Timing? Why did Stephen Elop announce Microsoft in February when first phones take a year more?

So, the CEO announces the end of the operating system and the shift to the new rival operating system. But when he does so, it is nearly a year to when the first phones on the new system will be available. Wot? Wouldn't that be the act of a madman, a lunatic? You might think so, I could not possibly comment (quoting fictional UK Prime Minister Francis Urquehart of the BBC TV series House of Cards).

I have been pondering that timing. Not the decision. I have said many times I think on the surface of it, the decision by Nokia to abandon Symbian and its MeeGo migration strategy only weeks from when the first MeeGo phone was to launch and after Symbian's first ever honest iPhone clone N8 was tearing up the sales charts - that was clearly a boneheaded move - on the surface of the parts we could see. But nobody is that stupid. There must be much more to the decision, things we cannot see (yet) and time will tell if the Microsoft gamble turns out to be a big winner (increasingly unlikely but is still possible, or shall we say, plausible haha)

This blog is not about whether Elop's decision to switch suddenly to Microsoft is the right decision. This blog is about the bizarre timing of the announcement. And all of the analysis in this blog is pure conjecture, is my reasoning, with me pretending to be Sherlock Holmes and trying to piece together a picture knowing I do not have all pieces to the puzzle. But the timing is so very odd.

I just wrote the blog about the dire state of Nokia this year. They just annouced a profit warning. I projected in February, only days after Elop's famous Microsoft announcement, what would happen to Nokia market shares, average sales prices, total revenues and profits this year. That picture was very sad, but I wrote back then that it was the best case scenario, where I was trying to see the best in the opportunity. Many felt that blog was very severe and that I was too harsh on Nokia. Now we have official Nokia numbers and they are indeed far worse than even I could forecast. Nokia is having its worst year ever and is certainly setting the world record for self-inflicted market share suicide.

This blog is not about that either. This is about the timing in February. You see, the weird part is, that Nokia is in trouble now - explicitly because Stephen Elop had to open up his mouth on February 11.

He had absolutely no business reason to do so! His first Microsoft phones on the original time table were not due until early 2012 (as articulated by Nokia Chairman Jorma Ollila at the time) and even in the new accelerated delivery schedule, the first Microsoft powered Nokia smartphone will appear in Q4. And when Nokia says Q4 it means end of December, not beginning of October (assuming the phone is not delayed. Almost all announced phones by Nokia recently have had delays from the annouced earliest date - the N8 was delayed by more than a year).

So if Nokia and Stephen Elop did make the Microsoft selection on February 10 as legend currently has it (some think it was decided months earlier, possibly as early as Elop's hiring decision by the Nokia Board) then Nokia was under absolutely no obligation of any kind to immediately publicize the decision then and there.

Nokia knew at the time, that they would not deploy on the then-current version of the Microsoft Phone 7 operating system. Nokia would wait for the next version, due in summer or autumn of 2011. That meant that Nokia's first Microsoft powered smartphones could not be sold until close to the end of the year at the very earliest. Nokia knew this in February.

Nokia also knew that the announcement would instantly damage Nokia's Symbian based smartphone sales, catastrophically. In some markets, some operators have pulled all Nokia Symbian phones from the shelves altogether. This was all predictable, I was not the only one saying this almost instantly after the announcement was made on February 11.

A 'smart' CEO would have waited until perhaps October, when the first new Microsoft Phone 7 powered Nokia phones were in prototype stage, to announce the Microsoft partnership. This way the current Nokia Symbian smartphone sales would have proceeded very 'normally' from February through October, and the damage would only have come few weeks or maybe months before the replacement phones were available. That is the textbook basic management standard way to do this. This is not rocket science.

WHY DID HE RUSH IT

Stephen Elop clearly rushed the announcement. I am not talking about the decision (which may also have been rushed, we don't know). But if the first phones come in Q4 or Q1, close to a year later, and he insists on announcing in February - knowing full well this will destroy the sales of his only cash cow - Nokia's smartphones counted for only about a third of Nokia's revenues but about 85% of profits at the time - then yes, this was a deliberate, contemplated and purposeful early announcement of something to happen much later.

Why? That has been on my mind for a while, and I have some hypotheses. I wasn't sure if I'd bother to blog about them but as I had to blog about the sudden Profit Warning, then this becomes quite relevant.

Because the only reason why Nokia's market share is in total crash-dive (as is Nokia's average sales prices and revenues and profits) is that timing of the Microsoft announcement. That Stephen Elop had to open his mouth on that fateful February day. If he had remained quiet about this, Nokia's market share would be on its normal trajectory.

How costly was that press conference. I am not talking about market cap or Nokia shareholder wealth (Nokia share prices have fallen about 45% since that February 11 event). No. I mean how much is Nokia voluntarily, willfully, now abandoning its most loyal, highest-paying smartphone customers - gifted to its rivals. This is gonna hurt.

I counted on February 16, in a blog of deep market share analysis, that the total value of the "Nokia Smartphone Customer Give-Away Bonanza" this year, at about 50 million abandoned smartphone unit sales would be worth 14.6 Billion dollars in annual revenues. How big is that? 50 million is bigger than Apple total smartphone sales of last year, and in dollar terms, 16.4 Billion is equivalent to the total annual sales of all of RIM ie all Blackberry sales globally. This is the size of Stephen Elop's timing decision. Or should I call it his timing error (You might say that, I could not possibly comment.)

