In Other 'Bloodbath' News: Recent Developments in the Smartphones Contest

We haven't looked at the Electric Boogaloo: Smartphones Bloodbath year 2, for some time, and last blogs have mostly centered around the Nokia implosion. Lets tour the Bloodbath scene and see what else is happenin' in the wild and wacky world of the phone-so-smart.

APPLE: WHEN?

So Apple had taught us to expect the new iPhone at the end of June. Now we know that won't happen. Apple will give us the 'iPhone 5' (or iPhone 4G or however it will be called) later in the year. If there was one year you don't want delays in your smartphone launches, it is obviously 2011, because of the bonus Nokia smartphone customer give-away which is worth a million customers per week. So if Apple gets the iPhone 5 out at the end of September, it will have abandoned - above all the sales the new iPhone 5 would steal from competitors under normal times - an additional 'Apple market share level' of about 18% out of the 13 million ex-Nokia customers given away during that period. That's 2.3 million happy iPhone 5 owners that will never be, because during July-September they went and bought an Android most likely..

But what of the iPhone 5? The early gossip had it, that it would come without a SIM card slot. Apple wanted to do a virtual SIM card, which would have allowed Apple to also deploy something called MVNO, and easily for Apple to manipulate which network is used by the same iPhone 5 in whatever country it was used. And potentially circumvent the international roaming fees that the networks usually charge. The networks said they were having none of that, and sent Apple back to the drawing board. Since that attempt, Apple went to the European standardization body ETSI with the proposal of a micro SIM card slot in May, and the Orange network has agreed to co-sponsor that micro SIM slot concept so it can advance to be accepted as a standard. We should know during June what happens at ETSI and you can expect a micro SIM slot in the next iPhone. That is the primary reason why it is now delayed, I believe.

In other iPhone news, first of all, I was the first analyst to call it, Apple has passed Nokia in Q2 and when the final numbers come out, the iPhone has sold more in this quarter than all Nokia branded smartphones, and Apple is now the world's biggest smartphone manufacturer brand (but Android will be the biggest smartphone OS platform obviously). Then the Apple iMessenger was announced last week. It will be a tricky move by Apple, the operators/carriers don't like it, but I think Apple will get away with it. It will most of all ciphon traffic and revenues away from SMS obviously, but the one brand smartphone maker most hurt by iMessenger is of course Blackberry.

BLACKBERRY NFC

The big news over at RIM are the NFC enabled Blackberries that are coming out during the summer, led by the new Blackberry Bold models 9900 and 9930. NFC ie Near Field Communications usually has mobile wallet and mobile money uses as the primary benefits, but from RIM's view, it also serves as a security access tech, so for example Blackberry owners could use the BB as their corporate identity pass.

SAMSUNG

Samsung's bada OS should be nearing its 10 millionth device sold any day now, and as they are rather eager to celebrate any milestones of the young OS, I would expect them to make a big splash about the number. My math says its any day now.

Meanwhile in Android powered Samsungs, an interesting twist from the South Korean maker. They have launched the most eco-friendly smartphone Samsung Replenish, which they say is made from 34% recycled materials. I would think that kind of marketing will find a strong appeal in especially the younger buyers and in particular probably in the European smartphone market where Samsung is strongly targeting to steal all Nokia customers. The Replenish is also sold for example by Sprint in the USA.

And in the world domination plans of Samsung, the Galaxy 2 has already notched up one million sales in South Korea where it was first sold. It is already available in Europe and will soon be launched in the USA. Oh, and I should mention in passing, that some gossip says Samsung is considering buying Nokia. My gut says the primary reason for that thinking would be defensive. Samsung wants to become number 1 in its markets including all mobile phones (where it is number 2) as well as in smartphones (where it is number 4). If a rival like ZTE of China or LG or South Korea were to buy Nokia, then the big mobile phone market would shift, and the traditional number 1 rival would no longer be the 'blated' old European giant, Nokia, but rather the company after the take-over would be run by a lean mean competitive Asian rival. But if Samsung bought Nokia, it could keep those assets it wants and sell the rest, and easily take over the number 1 ranking in both mobile phones and in smartphones. Can you imagine what 'execution perfection' Samsung would do with 'innovation excellence' Nokia assets? And they'd terminate the Microsoft deal obviously and migrate all low-cost Nokia phones to bada, and suddenly bada would be a serious rival Android which together would be the duopoly of the smartphone OS space. I think the Samsung rumor has some degree of legitimacy. But I also think, that part of Samsung says, we can do it better without the Finnish baggage - they are that confident they are that good haha..

