Nokia Q2 Results 2011: 15 Years after Inventing the Smartphone, Finally The King Is Toppled: By Who? Apple's iPhone of course

Nokia Q2 Results are out. 15 years after inventing the smartphone in 1996 with the iconoic but outrageously expensive Nokia 9000 Communicator, and selling more smartphones than any rival every single quarter since then, we have now seen a moment in history: The king has been toppled. And that was done by who else, Apple and the iconic iPhone.

Imagine going back in time, and witnessing the success of the first mass-produced automobile, the Ford Model T. Ford did not invent the car, that was Daimler-Benz (ie Mercedes Benz). But while Daimler-Benz started with the world lead, it was the Ford Model T which made the car affordable for mass markets. Or take Apple the PC maker. It was once the world's biggest computer maker by volume of desktop computers. Then along came Charlie Chaplin in an IBM advertisement for the IBM PC, which ran away with the PC market (and propelled Microsoft to become the biggest software company). Those are iconic moments in industrial and technology history, are studied in MBA classes worldwide.

Now we are witnessing that kind of historical moment in technology, and this transition will be studied in MBA case studies in business schools for this whole century. Mobile phones are the most widely spread technology on the planet (3x bigger than TVs, 4x bigger than PCs, 5x bigger than cars, etc). And Nokia is the biggest phone brand, and all phone makers and major analysts agree, that the future of mobile phones is smartphones. So remember this July of 2011. This is truly a big moment and we are witnessing history.

Q2 RESULTS CATASTROPHIC FOR NOKIA

We have the Q2 Results from Nokia. As so many expected, the results are brutal. Nokia's new CEO Stephen Elop's bizarre timing of his (very misguided) Microsoft strategy have devastated Nokia smartphone sales. As Nokia faces global reseller boycott of what now are perceived as obsolete Symbian phones, the sales of Nokia Symbian smartphones have collapsed. With it so have revenues, average sales prices and profits also all crashed in world-record-setting style. What a way to go, Stephen Elop! You will be famous - or should we say more accurately, infamous.

Nokia just reported their total sales of smartphones for Q2 was 16.7 Million smartphones. That gives Nokia a preliminary market share in smartphones of 15% (was 24% in Q1 only three months ago!)

The unit sales of smartphones are down 31% from just 3 months ago in Q1 when Nokia still sold 24.2 Million smartphones.

I also want to mention that Stephen Elop says in the Q2 results document that the 'challenges' were 'greater' than he had expected. ??? So. Anyone studying technology business at university will learn of the 'Obsorne Effect' of what happens to your existing products if you announce a superceding product. The current product sales will collapse. This is not rocket science and only an incompetent fool would have been taken by surprise by the crash of Nokia's smartphones after February 11. Now we have a good comment on Twitter from Nick Doulas @nickdoulas who said 'Osborne Effect to be forgotten in history, replaced by Elop Effect: much larger failure by comparison." Excellent, funny and also, sadly, completely true. Oh, and this delusional Stephen Elop now dares to suggest that in Q3 Nokia will generate about a zero profit from the handsets unit? What? After we remove the one-time payment of IPR royalties from Apple, Nokia handsets unit actually generated one BILLION dollars of a loss in Q2. That is his 'starting point' now. And what does Elop do in early July? He CUT the prices of Nokia smartphones. That pushes Nokia deeper into the red. One Billion dollars of losses is not enough for Elop. He wants to establish his mark. He wants to be sure, his world record will never be bested. He wants to go down in history as the most incompetent CEO ever.