But gosh. He could have waited to announce near the end of the year. Microsoft is a big company, it wouldn't have vanished in the interim. Steve Ballmer is Stephen Elop's former boss and buddy - and Microsoft desperately WANTED Nokia to join the Windows Phone 7 family. He would understand if Elop said, I'll keep this quiet until we're ready to show the first prototype phones... (not to mention, a good leverage tactic to ensure Microsoft stays on schedule..)

So. He could have waited. And Nokia would not be currently in desperate market share nose-dive so bad, it issued a Profit Warning! Nokia's handset unit has never made a loss. Not one quarter (Nokia the corporation has made losses, but never the handset unit). Now his decision causes the most profitable unit of Nokia to go into the red? And voluntarily hand over 50 million of Nokia's best, highest-paying premium customers to Apple, Samsung, Blackberry, HTC, SonyEricsson etc... The Elop timing (mistake) cost Nokia 14.6 Billion dollars this year. Few CEO's get the luxury of making errors of truly gargantuan size...

And note, those 50 million lost customers are gone forever, not just for this year. They are truly gifted to the rivals. How big is that? If you add all the smartphone sales of SonyEricsson last year, and add all the smartphones sold by HTC, and add all the smartphones sold by Motorola - combined. That is still less than what Stephen Elop's timing now cost Nokia. Think about that for a moment. The 14.6 Billion is nearly big enough to get you into the Fortune 500.. And if Elop had been quiet, that money and market share had stayed with Nokia. They'd be happily reporting strong smartphone sales and profits now, not vanishing customers and disappearing profits.

One last point on that. My calculation was on my 'best case' scenario for Nokia. It has since been proven too rosy, the reality is far worse for Nokia. So the real damage is maybe 60 million customers lost or more, and the lost revenues closer to 17 Billion dollars etc...  But I am not now going to try to re-calculate those numbers. We'll know soon enough this year as the facts are revealed in the quarterly results for the industry players.

WHY OH WHY? PAGING SHERLOCK HOLMES

Lets play detective. Lets try process of elimination to try to find the answer. Here are what I think are the most obvious alternate reasons why he rushed his decision. Lets assume he did not do it because he's an idiot. You might think that, I could not possibly comment.

So what possible cause? Could it be Microsoft? Is it possible that Microsoft somehow insisted? Not possible. Microsoft needed Nokia, Nokia did not need Microsoft. Microsoft had to pay Nokia billions just to join. Nokia was also closely wooed by Google to join the Android family, which would have given Elop a lot of leverage. He also had his Symbian OS which was showing far better competitiveness by February than the tremendously underwhelming Microsoft Phone 7 operating system (which is selling so badly that it is still even outsold by the obsolete Microsoft Windows Mobile system which has been discontinued). And Elop had the partnership with Intel to make the MeeGo operating system. So it was Microsoft who desperately needed Nokia to come to save the endangered Microsoft smartphone operating system venture, not the other way around.

If the story was leaked at some point, Nokia could always respond with 'no comment' until it was time to announce. A 'public secret' that Nokia would soon shift to Microsoft would have a far smaller effect on any current Symbian based Nokia sales than the February official announcement did.

Could it be the Investors and/or Wall Street? That does not explain February. The Nokia share price had stopped its downward trend and started to pick up a gradual upward direction. Stephen Elop was the new CEO and Nokia was under bad times, but starting to do a bit better. If the share price had been in free-fall then maybe. But no, nothing dramatic, on the contrary.

Could it be Jorma Ollila or the Board? Ollila definitely would see almost instantly that this announcement would damage Nokia's 2011 performance, quite severely. And he'd been under pressure by the investors to fix Nokia's profitability problems and share price - this would obviously hurt both and that was easily predictable to anyone who had worked in the mobile phone handset business for many years (or decades as in the case of Ollila). If anything, he would be cautioning to delay the announcement. To me it seems far more likely that Ollila and the Board were consulted on the Microsoft decision part, but Elop didn't tell them he'd announce it the next day. They knew the decision yes, but probably the timing of the announcement was a total surprise to the Board (to which Elop could say, it didn't occur to him to even mention it..)

Could it be his ego? Stephen Elop and the Noki-Soft Micro-Kia buzz did suck the oxygen out of the Mobile World Congress that was about to begin in Barcelona. He had a lot of face time with big execs of the industry and was a lot in the press. But that would happen in any case when the Microsoft deal would be announced. Elop was already a highly desired Nokia spokesperson, easily on TV and the press almost as much as he'd want - far more so than in his previous job as a senior exec at Microsoft in the shadow of Steve Ballmer and Bill Gates. I cannot see him making this massively expensive an (error) just to get more visibility than what his new Nokia top job was already providing.

Conspiracy Theory? What of the gossip that this is a cunning plan to plant Elop into Nokia, to deviously do all the damage he could, so Nokia's price would crash and he'd be able to sell Nokia to his former masters, Microsoft at a bargain price. Its a nice conspiracy theory yes. But first, the steps he did in 2010 didn't exactly sit in that pattern (remember, Nokia's share price was slightly growing by February). He could have sabotaged Nokia quite effectively in smaller steps along the way from many months earlier, rather than in this one, monsterously visible (error).