HTC MOVING AWAY FROM WP7

In HTC news, the big news is that they are now shifting their attention away from Microsoft Windows Phone 7 and onto more Android. They didn't give a reason for this (and we have it below in the Microsoft section of course). But this is again more bad news for Microsoft. HTC is the launch customer of Microsoft's smartphones with a 10 year history with the brand. If HTC doesn't believe in WP7, then Microsoft is having some serious troubles. And on the Android side of HTC, an interesting twist on the CDMA side of smartphones, HTC has released the HTC Merge, a world phone that works on both CDMA and GSM networks.

SONY ERICSSON

The big play by SE was with the Xperia Play, the 'Playstation' phone that runs on Android. It has not set the world on fire. Is it perhaps a problem with the concept, that gamers will go for the optimized device (Playstation Portable etc) or is it now brand and execution at SonyEricsson. But many of us in the industry - including myself - had expected that when Sony finally release a Playstation compatible smartphone, it would be the next big thing, and would sell like hot cakes, and be the biggest story since the iPhone. Also the management of Xperia Play titles seems to be mired in 1990s thinking, they annouced 20 new titles. Twenty? In an Android-iPhone world of today when we measure apps by the hundreds... of thousands.. of titles. Its not that its a total dud like the Nokia N-Gage but certainly SE is not getting the traction it would have hoped for, with the Xperia Play. Pity. But in other news, Tommi Laine-Ylijoki joins SonyEricsson as Head of Operations. He comes from where? He is part of the Elop-Exodus of top talent fleeing the sinking ship MS Nokia-Titanic where he was VP Materials Management.

MOTOROLA

The picture at the ole Moto-Moto is quite blurry, nothing that amazing to report. The big news past weeks is that Moto is killing its customization of Motorola Android smartphones called Motoblur. While others emphasize differentiation, Motorola boldly steps in the opposite direction. We wish them well, the poor sods. When will we see a strong Motorola again in this industry? Maybe some dinosaurs deserve to die in peace?

NOKIA

As I have had a long series of Nokia smartphone blogs, I will keep this brief. Nokia is now bleeding market share even more badly than before. The mobile operators/carriers have started a Nokia Symbian smartphones boycott. There are millions of Nokia Symbian phones sitting in warehouses, with the channel refusing to sell them. The Nokia Symbian smartphone factories are on idle, with capacity to make dozens of millions per quarter, and doing nothing. This at a time when rivals complain about such high demand that they cannot meet demand and the industry growing at its record pace. Bad timing, Stephen Elop! Bad timing to incite a reseller revolt.

Nokia decided to pull the plug on Ovi branding on its store and seems to be giving most of the crown jewels of Nokia's app store to Microsoft and all WP7 partners, free of charge (the maps, the carrier-billing relationships etc). Who is Elop serving, honestly, Nokia or Microsoft? And then Elop tried to talk back the Symbian end, by telling the China market that Nokia would now commit to Symbian up to year 2016. Haha, is that because Nokia 'wants' to extend the life of 'burning platform' Symbian or is it because Nokia has so many million unsold Symbian phones in its warehouses, it will take until 2016 to dispose of them?

The ship is sinking and the smartest are jumping off. We just heard last week that Nokia Chief Technology Officer, Richard Green had left (was on extended leave of absense) and why? Because of Elop's strategy switching from MeeGo to Microsoft. Green had been brought in, to build the most carrier-friendly and most developer-friendly, open, ecosystem on the planet, which included the concept of 'migration path' from legacy Symbian to MeeGo with Intel, via tools called Qt and with the separate branding of the Ovi store. As we have seen, Elop has killed all that, and rather wants the least carrier-friendly, least developer-friendly, closed, ecosystem led by Microsoft without Nokia co-ownership. No wonder Green refuses to support that.

