q4 level, before the Microsoft announcement) Nokia's smartphones formed this kind of split (remember, the prices here are 'unsubsidised' prices ie SIM-free prices ie prices which are not bundled to a 2 year contract):

Nokia high price smartphones (price over 450 dollars) - 2%
Nokia mid-price smartphones (price between 250 - 449 dollars) - 16%
Nokia low-cost smartphones (price between 100 - 249 dollars) - 81%

This split of Nokia smartphones gives us an average sales price for Nokia at Q4 of 210 dollars or 156 Euros (ie 210 US dollars) matching exactly what Nokia had in their Q4 quarterly report. Then I modelled the growth in sales, and calculated what kind of sales would the windfall gift of Nokia to its competitors be. They would mostly be at the top-end of Nokia's customers 'obviously' and for the 50 million smartphone buyers that are now being gifted to rivals, I model the mix to be:

High price smartphones (price over 450 dollars) - 7% - ie 3.5 Million units
Mid-price smartphones (price between 250 - 449 dollars) - 55% - ie 27.5 Million units
Low-cost smartphones (price between 100 - 249 dollars) - 38% - ie 19 Million units
Total 50 million smartphones, with an average sales price of 292 dollars
Total value of those 50 million smartphones = 14.6 Billion dollars

After this transfer of Nokia's best customers to its competitors, the Nokia average sales price will settle at roughly 116 Euros (157 USD) at the end of the year. That is consistent with the projection I made yesterday of Nokia's market share and ASP development path for this year 2011. Note also. that Horace Dediu at Asymco blog has made his projection of how Nokia market share will fall (his was done before mine) and his numbers are almost the same for 2011 (but his forecast continues to 2012 where it gets far worse). So if you are not sure about my numbers, there is now at least one other analyst who has a very similar view. For the full year 2011, the Nokia smartphone ASP would end up at an average of 131 Euros (176 dollars).

So we are giving away essentially a smartphone maker giant, which sells somewhat more smartphones than Apple, and makes revenues slightly less than RIM (and was profitable). When we add the revenues together, these smartphone sales at these prices would create a new company with 14.6 Billion dollars of annual sales! That size is nearly big enough to qualify for the Global Fortune 500 - this is a huge huge windfall that is now awaiting the industry rivals to devour.

Also understand, this prize will not go to one rival, this market will be split up, obviously. But to understand, this is nearly unprecedented, as far as I know. This kind of windfall will help CEOs make superb market gains, exceed targets, hit huge bonuses this year - for those rivals who are well prepared and poised who can benefit from this opportunity. It won't happen again in smartphones (ever) and it will only happen now in this wonderful year 2011 the year of Nokisoft Microkia for some - not all - of the rivals. And the very hungry, fast-moving rival can capture far more than their fair share of the prize.

Imagine Christmas at some school and imagine Santa Claus coming to visit. Then imagine at the end of the visit, he pours a big pile of candy into a bowl and the kids can take how much they want - it would be a classic contest of grab, the biggest and most aggressive kids would get far more than is 'fair' and there would be kids crying and the teacher would have to step in to try to stop the grabbing. That is kind of what I see now, we have a rush to devour the abandoned Nokia smarthones loyal customer base. Lets see who gets most of the goodies.

COULD BE BIGGER STILL

At 14.6 Billion dollars, this is a huge prize in play. Please understand the scale of this sudden prize. The Apple iPhone App Store generated about 1.5 Billion dollars of app sales of its what, 300,000 apps last year. Yes, the IT industry is hot about apps, but this is ten times bigger now. And whoever takes these customers is well poised to keep them for years, decades even, on future replacement sales and upgrades. This is the hottest opportunity in mobile for this year.

And as I said, my model was the best-case scenario - there may be more smartphones actually that Nokia will abandon this year in sales haha.. The prize could be considerably bigger than this, by the time the carnage is done and the final count is made. And I am assuming Microsoft Nokia will have on offer competitive phones for sale to the consumers by Q1 of 2012. If they are delayed, this prize will keep on giving until Nokisoft Microkia get their act together. Nokia management will be under enormous pressure this year.

So yes, no matter how much you like or hate the Microsoft phone idea for Nokia, it is pretty clear that this year Nokia is awarding for whoever has the guts to just take them - nearly 15 Billion dollars worth of smartphone customers - and the loyalty that goes with them as well. No doubt many of those will end up with iPhones and Blackberries and Samsungs and HTCs but lets examine more carefully, what can we see from the early market picture and from Nokia's smartphone sales footprint and customer base. Who is particularly well poised to benefit.

THE WOUNDED GIANT

First - please lets remember, Nokia is not about to die. Even after this wholesale distribution of Nokia's premium customers, it will end up by far the biggest overall handset maker (but will make much more basic dumbphones than smartphones this year). And it will end up selling nearly 100 million smartphones again in 2011. Last year they sold 100.3. This year with the optimistic scenario, I have Nokia selling 92.3 million smartphones for the full year. That may still end the year with Nokia the biggest smartphone maker for one more year - although it is very - extremely - likely that by year-end, for the fourth quarter, Nokia smartphone sales will be passed by Apple iPhone, Blackberry and Samsung. Maybe even HTC if they are swift this year. For current number 2, Apple, to pass Nokia (at this level of 92.3 million), Apple would need to double in size. But that is well within the realm of possibility, Apple grew by 89% last year, from 2009 to 2010. With just some early and rapid strategic moves, Apple can well grab the title of the world's biggest smartphone maker for 2011 - and re-grab some of the lost lustre that Google's Android took from them last year.

Also, just to be clear, it will be inevitable that Android will be the biggest operating system this year, that may now happen even in Q1, passing Symbian and latest by Q2. And for random readers - that Canalys report from a few weeks ago was premature, its numbers did not add up and rival analyst houses have confirmed Android was not yet bigger than Symbian - but now after Nokia's Microsoft announcement, it is a foregone conclusion, and only a matter of weeks that Android will pass Symbian.

WINDFALL

I want to make one specific point about 'windfall' gains. These are gains that could not be anticipated, totally unplanned and 'bonus' gains. The smartphone market grew 72% last year, and I expect it to grow 67% more this year. There are huge gains 'organically' for all major players in smartphones now - just because they are in this industry at this time. Apple, RIM, Samsung, HTC, Motorola etc will all gain automatically this year, simply for being in the right place at the right time, selling smartphones now when it is the hottest consumer gadget globally. The industry will sell 500 million new smartphones this year alone, growing from almost 300 million last year. Every major smartphone maker will have a banner year this year in any case, because like they say, a rising tide raises all boats.