If there is a corporate take-over of Nokia by Microsoft in say the next 18 months or so, with a vastly discounted Nokia share price - then I am pretty sure there are FCC regulations that kick in, and the behavior of the 'ex Microsoft' new Nokia CEO would come under exceptional scrutiny no doubt. And any collusion in deliberately sabotaging the stock price of a publically traded company, I do believe there are insider trading laws about that, and all kinds of rules about stock price manipulation etc. And that explicitly the executive in charge of a corporation is prohibited from such actions.. But I am not a lawyer nor an investment banker haha..

WHY OH WHY, TELL ME WHY

What can it be then? I would welcome any theories by you, my readers. Honestly, please add your comments here, if I think its really valid, I'll add it to this blog story with reference to you. But yes, lets go to my thinking. Clearly Stephen Elop knew he didn't have to announce on February 11, and he could have waited until say October or November and save 'his' company billions of dollars. And that his rush to announce decimate Nokia's market share as well as its brand and share price. So he had to do it - deliberately - and - inspite of the costs involved.

He knew what he was doing, and something was so compelling that he felt he had to announce then and there, in February, rather than wait.

So my theory. Hang on, this is a bit convoluted. Lets first assume its reasonably fair that the replacement of Symbian was part of the deal to get Elop, that he negotiated as part of his management freedom to save Nokia, when he joined the company and negotiated with the Board about his terms. We know Anssi Vanjoki was also in those negotiations as a rival candidate for CEO and at least judging by all that Anssi has said and done in public, he would have insisted on keeping Symbian.

We also know that late in 2010 Elop did negotiate with the other operating system providers. RIM had said no. Google and Microsoft had wanted Nokia and both had negotiated at length from at least in December. We can guess that Nokia had also approached Apple who would have of course said no.

So its very clear that Elop has a 'mandate' to kill Symbian (and its fair to say, he also had the right to kill MeeGo - probably at his discretion - because one of his first decisions was to postpone the nearly-ready first MeeGo device - that caused MeeGo's then-boss to resign in protest. And then in early 2011 he killed the first MeeGo phone - causing the then-boss of MeeGo at Nokia to resign also in protest).

Remember what I wrote on February 14 about how Nokia got to that point, the hiring of Elop was not about Symbian or Microsoft, it was about Nokia profitability and share price (and to some degree its USA presence) not about Symbian. Symbian was one little detail in a far bigger picture for Nokia's Board at the time.

A NEW HOPE

So the signs to me are very clear, that Nokia's new CEO Stephen Elop has the right to kill Symbian. He dutifully proceeds to interview the candidates and makes his decision (or recommendation to the Board) to go with Microsoft. So far so good, the facts bear this out. But why the date of February 11? Why the outrageous rush. The decision was made the night before - and Elop famously called the CEO of Intel (co-developer of MeeGo and Nokia's 'strategic partner') only the night before to inform him that Nokia was abandoning Intel and MeeGo and going with Intel rival Microsoft instead. No wonder the Intel CEO was steamed after the call..

We know from the timing that Elop deliberately did not want to make the announcement earlier (and bring the decision earlier) so as to not damage the single best selling season in the world's biggest phone market and one of Nokia's best markets, China. The backlash in China now is indicating just how hard the Chinese feel they were duped into buying obsolete Symbian phones in late January and early February. That was a calculated move.

So what is so 'important' that he cannot wait until October? It cannot be the networks unit or Navteq, these were not significantly impacted by the timing or the announcement even. It cannot be the dumbphones unit either, while it is suffering from the decision, the effects are similar, but far more mild than the effects at the smartphones unit.

This helps narrow the likely answer. So if its smartphones, what is related to Feb 11? Selection of Microsoft (no real immediate Nokia impacts) means end of Symbian and end of MeeGo with related staff layoffs etc. A-ha..

I think Elop's own behavior gives clues also which is the relevant point here. He had campaigned actively to sabotage MeeGo from the very first actions he took at the Nokia helm. So he did not need February 11 to terminate MeeGo, he had been doing it already with the operating system delays, the handset delays, the first handset cancellation etc. Elop didn't need to so anthing on Feb 11, to end the Nokia involvement with MeeGo. No, it is likely the other one. Symbian.

He had to announce Feb 11, because of Symbian.

WHY SYMBIAN?

What had happened very recently that didn't exist when he was hired, that now was so critical to Elop? Remember, Elop was so convinced when he was hired last summer, that Symbian was so obsolete and useless, Elop was given permission to end the whole operating system. It was part of his employment contract. That is how deeply Elop believed last summer that Symbian was a critical factor preventing Nokia's return to success. Elop honestly believed so strongly that Symbian is a key barrier to Nokia's success - that Elop (not the Board) insisted Symbian's death must be put in writing into his contract.

And he made it his top priority. Stephen Elop had personally been engaged in at least two months of negotiations to pick Symbian's replacement. This is his first major action as boss (resulting in the layoffs of 7,000 Nokia employees - it is a very big act by the new incoming CEO). He was utterly committed to ending Symbian. And he authored that ridiculous error-filled memo 'Burning Platforms' to help set the Nokia operating systems on fire, and get his decision moving internally.