This is your Arabic Spring, Stephen Elop, the channel has spoken and like Europe and Nato came to support the Libyan revolution, the Shareholders of Nokia have now joined the chorus by slashing the Nokia share price. Like the 60 Libyan army generals who fled to Italy, your best and brightest are already deserting your ship. You do have to go, Elop, like Libya's Muammar Ghaddafi. And what is worst of all, after Elop torpedoed Nokia's Symbian, and assassinated the evolution path to MeeGo, now Nokia is set on a path to Microsoft Windows Phone 7, where another reseller boycott has been started.. The Microsoft WP7 option is actually even worse for Nokia than sticking with Symbian!

ANDROID

So how's our Android doing? The Android ecosystem is picking up speed and now the whole Nokia-Symbian developer community has fled that sinking ship and joined Android. Android has 450,000 developers and is up to 200,000 apps already. The developers who do both iPhone and Android say its easier and faster to develop for Android, and obviously the Android platform is selling far more than the iPhone and will shortly become the bigger of the two platforms by installed base of devices. Google also celebrated the 100 millionth Android device shipped, a massive milestone. Bear in mind, that as Android is essentially about 2 years of age (vs Apple's iPhone which is four years of age).

The Android army of smartphone makers meanwhile keeps growing at breathtaking speed. Google announced the daily activation rate has passed 400,000 per day, so Android phones now are sold at an annual rate of 146 Million or 36.5 Million per quarter. Thats now twice the size of Apple iPhone. And toss in the news from the above that HTC is switching most of its Microsoft effort into Android, and remembering HTC is the biggest individual manufacturer in Android, and you see the potential for Android is quite enormous.

MICROSOFT

And in Microsoft Windows Phone 7 news. The life over at Microsoft seemed peachy in February, when the world's biggest handset maker, Nokia, announced it will terminate the world's biggest smartphone OS, Symbian, and end its partnership with Microsoft's long-term rival Intel to develop a next generation OS, MeeGo, and rather switch to Microsoft's severely underperforming OS, Windows Phone. The early projections were suggesting that Microsoft would end up as one of the big 3 smartphone operating systems in the big race (with Android and Apple's iPhone). Ironically, just as recently as 2008, Microsoft HAD been one of the big 3 smartphone operating systems, but that lead was squandered by the meddlings and mismanagement we typically associate with CEO Steve Ballmer.

Now some were projecting that Microsoft would end up with 20% market share, ahead of Apple, behind only Android. If that fantasy was perhaps possible in the early reckoning, it is now utterly impossible. Not only have the retail channel revolted against Nokia Symbian phones, destroying its market dominant position, so that at the end of this year, Nokia's smartphone market share can be discovered with a good microscope, in the mid-single digits; the latest news is that Microsoft's WP7 is on its own reseller boycott.

Why is that? Its Skype, Stupid. Microsoft purchased Skype, perhaps a clever move for Microsoft the corporation, time will tell. But it was the death-nail to Microsoft's ambitions in smartphones. Mark my words: No carrier will subsidise Microsoft WP7 phones that come with Skype. Voice calls account for 70% of mobile operator/carrier revenues, and 40% of their total profits. Skype would instantly destroy all that, like the fixed landline carriers/operators have witnessed. The mobile operators are not that stupid to subsidise their own death. And we see how vital a handset subsidy is, come on, even Microsoft has to know this, because it was a lack of subsidies that killed Microsoft's own phone project the Kin phones - the fastest death of any new phone brand ever, six bloody weeks!

The San Francisco Chronicile and PC Week and other sources are now reporting that the resellers have put all Microsoft based smartphones on boycott. They will switch the customers to Android phones instead. Already Microsoft in desperation has resorted to selling its current stock at the cost of one penny per phone and they are still not moving. That is desperation. Microsoft WP7 went from 'one of the big 3' to 'last of the bunch, worse than even toxic Symbian' in the eyes of the resellers. This is not because of anything in the software or the platform or the apps or the ecosystem. It is because Microsoft bought Skype, the company all mobile operators/carriers hate. Microsoft WP7 died that day. And incidentially, if there was anyone over at Nokia who was hoping that Microsoft will revive a Nokia resurgence, that wish died on the day Microsoft bought Skype. This is why the fast-moving HTC (who has an option, after all, idiot Nokia CEO torpedoed his own options in February, what a silly man to put all his eggs in one untested basket) is already now shifting its emphasis from Microsoft to Android. They see the market reaction and do not want to be victims of a reseller boycott. Nobody is boycotting Android, made by the 'Do No Evil' company also known as Google.

