Mid-year Update to Nokia Smartphone Forecast to 2011, with View to 2012 and new Microsoft based phones

On February 15 I was one of first analysts to provide a detailed quarterly forecast for Nokia's smartphone sales this year, after the bizarre announcement by CEO Stephen Elop to select a new Microsoft based smartphone operating system while having no phones to sell, or even to show. That caused what is known as the Osborne Effect ie it killed sales of current models. If Elop was competent, he would have seen this coming. He admits now at Q2 results that it took him by surprise. I think its fair to read into that, that Stephen Elop is completely unfit and incompetent to run Nokia in these difficult times. But lets not talk about Elop now. Lets look at the performance of Nokia's smartphone unit.

My February 15 forecast included a lot of very detailed analysis of why I felt those numbers would happen. There are tons of comments too, and many suggested I was being too pessimistic. Here is the actual forecast from February and the Reality of Q1 and Q2 results to see how pessimistic or not, I happened to be:

TOMI ORIGINAL FORECAST FROM FEBRUARY 15:

Quarter . . . Market Share . . . Unit Sales . . . .  ASP . . . . . Total Revenues of Smartphones
Q1 2011 . . 28% . . . . . . . . . .  29 M . . . . . . . . 146 Euro . . 4.3B Euro
Q2 2011 . . 21% . . . . . . . . . .  25 M . . . . . . . . 136 Euro . . 3.3B Euro
Q3 2011 . . 16% . . . . . . . . . .  21 M . . . . . . . . 126 Euro . . 2.6B Euro
Q4 2011. .  12% . . . . . . . . . .  17 M . . . . . . . . 116 Euro . . 2.0B Euro

ACTUAL NOKIA PERFORMANCE

Quarter . . . Market Share . . . Unit Sales . . . .  ASP . . . . . Total Revenues of Smartphones
Q1 2011 . . 24% . . . . . . . . . .  24 M . . . . . . . . 146 Euro . . 3.5B Euro
Q2 2011 . . 15% . . . . . . . . . .  17 M . . . . . . . . 142 Euro . . 2.4B Euro

I was being as honest and accurate and detailed as I could be. But I also wrote on the blog, that this was my best case scenario. Now we have Q2 results, the first full quarter with the Stephen Elop Effect to destroy Nokia Symbian phone sales. And look at the results. I projected 21% market share. Nokia managed 15%. I projected 25M unit sales. Nokia only did 17M. On the ASP Nokia did better but the total revenues are still almost a Billion Euros BELOW what I had projected. Yes. Tomi was indeed - far too optimistic in his initial forecast haha..

TIME TO UPDATE AND CORRECT THE MODEL

So now we have the first full Quarter of the Elop Effect and we can now do a realistic update to the model to the end of this year (and do some prelim analysis towards next year when Microsoft Windows Phone based Nokia smartphones are expected to sell in mass market quantities).

Lets change the formula for the model. I used the only analogy I could find, and I set the level of lost market share at one quarter (25%). Now we have the real number. All things considered, my guess was not bad haha, the real number is 30% loss. I don't mean 30 market share points, I mean losing nearly one third of your existing customer base - per quarter. But then we recalculate the remaining customers at hte end of the quarter, and then take another nearly one third, and remove those, and repeat and repeat..

NEW MARKET SHARE PROJECTION EFFECTIVE 21 JULY

Quarter . . . Market Share
Q1 2011 . . 24% (actual) 
Q2 2011 . . 15% (actual)
Q3 2011 . . 11% (TomiAhonen projection)
Q4 2011. .    7% (TomiAhonen projection)

Yes. Sadly. Nokia will end this year with 7% market share in smartphones, give or take a point. Single digits most certainly. (if Nokia continues on this suicidal path towards Microsoft and with the psycopath Stephen Elop in charge).

Nokia had 29% market share with growing unit sales, growing average sales prices, growing revenues and growing profits as recently as Q4 of 2010 ! Now Nokia has already destroyed half of its market share. This, during a year when smartphone sales are exploding globally. A year when Apple can't sell enough iPhones with the demand exceeding supply. Where Samsung is doing more than double the sales from a year before. And Nokia is destroying half of its market in a mere 5 months.

Also do undestand what 7% means. RIM, ie Blackberry, has now fallen to 13% market share in Q2 and everybody is calling them a failure, and most who consider future operating systems and 'ecosystems' are counting RIM out now, as having failed. THAT'S TWICE where Nokia will be, in only 6 months. Nokia is completely doomed on this path. By current projections, Nokia is not only falling from biggest to second to third, behind Apple and Samsung. And obviously by Q3 will fall behind RIM and HTC, but by Q4 Nokia will be playing 'Honey I shrunk the kids' falling behind LG and SonyEricsson and racing Motorola for who gets to be 7th biggest smartphone maker. And may even fall behind ZTE. So Nokia could be as little as 9th biggest smartphone maker. From first to 9th in less than 11 months. This is so outrageous, if someone at Hollywood suggested this as a plot for a movie, it would be rejected as unbelievable.

Lets populate the model with the rest of the data. I am modelling smartphone sales this year to hit 475 million units (up from 300 million in 2010). And I will use a linear decline in ASP, dropping it the same 4 Euros per quarter. Then I multiplied it across to get the revenues.