So, could he have waited till October. Of course. He could have fired those 7,000 people in October just as easily and written pretty prose about burning oil platforms at that time just as well. Now, why didn't he? What has changed between summer of 2010 and February 2011?

I think it is the Board's commitment to end Symbian...

I think Elop was afraid, if he didn't announce Microsoft on February 11, he would soon have to keep Symbian.

I think Stephen Elop placed his personal preference and choice ahead of the good management decision favorable to Nokia.

Why so? 

In the summer of 2010 when Elop was being headhunted for the CEO job, Nokia's latest Symbian version was honestly, accurately described and tested as clumsy and very poor in its touch-screen use. Symbian developers themselves were making apologies about how bad it was. Anssi Vanjoki took the extraordinary step of apologizing in public on Nokia's behalf about it. The smartphones using Symbian, most notoriously the then-current flagship, N97 - were not anywhere near the class of the iPhone or the Android phones. That is his first real experience of Symbian and based on which he decides Symbian has no place in Nokia's future. Remember, it is not necessarily the Nokia Board's view, they were also interviewing Anssi Vanjoki, a strong proponent of Symbian, its future evolution and the migration path to MeeGo.

Remember in the summer of 2010 the N8 was once again delayed. That was to be the first phone with the new Symbian S^3 operating system. So Elop didn't get to see the new Symbian in its real form yet, when Elop decided Symbian was to die.

The pundit and analyst consensus view in the summer of 2010 was that Symbian was hopelessly outdated, comprehensively outclassed, and it could not be salvaged and its time had come and gone. For anyone outside Nokia, coming in with 'fresh' views, it is easy to believe that, and to dismiss any Nokia defenses of Symbian as unreasonable nostalgia.

RETURN OF THE JEDI

Symbian S^3 finally shipped in Q4 on the N8 and then on three other smartphones by Christmas with more in January including the E7. And contrary to what almost all expected, Symbian S^3 is very competitive and user-friendly and close to being on par with Android (nothing is as good as Apple's iPhone obviously) and S^3 dramatically outperformed other touch-screen OS's like Blackberry and Microsoft Windows Mobile and Samsung's bada. There are very many tech reviews in Europe and Asia which rate the S^3 very highly and find it completely modern.

This was not supposed to happen. It was supposed to be so hopelessly outdated that it was impossible to get anything useful out of Symbian anymore. Yet it now in late December in early units and now in January and early February was winning customers over to it en masse. Nokia had several hit phones riding on S^3, so much so, that the N8 reversed Nokia's chronic decline in average sales prices - and turned Nokia's smartphone average sales price to growth in Q4. Driven by the new hit phone N8. Powered by that darn Symbian S^3. And coming up in Q1 were more hit phones to run that same S^3.

This is not conjecture. This is fact. Nokia's Symbian S^3 is a very competitive operating system and in the N8, according to many neutral reviewers, Nokia has its first-ever viable iPhone-rival in the iPhone clone form factor (but at a lower price). And then coming for Q1 was what seemed like Nokia's first iPhone killer (potentially) the 'superphone' in the E7.

What was disaster for Nokia smartphones when Elop was hired, in Q3, turns out a radical turn-around and a legitimate hit product - the N8 - as Nokia's then-flagship - running the suddenly competitive Symbian S^3 - to be followed up by an even more expensive new flagship, the E7, on that same S^3.

That is what happened. And no doubt, he saw the numbers from the January sales - led by awesome Nokia success in China (again, led by N8 and E7).

EMPIRE STRIKES BACK

I honestly do not know. It is honestly conjecture. This is mere hypothesis. But the only reason I can see, why Elop had to rush to announce Microsoft on February 11, was, that he was afraid if he didn't do it then, his 'permission' to kill Symbian would be evoked, and he'd have to live with a Nokia running on Symbian for his tenure, rather than his beloved Microsoft.

So why was he afraid? Maybe he knew that the Board had some members who were wavering. Maybe some internal numbers were leaking. Maybe Jorma Ollila had signalled that there might be a change in that issue.

Or maybe it is sheer smart CEO instinct. Maybe he saw the internal numbers (January sales from especially China) and knew if he has a full 3 months of that kind of sales success for Symbian across all markets, Symbian will be seen too much of a recovery, a kind of Phoenix bird, arising from the ashes, that even with his mandate, he could no longer kill Symbian, for the facts would prevent it. He'd face a management revolt...

I do believe it is Elop's fear of the sudden return of Symbian, which threatened his preferred choice of going to Microsoft, which forced Elop to make his (very costly) announcement on February 11, damn the torpedos, full speed ahead. It is quite possible he didn't discuss this with most of his team even (that he'd announce on Feb 11).

We may never know. We may find out other data in the future that totally invalidates this thesis. But this is how I see it now, June 2nd, thinking about what transpired and pondering on that 'why'. Why that date? Why did Elop announce on February 11, when his first Microsoft phones were scheudled for Q1 of 2012 (at the time). Why didn't he wait until October or November to announce. A decision that cost not millions but literally 14.6 Billion dollars this year alone. And destroyed 45% of Nokia's shareholder value.