I think that is the big news from most of the big players in the Electric Boogaloo year 2. I will return of course with more news as they emerge and we'll be doing Q2 results when the big companies start to report quarterly results in some weeks.

Comments

[Bob]

do you think android will touch 1 million activations per day by year end ?

[bongch]

i like nokia phones bcos it has the best call quality using loudspeaker. it is sad to see its downward trend. i don't want to see it belong to samsung, which the phone built is just not there.

[Michael]

Tomi: Some quick thoughts...
Apple: Interesting comment on Apple's iPhone 4s/5/whatever being delayed to rework the SIM issue.
Microsoft: I keep hearing statements to the effect that Windows 8's mobile platform is build on a different code base. Therefore, any app build for WinPhone 7 will have to be reworked for the new system. If this is true (and I'm not a developer and cannot verify this) it's one more nail in the Microsoft Smartphone coffin.
Nokia: You make a good case for Samsung to buy Nokia. Do you think there will be other bidders from the existing smartphone companies?

[Matthew Artero]

Thanks Tomi,

I love your thouroughness and your sense of urgency. You can always be counted on to report quickly and also how it relates to the big picture. Maybe you were a great conquerer/general in another life.

When you wrote regarding Samsung "they are that confident they are that good"; did you mean they are both that confident and that good or they are that confident that they are that good?

I read that Nokia's Board selects who will be on the board. They have flooded it with economists and I don't see that they need a physicist or neuroscientist.

Nokia's Board lacks the skillset necesarry to meet the changed market challenges and they continue to do nothing to recruit the needed skills into the Board. So of course this Board always chooses the wrong guy to be CEO and lets the wrong guy stay in too long.

They will not get rid of Elop because they don't know what to do. Because they don't know what to do means they should get rid of themselves.

Elop's resume doesn't show the experience necessary to face the market challenges Nokia is confronted with and neither do the resumes of the rest of the board. There is a lot of redundency in the collective resumes of the Board. So the Board members can all concur with each other because they all only know the same thing and none of them knows better than the other.

[sonicnights]

Hi Tomi, half a dozen tweets and now a comment on your blog, your my best friend today. Good analysis as usual but I feel you were soft on RIM, only one new product announced, shipping date very delayed, Playbook development also slow and of course as you noted iMessage.
I think they could well be the next Nokia.

One more thought, HP, where are they ? Exactly ,nowhere and that's where they will remain.

2011 Bloodbath indeed, extinction level.

PS posting from my ipad not allowed :-(

[masquisieras]

I like what I read here but Apple. If like they have said in several occasions (we will have sell more if we were able of make them) are productions constrained this is the year to delay. They can't take the Nokia gift because they don't have more phones to sell anyway so the delay put to september the dip in production due to the transition and the Nokia gift allow them to keep selling a more than a year phone as a top of the line at top production.

[Michael]

following up on my earlier comment... From Ars Technica this morning,
"Microsoft Vice President Julie Larson-Green, in charge of the Windows Experience, briefly describes a new immersive application—a weather application—and says, specifically, that the application uses 'our new developer platform, which is, uhh, it's based on HTML5 and JavaScript.'"

[Home Inspector Marketing]

Samsung stated back in June that ALL Galaxy S devices would be getting the Android 2.2 (Froyo) update before the end of 2010 and here we are in early 2011 without this update while new Android 2.2 and even 2.3 devices are starting to appear.

[Boris]

@ Home Inspector Marketing

:lol:, blame you carrier. In Europe, Galaxy S without SIM lock and branding are updated to Android 2.3.3.

[KPO'M]

Interestingly, developers at last week's WWDC are more likely to see Windows Phone than WebOS or BlackBerry as a viable growth platform.

http://tech.fortune.cnn.com/2011/06/13/ios-developer-survey-47-are-on-android-too-only-7-mac/

I don't think Tomi's "abandon WP7 and crawl back to Symbian/Meego" approach to reviving Nokia would work. If anything, a shift to Android is more likely.

[Tomi T Ahonen]

Hi all, thanks for comments. I'll respond to the first set here and return with more

Hi Bob, bongch, Michael, Matthew and sonic nights

Bob - I don't think a million activations is feasible by end of year, it would be rate of 365 million new phone sales per year, and correspond to a 73% market share. That is more likely to be a level they'll get to next year (as total smartphone market keeps growing) where it will be nearer to 50% market share.