That is not windfall. That could be predicted. That is what RIM and Apple and Samsung and Motorola and HTC management have planned for - how can they do 'better' than the average for the industry - how can they gain market share in these great times of huge growth. They plan their factory production runs, and distribution contracts and price levels etc based on those plans. This is what Donald Rumsfeld would have called the 'known unknowns'

The windfall is something else. The definition of windfall gain is an unanticipated gain such as a fruit falling from a tree because of the wind, and blowing it to the road, where you pick it up. You didn't go climb into the tree to get it (on someone else's property) but it was just an 'accident' that the wind blew that apple off the tree, and onto your path. It is a windfall gain. For example lottery wins are so unlikely, they are seen as windfall gains. So this is a windfall but as far as I know, it is perhaps the most valuable windfall of any industry ever, and the most valuable single windfall 'gifted' by one industry player to its rivals. So we need to be clear about this blog. We are not talking about the normal competitive environment here (I will do that separately later, for the whole world market of smarpthones).

From Friday 11 February, when Nokia CEO announced his Microsoft deal, the rest of the industry now faces a genuine windfall gain, something totally unanticipated, what was not fore-seeable, utterly 'unplannable'. But windfall gains are sudden gains. It is the 'unknown unknowns' in the words of Rumsfeld. Nobody could have predicted that Nokia's total smartphone juggernaut would collapse this year and gift 50 million smartphone customers to its rivals, for no charge. Lets map out the opportunty and see who is poised to grab most of it.

US MARKET

First, lets start with the US market. There is really nothing to gain there. So here Nokia as a smartphone brand, for what it may have had left, just vanishes but their total smartphone sales were maybe 1 million devices for the full year, so nothing to share. The same is true of Japan and of South Korea. Nokia is not there, so those brands strong in those domestic markets will have nothing to feast upon from the Nokia Bonanza. So Santa Claus did not come to give goodies to Motorola or Palm/HP (USA) or Sharp or Fujitsu or Kyocera (Japan) or Pantech (South Korea). We have to find Nokia customers from the rest of the five inhabited continents, and in Asia, from the rest of Asia apart from Japan and Korea.

E-SERIES

So lets go to the E-Series, Nokia's enterprise and business phones. I said yesterday that this market segment will be obliterated and become a wasteland for the Nokia brand. It is particularly heartbreaking, as it is very slow to generate sales in the enterprise sector, and once you do gain a road in, you tend to be very stable there. So the hard work usually in this segment pays dividends for many years, decades even afterwards, because of how corporate IT departments make their decisions.

So a brief explanation. This is because any enterprise 'business phone' users who buy thousands of handsets per year, will also be doing deep business system integration. So the company intranets and email systems and customer relationship databases etc will be integrated onto one or two smartphone platforms. Nokia had followed Blackberry and built a whole business unit around the E-Series, and done a huge sales and IT integration effort globally (succeeding quite well in all other markets except the USA obviously and Japan and Korea) and roughly speaking divided the rest of the world in half, with Blackberry. Remember this is large corporate accounts who buy thousands of phones per year. And they will not be buying iPhones. iPhones may be used by the marketing department but the sales representatives and middle managers and field engineers etc, they will have Blackberries or E-Series. The TNS survey of US large corporations found that 81% of them had Blackberries. That kind of customers and penetration levels.

Now that is all gone. The IT departments know that Symbian is dead for them, and they will transition as soon as possible, away from Symbian/Nokia to a currently live IT platform that is reliable and robust and one which already has the necessary business corporate solutions for whatever industry they are in, like banking or insurance or manufacturing or whatever. It is fair to say, the E-Series handset sales of Symbian based smartphones collapsed totally on Friday 11th of February. Now the customers with signed deals are angrily calling up their Nokia sales reps, cancelling contracts and Nokia won't be able to make any meaninful new sales. The remaining E-Series handsets will be rapidly shifted from employee phones to consumer ("youth") phones and pushed into the retail channel. So we have a big market of enterprise phones to be distributed.

The TomiAhonen Phone Book 2010 tells us that about 20% of all smartphones in use are in the business/corporate space (this translates to about 60 million new handsets sold in total in 2010). Of employee phones, the market share of Nokia E-Series is about 35% globally.  So this prize alone has a potential of 21 million devices. I think its fair to say, it won't vanish quite overnight (some will be willing to remain with Nokia, going to Microsoft), but lets say about 80% of it is now gone this year, so we have 17 million handsets to pick up. Here the argument for Blackberry is overwhelmingly strong, their only problem is knocking on enough doors right now in February 2011. I'd say 75% of that market of 17 million enterprise-customer smartphones will go to RIM without any problem. Thats about 13 million new Blackberry unit sales and also 13 million new enterprise subscriber customer accounts. What RIM needs to do, is to hire every salesguy they can get their hands on this week and try to get them to start on the job before February is done.

Of the rest, I think its fair to say Apple will take quite a lot because of the strong appeal the brand has, so those IT managers who have been saying 'no, our strategy is only Symbian phones' will suddenly feel the dam has broken. But again, I don't see enterprises rushing to buy thousands of iPhones costing 600 dollars each so their employees can play Angry Birds at the office haha.. But lets say Apple gets a bonus 2 million here, and the rest is sprinkled among all other brands rather uniformly. HP with Palm could have been a major beneficiary, but their organization is not in place to capitalize on this (especially not, outside of the USA today)

CONSUMERS

Then we have consumer smartphones, so about 33 million of those Nokia customers to spread to rivals. Where are they? We have the info in the TomiAhonen Phone Book 2010 again. The two big markets of Nokia branded smartphones regionally are Western Europe and Asia Developing (ie China, India, Indonesia etc). These two regions account for half of Nokia's total smartphone sales. The majority of Nokia's remaining 'spoils' (after E-Series) will go to those smartphone brands which can capture these two markets.

China is the strongest single country-market of the smartphone markets of those, but China is a special case, they had their big gift-giving season just days before Stephen Elop's big Microsoft announcement, so the big smartphone sales in China have already happened for the year. China will not be nearly as important for the remaining last ten and a half months, as it was for the first six weeks of this year.

EUROPE

But lets start with Europe. In Western Europe Apple is the big rival, RIM a distant and Samsung a newcomer. In many European markets the phones are sold without subsidy (like in Italy, Belgium etc) and even with subsidy, the customer is usually very well aware of the real price of the handset. So the iPhone 4's current price of 600 US dollars without contract is a steep price for most of Nokia current customers except perhaps N8 type of buyers. What Apple desperately now needs is that rumored iPhone Nano, to maximize its take of this lucrative pie that Nokia is serving to the competitors this year.

Blackberry's market share included obviously enterprise customers so we need to be careful not to double-count, but RIM will definitely take some of this market. Samsung is very strongly growing and has a big porftolio of desirable phones - and many past Nokia owners have been very happily converted to Samsung users. Also remember Samsung is already bigger in Europe than Nokia, in the dumbphones price segment, so essentially all carriers/operators and mobile phone sales outlets have Samsungs in their portfolio. Europe is also SonyEricsson's best market, so they can capture some added sales here.

If we say that of all 50 million smartphones to divide, about 17 million are in Western Europe - and of those, lets say 7 million were enterprise/business phones, it leaves us with about 10 million to split. I'd say that Apple takes about half. Give another million each for RIM, Samsung and SonyEricsson and the rest split with the remaining brands.