Is this the act of a smart CEO or is this the act of a madman? Is Stephen Elop a lunatic? You may well think so, I can not possibly comment.

And that brings us to part 3 of this trilogy. If you thought this was weird, what about the CNBC interview our hero Stephen Elop gave yesterday? He said some strange things in that TV interview. So strange, that one might ask is Nokia CEO Stephen Elop delusional?

Comments

[Vikram]

Nokia was losing the the 50M smartphone sales that you are referring to regardless to Android and iPhone. Elop's Microsoft message had very little to do with that.

Lower priced Android smartphones work much better than S^3 on higher end Nokia models. The only thing that Nokia has an advantage on is the beautiful hardware but the software was, is, still behind.

Nokia was going to crater regardless of Elop's message. It's not something that he could have hid till late this year when making the decision to go to Microsoft because the whole company would be positioned to work on the platform and he would not be able to keep it secret.

There is no way when you make such a big switch that he would have been able to keep it secret for that long.

What killed Nokia was the inability to get Meego to Android/iPhone standard and the idea that S^3 is at all comparable to iPhone or even Android is wrong - S^3 is clunky and poorly functional. It may be better than other Symbian but that is not saying anything. This is not 2005 or 2006.

[virgil]

Another possibility (a longshot, yes, but still worth pondering): he says it's a war of platforms, maybe he truly believes that.
In this light, it's important to give a headstart to the platform. If Nokia developers commit to QT and Symbian, they'd feel tricked in the summer, and Nokia would be left with second-class applications from the Windows Phone Market that were not designed with Nokia hardware in mind.

Maybe Elop simply sacrificed the (current) business to give an early boost to the platform, and thus to increase the chances of future success. It's a longshot, and it's a questionable strategy - but it's a very real possibility, just like your hypothesis that he was panicked about Symbian's return
(also, your hypothesis is that he can't change his mind in the light of new data - in fact he is so fixated on his "strategy" that when he sees that there are good reasons to change it, he sabotages the company just to avoid the "good reasons to change". Possible, but if true, that's a very, very sad story for Nokia, and it means that they did a LOUSY, LOUSY job when hiring the CEO).

[Alighieri]

NOKIA AND MICROSOFT WANTS THE CHINESE MARKET. APPLE IS EXPENSIVE FOR CHINA FOR THE MIDDLE CLASS.

THIS IS TO HAVE A FUTURE VISION

THE PEOPLE OF CHINA´S AD INDUSTRY :TOM DOCTOROFF

by Daniel Gilroy on Thursday, June 2, 2011

Tom has lived and worked in Shanghai since 1998, previously heading up the Greater China office at one of the largest and most respected advertising agencies in the world, JWT. Now he is the agency’s CEO for the entire North Asia region covering countries such as Japan, China, Hong Kong, and Korea – not an easy task. His key clients include: Unilever, DeBeers, HSBC, InBev, Ford, Nokia and Microsoft and leading local enterprises such as Lenovo, COFCO, renren.com, China Unicom, Yili dairy and Anta shoes.
The “joys” of working with local companies, despite the operational and relationship management challenges, is that they are genuinely passionate about their brands. Their ambitions are huge. They also have a natural appreciation of the ins and outs of both the Chinese market and the Chinese consumer, leading bolder experimentation, assuming the stars are aligned in terms of clear objectives and open communication.

From an ad agency’s perspective, it’s very much high-risk, high-return. I’m as proud of the work we do for our local clients such as Anta or COFCO (China’s largest food conglomerate) as I am from some of our largest multinational companies such as Ford or Nokia or Microsoft.
There is a middle class in every city (click here to watch Tom educating Microsoft about the Chinese ‘middle class’). Once you realize that individuals earning 20,000 RMB per month in both Shanghai and Wuhan have more in common with each other than do denizens of specific cities in at different socio-economic strata, things become simpler.

Apple is a middle class hit…everywhere. Inland consumers who can afford, say, a Ford Focus are almost as sophisticated in terms of buying an auto as their coastal cousins, with the caveat that care must be taken to keep messages simpler for first-time, usually lower-tier, buyers.
That said, brand tiering is a fundamental challenge for brands as the expand geographically. Practically all of Procter & Gambles products have cheaper variants and they have pursued this strategy with a relative degree of success. In the Apple era, Nokia‘s non-smart phone range at the rural fringe is a powerful weapon to win “the next billion” mobile phone buyers.

Chinese revere scale and “big brands” — i.e. ones that extend across price tiers — reassure; to boot, any brand that does not boast both margin and scale will have a difficult time taming unwieldy distribution channels. However, we need to keep in mind that the “cheaper” products are targeted at less affluent consumers.

Extreme care must be taken to avoid equity adulteration of the premium variants as the brand is extended downward. This is a tricky minuet and some of the best marketers have fallen by upsetting a delicate price-value equation. As a rule, expensive brands should be used to build image and tactical promotion of inexpensive versions should take place closer to the point of purchase.

http://advertising.chinasmack.com/2011/t...

LOOK VIDEO.

http://research.microsoft.com/apps/video/dl.aspx?id=104377

SMELL A MANIPULATION.
PRICES TO DROP. BUY OVERSEAS. WHO? SOME OLD FOUNDER?MMMMMMMMMMMMMMMM.....