Bongch - I know, I appreciate that, and yeah, in many cases the loudspeaker is very important where the phone is a primary entertainment device. I see here in Hong Kong for example on weekends when the Philippino ladies who work as maids, have their days off. They often use their phone as the music player for a small group of their lady friends, etc.

Michael - thanks. Haha, good point about pain for MS developers. About who else might buy Nokia? Its the world's most widely spread tech brand, by a MASSIVE margin. Regardless of how badly Symbian has recently been killed, in most huge markets like India, China, Brazil, Russia, Indonesia etc, a Nokia premium phone - even feature phone - is golden. A little bit of repairs to its branding and marketing issues now, and Nokia is easily back. If Elop had focused on execution rather than his Microsoft Moment, Nokia could be on a very strong come-back. For almost any tech brand, not just handsets, but PCs, home electronics, cameras, etc, the Nokia brand could be a powerful gain. Imagine Visa (or Amex or Mastercard etc) if the future of money is really mobile, as many in the digital money space are now saying - then why not buy Nokia corporation. Sell off the networks and Navteq and most smartphone parts, but keep the Nokia brand and featurephones - but roll out near field money phones globally, and make it the next Visa card. Nokia has an installed base of 1.4 Billion Nokia phone owners. Suddenly Visa is in the handset game for real and has a massive advantage over Amex and Mastercard, etc... Not just the handset makers haha, I think soon there will be a feeding frenzy on Nokia, because they have deep assets in mobile-TV, in mobile music, in mapping, in messaging, in mobile money, etc etc etc.

Of the smartphone companies, I think it would be silly for any of them to not consider Nokia. What could Apple gain? They could take Nokia's best Chinese smartphone factories, and sell the rest (no need to keep any Nokia design haha) but in one fell swoop dismiss their Taiwanese subcontractors, and own a real smartphone factory, in China or perhaps India etc, where production costs very cheap. And pick and choose some other goodies from the Nokia basket. But not keep much, sell at least 90% of the corporation, in pieces.

What of RIM? They could keep the E-Series hardware, software, sales force, and effectively double RIM's size overnight. Rebrand all Nokia to Blackberry, and migrate E-Series Symbian to Blackberry OS as soon as possible.. Keep them top dog in enterprise and in youth messaging for many years to come, owning that niche. So keep about 10% maybe 15% and sell about 85% of Nokia (they might also keep some networks assets perhaps, some softare also perhaps)

HTC is losing to Samsung. If they bought Nokia, they'd leapfrog everybody and become biggest smartphone maker, with also biggest sales force and biggest factories. They'd gain Nokia's remaining assets in MeeGo which they have hinted they'd like with Intel, and would seem like the natural play, to make MeeGo/Nokia HTC's private label OS. Transition most of Nokia smarpthones to Android and Meego, keep some wtih Microsoft just for fun (HTC likes to dabble with Microsoft) and sell dumbphones, sell the Nokia brand, keep the Nokia smartphone sales organization and factories. Sell networks. So HTC would keep maybe 30% of Nokia.

LG would do like Samsung, take all handsets stuff, keep 70% and sell only networks, but leapfrog Samsung to become biggest smartphone maker.

Motorola and SonyEricsson would like Nokia but can't afford it (making losses).

HP could make a new effort to come back, Palm wasn't enough, but Nokia would give the sales channel they need. Suddenly HP could bypass both Microsoft and Apple and with their deep pockets could become biggest player in mobile. but seriously, how badly they've messed up their Palm opportunities, they'd mess up Nokia too.

The Japanese (Sharp, Fujitsu, Kyocera etc) could want Nokia for the global reach. They'd find great synergy in design out of common Symbian knowhow.

Etc. Nokia has tons of great assets, they will be soon sold and chopped up, unless the Board fires Elop and renounce the Microsoft path..

Matthew - haha, good question about Samsung. I did mean it when I wrote it, that they think they are that good, but now that you ask me, I'd add, they also are that good. About Nokia Board, you are so right.. sigh..

sonic - haha, thanks. Yeah, I have a soft spot for Blackberry.. Their US market is very strongly suggesting they are the next Motorola or Palm or Nokia haha. But their international expansion and youth appeal say otherwise. Lets see what their quarterly numbers say. I am expecting they say tablets disappoint, US market is down, but 'surprisingly international sales especially youth' has been strong.. if so, don't count them out.