DESTRUCTION OF PROFITS

The smartphone unit which made over 500 million Euros (over 700 million dollars) of profits per quarter as recently as six months ago, has now crashed and reports an operating loss! And please understand, this is not the bottom. The situation is going to be far worse in Q3, Q4 and Q1. Nokia has already in early July responded to the global market collapse by cutting prices across the board, as much as 15% from its top phones. If your smartphone division is making a loss - and you then cut your prices by 15% - you are ADDING to your losses MASSIVELY. While this blog is not a finacial analysis blog, we should point out that this new Microsoft strategy and Nokia's catastrophic performance has been so strongly punished by Wall Street, that Nokia's share price earlier this week hit a 14 year low (and while I am no forecaster of share prices, haha, I think the continuing flow of bad news about Nokia smartphone market shares, average sales prices, revenues and profits/losses, will hurt the share price severely in the weeks, months and quarters to come).

WE ARE WITNESSING WORLD RECORD DESTRUCTION OF A BRAND

The real comparison of Nokia's crazy shift in smartphone strategy cannot be done to the previous Quarter, ie Q1 of 2011, because the market collapse started in the middle of that quarter. The comparison of Nokia's current malaise has to be compared to the last full healthy quarter before that fateful announcement of February 11, so we have to go to Q4 of 2010 for comparisons. What was life like before Stephen Elop started to destroy the brand most widely spread on the planet (more people use a Nokia phone than drink a Coca Cola, than wear Levis's jeans, than tell time on a Timex watch, than wear Nike running shoes, than smoke Marlboro cigarettes, or write with a Bic pen). 

In Q4 of 2010, Nokia sold 28.3 million smartphones and had 29% market share. The average sales price of Nokia smartphones was 156 Euros or about 210 US dollars. We have since learned with Nokia's new financial reporting also about the smartphone division profitability, so in Q4 Nokia smartphones made a profit of 548 million Euros (715 million US dollars) which gave a profitabilty of 12.5% for its smartphones unit. Obviously this is nothing like as spectacular profitability as Apple does with the iPhone, but Apple is not Nokia's primary competitor, and of Nokia's main competitors (who sell globally both smartphones and simpler 'dumbphones') - LG, SonyEricsson and Motorola have all been struggling to do any kind of profits. Only Samsung of Nokia's main rivals is consistently profitable in its handsets unit. And up to now, never has Nokia reported a loss in its handset unit.

Also understand how Nokia was doing at the time. The 'conventional wisdom' mostly led by US based analysts who tend to view the global market from what they see in the US domestic market - where yes, Nokia had failed years earlier and was a bit-player - suggests that Nokia was 'in decline' before Stephen Elop announced his Microsoft Strategy and that Nokia was doomed without it. That sounds great but does not correspond with the facts. I deal with the facts here, not myths. The fact is - go ahead and check the numbers - Nokia grew unit sales of smartphones from Q3 to Q4 in 2010. Yes, Nokia's 'obsolete' Symbian was growing, not declining. It was the world's bestselling smartphone OS well ahead of Android until Elop assassinated Symbian in February. Symbian had half a dozen manufacturers still supporting it including several Top 10 sized Japanese smartphone makers.

To understand how bizarre the Microsoft Windows Phone 7 decision is - all handsets makers who made Windows Phone 7 handsets - were outsold by those Symbian makers who are NOT NOKIA !  Yes, the 'other' Symbian makers ALONE outsold all Microsoft Windows Phone manufacturers. But yes, where was I? Nokia? How much did customers love or hate Nokia's Symbian smartphones in Q4? They loved Nokia so much, that the average sales price grew by 15% from Q3 - a Nokia record jump in ASP in one quarter AND the total revenues of Nokia smartphones grew 22% from the previous quarter. This is not a platform on fire, unless by 'on fire' you mean - it was hot and growing and generating profits.

How much profit? We didn't have the numbers back then because Nokia did not break out its smartphone profitability until now. But now we can see, that In Q4 the Nokia smartphones unit generated 548 million euros of profits - and yes, the profits grew from Q3 by a massive 64% !!! Yes. Nokia's Symbian phones were so much 'on fire' that they grew unit sales, they grew revenues, they grew average sales prices and they grew profits. They grew profits 64% from the previous quarter! This is the 'goose that lays the golden eggs' which was truly and thoroughly killed by Stephen Elop on 11 February 2011. Now the smartphone unit generates a loss of 146 million Euros.

