Bloodbath update: Smartphone market at end of June (before the Q2 results)

Lets do some Bloodbath news. How is the smartphone market doing mid-way in this Year 2 of Smartphones, the Electric Boogaloo? The weather report for the summer is sunny for some, shady for others and stormy for some. Lets start with the two who already reported.

RIM IN TURMOIL

Blackberry maker RIM reported Q2 results first. As we saw on his blog, that was the first quarter for ages that RIM reported a real units decline in smartphone sales (not just a decline in market share, which RIM had reported for several quarters while still growing total unit sales). RIM sales hit 13.3 million units, down from 14.5 million in the previous quarter. The market share for RIM is down to 13%. Now the staff at RIM is panicking, seeing what happens over at Nokia, and feeling that the management is not focusing on the right problems. An open letter by an anonymous employee has attracted a lot of attention by the industry. Meanwhile there is now speculation if and when RIM will fall behind HTC in total smartphone sales (it is taken as a given that Samsung has now passed RIM already). Well, we have the actual reported Q2 numbers from HTC, so lets see.

HTC GROWING STEADILY

So, the biggest Android manufacturer, HTC keeps growing. They just reported Q2 numbers at 11.0 million smartphones sold. That is a strong growth of 13% from Q1 when they sold 9.7 million smartphones. HTC has picked up another market share point and now their market share in Q2 is 11%. But clearly they did not catch up to RIM yet. If these trends hold, they would be neck-to-neck by Q3 and HTC should pass RIM by Q4. That is assuming that RIM cannot turn around their sales during the autumn sales (going-to-school quarter in Q3, youth sales of Blackberries, etc)

HTC gives us an very interesting glimpse into their split of handsets by operating system. They said that in Q1 HTC sold 9.3 million Android-based smartphones (ie smartphones of the HTC 'Sense' series). Why is that interesting? Because the total HTC smartphone shipments of Q1 were 9.7 million. So 'all other' smartphone platforms - Windows Mobile and Microsoft Windows Phone 7 - combined - sold for Microsoft's strongest partner, HTC - a total of 400,000 units. Thats nothing! So smartphones made by HTC, sold by HTC and running Microsoft's two operating systems, sell so poorly that HTC's own Android based phones outsell them by 23 to 1 - this is exactly why HTC had such a disappointing quarter in Q1, and why they said they will shift their emphasis away from both Microsoft operating systems to Android. 

And to show they know how to do cool funky future tech phones, HTC is now showing their newest model that has 3D display and dual cameras for stereoscopy 3D capture. Similar to what Sharp first did out of Japan and LG has been starting to sell this Spring. So HTC is the third smartphone maker with 3D displays and 3D cameras.

APPLE RUMORS

Apple didn't give us a new iPhone 5 for June. Its delay is rumored to be because Apple designed the iPhone 5 to have a virtual SIM card, and the operators/carriers were having none of that. So Apple redesigned the iPhone 5 to have a micro SIM card and this redesign caused the delay to around September. Its all rumors, but we do know that Apple submitted to ETSI the standardizing body for such things in mobile telecoms as SIM cards, a new specification micro SIM in May for which Apple got Orange of the UK to support it (necessary to get the specification to be considered).

We have no official word when the iPhone 5 (or whatever the next iPhone will be called) will be released but Apple analysts expect late September launch to help boost Q3 sales, then offer strong iPhone sales for a strong Christmas quarter. There is growing speculation that Apple will split the iPhone into two products, a premium iPhone like the ones we have had, that is a showcase of Apple excellence at roughly the 600 dollar unsubsidised price range; and a cheaper iPhone 'Nano' with smaller form factor and more modest tech specs, to sell at roughly half the price, for the entry level model and intended in particular to help Apple sell in the Emerging World markets. (Regular readers remember I have been advocating Apple to do exactly that for more than a year now, its high time!). Those who estimate iPhone sales seem to be converging on a Q2 sales level of about 16-17 million iPhone units, thus about 16%-17% market share if that happens. We will know later in July when Apple reports.

SAMSUNG STRONG

So we then hear from the raging bull of the smartphone market, Samsung. Samsung seems to be giving the industry nothing but news of big successes. The latest is that their newest model of the Galaxy, the Galaxy S2, has set a Samsung record for fastest sales of a new Samsung model ever. The previous Samsung record was with the Galaxy S which sold 3 million in 85 days. Samsung is now performing better than the best Nokia could do who did 4 million with the Nokia N8 in Q4 of last year (3 million in 55 days is the speed of about 4.5 million over 3 months). But the grand master is still Apple, the iPhone 4 sold 3 million units in only 30 days. But Samsung is catching up and growing by leaps and bounds. Oh, and as usual, the newest phones don't launch in the USA, Samsung's Galaxy S2 is coming to American shores... 'later' this year (maybe).

Meanwhile I am still hunting for those elusive bada shipment numbers. My projections say they should have passed 10 million bada devices sold already, but Samsung has not released the number. Is bada not selling as well as we expect, or are Samsung waiting to surprise us with a massive number at their next quarterly results later in July. We have to see.