THE CHART, RSI(14)19.24,VERY TEMPTING!!

http://stockcharts.com/h-sc/ui?s=NOK&p=D&yr=0&mn=3&dy=0&id=p61829176931

GREETINGS,

A.M

[Charlie]

You say Balmer would have waited, but are you certain of that?

In Feb 2011, Balmer would have known that WP7 sales were less than spectacular, so getting Nokia to announce their 100% support for the WP7 platform would have been a positive endorsement of Microsoft technology when it needed it the most, even if it was verging on a suicidal move by Nokia. We know MS are bank rolling Nokia and with their cash reserves they can prop up Nokia until they start cranking out their WP7 devices. As a side benefit, they also kill off the threat posed by MeeGo and Qt.

Indeed, by getting Nokia to announce their old platform was dead they would have no option but to commit to WP7 wholeheartedly (I believe some have call this the burning of the boats analogy), strengthening the hand of Microsoft significantly. Basically, Microsoft would have the upper hand in February, and would have the deal signed in May but 9 months in the mobile phone business is a long time and the deal might not happen if they wait until October to announce/sign.

And by getting Nokia to commit to WP7 in Feb even if they won't produce a phone for a year, it keeps the tech blogs talking about WP7 while everyone waits for Nokia to pull the trigger on their device. Nokia going batshit crazy on their own platforms has ensured WP7 remains in the news, at a time when people couldn't care less about WP7. Look, we're talking about it now when we wouldn't be if Nokia were continuing to plough full steam ahead with Symbian and MeeGo. Without Nokia, WP7 would be a slowly fading memory.

But why would Nokia be so stupid to follow Microsoft's lead? I can easily imagine Balmer getting quite worked up about any procrastination from his buddy Elop in terms of delaying the announcement, maybe even throwing a few chairs around or doing a monkey impression. I can also see Elop continuing to be a weak-willed subordinate in awe of his former boss, with Elop naiively doing whatever he was asked to do without considering the full ramifications for Nokia.

Besides, after the leak of the burning platform memo the Feb 11 announcement was pretty much a done deal - much of the damage had already been done by that memo. As a CEO you don't publicly describe your main cash cow as (effectively) "crap" and then get away with it - just ask Gerald Ratner.

For what it's worth, I also believe that Symbian was on the up (daily downloads from Ovi Store were growing at a very respectable rate, great devices, just needed a new lick of paint in the UI department) and the decision to ditch it in February, along with Nokias first sane and well thought out long-term software strategy of Symbian/MeeGo/Qt, will prove to be a very costly mistake for the current 130,000 employees of Nokia. But not for Microsoft, who will walk away, largely unscathed.

[Mark]

Is it possible the announcement was made in February because Nokia is fundamentally honest? Perhaps it didn't want a backlash from customers (and developers etc) who felt they'd been duped into buying/supporting an obsolescent OS. Now they have a promise of support until 2016 - which is more than customers with the latest Windows Phone, Android or Apple OS have.

[writing thesis]

thanks for the post) very interesting)))

[KO]

@Mark: a (smart)phone in the hand is worth a lot more than a promise of two in the bush

[Charlie]

Read the article:

http://www.engadget.com/2011/06/02/the-oh-sh_t-moment-that-nokia-decided-to-abandon-meego/

it adds some flavour to when/how Elop sealed the deal (assuming anything he says can be believed, of course).

As for MeeGo mentioned in the article, isn't it odd how Nokia actually planned to release a device based on Maemo6 before MeeGo, and that this Maemo6 device (which is meant to be _very_ good, both hardware and software) has been ready for months (certainly since late 2010) yet Nokia exec now constantly stall on it's release. Why would that be? Maybe because not released the Maemo device allow Elop to spin stories about MeeGo (getting into bed with Intel and combining with Moblin was Nokias biggest mistake there - it's just resulted in MASSIVE delays with little real upside so far).

[Victor Szulc]

First of all: Announcing the switch as early as it happened, was simply the right thing to do, in regards to develeopers, partners and even customers. That way they all have a long transition period, and won't waste ressources on an OS that only has a short-term future.

Secondly, you seem to be looking for a conspiracy that never really happened. Elop didn't need to rush with the announcement or somehow conspire to kill Symbian or Meego. The two were uncompetitive and walking dead already. Nokia managment and board KNEW this. Even Kai Oistamo, who used to be a cheerleader for Meego, knew that Meego simply wasn't able to compete with Apple and Android.

(Nokia was set to release 3 Meego handsets between now and 2014. THREE!)

Finally, you seem to be confusing the symptoms of Nokias woes with the consequences of their plan to save the company.

Nokias falling marketshare isn't BECAUSE of the Feb 11. announcement, and it would have happened regardless. It's dropping because of Symbian being obsolete and uncompetitive, and people are choosing Apple and Android phones because they're more modern and user-friendly.

Most customers don't realize that Nokia is changing it's OS, and those that do are smartphone enthusiasts who don't necessarily care about what happens in two years, since they change handsets every two years anyways.