So yes, its a widely repeated myth that somehow Symbian was killing Nokia and Symbian didn't have life in it and customers were abandoning Symbian etc. All utter rubbish. You read the facts and see, Symbian was a powerful, world-leading operating system, totally updated and modern by its S^3 version that was on for example the N8 smartphone. Yes, Nokia was developing Symbian's replacement, called MeeGo, but Nokia had years of lifespan left in Symbian, where Symbian is particularly well suited for modest power, modest CPU and modest memory requirements of low-cost smartphones.

Understand how enormous Nokia was just six months ago. As a smartphone maker when measured by units sold, Nokia was bigger than Apple and Samsung added together (its likely Samsung has also passed Nokia in size, as Nomura has already calculated. We will not know Samsung Q2 results until 29 July). Nokia was the run-away market leader smartphone maker in all continents but one (North America). In China (world's biggest mobile phone market) Nokia was reported to have 72% market share in smartphones in 2010; in India (The world's second biggest market) over 60%. Now we learn that Nokia's market in smartphones in China has collapsed to 22% and similar in India. European major markets have seen Nokia smartphone sales collapse anywhere from around half lost to as much as three quarters lost in just a matter of five months.

So now, with Q2 results, compared to the time before Stephen Elop's ill-timed announcement of its Microsoft alliance ie Q4 results, we know how bad the damage has been. And because the announcement was on 11 February, we know that the crash in market share, average prices, revenues and profits has happened in under 5 months. With Stephen Elop at the helm, we have seen Nokia destroy half of its total market in smartphones.

Lets understand how significant this is. This is not like the carnage that caused the death of Motorola (and the company to be split) or the destruction of Palm (that caused it to be sold to HP) or similar disasters in mobile telecoms. This is truly the world record for market share capitulation not just in mobile or tech; it is brand destruction world record - in any industry, ever. Toyota's damage with the brakes in its cars, BP's oil spill, British Airways worst quarters fighting with labor disputes; etc have not slashed market share by half in only five months. Nokia and CEO Stephen Elop will go down in history as the notorious and misguided names that destroyed the best-known brand on the planet. This is management stupidity in the scale of Coca Cola's 1985 launch of New Coke.

THIS IS ONLY BEGINNING OF THE NIGHTMARE

We can now update the first projections to how badly Nokia will bleed market share to the end of 2011 when the first Microsoft Windows Phone 7 based Nokia smartphones will start to ship. That level is definite to hit single digits but I will return shortly with that full analysis. It is FAR WORSE than anyone had projected so far, and Nokia cannot recover to its pre-February 2011 levels, not even half-way with Microsoft, because of the severe problems with the Microsoft partnership. So please understand what I am saying - some analysts have bravely and optimistically projected Microsoft and Nokia to get something like 20% market share in 2012. That is utterly impossible now. That is a fantasy. The facts now show that Nokia will never recover its smartphones using Microsoft OS, to that kind of levels.

I was one of first analysts to project that the Microsoft announcement would cause a collapse of Nokia sales, and that Nokia smartphone sales this year would hit a level of 17 million sales per quarter, and the average sales prices of smartphones to 116 Euros. My blog was called by many colleagues as "too pessimistic". Now we have the first meaningful facts ie Q2 results. And Nokia is nearing those numbers already. I felt that level would be seen by Q4 of this year, not Q2. Thus I was being too optimistic! The situation is far worse than even I could have guessed. But now we can make a revision and more accurate projection for the rest of the year and into next year. I have just updated my projection with the new number for 2011 Q3 and Q4. Spoiler alert: Nokia's market share will crash to 7% by Christmas.