ASIA DEVELOPING

In Asia Developing we have another about 14 million Nokia smartphone customers to split up. Lets take 4 million out for E-Series and then we have 10 million to share in the consumer space. Here the rivals are RIM as the strongest, with Apple, Samsung and HTC also in the game. Note that obviously part of Blackberry's strength is in the enterprise space, but RIM is definitely far more a consumer brand in this region. Motorola would be for China but outside of China they aren't big enough. So I'd say give each of RIM, Apple, HTC and Samsung 2 million in the consumer space. The remaining two million would be left for the rest which includes the rapidly growing low-cost smartphones at ZTE, Huawei, G'Five etc.

REST OF WORLD

Then we have Africa, Latin America, Middle East, Eastern Europe, and Advanced Countries of Asia-Pacific. Here we have a market of roughly 19 million Nokia smartphones to split. There are about 4 million enterprise phones, so we'd have 15 million consumers left to divide. These markets are strong for Samsung, Apple, RIM and HTC, so if we give each 3 million, we then have 3 million left over.

Now I have allocated 19 million for RIM, 12 million for Apple, 6 million for Samsung, 5 for HTC, and 1 million for SonyEricsson. Then we'd have 7 million left in the 'pool' which I'd just allocate by the 'normal' market shares of all smartphones outside of USA, Japan and South Korea (and without Nokia) - so I'd give Apple and RIM another 2 million each, and HTC and Samsung one more million. The last million is spread between all other brands like ZTE and LG and Motorola and HP etc.

A VIEW BY REGIONAL MARKET SHARES

Thus, the 'market potential' of the spoils would go to:

Nokia Smartphone Windfall when Split by Regional Market Shares

RIM 21 million
Apple 14 million
Samsung 7 million
HTC 6 million
SonyEricsson 1 million
thers 1 million

Recognize how big these additions are for the four big brands. For RIM its nearly half of what they sold last year. For Apple its a third. And for Samsung and HTC the bonus is about a quarter of what they sold last year. These are huge jumps - that will be a bonus - a 'windfall' gain - over what they would have normally gained in the market share battles this year.

So for example the Apple Verizon CDMA iPhone will provide gain in the US market, which is not reflected in the above. The above 14 million is just 'candy' that Nokia's new CEO Stephen Elop is handing out to the rivals. At least these four big handset makers should send a nice gift basket for the Elop family for Christmas as thanks.

IT WILL BE NOT EXACTLY THAT

Now, this is obviously NOT how I would split those numbers. First, the number will not be exactly 50 million. As I said, my analysis yesterday was a 'best case' scenario. Probably Nokia suffers more than that, so the prize can be bigger.

Secondly, the regional market shares of 2010 reflected the market situation back then - for the full year. Therefore, it under-counts the late surges - especially the Android rise, so the major Android brands - HTC, Samsung, LG, Motorola and SonyEricsson - are under-counted in the above! The Android phones should do significantly better - probably twice as well, maybe more - for splitting this windfall. That will have to come from the shares of RIM and Apple. This is a zero-sum game, for me to win, you have to lose. There are only 50 million in the pot, and if Android actually takes more, it means some have to have less.

A further, very important point - this is a price issue. While we are mostly splitting Nokia's 'premium' priced smartphones, they are still far less expensive, on average, than top iPhones or Samsung Galaxies or SonyEricsson Xperias etc. The more any competitor now will push low-cost smartphones, the more they can hope to 'steal' some of the candy from their rivals. For example Samsung's bada based low-cost smartphones - should do far better at the bottom end of the Nokia market shares to be divided. I would expect Samsung specifically to do far better than the model above suggests.

So note - Samsung sold 5 million bada phones in the first half year they were on the market last year. Their target for 1H of 2011 is 10 million units. In my model in the above, I already find 7 million Samsung phones. While that includes both Galaxy and bada class phones, I would think it will be real easy for Samsung to reach its aggressive 10 million target for bada in this first half, and if I was a sales manager at Samsung, I'd raise that target now to something like 15 million haha.. And then hire the extra sales staff to go get those sales now.

Meanwhile Apple - Apple cannot get to that potential. Remember my original Nokia model with the average prices. Apple has a 'potential' to grab 14 million Nokia smartphone customers this year but only 3.5 million of those would have bought a Nokia smartphone as expensive as the iPhone 4 (ie costing 600 dollars without subsidy). So Apple desperately needs its iPhone Nano, now! For every month Apple now delays announcing its iPhone Nano, it abandons a million windfall pick-ups of Nokia customers. So if for example, the Nano iPhone was released at the end of June, and sold globally only in say July - then Apple would only pick up about 6 million of the Nano price customers and the 3.5 million iPhone 4 (or iPhone 5) price customers - ie Apple could achieve 9.5 milllion of the windfall. Not the full 14 million. So the potential in the chart, shows the upside according to my model, based on the existing market shares, which reflect existing carrier relationships and sales organization and manufacturing capacity etc. These all have to be in place, to capitalize on the windfall. This is a 'one-off' gain, and only those major smartphone makers who have the ability, can capture their share (or more).

ANOTHER VIEW - BY AVERAGE PRICE

There is another way to look at the spoils. Lets look at the prices. We had the model built from the TomiAhonen Phone Book 2010 showing what is up for grabs, lets bring that here. This is the total 'prize' of the 50 million smartphone customers and what price phones they were willing to buy from Nokia, prior to Friday the 11th of February announcement:

High price smartphones (price over 450 dollars) - 7% - ie 3.5 Million units
Mid-price smartphones (price between 250 - 449 dollars) - 55% - ie 27.5 Million units
Low-cost smartphones (price between 100 - 249 dollars) - 38% - ie 19 Million units
Total 50 million smartphones, with an average sales price of 292 dollars
Total value of those 50 million smartphones = 14.6 Billion dollars

Who competes in those ranges?

High-priced smartphones at over 450 dollars, this is the superphone category, its the Apple iPhone 4, its the Samsung Galaxy S, its the premium SonyEricsson Xperia, its the Blackberry Bold and similar top phones. Sharp's aspirations come in this price range too. There are only 3.5 million here to split and every player comes to the party, even LG with its 3D display phones is in play. I think its fair to say, Apple cannot take all of this. Even for having the most desirable phones - they are not on all networks and the competition from the rivals is ever stronger. If we say half goes to Apple and half goes to the rest, we'd get almost 2 million to Apple from here. And less than half a million each for the big rival brands.

The mid-price smartphone space of smartphones in the 250 dollar to 449 dollar range, this is mainstream Android and most Blackberries. So this is all big global brands HTC, Samsung, LG, SonyEricsson, Motorola and RIM, except for Apple (until it releases its rumored iPhone Nano, which would probably hit this price point). Because Motorola is so strongly focused on the USA, lets give them only a small slice, but lets divide the rest evenly among the other five. So each could win 5 million here. Lets say Moto gets one million.