On HP.. I wrote about them in the above, what a masterful company of totally missing its opportunities in mobile. What a waste. They bought the only phones and OS that were rated ahead of the iPhone, far more so than Android, and what did they do with Palm? A year later and still nothing. What a waste.

Thank you all, I'll return with more comments, keep the discussion going

Tomi Ahonen :-)

[Afewgoodmen]

Tim, lovely post. I'm an avid follower of yours on twitter. And always seem to enjoy your chain and flow of thought.

I just want to remRk that I believe that the delay in the releas of the iPhone 5/4G is actually deliberate by Apple. They are still making a he'll of a sales from the iPhone 4, so they see no reasons to push out the new iPhone. Heck, even the iPhone 3Gs is still selling like hotcakes.

When a new iPhone comes; the iPhone 3GS will be retired and the price of the iPhone 4 will fall. Perhaps Apple wants it to re-live past it's glory. It is indeed a fabulous piece of equipment/phone!

[Brian]

Tomi, really enjoy your writing. I have a question about part of your style.
You throw in little twists of common idiomatic english expression. In this post you used "death-nail." I know the expression as "death-knoll."
It's a very expressive use of the words!
Do you do these on purpose, or more from knowing the expession verbally?
Thanks, great stuff, I just read for the drama:)
Brian

[Matthew Artero]

Why Nokia Will Never Recover Its Loss Market Share

Another way to further describe the awful situation of Nokia’s Board being made up of resume’s with redundant skills would be to note that the Board is supposed to provide the direction of the company but because they lack the skills to go in the direction the market demands, Nokia’s Board offers no direction or the wrong direction.

Elop hasn’t shown he is going to do better than the competition. His statements equate to being an iPhone follower. He gives the impression of one who is running scared; quickly reverting back to the only thing he knows, Microsoft; rather than having the courage to make the attempt of doing something better.

If it is such a good move, why didn’t Google do it instead of making Android? Elop ran crying to Microsoft the same way Motorola dumped everything and ran to Droid. There is nothing to indicate we can expect Nokia’s future to be any better than Motorola since they have essentially done the same thing.

That fits Tomi’s argument of delusional. Elop and his Board have taken the same route as Motorola but are claiming they will get a different result.

To easily understand the skills necessary to turn Nokia around we can look at the story of Steve Jobs who has several times killed industry giants in different industries.

We’ve all heard the story that Steve Jobs was most recently a computer game programmer when he got VC funding to start Apple Computer. Surely a computer game programmer didn’t have the understanding to run the computer manufacturing process.

What he focused on was the individual customer experience. Of coarse the retailers would want lower price and bigger markups which was Nokia’s strength with its economies of scale. Nokia could give the retailers what they wanted. But Apple went after the user. With the graphical user interface Apple sent the personal computer industry down the path that would eventually slay the giant IBM.

Next this former computer game programmer takes on the music player industry and faster than the iPhone dethroned Nokia, the iPod conquered all the giants of that industry. It was the exact same game plan that killed IBM’s PC business. Focus on the user experience.

Next of course was the iPhone with the same game plan. Over and over again it has been demonstrated that economies of scale which is very important to the retailer is not as important to the user. If it was we would all still be driving the very economically produced Ford Model-T with no electric starter, no power steering, no automatic transmission, no air conditioning, and so on.

What do all these stories of slaying industry giants have in common? The giants were all slain at a time when prices were coming down. This meant users were not having to spend as much as they previously did in order to get the same experience and they therefore had money to spend on an improved experience.

Nokia sat on its laurels believing that its economies of scale and speed of production, things that retailers like, protected its market share. A needed skill that both Nokia and its Board lack is a focus on improving the experience of the individual user.

There is also a lack of retail knowledge. To enrage the retailers one depends on, to bite the hand that feeds you, surely means metaphorically that one has no business in the industry and soon literally won’t. Neither Elop or MS has shown us how the WP7 experience is any more compelling than the iPhone or Android.

There is also a lack of knowledge about users. Elop abandoned Meego saying only three devices could be launched between now and 2014. That’s the same number of iPhones that will probably be launched during the same time period. Elop’s understanding of the market is upside down. For years now it hasn’t been about the number of devices. It’s about how compelling they are.