And while I projected that Apple has grown past Nokia for Q2, Nomura analysts have calculated that Samsung has passed Nokia in Q2. It suggests its a close three-way race who is first, second and third. My gut says Apple is still ahead of Samsung in Q2, but yes, Nokia may well have fallen behind both. Then the big race is for Q3 and as Samsung is in a strong growth trajectory, it is up to Apple, can they release the iPhone 5 in the final week of Q3 to jump their sales. It will be interesting times.

NOKIA KILLS MEEGO AGAIN, AND AGAIN, AND AGAIN

So, Nokia had its biggest buzz and positive press reaction to the MeeGo powered N9 smartphone that Nokia had seen for years. It was a massive positive story for Nokia. Even the stock market loved the story and Nokia's share price got a jump. MeeGo was slick and sexy, the N9 was a hot phone with excellent specs. Any CEO who loves his company would celebrate and cherish the moment and do his best to promote and prolong that success. But not Stephen Elop. No. What did he do. He immediately moved to quash any possible good will that the N9 and MeeGo were generating. He first 'revealed' the first look of a Microsoft Windows Phone 7 based phone - which looked to most analysts identical to the N9 except for one mysterious button. And he did it in a most clumsy way telling a packed audience "don't show these pictures" while at least two news outlets were videotaping his presentation. The stock market rewarded Stephen Elop's new Microsoft Phone 7 based Nokia phone preview with a share market decline. He stole all the thunder and bizarrely for a CEO, he actually stiffled a stock market rally. What is wrong with this guy Elop? Who does he work for? He certainly doesn't seem to be working for Nokia.

If thats not enough to help kill Nokia N9 and MeeGo, Elop went in public to say that "even if the N9 and MeeGo were a success, there will be no more MeeGo devices". What? Even if this totally new Nokia product is a market success, the CEO will kill it. Thats a very special kind of love, isn't that. Its not euthanasia, which one might argue, Stephen Elop was doing for Symbian. (Euthanasia is a mercy killing of someone who is already dying). No, its pure murder what Elop is now committing to MeeGo.

And to be absolutely sure, that MeeGo has zero chance of even a 'fair fight' - Nokia has since kindly announced to us which markets will get MeeGo. The N9 will not be launched in.. the UK, Germany, France, Italy, Spain and the Netherlands (and several other major Nokia markets). Thats the 'big six' Western European markers where most of European smartphones are sold! Not a one of them gets to play with MeeGo, none of them get to buy the N9 ! This is Nokia's way of killing Me softly with Microsoft, killing Me softly, with Microsoft, killing Me softly, thats Elop! And by weird coincidence, have a guess what are the six European countries that will be the launch markets for the new Microsoft WP7 phones? Yes, the UK, Germany, France, ITaly, Spain and the Netherlands! Is Elop really this afraid of MeeGo? He has to sterilize Western Europe against MeeGo, keep it pure, so its not 'polluted' by the better OS that Nokia's own designers created, so that Europe would be willing to buy Microsoft's OS. Who is Elop working for? This is not in Nokia's interest, this is a CEO who is working for the best interests of a rival corporation! Elop is not looking after Nokia's best interests, he is looking after Microsoft's best interests.

UPDATE only 2 hours later - as I was posting this blog, news emerged that Nokia has cut its prices across the whole range of its smartphones, as high as 15% at the top end - the top end - of its smartphones. Nokia is already at about zero profit or making a loss in Q2 which ended June 30. Now for the start of July we hear that Nokia cuts the prices of its biggest source of any remaining profits - top end smartphones by a sixth! That is massive. It means Nokia is STARTING the race into Q3 with far deeper losses already. The reseller boycott is really hurting Nokia and now its obsitnacne to not even release the much-loved N9 into those markets that refuse to sell Symbian only shows that the CEO prefers to damage Nokia than let a Nokia-built hit product help rescue the company. Stephen Elop is destroying Nokia as we speak. This price cut across the board now by Stephen Elop is EXACTLY what got Olli-Pekka Kallasvuo fired last summer! What madness in Nokia management and the Board of Directors allowed this Microsoft Muppet to REPEAT a FAILURE that almost destroyed Nokia just LAST YEAR... Duh? What part am I not understanding in this?

MOTO, SE - NOTHING NEW ON THE WESTERN FRONT

In the Motorola and SonyEricsson corner, I find nothing remarkable to report for now. We await their quarterly results.

HUAWEI, ZTE CHINA GROWING

But in the Asian corner, Huawei the Chinese telecoms manufacturer better known for its infrastructure gains, is reporting strong growth of its smarpthones. They say they are on pace to do 12 million smartphones sales this year, which would put them at about 3 million level for Q2. They would soon be nipping on the heels of say a Motorola.

And Chinese rival ZTE more known for handsets but also selling infrastructure is not to be left behind. They just celebrated their 2 millionth Blade smatphone, a touch screen Android device.

I'd like to hear how the LePhone is doing from Lenovo. After a noisy launch the smartphone whose name is translated as 'Happy Phone' in Chinese, is not really giving Lenovo the sales success we were expecting. It seems its not that easy for PC makers to transition into handset makers haha...