The low cost smartphone space is mainly Samsung's bada and the very low cost smartphones on Android like Lenovo's LePhone and most of the smartphones from ZTE, Huawei, etc. Samsung is very strong here because of their massive global reach, lets say 10 million goes to Sammy and the three named Chinese brands get 2 million each.

 With this model, we get the following split of the windfall:

Nokia Smartphone Windfall when Split by Price
Samsung 15.5 million
RIM 5.5 million
HTC 5.5 million
SonyEricsson 5.5 million
LG 5.5 million
ZTE 2 million
Huawei 2 million
Lenovo 2 million
Apple (without a Nano model) 2 million

Motorola 1 million
rest about 4 million

I think these two models are both valid, and both incomplete. But lets do an average of the two models, to give us my 'likely' scenario. So I just calculated the average of those two models and I get this split of the Nokia smartphones windfall for 2011:

A THIRD VIEW - THE TOMI AHONEN PROJECTION

Likely Split of Nokia Windfall in 2011:

RIM 13 million (26%)
Samsung 11 million (22%)
Apple 8 million (16%)
HTC 6 million (12%)
SonyEricsson 3 million (6%)
LG 3 million (6%)
Chinese low-cost makers like ZTE, Huawei, Lenovo etc 3 million total (6%)
Rest of smartphone makers 3 million (6%)
Total 50 million smartphones

The four big winners are also the four biggest smartphone makers after Nokia - ie RIM, Samsung, Apple and HTC - but not in quite the same order. The maker who seems to get 'the lion's share' in this grab of all the candy, is Samsung due to its low-cost phones. And this hybrid model essentially assumes the iPhone Nano at mid-year (June launch) even with that, the performer who takes the least of the Nokia spoils is Apple, due to obviously its high price strategy. If Apple ever thought it might experiment with an April price cut in half, of its 'about to be replaced' model ie the iPhone 4 - this would be the year to try that, haha, to boost Apple's take in the Nokia sweepstakes.

Now, some players can greatly influence their own performance with the windfall. Lets go to specifics by brand

RIM

Blackberry is set to have a far better year than anyone could have anticipated. Not just growing unit sales, but getting many many more corporate account customers, just when it seemed that market had stagnated and settled. This will be the year to be a RIM corporate salesguy, they will all hit their bonuses and more. What RIM needs is an urgent immediate call to arms. The battle is not on US shores. Send most of the US corporate sales force on a half-year commission to go hit corporate clients of Nokia in Europe, Asia, Latin America, Australia, even Africa. The VP of Sales needs to tell his sales managers to ask every current job candidate for sales and sales support "can you start this week" and for anyone who says "yes" - stop the interviewing and testing process - hire them all, now. Then do an internal call for volunteers to join the sales force for a six month expedition abroad - to support sales in Latin America, Europe, Asia etc - and make this the biggest priority at Waterloo. This kind of gift comes once in a lifetime, if you're lucky (for a CEO, or even for Co-CEO's haha) and you have to make it count. Nothing else matters at RIM now, except taking all those E-Series clients who are not going to be 'competitively' tested for by rival smartphone makers. They are RIM's to take, if they only have the time to get to them. Hurry! This is your year.

While there, also obviously push the Blackberries to the consumer segments in the youth markets. Do heavy youth marketing push now in all markets where Blackberry is starting to get traction among the youth, easiest to see at university campuses. Wherever Blackberry is now the hit phone at campuses, do the full 'youth Blackberry' blitz in marketing. RIM, you need to spend in sales promotion and sales support now. Not R&D, not in app stores not in the ecosystem. Yes, they are all important, but theoretically you can add 50% more to RIM's size if you play this card perfectly. And they will be RIM loyal users for life, if you do this right and get them on Blackberry messenger (or corporate accounts on the business side).

APPLE

Apple you need that iPhone Nano now. It is not 'needed' in the US market - where it will help, but this year of the Windfall, the Nano is needed abroad. If you had been planning to launch it on AT&T and Verizon first in June and like August for the rest of the world - please trust me on this, reverse that. Do the biggest potential Apple markets first - China, Russia, Brazil, Indonesia, India - where an unsubsidised 600 dollar iPhone is struggling. There are millions of Nokia customers who will jump at the iPhone Nano this year. Take them. You can launch the Nano in America in August, it will be fine. Do Europe and the big markets first.

And be sneaky about it. Once the Nano is announced, the phone market will be kind of 'paralyzed' - so even if it stalls some iPhone 4 sales, try to announce the Nano model as soon as you dare, in April, even March if you can. That will make some re-consider who might buy a rival smartphone now. You could not have selected a better year to do the Nano than now, with this Nokia windfall. But every month we now wait, is a million windfall sales - bonus sales - wasted - and worse - gone to rivals. Try to get the Nano out by June, announced by April, and you will be taking a great slice out of the potential, and with a bit of luck, you will celebrate the end of 2011 as the world's biggest smartphone maker - and also - then - beating Nokia - you will also be the world's biggest computer maker once again. Wouldn't that make Mr Jobs smile once again? The true come-back kids, eh?

Hey, there are rumors now about a QWERTY based iPhone. I know I know I know that this goes against all that is Apple iPhone, but come on - QWERTY based smartphones sold more than twice the number of total iPhones last year, why not also play in that market. Make it a premium iPhone - more expensive - more profitable! If you had a slider-QWERTY on the iPhone, that would be the ultimate 'must have' smartphone for whom? For the youth segment! The only consumer segment where you know, your internal customer studies tell you time and again, thats the only consumer segment where you are beaten by RIM (and Nokia E-Series even haha). Do the math, do the analysis, swallow your pride, this is THE year to launch the QWERTY iPhone - and suddenly you put a dent into that 'only for RIM' slice in the above! With a QWERTY iPhone you will grab more than what I project in the above - out of this Nokia Windfall, but you also - obviously - will be able to compete in the 'normal' market share battles of this year, against RIM.

SAMSUNG

See what I wrote about RIM and sales staff. You guys know this. This is THE year of Samsung. You get far more than your fair share of the above Nokia windfall, and you know you can do it. What you need now is sales staff and sales support. Hire every body you can find to sell sell sell. Make Samsung the brand everybody sees everywhere, in the Nokia footprint. Steal that candy, it is yours. Move faster than the rivals, 'balli-balli' and push your factories, especially bada Wave phones. Don't let the 10 million be the bottleneck this first half of 2011, you have to sell much much more than that. 15 million bada phones at least in the first half. You are best poised to eat the low-cost slice of Nokia's windfall. But do it the right way - keep pushing the Galaxy series, make Samsung the new aspirational phone, so all those who can't afford a Galaxy this year, will buy the bada Wave phones hoping to upgrade to a cool Galaxy next time.