MICROSOFT IS COMPLETE ILLUSION AND WILL NOT PAN OUT

(Quick comment about Microsoft and why what once looked like a good strategy for Nokia is now a recipe for a disaster. It starts from the design of Microsoft WP7 operating system which is typically Microsoft-ish 'resource hog' so it requires more powerful chips, much more memory onboard the phone, etc. So Nokia is now making losses in its smartphone unit, using Nokia's own well-known, well-fine-tuned manufacturing and design processes, using its own software. Then when it shifts to Microsoft, the costs and manufacturing and design of new Microsoft phones is far more costly to Nokia than it was with Symbian phones. And with Symbian and MeeGo, Nokia did not have to pay a royalty. With Microsoft Nokia has to pay a royalty for every phone. Thus we have far greater costs to Nokia smartphones on the new OS.)

(Then we have Microsoft's own admission that the operating system is failing in the markets - Steve Ballmer Microsoft CEO said that Windows Phone market share which was tiny in 2010, is now ... tiny. Far worse is the average sales price. Don't expect fancy high-end expensive 'iPhone killer' smartphones from Nokia, like the sexy N9. The average sales prices on Windows Phone will be slashed - thats not what I say, that is what Microsoft says - that smartphones on WP7 next year - will only earn half - half - of what modern smartphones are sold for - so Nokia costs go up, the complexity goes up, the customer experience - delays in using the phone - go down; and the price that Nokia can expect from those new phones go down - to half their current level. If you thought Nokia profits were bad recently - they will be FAR WORSE with Microsoft based smartphones.)

(This Microsoft alliance sounded great to some analysts looking at it in February. By now that we know much more of it, and all facts say this is suicidal move by Nokia and is not sustainable and will be abandoned just like HTC did with Microsoft, and LG did, and Motorola did. And add on top of that misery, now we learn in late May/early June, that the carriers have revolted against Microsoft in a reseller boycott after Microsoft bought Skype - carriers hate Skype - and then add the point that Microsoft's other handset makers are now deserting the platform and shifting their production to ever more Android. The Microsoft strategy is utter folly by Nokia, but I will do a more thorough analysis of that option shortly on this blog. Stay tuned). 

(Incidentially - when the analysis is done thoroughly, it is clear that the Microsoft option is certain death to Nokia. There is no chance for that to now rescue Nokia. Thus every penny spent on any Microsoft evolution is totally wasted. And because Nokia has to transition away from Microsoft as soon as possible, this is going to be enormously painful. Nokia desperately needs to distance itself from Microsoft now. But Microsoft needs Nokia desperately to remain relevant in mobile. While Elop has said there were no talks of Microsoft buying Nokia, if Nokia moved away from the WP7 operating system, Microsoft could panic and rush in to buy Nokia, especially now that Nokia's parts are worth much more than the share price. Now consider Stephen Elop and his loyalties? What a challenging conflict of interest is it, to abandon Microsoft or to drive Nokia into the ownership of Microsoft? Elop has to be fired right now, because he will not look at Nokia's best interests)

WHAT COULD SAVE NOKIA? MEEGO

So what to look for. If Nokia fires its incompetent CEO Stephen Elop and hires some smart CEO from the carrier/mobile operator community, that would be a good start. Then if Nokia abandons the moronic Microsoft strategy, that would be a strong signal. Symbian has now been damaged so badly by Elop that it cannot recover but Nokia has a real chance, if it goes full speed with MeeGo, its home-grown OS. The MeeGo based Nokia N9 smartphone is shortly starting to sell. It is the best-received Nokia smartphone ever, utterly loved by the early reviewers. But idiot Stephen Elop refuses to let the N9 be sold in most markets where Nokia is now bleeding - like the UK, Germany, France, Spain etc - and major international markets like, haha, can you believe it, Elop refuses to release the N9 in India for example!.