By my math the replacement rate of mobile devices is greater than three years. That means only about .08 percent of the market is up for grabs each day. This means the iPhone’s rise really couldn’t be any faster than it was. By giving up market share the way Elop did, without a compelling user experience to retake it, he has doomed Nokia to never recover from this self-imposed disaster.

The replacement rate is far greater than the growth rate of the industry. One must have the courage and drive to dominate the replacement rate otherwise the growth rate will forever elude them.

For Elop to go running back to MS shows he has no stomach for the fight to be more compelling. It’s a demonstrated lack of courage and faith in one’s self that says “mommy please help me”. Perhaps Nokia’s Board has already given up on both itself and the company long before it hired Elop.

Both Elop’s rhetoric and actions have been pretty gutless. We all know where being gutless gets one. Perhaps his burning platform message was his way of already excusing himself for giving up without first attempting a single new compelling product. What Elop has said loud and clear to the world is that he doesn’t have a compelling product and he never would have come up with one and he believes there is no reason for anyone to think that anyone at Nokia would have come up with one.

To use a baseball analogy he refused to swing at a single pitch. He never even left the dugout to go stand in the batter’s box. Perhaps that’s how he protects his reputation; if he doesn’t try and fail nobody can call him a failure. But we can call him a coward. A selfish coward that thinks of himself first and wasn’t willing to break a sweat. All he did was sound the retreat. Anybody could have done that. What does Nokia need him for?

Everybody knows one is supposed to cannibalize one’s own market share, not just give it away. You hold on to it as long as you can until you’re ready with a new compelling product. There is no excuse for what Elop has done. It violates the most basic business teachings.

Even hotels, apartment buildings, and business complexes, renovate one wing or one floor at a time. The only time the entire structure is torn down is when they are ready to build something that is so much better it is going to make up for the loss business. Elop told us he didn’t have anything and tore it down anyway.

But nothing is this guy’s fault. He’s got an excuse for everything. Now he’s brought in MS to be his next scapegoat. If the next product doesn’t do well he can blame MS.

[khim]

@Matthew Artero: was this is riddle "find ten serious mistakes in the post" ?

I'll try.

1. Elop ran crying to Microsoft the same way Motorola dumped everything and ran to Droid.

Motorola's fate is quite different from Nokia's fate. It was losing market share fast before they bet bit on Android. They had no resources for the new OS development (Motorola's smartphones before Android were a joke) - so their only hope was Android, Symbian or Windows. They've chosen Android early on - and it looks like it was wise choice. It's not clear if it'll save the company, but at least now they have a chance. Nokia's marked share was slowly eroding, but it was still the biggest smartphone manufacturer when Elop torpedoed Symbian!

2. To easily understand the skills necessary to turn Nokia around we can look at the story of Steve Jobs who has several times killed industry giants in different industries.

Steve Jobs never "killed industry giants". The only market where Apple ever killed anyone was MP3-players and the only participating giant (SONY) killed itself (since it insisted on ATRAC where everyone else used MP3). All other markets Apple with Steve Jobs eventually lost: personal computers, laser printers, etc. Sure, Steve is good in finding newer and newer niches to grow so Apple under his guidance survived in the end (even if NextSTEP amost didn't) - but this is completely different thing.

3. We’ve all heard the story that Steve Jobs was most recently a computer game programmer when he got VC funding to start Apple Computer.

Steve Jobs was never a game programmer and before Apple computer was formally funded and started it already had a computer developed by Steve Wozniak.

4. Surely a computer game programmer didn’t have the understanding to run the computer manufacturing process. What he focused on was the individual customer experience.

I think you are talking about "second wave" of Apple? The GUI "invention"? The first one (Apple Lisa) flopped. The second one (Apple Mac) generated a lot of buzz yet never managed to regain market share lost in Apple ][ to Mac transition.

5. But Apple went after the user. With the graphical user interface Apple sent the personal computer industry down the path that would eventually slay the giant IBM.

Sorry, but no. Apple was big for a time in US, but never generated anything similar outside of it. IBM essentially killed itself: when it developed IBM PC it outsourced everything except it's "core competence" (the ability to actually assemble and build computers) - but as later history showed this particular ability was easily copied and IBM had not control over OS and the critical component (CPU). Apple was irrelevant to the fight. Compaq and followers killed IBM, not Apple.