HP WANTS TO LICENSE PALM WEB OS

So in the PC corner, HP is still showing nothing significant out of its Palm acquisition. A couple of handsets have been announced, nothing spectacular happenin' anywhere. Now we hear from HP that they are eager to licence the Palm WebOS to third party manufacturers. I can see this would be to HP's interest yes, to build a bigger ecosystem etc. But I can't see the benefit for any handset maker to go with this miniscule and unproven OS. If you want to go wtih a manufacturer who also makes their own phones, then going with bada will get you instantly what, a 10x bigger market and app store and installed base. And if you want to go with a new OS that is not controlled by a handset maker, then go with Intel and MeeGo, where three dozen device manufacturers are already signed up and half a dozen devices are already available (mostly tablet PCs but obviously Nokia will have two MeeGo devices this year).

ANDROID MASSIVE

So we hear the latest numbers from Google and in June Android passed the 500,000 daily activations level. Thats an annual level of 183 million, and on a quarterly level it means that at the end of June Android was activating at the level of 46 million devices per quarter. That is not Android's actual performance in Q2 for two reasons - first, it includes the tablets, so smarpthones will probably be a million or two below that - and secondly, its the performance at the end of the quarter, when it was far less at the beginning of the quarter. Nonetheless, Android is clearly the biggest OS out there and still growing very strongly.

SYMBIAN BOYCOTT

Then in the Symbian corner, we hear that the sales channel is boycotting all Symbian phones. In many stores the carriers have pulled all Nokia phones off the shelves. Nokia is releasing several cool hot new phones and most carriers are actively ignoring these, because they are on the Symbian OS. Stephen Elop initially said that Nokia would commit to 150 million more Symbian phones, which meant Symbian sales would end in the summer of 2012. Now Elop is talking of far extending Symbian's 'life' (for what that is) and is talking of Nokia supporting Symbian to year 2016. Its far too little, Mr Elop, and far too late. You killed Symbian on February 11 and you cannot bring it back alive.

MICROSOFT ALSO IN BOYCOTT

The more interesting twist to the tale is the sudden Microsoft boycott. This was already reported by severeal US newspaper who surveyed US resellers (Microsoft's best market) and found that there were no Microsoft phones, or the only phone on exhibit was a broken phone; and that sales staff were very actively steering customers who asked for Microsoft phones, to buy Android. Why is this? Its like I said when we learned of Microsoft buying Skype - this is the death-nail to Microsoft Windows Phone 7. The mobile operators/carriers hate Skype with a passion. Its their number 1 hated service and brand. The carriers witnessed how utterly Skype devastated the traffic, revenues and profits of the fixed landline cousins in telecoms operators/carriers. The wireless carriers/mobile operators will not allow Skype to come and mess up their nice little voice-calls based playground. And immediately after Microsoft bought Skype, the carriers placed Microsoft based smartphones in boycott. I predict that there will be no subsidised Microsoft WP7 based phones ever. The carriers will never support Microsoft becasue Microsoft bought Skype. And thus, the smartphone operating system which is most guaranteed to fail - is Windows Phone 7. It is destined to fail not because the OS is good or bad, not because the ecosystem is good or bad, not because the handsets are good or bad - its because the carriers hate Skype.

PS look at the biggest (and longest serving) Microsoft smartphone manufacturer, HTC, is doing. They are shifting their Microsoft-based phone manufacturing away, and onto... Android. This is the biggest Microsoft partner, actively shifting away from Microsoft to Android.

Even the news from Microsoft's home market is dismal. The latest Nielsen survey tells us that even now, a year after Microsoft Windows Phone was launched, it lags the older sibling from Microsoft, Windows Mobile by a ratio of 9 to 1! Even that 'obsolete' Symbian is in twice as many pockets in America as Microsoft's mighty Windows Phone, according to Nielsen. Even the near-invisible HP owned new Palm Web OS has achieved twice the penetration than Windows Phone, and Microsoft's miracle OS can only match that of the older Palm OS, at one percent penetration - in the USA, Microsoft's best market! That is evidence that the market is truly rejecting your offering on a massive scale. In new phone sales, Nielsen says exactly the same, Microsoft, for all its amazing branding and marketing, has managed in Q2 to sell... 1% of all new US cellphones. That is miserable.

MEEGO

And Intel, after Nokia pulled away from MeeGo partnership, is working double-time to ensure MeeGo is viable and will survive. They've had several netbooks released on the MeeGo operating system and have heard from reassured partners that they will remain with MeeGo. There are over 3 dozen manufacturers committed to MeeGo (mostly car makers, home electronics and PC makers) but also at least 4 handset makers - ZTE, Huawei, LG and Panasonic. And probably the most significant partner in the MeeGo ecosystem is China Mobile, the world's biggest mobile operator/carrier which alone is about twice as big as all USA based mobile phone operators/carriers added together. So when China Mobile says their preferred smartphone OS is MeeGo, they can very well dictate that to be the OS on all smartphones that China Mobile would support in its marketing and its stores and its campaigns. Still, the buzz around the N9 and the very warm reception that MeeGo got, has come as a very welcome boost to the rough year that MeeGo is having. MeeGo is the youngest and newest OS for a good reason - it can therefore also be the best. But is it coming too late. Time will tell. If Nokia had bothered to support MeeGo, it would instantly be one of the big platforms, especially after Nokia built the migration path for the 400,000 strong Symbian developer community to develop apps for both Symbian and MeeGo using the Qt tool.