And what is even worse, there is a SECOND already fully designed Nokia premium smartphone running the amazing MeeGo OS, called N950. And Elop refuses to release that phone to any markets, and it is only given to some developers. How mad is that? The reviewers who hate Nokia and love Apple, are now comparing the N9 and MeeGo to Apple's iPhone, commonly called the jesusphone based on my blog from 2007, and now those analysts are calling the N9 and MeeGo as the god-phone.

Unlike Microsoft Windows Phone, the MeeGo OS was designed to take advantage of Nokia's competences and components and designs. Thus a MeeGo smartphone by Nokia can take advantage fully of Nokia's competences rather than be crippled like early phones with Microsoft. The MeeGo OS is fully supportive of Nokia's current 400,000 strong app developer community via Nokia's development tools Qt, something Microsoft is not. MeeGo phones are capable of high-end devices at high prices (something Microsoft says WP7 is not capable of). MeeGo production costs would be less for Nokia, and made in Nokia's own factories (The first Microsoft phones will be made in Taiwan by subcontractors! Imagine the lunacy of that CEO decision, when Nokia's own factories are running at half-capacity, he goes and hires an outside factory to make the Microsoft phones. What will that do to Nokia brand value when we hear of suicides at sweat shops, while Nokia's own smartphone factories are idle). And on and on and on.

If the early reviewers are even partly correct, Nokia is sitting on the biggest hit they have ever had. The N9 and MeeGo (and N950) could be to Nokia what the iPhone was to Apple or what the Razr was to Motorola. IF there ever was a time when the N9 was needed - it is now as Nokia profits have vanished. And what a HUGE profit engine would the N9 and N950 be to a market starved for competitive Nokia premium phones! The first Microsoft phone won't ship until the end of the year! But the N9 and the N950 could ship now! Yesm now. In Q3. Both of them! And Nokia has smartphone factories on idle. But the clueless Nokia CEO, Stephen Elop (aka the Micrsoft Muppet) - refuses to release the N9 in most of Nokia's biggest and strongest markets, and only offer the N9 in very limited release in 29 countries, many of which are small countries like New Zealand, Singapore and Norway. And he is not even allowing the N950 to be sold. And get this - this from the CEO of Nokia - he told Finland's biggest newspaper, Helsingin Sanomat - that even if the N9 with MeeGo was a huge hit, Nokia will not make more phones on MeeGo. Who is he working for? This from the Nokia CEO? 

If the CEO of a company has a hit product and restricts its sales - he is actively destroying shareholder value - it is not only 'cause' to fire him without compensation, it is breach of duty and the shareholders should sue Stephen Elop. Any Nokia Board Members who don't voice a call of no confidence for the CEO are suspect to collusion with the traitor and must also be fired and sued. (but I will return with the full scoop on the MeeGo and N9 and N950 later, including some financial modelling on what their impact could be to profits if launched broadly)

ALL HAIL APPLE

So, Nokia invented the smartphone. It had held the global lead in smartphone sales for 15 years. That has been a nice long run. It didn't have to end this rapidly - and certainly Stephen Elop will go down in history as the notorious saboteur CEO who destroyed his own brand and market - but there is a particular poetic justice in who is the new boss.

Apple was once the biggest PC maker. Then came IBM who took it. Apple saw its market erode was on the brink of bankruptcy making losses in the middle of the 1990s. By that time a Finnish phone maker decided to merge the pocket computer and cellphone and invented the smartphone. Then during the 2000s decade the PC makers all agreed that modern smartphones were indeed computers. With Steve Jobs at the helm, Apple joined the smartphone races very late in 2007 with the radical, iconic and all-altering iPhone and its iOS, app store and ecosystem; and in only four short years Apple displaced Nokia as the bigger smartphone maker (we cannot say for certainty if Apple is only bigger than Nokia, or if Apple is biggest smartphone maker - because Samsung might report bigger results as well). Nonetheless, it must be a good feeling over at Apple that their smartphone strategy succeeded in only 4 years to topple the global giant smartphone maker, Nokia.