6. Next this former computer game programmer takes on the music player industry and faster than the iPhone dethroned Nokia, the iPod conquered all the giants of that industry.

This was giant achievement, true, but... can you name one giant of said industry? Diamond Multimedia? Creative? These were much smaller companies...

7. Next of course was the iPhone with the same game plan.

iPhone is similar to Mac, actually. Apple was able to sell surprising number of iPhones and for surprising price (they are the most profitable phone makers today), but they will never capture majority of the market. It's like with PCs: Apple is biggest PC manufacturer in the world, yet most users use something else.

8. By my math the replacement rate of mobile devices is greater than three years.

Wrong again. It was measured many times and results are consistent: replacement rate is between 18 and 24 months.

9. This means the iPhone’s rise really couldn’t be any faster than it was.

Then how it was possible for the Android to overcome iPhone in two years? Sure, it's not apples-to-apples comparison, but if replacement rate is the limiter it'll limit Android just as well.

10. The replacement rate is far greater than the growth rate of the industry.

Which industry? Mobile phones? Yes, this industry is close to it's limit. But smartphones are grown much faster then the whole industry (90% in last year, 75% this year) - this is because it's still a small slice of the whole industry.

Good enough or have you placed more errors to be found in you message?

[E.Casais]

>> By my math the replacement
>> rate of mobile devices is
>> greater than three years.
>
> Wrong again. It was measured
> many times and results are
> consistent: replacement rate
> is between 18 and 24 months.

I always found these figures of 18-24 months highly suspicious. Anecdotally, they do not seem to match what I see around me and it is unclear whether they take into account the increasing number of people using a couple of phones (private / professional, everyday / outdoors, etc).

Does anybody have serious references to statistics about the replacement rate for mobile devices? Especially, statistics that make it clear whether they deal with the median or with the average rate, and with an indication of dispersion (standard deviation or the like)? Tomi?

[Boris]

Nokia, Apple Reach Patent Deal, Settle Lawsuits

http://www.bloomberg.com/news/2011-06-14/nokia-apple-payments-to-nokia-settle-all-litigation.html

At leats some good news for Nokia...

[E.Casais]

I really meant to say that I am suspicious of the 18-24 months figures (or, alternatively, that they are suspect).

Anyway, another important factor is whether these replacement rates have been measured in countries (such as the USA or Finland) where almost everybody is on post-paid subscriptions that typically last 12 or 24 months and whose renewal comes with a replacement device; or whether they are measured in countries (such as Mexico or Italy) where almost everybody is on pre-paid and people often have to shell out the entire cost of a new device up front.

[JukkaGM]

Very nice analysis! Inspired by it, I made a very quick one in Excel: take Q1 market share from your blog, move Nokia from 24% smartphone market share down to single digit 9% and share the giveaway 15% between Android makers only - Samsung, HTC, SonyEricsson, LG, Motorola, ZTE (this is what I see happening when looking around)

Q1
Nokia 24 %
Apple 18 %
RIM 14 %
Samsung 13 %
HTC 10 %
SE 5 %
LG 5 %
Moto 4 %
ZTE 2 %
Sharp 2 %

allocation key for Nokia's giveaway 15% (based on Q1 market share)
Samsung 33 %
HTC 26 %
SonyEricsson 13 %
LG 13 %
Motorola 10 %
ZTE 5 %

Q4
Samsung 18 %
Apple 18 %
RIM 14 %
HTC 14 %
Nokia 9 %
SE 7 %
LG 7 %
Moto 6 %
ZTE 3 %
Sharp 2 %

Same story as yours, the top 4 is quite close to each other. I would give more boost to ZTE because they make the cheapest of the cheap Android phones so it is an attractive alternative to featurephone or even Bada - you can get a real Android at the price of featurephone. So in the worst case also ZTE can overtake Nokia as a smartphone maker and Nokia will fall to place 9.

Even if Nokia's first WP7 phone was a success, it will probably be released very late in 2011 (Ollila said before Elop that it would be a 2012 event, remember) so it will not have major boost for sales. Either the sales period will be very short or Nokia will have delivery problems, quite normal for a new product whose production is being ramped up.

[FernFleming]

If you are willing to buy a house, you will have to receive the loan. Furthermore, my brother usually uses a collateral loan, which is the most rapid.