Then keep pushing that bada ecosystem story - don't let Microsoft get away with talking about it being a race between three ecosystems. Get your Korean developer community - and Korean games - onto bada and push push push. Bring in Chinese and Japanese apps and games to the bada system and steal that slice of the 'mindshare'. You are on a rapid growth trajectory, far far faster than Microsoft's Phone 7 - but few will know this, so you need to beat that drum also very loudly. Make it appealing for disgruntled Symbian and Microsoft developers to jump to bada (as the second choice after Android, or third choice after Android and iOS).

But the main focus for Samsung is to make the most astonishing growth year of any smartphone maker ever. The trajectory was right going into this year, now with the Nokia windfall and especially the large low-cost customer base that is on offer, this is Samsung bada's market to lose. Don't be defeated in this battle.

HTC

The time is to push lowest-cost Android HTC devices to the market as you can. The fight at the top will be tough with ever more high-end Android devices flooding the market. Yes, that is where you make your profits, but this is a year of a 'land-grab' in market share, and unfortunately Samsung is going to pass you in size due to their low-cost smartphones. You need to come down fast, especially hit the price points well below the anticipated Apple iPhone Nano. You can do it, you are fast and nimble, and you are very comfortable doing many handsets for many markets. Now push. You need to expand your porftolio a lot into the lower edge of the price spectrum.

Because you are going to fight with more 'new' phone models than existing sales, and your strategy in capturing Nokia customers will be more successful in the second half of 2011 than right now - then I'd say, study the recent popular Nokia phone models and designs - and clone them. Do the lowest cost N97 clone you can, but do it 'right' and on Android obviously. Do the super-camera N8 clone, but without the silly wide-angle lens, but similar form factor and size - and do it at far lower cost (Moore's Law says you should be able to do that easily for about 250 dollars by ther summer) and again, on Android. So aim to steal those Nokia customers who really wanted their Nokia device, but can't now bother with Symbian anymore. So for example the E7 - if Nokia won't do a proper 'Communicator' anymore, haha, why not take those customers to HTC. Your strategy is not to try to sell HTC phones now to Nokia current customers, it is to rush a couple of Nokia clones and take Nokia customers with phones they'd love. Talk to Nokia current customers to see exactly what it was that made them love the phone and do some clones. You'll get many very satisfied customers out of this strategy. You are fast enough to make it happen this year, most of your rivals are not fast enough.

HP

You were so poised with the right products and right launches in the right time but in the wrong place. Palm's last major footprints were in the Americas mostly and what HP can take advantage of, tend to be there. So you have almost nothing to gain from the Nokia windfall, some crumbs at best. But you'll have a great year in smartphones this year anyway. I'd say forget about Nokia windfall, go for a big splash in the US market which most of the big boys will now tend to be neglecting.

MOTOROLA

Moto is mostly focusing on the North American market with a presence also in Latin America and China. Not much in the windfall for Motorola. Some gains yes, but modest, and there isn't that much that Moto could do to try to capitalize on the slim pickings that are left on the table.

LG

LG was a bit too late to the party and now again, faces a portfolio which is exciting, but a bit late. LG will have a good year and strong growth, but it won't be able to capitalize much on the Nokia windfall. It will be one of the smaller of the Android players to gain, because much of LG's market is in countries where Nokia was not a force (USA, South Korea etc) and LG's product portfolio is still modest in Android and focusing on the higher end devices.

SE

SonyEricsson is in a similar boat to LG with mostly higher-end products in its Xperia range, but in Europe SonyEricsson is traditionally strong, and it ise seen by Nokia owner as being 'similar' and thus 'familiar'. I think especially in Europe, SonyEricsson will be able to make some stronger gains than at first glance, but SonyEricsson won't be able to fully capitalize on this windfall.

SHARP

Sharp seems not to be born under lucky stars. Sharp is aiming for anotehr big come-back this year and has already launched the first Android phone with 3D screen and the world's second phone with pico projector etc. But these are high-end premium smartphones. They will help Sharp get some visibility and some sales, but the Nokia windfall is in the low price end. Sadly, Sharp was the manufacturer of Microsoft's Kin phones for the youth, which could have been a huge hit this year as Nokia abandons its youth market of QWERTY phones. But Sharp seems to be unlucky in its timings. Still, use the opportunity to showcase your tech leadership and aim for that high performance niche that once was the top phones of Nokia N-Series, at least there aren't many who are claiming that end.

CHINESE BRANDS

The ZTE, Huawei, G'Five, Lenovo etc Chinese brands that sell tons of ultra-low cost dumbphones and some featurephones and recently have gotten into smartphones - you have a huge prize waiting in the market of low-cost Nokia smartphone customers you can fight for. On Android you have a compelling story against Nokia's remaining Symbian market. Go aggressively beyond China and India and Indonesia, to Russia, Brazil, Africa, the Middle East and Eastern Europe. Make some cool phones quickly in similar form factors to some of Nokia's recent smartphones (E7 etc) and push push push. Spread your sales force wide and take as much of this market as you can. This is the time to do bulk deals and its not the year to waste weeks and months arguing the finer details of some contract and price. This is a year of a land-grab in smartphones and you can grow strongly in market precence now, which also boosts your bottom line selling higher price (basic) smartphones than low cost dumbphones.

PS AS MONDAY-MORNING QUARTERBACK

So, it seems Nokia gave away its N-Series and E-Series customers, abandoned high-end Symbian development (while awaiting Microsoft Phone 7 devices) and abandoned the MeeGo path for N-Series. This, while only holding onto ultra-low-cost smartphones selling for 157 dollars on average, running Symbian.

Just humor me with this thought. What if Nokia Board had instead sold the Nokia premium smartphones unit - as a licenced (Nokia-owned) Symbian handset maker, and with contractual obligation to migrate to MeeGo rather than say Android. And the Nokia N-Series and E-Series staff and sales organization and production and design and marketing would have gone in that split. Would Nokia have gotten good value from this "sale" - to someone who is hungry to get into smartphones, has money, is not in it for 'real' yet like say HP or Lenovo or Asus for example - or perhaps someone else, who is a small player with big hopes globally - like Sharp or Fujitsu - or perhaps someone who wanted their own OS but lost out on the Palm sweepstakes - especially HTC. As a 'fire sale' they might not get full value for the Symbian-based Nokia premium phones unit, but at least they would have gained billions in the deal - rather than losing billions in the stock market carnage that followed Stephen Elop's Microsoft announcement - which in effect clearly had the same end-result, Nokia's N-Series and E-Series unit(s) are kaput.

I know its 'easy' to say this in hind-sight, and also, trying to sell Nokia's 'crown jewels' would have been incredibly unpopular no matter how we now view it, but maybe a leveraged buy-out by the management of the N-Series and E-Series units? To a management team of Nokia senior execs led by Anssi Vanjoki and supported by some of Nokia owners and bankers - some of whom must have had some uncertainty about the Microsoft deal. At least Nokia would have gotten something out of this change, and not just handed these customers to rivals.