And now when we add together Apple's Mac shipments, and iPad shipments, and iPhone and iPod Touch shipments - Apple actually sells more 'computers' than any other computer maker including HP, Lenovo, Dell, Acer, Toshiba (and in smartphones Nokia, RIM/Blackberry, HTC, Samsung, etc). So the king is dead, long live the king! Congratulations Apple. The jesusphone did truly change everything in mobile. Only four years to topple the giant. Wow. We were witness to history.

A TALE OF TWO STEVES

I want to mention also the two Steve's. When Apple was making losses, they brought back Steve Jobs, who rescued the company, turned into a powerhouse which now makes astronomical profits. Then we have Stephen Elop, who came to Nokia when it was making the biggest profits among the traditional handset makers (excluding those who are pure smartphone-makers like Apple, RIM and HTC). So Elop took profit-making juggernaut Nokia - and he destroyed it so it now makes massive losses, while slashing prices to make even more losses (and refuses to release profit-making MeeGo phones). So yes, Steve Jobs is the hero of all technologists. Stephen Elop is the evil opposite of Jobs. Where Jobs turns loss-makers into profit-powerhouses, Elop takes profitable giants and guts them. Hey. Am I the only one who is stunned that while Stephen Elop's Microsoft strategy clearly killed Symbian sales, why are dumbphone sales so badly down? Simple answer if you know anything about brands. When the CEO torpedos his own premium brand Nokia smartphones - that hurts ALL Nokia branded phone sales. Yes, Stephen Elop, you Microsoft Muppet. You must be fired and sued and barred from any executive position in any publically traded company. You are a disgrace! Your name will be synonymous with total corporate destruction from the inside - and by the CEO. Shame!

There will be several update blogs to these Q2 numbers. First up, you may want to see how the most accurate forecaster of Nokia performance now updates projections for Q3 and Q4. Yes, it won't be pretty. I will also return with projections for Nokia-Microsoft alliance smartphone market performance in 2012-2013; with the explanation why Microsoft is now a dead end for Nokia; and why Stephen Elop must be fired now. But read the Nokia market projection first.

Comments

[JM]

Tomi, I respect all of your writting and agree that Nokias situation would not have needed to come to this as fast as it did. Anyway, looking forward you should realize that Windows Phone has some major advantages over Qt on Symbian and Meego strategy:

1. It is a single non-fragmented OS, meaning that every single app will work on every single device: No redesigning the UI, no recomplining and no resubmitting your app. All the 25k apps in the Marketplace will actually be available to each and every device if the developer just checks an checkbox to make it available in that country. I doubt many Symbian devices (if any) have 25k apps available, even if the Ovi Store has over 50k apps in it.
2. Microsoft is undeniably the greatest software company on the planet and is extremely committed to develop and push Windows Phone. Infact, I've never seen them push anything this much or make such swift progress on anything, ever. Comparing the speed of development and ability to react on issues based on customer/developer feedback is from a different planet than what we've seen with Symbian and Meego.
3. There are many many times more .NET developers than Qt developers that could possible jump into backing the born mobile ecosystem. Additionally Microsoft's development tools and resources are unmatched.
4. The ecosystem Microsoft is building is not only a mobile ecosystem, but a whole "three screens and a cloud" one which can become a major selling point. Meego and Qt just couldn't match what Microsoft is building.
5. Microsoft has a bunch of services to put on the table that Nokia doesn't have. Most notably on the field of gaming, search, advertising and bussiness.

While Symbian might be well optimized for lower end hardware, technicly Windows Phone should be atleast as efficient as Android, and there are already Android phones out with 600MHz processors. MS did great job optimizing Mango and dropping the CPU requirement to 800MHz already. I don't think "Nokia doesn't have to pay for Symbian/Meego" is not a valid argument either. Paying for the development of two OSes sure isn't cheaper than paying for the WP license. Additonaly the MS deal did open Nokia some new income streams and marketing help.