JAPAN

I want to also include a few highlights from a couple of national markets. After Stephen Elop killed Symbian on February 11, Japan's NTT DoCoMo, which has been the biggest and most loyal partner to support Nokia, immediately moved away decisively from Symbian and onto.. Android of course. We hear now that for Q2 in Japan, Android has passed past the iPhone. Same phenomenon as we saw in the USA a year ago. It is inevitable (that Android will grow past the iPhone) because of Android's 'army' of suppliers. And consider how crazy the Symbian death was - this was a closed market, where several million Symbian handsets were sold every quarter regularly as clockwork by makers such as Sharp and Fujitsu etc. Now they are shifting to Android.

INDIA

In the India market, Voice & Data the market analysts calculated that the total India handset market (not smartphones but all phones) grew 15% in the past year. They measure by revenue not by unit sales but the findings are still indicative of what is happening in the Emerging World markets. Voice & Data report that Nokia sales are flat, ie Nokia was not able to grow where the industry grew (so in effect, Nokia has witnessed a one sixth loss in market share in one year). Nokia which has owned as high as 70% of India's market share is now down to 39%. Samsung is gaining, and grew by 22% to reach a market share of 17%. Domestic Indian brand Micromax is in third place, and grew 43% in the past year to 7% market share. And the astonishing performer in India is Blackberry where all other bigger rivals mostly sell dumbphones, Blackberries are very expensive smartphones, yet grabbed 6% of the market in India. But please remember, this measurement is not by unit sales, it is by dollar sales revenues, so of course a few unit sales of expensive Blackberries will count the same as many sales of cheap Micromax 'dumbphones'. Nonetheless, by revenues, RIM is India's fourth-best-selling handset. Quite an achievement in the world's second largest handset market.

USA

Lets get back to the Nielsen Q2 study of the US domestic market. They found that Q2 was the first quarter where more smartphones were sold than dumbphones, and for the installed base in the USA, already 38% of all phones in use were smartphones. These are trends that follow leading Western European countries, which themselves follow leading global countries in smartphone adoption like Singapore, UAE and Saudi Arabia. Those three countries have passed the point where more than 3 out of every 4 phones sold is a smartphone already..

But yes, in America.. Nielsen reports that Android has 38% of the US domestic smartphone market. The iPhone is ranked number 2 at 27%. Blackberries are at 21% - but remember, Nielsen measures domestic users not business users so Blackberry's total penetration rate is higher than this. Windows Mobile the old and defunct Microsoft OS has 9%. Symbian has 2%, HP's WebOS (the new Palm OS) has 2% and the old Palm OS has 1%. Oh, and Microsoft's new Windows Phone OS has .. 1%.

THATS IT FOR NOW

We await the results of the most unpredictable quarter ever in smartphones, as Nokia crashes and burns after Stephen Elop set his company's strong platforms on fire. In Q1 we only got a partial impact of that fire, now we have the first full results. Will Nokia land at 14% or 13% or 12% market share in Q2? Who knows. It was 29% in Q4, the last full quarter before Stephen Elop made his big announcement to kill Symbian and abandon MeeGo,

What of Apple. The iPhone had its China effect in Q1 but now for the first time in years, there is no new iPhone for the end of June. But the iPhone had spread from AT&T to Verizon, and Apple released the White iPhone (said to be very popular in China for example). How did Apple do in Q2. We have to wait to see. And we know Android grew strong but how did the Android members fare? We heard from HTC but how about Samsung, LG, SonyEricsson and Motorola. We'll know during July. And yes, Microsoft? What kind of numbers do we hear from Redmond. Will they even dare to release the Windows Phone sales numbers or will they attempt to hide the numbers. This will be an interesting month to report whats happenin' in the smartphones space. Stay tuned.

Comments

[Nelson]

The sterilization imposed to MeeGo is absolutely unbelievable, Selop is not even giving it a fair chance. How can the Nokia board neglect this? And how could Jorma Ollila have said that the software dominance in mobile has shift to the States when we look at the great job the Finnish engineers did with MeeGo? Oh by the way Reuters announced that Nokia has cut prices in smartphones by about 15%... ouch! That boycott must be hurting ;)

[janne]

http://www.comscore.com/Press_Events/Press_Releases/2011/6/comScore_Introduces_Device_Essentials

Nokia is in the 'other' category (Share of Non-Computer Device Traffic for Selected Countries in May 2011). There's huge amount of work to do to counter iOS and Android dominance. Those OS's were created the web in mind.

[Matthew Artero]

Wow, Stephen Elop's statement that even a successful Meego will be discontinued is in direct contradiction to what he said his number one priority is on the supposedly leaked video in which Elop stated the first and most critical priority of Nokia is to sustain its existing business/sales.