Ah, that is looking back again. Sorry. I will try to focus on the future now. Nokia is a new animal, we need to understand it, in its new environment as a box-mover and slave to Microsoft's whims. But for the market, the big winners are RIM, Samsung, Apple and HTC. SonyEricsson and LG are also going to make good gains, as are ZTE and Huawei.

MORE INFO - for those who want the inside info on all regional markets, average prices, market shares etc, please consider the TomiAhonen Phone Book 2010 that came out a month ago, that has 98 charts and tables of all the data about the handset industry you could hope for. At only 9.99 Euros it is a bargain. It is only available in eBook format and only from this site, see more at TomiAhonen Phone Book 2010.

Comments

[Vikram]

Tomi - Nokia isn't giving away any market because of the Microsoft move - they were going to lose it anyway.

The reason is that MeeGo was way behind iOS and Android. Elop is a software guy, he looked at it and realized that MeeGo was substandard regardless of when they could release it. Any developer who got got to see Beta releases of MeeGo knew that. This move to Microsoft has nothing to do with it. Nokia's downward trajectory was already in freefall.

As for 2011 - this is the year of Apple and we will see Samsung, SE, LG and Motorola in serious decline as Apple gets on all major carriers and releases iPhone 5 + the low cost iPhone that they are planning to release.

The other big winner in 2011 will be the ZTE's and Huawei's of the world and white label manufacturers. They will be able to leverage Android on the very low end as all phones become smartphones.

It is not just Nokia who will lose in 2011. All the brand labels except for Apple will lose when the low cost iPhone mini comes out because of the following reasons:

1) iOS is better than Android
2) Apple has the best brand in the world that people aspire to. No one aspires to own Samsung
3) Apple has the best ecosystem in the world with iTunes

2011 will be the year of Apple and people will finally realize that Android is only "selling" because it is free for manufacturers who can sell it well where Apple is not. When Apple comes to those markets - it is over except for the very bottom.

[Good phone]

You people sound like Nokia wasn't already loosing it.

[Ts]

Contradicting your analysis: http://www.marketingmagazine.co.uk/news/rss/1055017/Mokia-will-fly-BlackBerry-will-suffer/

"For Nokia and Microsoft it will be pretty powerful, but for RIM [BlackBerry's parent company] it is the real problem. Microsoft has access to Word, Excel, Outlook, etc. All major companies use BlackBerrys. Suddenly, there is a major new player which will have Microsoft Office natively. One client has already called us about this."

Did you hear that? Native Microsoft Office running natively and 30 million paying gamers taking their Xbox Live with them everywhere they go. This is very good news for the gaming community and you seem to have overlooked that.

http://www.knowyourmobile.com/mobile-games/mobilegamefeatures/767674/why_nokia_and_microsoft_uniting_is_awesome_for_gamers.html

[Croco]

The trends were pretty clear but not decisive. Nokia is THE brand globally in what concerns mobile phones. Put anyone to draw a mobile phone and name it an you will see that will put Nokia's name on it.

The main issue here is not that Nokia (MAYBE) was loosing the market anyway but that not it is loosing it for sure and without any fight.

Simbyan 3 was not nearly perfect in terms of UX and UI but the sales were not that bad as RIM, Apple, Palm etc. And I believe that the things could have been put back on track with some drastic changes in terms of internal processes and business strategies.
I am not saying that I will not buy a Nokia WP7. i would do it tomorrow if it would offer the same features S3 have.

And this is my second main issue here. Until and only IF Nokia will be able to influence and improve WP7 to include S3 features some 2 maybe 3 years will pass and they will loose it all.

2 years of boosting and focusing on Qt development and implementation together with some improvements of S3 together with focusing on developing MeeGo would have had more chances than WP7 (IMO)

An my 3rd main issue is .... DEVELOPERS DEVELOPERS DEVELOPERS
They were just starting to adopt/ learn and implement Qt and it was just a matter of time until it would have paid off. I saw some Qt apps and I was amazed of the possibilities to innovation and long term development.

I hope at least Intel will find some others interested in MeeGo cause this is what I will buy. And hope it will come sooner than my N900 will stop working

[Allen Cross]

Very good write-up, Tomi. Been following your blog for awhile now and, admittedly, haven't always been a fan -- finding your analysis often excellent but your conclusions sometimes non sequitur. However, ever since the shock of Nokia's 11/2 announcement you seem to be on a roll. Maybe this is because you perform best under pressure? :-)

Still, I would argue that in granting Apple a significant share of 'Windfall' candy, your European forecast overlooks something: signifcant ill will toward Apple (i.e.: seeing the infamous 'walled garden' as anti-competitive and too overtly 'corporate America') and, perhaps to a lesser extent, toward the 'iPhone mindset' (i.e.: the triumph of form over function).

I suggest these perceptions are more pervasive -- and powerful, viz decision making -- than you might suppose. By my estimates, they will have a huge impact on Apple's potential buyers, reducing Apple's share of 2011's superphone 'candy' by 25%-35% below even your most pessimistic model. Of course, Samsung and HTC are the likely beneficiaries.

Anyway, it'll be fun watching the action. :-)

[Tomi T Ahonen]

Hi Vikram, Good, Ts, Croco, Allen

Vikram - I agree with you that Nokia's market share was in decline. But even after exceptional decline for two quarters, Nokia was still towering over its nearest rivals - more than twice as big as its nearest rivals Apple and RIM. I can yes, agree that management had to do something drastic. But there was a clear plan to migrate Nokia to MeeGo. You don't like MeeGo now. Fine. I'll grant you that. I put to you, that if Nokia had stayed with Symbian S^3 - which outsold all Microsoft Phone 7 handsets in Q4 by more than 3 to 1 - and developed MeeGo seriously last autumn (rather than stop its development) - Nokia would end this year 2011 with FAR better market share than 12%. Maybe not 25% or even 20%, but something like 18% or so - with the world's second biggest app store in Ovi - and most Symbian developers migrated via Qt to MeeGo and then would be the time to release a series of MeeGo devices.

We will witness the crash of Nokia market share this year, that is agreed by most analysts already and many say my forecast here is far too optimistic. Now, Vikram, if you go to industry analyst houses and forecasters like Gartner, IDC, etc and look how they projected Nokia's market share for 2011, before the Microsoft announcement - ALL felt Nokia would have over 20% market share by end of this year, some put Nokia near 30% with its Symbian/MeeGo strategy. Even if they were off by a huge error, Nokia would still end up with far more than what they now will have.

You say this is the year of Apple and if that includes the Nano iPhone (and/or QWERTY iPhone) then yes. If not, then not. Apple has the chance to become the biggest smartphone maker in the world but only if they offer the Nano model.

Then you say the victims will be Samsung, SE, LG and Motorola. Here I totally disagree with you. Samsung's Galaxy is very competitive against the iPhone 4, and the Samsung bada phones are far cheaper than even any Nano iPhone can be. No, Apple won't do damage to Samsung, the opposite is true. SonyEricsson, maybe. Their main market is Europe now, and if Apple brings a Nano iPhone, that would hurt SonyEricsson. Meanwhile the Playstation Xperia phone may well turn into one of the biggest hit Android phones of the year.