[arild]

Hmmm... you have some interesting ideas in this post but I think that it really bases itself on a revision of recent history, which I will get back to. However, I think we can all agree that Elop did a major mistake in overlooking the Osborne Factor (http://en.wikipedia.org/wiki/Osborne_Effect) which he should really know about if he has done his tech company CEO home work. Perhaps one way out of this quandary could have been to present Windows Phone as a replacement of Meego (only a single phone planned for it at that point, no biggie to lose a few sales), then kill of Symbian as the Nokia Windows Phone price point fell. But, it is easy to discuss this afterwards...

However, the idea that Symbian is now good enough to compete with Android and iPhone is really extraordinary, and more based on personal emotions than reality I think. When we talk about competitiveness for mobile phone operating systems we have at least 3 levels: The end user experience, the developer experience and the manufacturer experience (which is Nokia and Elops point of view). I am here ignoring a fourth one, the telco experience, which I do not know much about.

The first one is very personal of course, one person's hero is another person's zero. However, having tried out the N8 myself I have to say it felt nowhere as smooth as Android or iPhone (and yes, I have had the Nokia 9210, E90 and E71, I am not a Nokia hater, but I do admit to never wanting to buy an iPhone, so there's my bias :-) ). And most phone buyers use their own 3 minute experience in the shop and friends recommendations to decide which phone to buy, not reviews in tech blogs or magazines. So to now claim that Symbian is on a level with iPhone is really a skewed view that jars with most people's experience. At the same time any references to improvements in (now dead) OVI and Symbian usability are always highlighting small, incremental changes when the competition is jumping ahead in leaps and bounds. Thus a slight improvement in scrolling in Symbian is mentioned again and again by people sympathetic to Symbian/Nokia when the competition was there years ago and are now busy developing new features.

As for the developer experience (not the financial side!), having written one tiny app for Symbian and tried to do one for Maemo (later Meego of course) and now trying out Android I have to say: no contests. I was in business in less than 10 minutes with Android, whereas Maemo took me several hours to get a virtual machine downloaded, then updated (why was it not the latest version?) and it then ran rather slowly and was very flaky, so I just walked away in the end. Symbian was years ago, but as far as I gather it is still awkward to work with (although QT helps). And just to stress, I am not discussing which is the "best" language to program in, I am talking about that crucial first experience when smaller companies/hobby programmers (who often provide a lot of small useful apps that add to a platform's attractiveness and also improves the all important "app store numbers") decide to check out a platform.

Finally, when it comes manufacturer experience there are two overriding issues of interest: How long does it take to update the OS to add new features (to keep it competetive), and how easy is it maintain (which is a cost centre). Both these points relate to the clarity and quality of the code written. It is clear from a number of articles (for instance http://www.theregister.co.uk/2011/03/10/nokia_ui_saga/ ) that Symbian was a lost cause here. The fact that they have just about managed to get it to feel usable in N8 does not mean it isn't a total mess underneath the surface in programming terms. And Elop is a software guy, he would understand that the more you get dragged into and committed to a cruddy piece of software, the more you pay later. I think the most telling piece of information which shows that Nokia really does not understand software (hence better to get it from the outside) is the fact that 5,000 people were apparently working on the Symbian "User Expereince". This is not just silly, it is insane. You can only write good software in small teams, Andy Rubin has stated that Android has much less programmers than what people expect.

So, I agree that whereas Elop did a big mistake in announcing the Windows Phone conversion in the way and at the time he did, killing Symbian is not. Tomi, your analysis might be right, Elop chose to do it so to kill off Symbian without others being able to opose him. But given the problems of Symbian, this is not a mistake, the mistake was to wait so long before decisively moving on!

[arild]

Perhaps worth revising this article in view of this in-depth Bloomberg article: http://www.businessweek.com/magazine/content/11_24/b4232056703101.htm

[khim]

This announcement most likely saved skin of both Ballmer (who faced serious crysis with WP7 fiasco - perhaps big enough crisis to lose his job) and Elop (who faced serious crisis in the likely case where WP7 will be discarded like a Kin).

Not sure what exactly happened but obviously at some point Elop was forced to do such announce to save his own skin... Nokia fate be damned.

Actually that's documented behavior of Microsoft: http://techrights.org/2010/09/26/independent-players-vs-cabal/

I'm not sure how exactly Microsoft forced Elop to abandon Nokia interest and do a suicide move which is mostly in Microsoft's interest, but... why are surprised? This is typical fate of the companies "helped" by Microsoft. Be it WordPerfect Corporation, SGI or Novel the result is the same: oblivion.

It does not mean it's impossible to succeed with Microsoft's help (think Intel), but the odds are so overwhenmingly in favor of death... I'm surprised Nokia shareholders ever interviewed Elop, let alone accepted him as CEO. But hey, it's their's money, not mine.

[cycnus]

Tomi,

As always... NICE article.

But I really wondering what took nokia so long for WP7 devices. Nokia didn't allowed to chose the CPU/GPU (must be qualcom), can't change it's home screen.... ALL in all, it's an OEM solution. Nokia only allowed to chose the casing material (plastic, aluminum, stainless) and color (red, green, blue, yellow, pink, purple, black). So, what's taking them so long???

I also want to put something here what I always said to others about Nokia-MS announcement.
Nokia don't need MS to be number one. It has been number one for 12 years, leaving MS as a footnote of history. On the otherhand, MS without Nokia is nothing.