TOMIAHONEN PROJECTION: NOKIA SMARTPHONE SALES BY QUARTER 2011 (REVISED)

Quarter . . . Market Share . . . Unit Sales . . . .  ASP . . . . . Total Revenues of Smartphones
Q1 2011 . . 24% . . . . . . . . . .  24 M . . . . . . . . 146 Euro . . 3.6B Euro
Q2 2011 . . 15% . . . . . . . . . .  17 M . . . . . . . . 142 Euro . . 2.4B Euro
Q3 2011 . . 11% . . . . . . . . . .  13 M . . . . . . . . 138 Euro . . 1.8B Euro
Q4 2011. .    7% . . . . . . . . . .  11 M . . . . . . . . 134 Euro . . 1.5B Euro

Source: Nokia (actuals Q1 & Q2), TomiAhonen Consulting July 21, 2011 (projections Q3 & Q4)

PROFITS

I said in my original Feb 15 forecast that Nokia smartphones would be reporting zero profit by Q2 and losses from Q3 pushing all of Nokia Corp into losses by Q4. I was right about what would happen but again, Nokia's suicide has been far more rapid than even I was able to project. They reported a massive loss not just in smartphones by now, in Q2 but also the whole of Nokia Corp has gone from making profits to making losses, already now in Q2. While the delusional CEO, Stephen Elop promises that Q3 handset sales would be near zero profit or loss (in other words a big improvement from now), that should be taken with a grain of salt. This is the same man who didn't foresee the Osborne Effect and who thought China sales in Q1 willl repeat in Q2 (ie didn't know about China gifts for Chinese New Year, the Chinese culture equivalent of Western Christmas gift-giving) and who had to rush only weeks after Q1 results, with a profit warning for Q2. So he is pretty well clueless as to how Nokia's handset unit might do profits or losses.

Here are the facts. Nokia's Q2 handset profitability (ie about 500 million Euros / 700 million US dollar loss) had a one-time positive profit injection - the IPR payment from Apple covering patent lawsuits and iPhone sales for the past 16 quarters since 2007. That was worth half a billion dollars. So in reality Nokia's handset unit in Q2 is doing so horridly, it is generating one Billion dollars of a loss.

Then what does Nokia do? In early July they annnounced big across-the-board price cuts - price cuts - up to 15% in their most expensive phones. So while they already report a massive loss, and in reality their operational performance hides an even more gargatuan loss, now Nokia cuts its prices - that boosts its LOSS. Nokia handsets will not be reporting a zero profit/zero loss for Q3. Ain't gonna happen. No f*cking way.

In the Q2 results Nokia reported their marketing costs grew dramatically by 6% from Q1, for the smartphones unit (because nobody is willing to buy - or sell - Nokia phones). The quarterly results also offer Nokia's validation of my claims here, that there is a reseller boycott - Nokia admits that the channel, the resellers and the operators - are 'reducing inventories' - ie refusing to stock and sell Nokia. But Samsung, HTC, Apple phones are jumping off the shelves into the pockets of happy new customers. And what of Nokia other costs? Their smartphone sales have been cut by half from their peak at Q4. So Nokia owns all those expensive mobile phone handset factories in 9 countries including China and India, and they now are running at half-capacity. HALF CAPACITY? Imagine the costs of that! This again, while rivals are complaining they can't meet demand. Nokia can't even keep its factories running at normal capacity. Texas Instruments complained that their biggest chip customer (ie Nokia) has seen a huge drop in component shipments.. So the costs for Nokia keep going up, while the prices they charge keep coming down. This is a sure way to make BIGGER losses, not less losses.

PROJECTION FOR MICROSOFT PHONES IN 2012 (COMING SHORTLY)

I will do my update and detailed first projection for Microsoft based Nokia smartphones for 2012. At this moment its late here in Hong Kong and I can't really concentrate to do this properly. But I know there are readers of mine who are waiting for my updated forecast for 2012 sales in Q3 and Q4. So I will post this blog now, I will return shortly to do the Microsoft and 2012 bit (and beyond). But trust me, it won't be rosy. Nokia and Microsoft will not get 20% or better market share in any conceivable scenario now, not after the carnage we see happening in 2011. Microsoft will not even get into the low double digits by end of 2012. But yes, I have to come back to that, at this point I will just post this blog and get some rest.

UPDATE July 25: I have now provided the update for Microsoft based Nokia smartphone sales for years 2012 and 2013. I used best case example of real existing smartphone sales patterns, so this is very real, and it is the best-case scenario.

Comments

[ノースフェイス]

著者の軍事Xiliu昨日のブログ記事はjinzhengenの判決は、韓国人は経済発展の中国の深セン経済特区のモデルから学ぶために、貧困の顔を変更するには、主導し、言った。

[グッチ]

しかし昨秋、国土交通省や亘理町などが堤防の拡幅を検討していると知り、修復工事を中断した。国交省は拡幅に必要な川沿いの住宅地で用地買収を進める方針だが、買収範囲は未定。男性は「範囲が決まらなければ、自宅を移転させるか手放すか、決められない」と嘆く。

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