LG is making a massive play in 3D displays including the world's first phone with a stereo camera (for 3D pictures and 3D videos). Apple isn't in that game so I don't see LG hurt. But Moto, yes. They are mostly going head-to-head against Apple in the USA, and a cheaper iPhone would damage Moto quite hard.

I agree about ZTE and Huawei. The rest of your posting seemed like that of an Apple fanboy, and I'll just leave it at that. If you want to believe those points, feel free.

Good - I am one person haha.. But also while its not obvious in this blog posting, I made a big analysis of what all is wrong when Nokia's Q4 results came out. I have been vocal about Nokia problems here before. But if you are not a regular reader, I know you might not have seen that.

Ts - haha. Well. Did you not know that Nokia E-Series and Microsoft had a deep partnership - since 2009 - to provide all Microsoft office suite software on Nokia phones. If that was the case as you reported, then Nokia should have seen such a gain from Blackberry back from 2009. What you report is an isolated case. I can promise you the Blackberry sales staff is in overtime right now taking customer calls, and Nokia E-Series sales staff is taking calls from angry customers cancelling contracts. Watch this space, watch what the analysts report and we'll see the numbers coming out soon.

Xbox Live is a valid point but it comes late. Sony's Playstation is now also in phones and unfortunately the SonyEricsson Xperia Play has the PS1 controls on the slider phone - compared to the Nokia phones, that is night-and-day for any gamers. Xbox coulda been big a year ago but now Xperia is the top dog in gaming phones.

Croco - we agree on most points especially the trends. On Symbian S^3 - in its first quarter, on only 3 phones, it sold 5 million units and easily beat all phones from Microsoft Phone 7 family. Within two quarters Symbian S^3 could easily have been on most Nokia phones and had a market share bigger than RIM or Apple. Not enough to match Android but easily the second-bestselling OS. This with the second biggest app store in Ovi. Nokia's OS strategy was on the verge of being a success, when it was killed...

Totally agree about Qt and especially about developers. Now Nokia has zero credibility with developers who are at best lukewarm to Microsoft haha.. Meanwile they seem to love Android and Apple. Which system wins, I wonder..

Allen - thanks. I try my best and haha, yeah, sometimes pressure will perhaps crystalize the thinking.. On Apple ill will, that is a good point that I did not consider. I am however, increasingly convinced by the customer loyalty studies which have consistently astronomical ratings for Apple far beyond any other brand in almost all age groups (except 16-24 age segment which obviously loves their Blackberries). So I think the customer love of Apple is perhaps stronger than the industry ill will haha. But we'll see.

Thank you all for writing,

Tomi Ahonen :-)

[Sander van der Wal]

Citi analyst Jim SUva has simliar ideas according to Business Insider at http://www.businessinsider.com/research-in-motion-upgrade-2011-2. He sets a target of USD 80 for RIM stock.

Quote:
Carrier "Promotion Commotion" should start to flip to benefit Research In Motion at the expense of Sell-rated Nokia (CIRA analyst Zahid Hussein). Nokia is completely changing its strategy to now embrace the Microsoft mobile operating system thereby creating a multi quarter gap in Nokia products & carrier promotion support. We met with several international carriers at Mobile World Congress in Barcelona Spain this week who commented on their forthcoming shift to promote other handset OEMs (Android, Apple & RIMM) until Nokia's product strategy is more realizable.

[LP]

Is the following scenario possible?

1) Microsoft gets Nokia stock using intermediaries

2) These intermediaries pressure Nokia board to give in and hire MS-guy (there were rumors that they threathend to kick out Ollila from board if he did not hire Elop)

3) Elop does what MS assigned him to do

I don't think that this would be out of character for MS and Ollila has been oddly silent about this whole episode

[Nelson]

@LP
I've thought about something similar myself. I've to say that it looks a lot like a conspiracy teory, leaks would probably had come to surface, and we would be aware of some rumours, but nonetheless it is possible (not probable).
Jorma's silence is also intriguing me. I still don't understand how the man that 10 years ago favored Psion (Symbian) against MS, because the company would lose the power over its destiny, now it's ok with it.

[LP]

@Nelson
On the other hand, traveling the subways of Helsinki and Stockholm I see more and more IPhones each passing day. It just could be that the Symbian-ship was sinking faster than anybody realised, even Tomi!

[LP]

Aha, now it seems that Ollila has made some comments in a speach he made (in Finnish):

1) US has passed Europe/Finland in mobile innovation and Nokia can't do it alone

2) Going to invest heavily to upgrade dumbphones to have internet connection and maps etc.. (internet to the next 1B)

3) Future mobile technology, taking a very long perspective

I just don't understant why Elop did not stress these points at the original announcement?

[Jussi]

@LP

1) Maybe it is more wise that this comment comes from the mouth of an European?

2) Maybe they wanted to left this to MWC2011 speech ... well, I don't know why either

3) Could it be that at this point of time Nokia wants to emphasize the partnership with Microsoft and the WP7.

Consider, in a long run, how important role the OS of the mobile device will play? In a long run, can it be that the ecosystem will be in the network, not in the device? Not stating that something would happen but ...

[netborn]

One more time a great reading, but I have just one doubt, for sure Apple/Samsung/RIM/HTC are now re-doing their 2011 forecast post Nokia/M$ announcement, but who will build this +50M smartphones for them?

Has RIM the capacity to produce +15-20M more devices per year? Or Apple (foxconn) or HTC? Smartphones don´t grow in the grass, somebody must build them.

I think that the big winner will be the one who will be able to exceed their production forecast to fulfill the Nokia exodus.

[Matthew Artero]

What is everyone's thoughts about Elop's credibility and how the credibility of the CEO dictates what Nokia is able to do and what it must do?

When Elop first took control of Nokia he publicly stated to the world that the solutions to Nokia's problems will come from inside Nokia. He went on and on about how smart Nokia employees are and how it is his job to listen to them. He promised customers, developers, and employees that all is well and great things will be coming from Nokia.

But now he wants to put Nokia’s fate in the hands of an outside company. Doesn't this make Elop a CEO with one of the lowest credibility? Does he want to shift the blame to the outside company that they now rely on rather than taking responsibility himself? Perhaps he couldn’t handle the responsibility and has brushed it off onto an outside company. Does this strategy require someone of his caliber? Couldn’t anyone have made the decision to not make the attempt to be self reliant? In refusing to rely on itself, believe in itself, Nokia looks like someone relying on government welfare food and housing.

Elop spoke about all the great products and services that have been developed in Mobile and he told us even greater things are still to come and that Nokia would be bringing them to us. But then he gave up without even trying.

Of course the best and brightest will not remain with Nokia now that it has become unreliable in keeping its word. Elop has now rendered Nokia unable to recruit the best and brightest. This forces the remaining employees to have no choice but to execute this plan of giving an outside company control of its future. Does this remind anyone else of Microsoft’s relationship with IBM? First IBM lost the Desktops and eventually the Laptops as well.