I don't see that a company with a schizophrenic at the helm can generate any confidence from the stock market, retail market, or this eco-system that Elop claims is necessary to succeed. Now its past delusional, we also have a split personality to contend with.

Nokia is looking like the USA civil war where the USA President Abraham Lincoln said a house divided cannot stand and fought to keep the country unified. Except in Nokia’s case the President is from a southern state and wants the break up. It’s a belief in “divided we stand, united we fall” rather than “united we stand, divided we fall”.

Not only has Elop divided Nokia internally, he has also divided Nokia from its customers and needed partners.

[Matthew Artero]

Perhaps Elop's business model was the breakup of the Soviet Union.

[Matthew Artero]

Maybe Elop thinks Nokia can be like Canada, claim its independance but still be part of an ecosystem. I think Elop's brain is stuck in the past when files on Windows were not compatible with Mac. Now there has been too much standardization with how data is handled allowing for the many operating systems we see today.

Microsoft is no longer able to offer a safe harbor that gaurantees a large number of customers. Other operating systems sync with Microsoft desktops just fine.

Phones are the Wild West and the PC boom was tame in comparison. In the PC boom a manufacturer like Nokia could easily survive. With smartphones the market is less locked in to a single way of doing things.

Because the replacement rate is over three years, Nokia should make Android phones just for the purpose of keeping a sale away from its competitors for another three years. Every Android sale is another customer Nokia will not have access to for another three years.

Instead Elop has a convoluted excuse for ignoring these customers. He only wants to make a sale, make money, if he can make it on his terms. One doesn’t get to choose the battlefield. The money that everyone wants is in the pockets of the customers. Therefore the customers choose the battlefield. If you don’t enter you don’t matter.

Just like he shouldn’t have destroyed his Nokia's sales before he had something to replace it with; he should have been actively destroying the profits of his competitors. Nokia gave away its share of the Android sales and then gave away their own sales.

Look at the example of HTC. They backed both Windows and Android and then went with the winner. They played both sides of the fence. Why choose to win or die when you can choose to win or win?

[JORGE SPAIN]

Hi Tomi,

Unfortunately the Nokia blame lies squarely with Mr. Gold Standard - Jorma Ollila and his Board. I cannot believe that this kind of crazy behaviour can take place unless sanctioned by the Board. The only logical explanation I can think of is that Microsoft has built in severe Penalty Clauses and conditions in their contracts and the crazy Board signed them....Another beautiful company ruined by Microsoft.

Thanks for your blog.

[@rodrigottr]

@Tomi

My opinion on why WP and Nokia BOYCOTT is almost UNNEVITABLE

"Why the hell would carriers boycott windows phones if iOS and Android also have Skype?"

1 - Because they can! Apple and Google are already too strong for carriers to fight. Boycotting the carrier unfriendly iPhone would be impossible in the US since Apple was one step ahead and had a partnership with AT&T. Carriers on other countries also wouldn't boycott iPhone because iPhone sells like whater and that would means losing users. So, carriers MUST have an option to fight AT&T and iPhone back. Android was, and still is, the only option. So, they had to accept Skype to don't be behind. And they accepted.

2 - But WP7 is a fiasco on sales, less carrier friendly then Android, and now that M$ owns Skype, we can easily imagine M$ is going to provide stronger skype integration with the device. So, this echosystem is clearly not interesting for the carriers to support since brings no new marginal advantage for them. Also, they have to worry with another nightmare: integration of skype with WINDOWS and FACEBOOK a! Suddenly more then 750 million more accounts on skype and all that fully integrated with Windows phone!! So, windows phone is a Nighmare, and if it can be destroyed, let's do it.

3 - Strategic paradox: when skype wasn't from M$ skype was a Third part app and competidor. Which means Skype incomes gone for Skype. Now that skype is part of M$, and the profits of using the service are going to M$, M$ becomes one more competidor to the carriers. Skype is no more neutral from the point of view of the mobile maker. Now, Skype is the child of the mobile maker and because of it, the mobile maker becomes enemy of the carrier. Why would a carrier sell its enemy's product? In the case of Google voice (who is not really comparable to skype in popularity), that is tolerable since Android is an evil necessary to face iPhone and AT&T. But carriers don't want another OS like this.

4 - Carriers are against the wall in the industry: Each year they are being pushed to invest more and more to make possible a heavy and expensive structure for data connections that their users demand to be 24x7 online on youtube, facebook, skype, google, iTunes, iCloud, using less SMS and voice calls, and generating profits for whom?? For the online services providers like google, facebook, apple who are tottaly unfriendly to them.

Why? Because there are only 2 or 3 online services companies and hundreds of carriers in the world. There is much less competition on online services then there are carriers. And carriers are strongly regulated by governamental institutions. Who's regulating Google, Apple or Facebook?

Doesn't that explains why many carriers in the world are stopping to offer unlimited data plans?? Aren't the carriers the champions of complaints on justice in your country? It has been hard to be a carrier these times.Low profits, high investiments, hight competition, and all the complaints for not delivering a service that interests more to online services companies than for you.