Additionally when evaluating Nokias future, you should take into consideration all the technical (fragmentation) and legal difficulties Android is facing.

[Alex Kerr]

Good comment on AllAboutSymbian:

"EVERYONE:

a.) Just think for a moment where we'd be if Elop had said nothing about Symbian's end of life, back in the Feb 11th announcement. If he'd only said things that supported the platform (e.g. selling well, sales up, Anna + Belle coming, new GHz devices coming) etc. This was perfectly possible whether or not he'd said they're going to try WP phones too. And for anyone using the excuse that "he had to announce a massive total change to satisfy investors" - oh yeah? Look at the share price and market cap etc. So you're saying that would have been much lower if he hadn't announced Symbian's death?

b.) Just think for a moment where we'd be if Elop had decided to stick it out with Symbian and MeeGo, not give up on them, and make them work. Perfectly possible. So, i.e. the same as what we have now (i.e. announced improvements to Symbian) plus all the S40 stuff, just no WP at all.

I think in both cases Nokia would be MASSIVELY, MASSIVELY better off than they are now.

And hey, a 3rd option of c.) Taking b.) as above, but also developing WP phones in secret with MS and not announcing them until they were ready and then releasing them in select markets. That answers all critics and problems - solves all the Feb 11th fallout and secures Nokia's future with WP *at just the same timeframe as we have now* should Symbian actually not be fit for purpose as some people say (I believe it would be fine for years if they did some UI improvements).

Thoughts?"

[peter]

JM, you are making wrong counts on .net developers, while MS may have more .net developers, they are working for desktop/enterprise realm, there is no need to develop for windows phone to make a living. real developers for wp7.5 is much much less. plus not all .net developer can do silverlight, very smaller batch can do silverlight. furthuer more, MS is going to dump siverlight in prefering html5. haha, meego already have it in support.

as to the hardware optimiaztion, it is more about graphics accleration. guess what, even my latest laptop intel i5 can not run silverlight application smoothly b/c it is coupled with intel built-in graphics accelerator which is not enough.

imagine how much power it will need to run silverlight on smart phone. it wnot last for one day for sure which is main problem android faces due to its java wrapper.

meego does it much better than android and wm7.5.

fire elop, increase n9 production and sell n9 to the every region where human beings live,please.

[peter]

Alex Kerr, you got it right, however, this elop comes to nokia on his own agenda which is against the interests of investors, consumers, distributors, employees. he is also not for the interests of MS but for himself. b/c he is a criminal for criminals on Wall Street.

[peter]

How big crime has Steve Elop committed to nokia investors, $20B.

[Christian Maurice]

Good point Leebase, Apple is the only good computer maker. Apple is in good shape and will continue to be in good shape. Nokia need scale and big marketshare like Samsung. Nokia is in very bad shape... The true Nokia competitor is Samsung and LG...

[JORGE SPAIN]

Tomi,

All this is very sad. But honestly, important and transcedental decisions like Elop has taken, cannot be taken without the Board's approval. So for me "Gold Standard" Olilla and his Board are to blame:

a) For allowing OPK and his bureaucracy to screw up Nokia
b) For hiring a guy without previous telecoms experience like Elop
c) For allowing Elop to go ahead with his crazy plans and supporting his anouncements from February and onwards
d) For not having fired him until now. Even after these catastrophic results and his crazy statements about Meego and N9, which are actually quite criminal. Am sure this guy is getting a HUGE payoff from MSFT for all his deeds...

Olilla needs to be fired first. And then Elop...

Thanks for your blog

[@rodrigottr]

Cheers Tomi!