It is no secret that both Microsoft and Nokia have relatively recently purchased Mobile advertising companies. How is it that a non-phone company like Google understands the importance of controlling the OS in order to be able to sell mobile advertising but Nokia doesn’t?

Nokia told its shareholders that it was taking a share of the lucrative mobile advertising industry but now it has just relinquished control of its ability to do so. Because Microsoft is a rival in this effort I’m not sure if Nokia’s decision is even legal.

How is it that Google with no Mobile legacy to speak of has full confidence in itself to compete but Nokia has lost all of its self-confidence? Perhaps it is because the founders of Google are the creators of their own technology (search engine) that has far surpassed all of their rivals.

It is a very different story when looking at Microsoft and Nokia. Microsoft did not invent the OS, the GUI (Graphical User Interface), or Internet Explorer. Nokia started its cellphone network decades after other companies were doing it. Perhaps it is because these companies cannot point to their own inventiveness in their origin stories is the reason they lack faith in their own inventiveness and do not give inventiveness the respect it deserves. Therefore we have companies like Apple and Google that show a better understanding of both the value and process of invention eventually outperforming those who have purchased their way into the game.

I think Elop scared the hell out of himself in that first speech he gave. He told us all these great things are yet to come but then he doubted his ability and the ability of his employees. His doubt in himself led him to the conclusion that these future great things he spoke of will come from other companies. In his state of fear and lack of confidence he feels that he has no choice.

Nokia recruited from the wrong source. Elop is too rich and too close to retirement. He is not going to look for another CEO position after Nokia so he doesn’t have to be concerned about his resume. Because of its desire to cash in on Mobile advertising, Nokia should have tried to lure someone out of Google instead.

[Jake Hamby]

Thanks for the great posts. I've been working in smartphones since 2003, when I developed a Series 60 app for a now-defunct startup called GoPix. In 2005 I got a job at Danger, Inc., where I worked on six different models of the T-Mobile Sidekick phones, then we were acquired by Microsoft, as you know, and I quit after one year into the disastrous Kin project. Now I'm working at Google, on Android. It's been a wild ride. A few comments for you.

First, I can't emphasize strongly enough just how utterly unsuitable Symbian was for any sort of future smartphone development of any kind. I know that it appears to many that Mr. Elop made a foolish mistake by cutting off Symbian, and curtailing MeeGo, so quickly, or that he didn't have Nokia's best interest in mind, but if I were in his shoes, I'm afraid that I would have had to do more or less the same thing that he did. Symbian is simply not competitive, and can't ever be made competitive, when stacked up next to any of the competitors, except for the now-dead Windows Mobile, which was in fact technically worse than Symbian in several areas that WP7 (or rather the underlying CE 6 kernel) has remedied.

I have often made extremely negative remarks about Windows CE / Mobile / Phone due to my unpleasant experiences working in the stressful environment of MSFT (see the many anonymous commenters at minimsft.blogspot.com for a window into the strange corporate dystopia that exists in Redmond). However, even I have to admit that while it may be a knock-off version of what I would consider a "real" mobile OS to be, and it may be filled with spaghetti code and legacy code and inelegant hacks, at least CE has the form and shape of what such an OS should look like. But the people who originally wrote Symbian did not understand how to use C++ properly, designed an extremely ugly and difficult to program API which makes the untidiness of Win32 look like brilliant craftsmanship in comparison, and their coding style used the most bizarre indentation of the curly braces that I have ever seen (using the same margin as the code inside, instead of the indentation of the enclosing scope, like normal C programmers do). So just pure ugliness from top to bottom. Elop was right to give it a mercy killing.

So that is my comment against Symbian. Clearly I'm not alone, or else there would have been some level of interest (any at all) when Symbian OS was open sourced a few years ago in a desperate attempt to save it. I know there are many users and some developers who loved that OS who are now very upset, who are vowing to leave Nokia for any of the other platforms, exactly as your analysis states. And I'm sure that Elop and Nokia's PR people could have handled the roll-out of the new strategy in a far more reassuring way than they did. But honestly, in my opinion, Symbian was truly a "burning platform", and MeeGo is not yet ready to replace it.

Microsoft clearly needs Nokia in order to salvage some measure of dignity out of their bumbling Windows Phone attempts, and Nokia clearly needs the backing and assistance of a company that knows software at all. As poor as I would rate Microsoft's software engineering practices and corporate culture, and certainly in comparison to Google, which has been a sheer delight to work for by any standard, they are probably going to help bring Nokia's engineering up to a level where they will be able to compete with the other players by the end of this year, or early 2012.

The other point I'd like to make is that there is no particular binding between the various smartphone OS's and the platforms that they run on top of. Just because they are making Windows Phones to the particular quirks that Microsoft requires for their platform (the three soft buttons vs. Android's four soft buttons, as one example), these are minor details that don't prevent the same device from also running MeeGo, or even Symbian Series 60 in some sort of compatibility layer, if the remaining Symbian engineers have the resources and desire to pursue that route.

As for Meego, they may succeed or they may not. It all comes down to execution. We shall see how it all plays out!

[Hari]

Tomi - i m following your blog for quite some time now. I dont understand why there would be a such a drastic drop in Nokia's Market Share. Meego was not there anyway & I dont think Meego had any good volume projection for 2011. It will still be primarily Symbian

And as Stephen Elop mentioned, if Symbian is still supported with New UI, Better processor, better design - Consumers will still go with them anyways.. So if Nokia Sold 100M in 2010- they should still sell more or less same even with the new Strategy - unless if you are intending consumers will be confused & they would stop buying Symbian - I doubt if that is the case in the Mid End Smartphones Nokia Sells today...

can you please clarify.

[marco]

Does the Nokia/Apple lawsuit have any relevance? Suddenly Apple has got no leverage on Nokia anymore since (if I remember correctly) their counterclaims were software based and Nokia is basically out of the software business. Is it likely, or even possible, that Apple could end up paying Nokia several $ per idevice, which could surely approach $1billion?

[Paul Jardine]

As several other commenters have said, I'm not sure that the carnage will be nearly as bad as feared. The question is whether WP7 is good enough and whether the public take to it (they were still buying Symbian phones, remember).
Longer term, Nokia has to be in a better position with WP7 than with Symbian, so the only question was MeeGo vs WP7...
Nokia will take a beating in Corporate sales, but elsewhere I'm not so sure.

[freeipad]

last chance for nokia, i hope you'll make it good

[m2]

hi Tomi, regarding your reply to TS -- "Ts - haha. Well. Did you not know that Nokia E-Series and Microsoft had a deep partnership - since 2009 - to provide all Microsoft office suite software on Nokia phones" -- you are mistaken.

There is as of yet no native support for the Full Microsoft Office Suite on Nokia smartphones. At most only ONE App from the suite is supported -- the Office Communicator Mobile.