5 - If you where a carrier CEO: So, if you where a carrier CEO, you would probably support Android and it's native Skype app as an evil necessary to face iPhone. But you would not give support to one more platform that brings nothing good to you on a hard moment. And you DEFFINETLY WOULD BOYCOTT A COMPANY THAT HAS PROMISSED TO BRING A COMPETITIVE OPEN SOURCE CARRIER FRIENDLY PLATFORM AND IN THE END BETRAYS YOU AND BECOMES YOUR COMPETIDOR! In fact, does it make sense to call as boycott if you don't support products from your competidor?

So, we will see the results of this SCHYZOFRENIC STRATEGy when the results for the Q2 come.

But I believe there is no chance of WP being successfull with this strategy. It is unninteresting to the most important stakeholders involved except Microsoft. That completely explains why Nokia's stocks felt 50% on 4 months and why they are cutting 15% on prices. THERE IS A BOYCOTT ON NOKIA GOING ON, justified by Nokia AND M$ behavior on:

- UNFRIENDLYSHIP OF WP OS compared to Android

- BETRAYING CARRIERS, promissing an open source carrier friendly OS AND BECOMING AN COMPETIDOR and abandoning the carrier friendly Symbian.

- the nightmare of M$ integration of Skype to wordwide massive products and services like Windows, MSN messenger and Facebook and making all that fully integrated to the Windows Phone

[hugo]

@rodrigottr
I'm absolutely not with you.

Carriers fear one thing most: One mobile OS maker controlling the market. And currently Google is heading this ways. Carriers have to prevent this if they want to retain some of their power. And they need to act fast.

Apple with iOS is not heading for the mass market. So another one has to stop Google for the carriers. The only possible option is MS/Nokia with WP7. So they have to support it. Regardless of skype or not.

And once the mobile OS market is split up into 3 competitiors, it's way easier for even more (RIM, WebOS, Bada, ...). The more, the better for the carriers.

[Steve Woodgate]

@Leebase
Read Tomi's book on SMS profits. At 5 cents a message that's more than $327 a megabyte.
But many carriers charge up to 25 cents a message, $1638 a MB.
So a data plan is just nothing compared to the profits on SMS.

Steve

[Tomi T Ahonen]

Hi all, I'll do a set of replies now, with more later

Hi Nelson, Janne, Matthew, LeeBase, Jorge and rodrigottr

Nelson - good points. And thank you for mentioning the 15% price cut, I noticed it too right after I posted the blog and already added it to the story itself.

Janne - good stuff, but remember the ComScore measurements are only from a few markets and they reflect traffic, not users, so it is biased to the heavy users on devices and price plans of the heaviest users, not truly respective of the whole mobile user base. (I'm sure you knew that, I'm telling more for the other visitors)

Matthew - yeah, we agree. Funny comparisons to the US Civil War and the breakup of the Soviet Union. Obviously I am still holding hope that it need not end that way for Nokia (watch for my next blog, am trying something a bit more humorous again..)

Leebase - so you were referring to the Nielsen survey? First, its not that Google Android had declined, the Nielsen finding was very clear Android was flat, the iPhone gain was at the expense of RIM's decline, not any decline by Android. But for the May month, Android was flat for the first time. Secondly, as always, Nielsen measures consumers only, so it undercounts enterprise/corporate smartphone sales where RIM is strong etc. But yeah, if you want to celebrate the iPhone's resurgence in the USA, there is good reason to note that - it is obviously primarily driven by the first full quarter of Verizon CDMA iPhone sales in Q2, plus some iPhone White sales. These do not produce the same effect as the next iPhone (rumored iPhone 5 or iPhone 4S) which is now much too much delayed, hurting Apple's market share for the year. And you know I am hoping we will hear there is a new iPhone Nano this year, I am not sure if you felt that was a good strategy when we discussed it before but you know my view on it.

Matthew - good stuff on the 'Wild West' analogy (you are full of analogies today haha, Civil War, Soviet Union, Wild West..). A small correction, the average phone replacement cycle is not 3 years, its 18 months but regardless, yes, Nokia should be locking in customers now, not abandoning them. Any loyal Nokia customer who is told to wait by sales for the new Microsoft WP7 phones, and doesn't want to wait 6 more months, will then go to Android or iPhone (or bada or RIM) and then the loyalty cycle is pretty well busted. Modern phones by most rivals are very good and its likely that Nokia customer won't be coming back..

Jorge - I partly agree but not wholly. Yes, Jorma Ollila and the Board have to have approved the decision to abandon Symbian, and separately then have to have blessed the choice of Microsoft (vs Android vs MeeGo). But like I wrote in February, while I didn't like the Microsoft choice, I said it was Elop's choice to make and something had to be done at Nokia. It was not the selection of Microsoft that caused the calamity at Nokia now. It was a long series of CEO blunders since. The timing of the announcement. The idiotic 'burning platforms' memo about which Elop has since issued statements several times that he really doesn't believe anymore many of the ludicrous claims made in that memo. And the statement Symbian would be killed fast (why?) ie by summer of 2012, and now backtracking from that to 2016. The silliness about the N9, MeeGo (come on, which company who is about to have a winning product, says 'but we will not follow it with more winners' ?????? I could understand if it was 'costly' to do MeeGo phones (expensive licenses) and 'free' to do Microsoft WP7 phones, but its the opposite. Every WP7 phone will cost Nokia a license fee and every MeeGo phone is free.. So its this type of CEO mismanagement, which is not 'micro managed' by the Board. The Board would bless or debate (or deny) major decisions, but not interfere in Elop's daily decisions. And its that daily stupidity which is now causing Nokia share prices to crash.