[cycnus]

I think the shareholder of Nokia should SUE their CEO.
It would be really interesting.

[Louis]

Tomi --- Your conclusion seems like the right one, but there's an alternative reasoning, which is this: Whether or not the Symbian phones of late 2010 were better than the previous ones, Elop's general read on the broader situation looks broadly correct: Symbian was unloved by important App developers in the US, had a history of being late and buggy, and didn't show much sign of that chaning; on the other hand, MeeGo wasn't really going anywhere, if the BusinessWeek article is to be believed. So a drastic move has to be made. (We can debate if there's any point, or whether the market's already been "disrupted".)

Here's where S. Elop not being S. Jobs starts to matter. Elop probably believed---I think correctly---that Nokia's internal structure is based on diffusion of responsibility and inertia. As a new guy, Elop may not have had the free hand to wind down Symbian internally while ramping up WP7 for a Fall announcement. But if he doesn't do that, it's also likely he's forced into a *three* platform story, with all the baggage it carries. So, essentially, Elop decided to just make the decision and go public as a way of giving his new strategy any shot at all.

(This said, I think the discussion's largely academic, but thanks for the interesting post.)

[blouechrism]

There are two things that are the key things for me - One is that it's increasingly clear that MeeGo is not worth worrying about - The handset pre-view from Sanfransisco showed an OS that is woefully behind in development and supports the assertion in the bloomberg article that they may get only 3 devices out by 2014 running MeeGo.
As for symbian, there has been the suggestion from Elop (in last nights D9 talk, and at McMaster university) that Symbian developers had issues with Symbian and how long it took to change things in Symbian that ultimatly tipped the balance.

As for the timing - reading the bbloomberg article, it seems arbitary - He knew there was an investor conference on Feb 11 and wanted to announce his strategy then. He could have picked any data but arbitarily decided on then. However, you are right, he must have known the hit this would have on Symbian. Perhaps it would have been more muted had the buring platform memo not been leaked, but ultimatly, you either make it big or you don't. This announcement shook the mobile world and everyone now is in anticipation of the first Nokia Windows Phones. The cost is that because the message (by design or accident) was "Symbian is dead", not "We'll do this but Symbian will be around until 2016 still" (Rafe Blandford would disagree). He made it big, and although every Symbian/Qt guy they could get gave interviews for nokia conversations that week saying we are still here and not dead, the damage was done.

Windows announced Windows 8 yesterday, a year at least it sounds like before it's released. However, they are getting people excited, and devlopers will download the SDK and build apps etc. Yes, they could have left it until later in the year, and so could nokia, but perhaps the thought was to prepare the company, investors and customers for what they do next year, they would just go for it. Sadly, customer and investors didn't like the idea, and Symbian 3 is better than S60 but still behind. A more interesting thing right now is What's so wrong with Symbian that Anna has been pushed back again?

[HCE]

I've said this before on this blog - but I think it bears repeating. If he *had* to announce something, why not announce that Nokia would be using Windows Phone for its US phones! Say that everything going as per schedule with the other platforms and make the *big* announcement when you have some phones to announce as well! Given that Nokia has a tiny presence in the US market, the loss of market share there will be of no consequence and you have less of an impact on the rest of the world.

- HCE

[Markus]

I'm laughing at someone saying Symbian 3 was competive with Android/IOS. It sold in Q4/Q1 to old Nokia fans. It was never going to sell in Q2-Q4. This was delusions of OPK time. The current hardware and software is awfully outdated for modern smartphones. That´s it.

He had to announce it in FEB for

a) To convince dev support for Windows Phone
b) To get a bunch of people sacked at the end of the year.
c) This is a major strategy change. You can't hold this off for 6 months from investors

[KPO'M]

I agree with Markus here. Elop was left between a rock and a hard place. The BusinessWeek article, while obviously sympathetic to Elop, goes into more detail about his thought process. Google wasn't budging, and the Symbian team was a year late and billions of dollars short with every promised update. Sure S^3 was usable, but it was a great OS for early 2009, and it had no future in tablets.

With Microsoft wavering with WP7, Nokia couldn't afford to wait until October. Symbian's "natural trajectory" was still downward, and Nokia still would have faced the "what's next" pressure. MS would have a lot of analysts wondering why they cling to an OS with 1% market share. IOW, sooner or later one of the two companies would have had to make an announcement. Elop took a calculated risk that he could avoid the Osborne effect. I think his mistake was not reiterating support for updates. If Symbian Anna were ready then, it would have made it easier. Perhaps he should have kept QT going so as not to leave Symbian devs high and dry, but this would undermine WP7 app development.

[pk de cville]

"It has been number one for 12 years, leaving MS as a footnote of history. On the otherhand, MS without Nokia is nothing."

Totally Agree. Ballmer's genius seems to be in the area of hard ball negotiations often driving his 'partners' over the cliff. He did it to Yahoo, even without an agreement! (Just media reports.)

In this case, I'd guess Balmer may have psyched his former subordinate out. The announcement's timing was all to the benefit of Msft - making iPhone 7 into a "real contender" over night, but absolutely demolishing Nokia in the same stroke. A genuine two for one play. Balmer may be the biggest genius negotiator of this era. Maybe it wasn't his dominance; the deal may have been done on a whole other (opaque) basis.