About a possible Microsoft penalty clauses. Yes, they must be there - because Microsoft paid so much (billions) you can be 100% sure there are penalty clauses but no matter what they are, Nokia has very deep pockets, pay the penalties and get out. Leave the rest to the lawyers. To the degree Elop is found to be colluding with Microsoft, any contract signed by Elop supposedly on behalf of Nokia will be null and void in any court. He's clearly been screwing Nokia for this whole episode.

rodrigottr - You make good points but some I have to disagree with. First on Apple being 'too strong' for carriers to fight back. No. Apple is nothing nearly as strong as Nokia was in 2004 when Nokia was nearly 40% of all phones sold on the planet and did over 80% of all smartphones and launched the N-Gage as the world's first consumer smartphone. Yet the carriers/operators punished Nokia and brought Nokia to its knees. And today, the carriers said clearly a comprehensive 'no' to Apple's intentions to do a virtual SIM card. No, they are not afraid of Apple or Android. The carriers hold all the cards, because they have a monopoly to the only scarce resource in telecoms - the spectrum.

Then you say the carriers had to accept Skype. No they didnt and mostly they haven't either. You look at Skype on almost all carriers. It is EXPLICITLY forbidden on your data plan, or else it is sold as a premium data service (ie for extra cost). Almost nobody does Skype voice calls and Skype videocalls as part of a standard smartphone package on 3G data - it would cripple the networks instantly.

I agree on your second point, the carriers will fight Skype harder than they've fought any other 'innovation' by any handset maker ever. And the rest of the posting is more in line with how I see it too.. Cheers!

Thank you all, keep the comments coming

Tomi Ahonen :-)

[Steve Woodgate]

@Leebase

The people you are missing are the 93% of mobile phone users who are not in America and that part of the 7% in America who don't have the knowledge or the credit rating to have a phone plan like you.
Even in the USA, 70% of subscribers sent a text in the last quarter but only 40% used a mobile browser, http://bit.ly/qB6xXc
For the carrier its all about controlling the customer and limited the churn. That's why "virtual sim cards" are bad and Microsoft is not a great partner.

Steve

[@rodrigottr]

@Hugo

I partially agree with you. Carrier fear one mobile OS maker controlling the market. But they fear the MOST one UNFRIENDLY mobile OS maker controlling the market. A monopoly of a FRIENDLY OS wouldn't worry them that much.

What is our concept of Friendly OS? An OS who helps the carrier to sell services like: Apps, Games, Musics, Ringtones, inputing their Brand (carriers also fight for the the mind of the consumer) sell cheap phones helping the carrier to penetrate all economic classes...

What is our concept of UNfriendly OS? An OS who blocks the carrier personalization to sell services like Apps, Games, Musics, Ringtones, inputing their Brand, AND Bypasses other services that are the most important revenue for a carrier like Voice Calls and SMS. An OS that Demands expensive hardware, making more difficult to penetrate lower economical classes with telecom services.

As we see, iOS is very UNfriendly since you can only install Apps, Games, Musics from iTunes or Appstore. Block inputing the Brand inside the OS. And offers lots of services to bypass carrier Voice and SMS services, like Whatsapp, Skype, Fring, Nimbuzz and others. Also, the iPhone is expensive.

Android is more friendly since you can put the Brand, sell services and sell it on cheaper phones. But bypassing services is also possible with VoIP or Free sms services.

But the most unfriendly is WP. It demands more on the hardware then Android, and can fully integrate SKYPE WITH FACEBOOK WITH THE PHONE in the future. That would mean an almost FULL Bypass of the carrier on SMS and Voice calls. And has less flexibility for personalization then Android, even having more then the iPhone. (I'm not sure about this point. Correct me if I'm wrong)

@lebasee @hugo

But why carriers worry so much about bypassing voice and SMS with DATA?

First because they earn more with Voice and SMS. Second because Voice and SMS pays more then DATA. Third because DATA demands high investments on 3G structure, while 2G structure is sunk costs and all its revenues are profits. While the smaller revenues of 3G must honnor its investments.

So, if the 3rd echosystem aims to be completely DATA centric, therefore more unfriendly then the other two, then they would surely prefer the duopoly and try to kill the 3rd if possible.

[KPOM]

MeeGo would not be one of the big platforms. Admit it, Tomi, you are letting your disdain for Stephen Elop cloud your judgment. Apple owns the tablet space right now, and not even Android, which is the dominant smartphone platform, can make a dent in the iPad at the moment. Unlike with phones, people aren't dependent upon carriers for their tablets, and thus it is difficult for competitors to Apple to gain traction.

The N9 is an interesting smartphone, but it doesn't follow that it would be a good tablet platform. Even in OPK's vision, MeeGo was primarily a high-end/tablet OS. Given that Nokia has already made its strategic decision, to water it down by saying you'll still support MeeGo would be counterproductive. Nokia just told the world in February that the old path is dead. They can't go backtrack now.

I think Elop's mistake, if things don't go well next year, will have been not going with Android. In the end, Nokia had a choice between a "sure thing" becoming a low-margin but high volume maker of a commodity (the most efficient manufacturer of Android phones) or taking a gamble on carving a niche with Windows Phone. We won't know for a year or so whether the Windows Phone gamble will succeed, but I'm guessing that the stock wouldn't have crashed so much had they switched to Android. People know that Android phones sell well, and they'd trust that a Nokia Android would sell well. The jury is still out on whether a Nokia Windows phone will sell.

[k tee]

this is a flat world. unless n9 supplies are severely suppressed artificially ... phones cross borders better than humans.

[@rodrigottr]

@Tomi

"First on Apple being 'too strong' for carriers to fight back."

That's true! And explains why Apple where smart and used the strength of the carriers against themselves (by exclusivity with AT&T, Orange etc

(Sun Tzu's teaching: if the enemy is bigger divide him)

M$ (it is clear to me that M$ is in command) since the beginning betrayed carriers by abandoning MeeGo, and then, did the unforgivable buying their greatest enemy: Skype. Which is the most brilliantly STUPID movement he could ever do.

He just united all the power of the carriers against him. And is trying to hit knifes with punches, as we say in Brazil. I have to say. He is a master in the ART or LOSE.

hahahahah

The more I think about it, the more I see how carrier relationship means EVERYTHING on this industry.

But there is something I would like to know. Don't my carrier knows I using Fring and Skype on 3G making free calls as I wish?? (In Brazil I use TIM) Could they block me from using VoIP calls? If they could, why they don't?? I even use a pre paid plan limited on 300mb and that is pretty OK for me.

[Baudrillard]

What I don't understand is how Nokia can be rolling out a range of new 1ghz Symbian^3 devices when MeeGo is getting all this positive hype!

They should load those Zeta phones with MeeGo and watch it fly off the shelves.

MeeGo is ready NOW!

[@rodrigottr]

@staska

I just answered @hugo who said the same thing about carriers desiring a 3rd System and fearing a duopoly. Well. That is really baseless. If they REALLY NEEDED, then why couldn't promote it well?? Why don't we see millions of WP outselling?? Is the product that bad that USERS are rejecting it??? Well. I don't think so. In fact. WP seems pretty interesting to me. What I think is that they are not promoting it well. And why would they not promote it well if the product is so interesting??

So, the answer is:

YES, they desire one more OS in the race
BUT ONLY if it is more friendly then Android is. And it seems WP is not since the beggining. Now Skype isn't good news at all. You and Me are saving money with skype on 3G. That is a fact, and a real threat to carriers.

"Hooks for the carrier to disable/enable Skype on any phone?"

You don't seem to remember that business strategy is much about politics. Carriers know how Microsoft is. They know what M$ did to Apple in the eighties when they stole their interface and created windows. They know what M$ did with Windows Mobile. They know what they did to HTC. They know what they did to Kin phones. All those exemples are exemples of cathastrofic partnerships/behaviors with M$. They didn't liked M$ aborting an open source carrier friendly OS like MeeGo and changing it to the unfriendly Windows.

But that was not enough. Here comes the strike from the back, as always: M$ buys Skype!

It is a pattern. That is how M$ do business. That is why they are hated. That is why Google's moto is: don't be evil (means don't deal with microsoft)

What is happeing to Nokia seems pretty much like re watching the same movie.

Elop is clearly following M$ agenda. Not Nokia's. Why in the hell for the sake of Nokia would a CEO of Nokia abort a winner project like MeeGo??? Why don't keep it as a plan B if plan A fails? Samsung has their own OS, HP has their own OS, RIM has their own OS, Apple has their own OS, why the hell aren't they aborting their OSs like Nokia is doin't to that lucious N9??

Because that is STUPID! IS SUICIDE! Is only good for M$!

Carriers are watching this. And ask them if they want to be friends with M$???

HAHAHHA

[Jontte]

About two iPhone tiers.

I have no idea who would be advocating for two different physical sizes of iPhone. It will not happen. All the hundreds of thousands of apps are done to 3.5" 4:3 screen, with 320x480 point resolution (in iPhone 4 the point equals two pixels). Why would Apple want to fragment their phone platform? What would be the gain?

Having two price tiers is another thing and that can easily be done with the model they are using at the moment, selling a year old, low mass memory, product alongside the new one. They just would need to price it considerably lower than today. What is the optimum between profits and marketshare is hard to know. But definitely Apple is not going all for market share, they never do.

[Boris]

@ Leebase

You can't use Skype without a data plan.
---
LOL, all you need is WiFi, and bye bye carries.

@ Hugo

Android OS is open sourced, WP7 is not. That's why carriers don't fear it. US (and many European) carriers bloat Android as much as possible. With WP7 and iOS – no way.

[beats by dre store]

between profits and marketshare is hard to know. But definitely Apple is not going all for market share, they never do.