You were right since the beginning:

1 - THERE IS a boycott from carriers.
2 - It affects the whole Nokia portfolio of smart and dumbphones
3 - MeeGo Qt strategy was the best way since the beginning since now we see what it was capable with N9 and N950 (what we didn't knew on February but Tomi has always stated)
4 - Elop is a Trojan since he insists to focus on the unready WP during a catastrophic moment while there is a ready-to-go iPhone Killer inside his pocket. That benefits only Microsoft. That is absurd.
5 - Investors are CLEARLY showing what they want and that they new what would happen from this partnership: On 11th February Nokia stocks felt 10% on few hours. Now that the 11th February strategy showed its results stocks raised almost 7% already. Wall street knew it. why so many people still so damn blind?

The same stockholders that pressured Nokia for profits on September 2010 now shall ask them to go back to the old strategy and sell the N9 and N950 worldwide on a quarter that probably Apple nor Android wont be able to answer. Apple is too busy with the SIM card design, and with Steve Job's succession. Google is more focused on their social media strategy. All the others elements are just waiting to go. Ovi store, Qt development tools (that include S40 now), developers, carriers (like china mobile), even Intel partnership could be reestablished.

Another important thing was the opinion of Eldar Murtazin. He said what nobody (except for me) has said before: Nokia has an incredibly bad corporative climate now. There is absolutely NO TRUST on the leadership. Leaks and internal sabotage are happening all the time: new phones where leaked (the symbian 1ghz phones) and even software updates where leaked (symbian anna)

Now I guess that even for a blind deadman is very clear to see which is the wrong way and which is the right way. Is only a matter of time, I hope so.

If not, then we can say näkemiin Nokia (goodbye Nokia on finnish) hahaha

[Earendil Star]

Were it not for the plight of Nokia's employees, developers, stockholders and you name it, this situation would just be ridiculous. Yes: the situation is grave, but not serious.

One comment to all those defending TH Elop, the MS Dark Lord, and saying that everything was doomed from well before.
Did you see the latest numbers and graphs on smartphone sales? For example on AllAboutSymbian?
You must have noticed that the plunge -for Nokia- starts in Q1 2011, not earlier. This is FACT.
Who made the infamous February speech in Q1? You know better than I.
When did the first loss in decades take place? Shortly afterwards, in Q2 2011.
No need to add anything more. Everything to the contrary is just wishful commenting and not based on facts.
TH Elop's ways cannot be explained unless you consider him an (incomptetent) MS employee.
A CEO should be judged by the consequences of his actions. In this case, the consequences are catastrophic.
The simple fact that he is still holding his post is mind boggling... unless he was called in to actually destroy the company.

Sorry for the useless rant, but it's sad to see a company like Nokia being annihilated the way it is.
Not from a fair fight against noble challengers, but consumed from within by vicious injected parasite.

[Carlos]

@LeeBase I think that Apple is in very good shape in the computer market because of the iPod and iPhone. They were almost bankrupt.

Also I do not care if Apple, Samsung or Nokia is making more money. I care of the money that I, as a developer, can do. This is why the market share is important to me. Of course it's important to know of this market share how many are potential clients and this may not be equal to market share. For example, some time ago we sold an application to a customer that buyed symbian phones. He wanted the functionality and he didn't care about the sexiness of the device. Now I see that this niche is being taken by Android. iPhone is not an option here and I believe that Windows Phone won't be as they do not allow to sell privatelly.

[Tomi T Ahonen]

Hi all - first, I will be responding to all of you by name. Please keep the comments coming.

Secondly, please note, I have added now the revised projection of Nokia Q3 and Q4 market share, unit sales, ASP and revenues (and profits).

Hi Murat, rodrigottr, Baudrillard, Sami, Boris, peter and Sad

Murat - on iPhone peak. I was RIGHT that iPhone peaked, but it was for that quarter - nobody else called that - and I was OFF by exactly one percentage point of market share, that iPhone didn't peak for the year. As a forecaster, if I can be within one percentage point, I'll take that error any day. If you want to gloat about it, go gloat with all the other forecasters who were off by 5%, 10% even 20% for the year.

rodrigottr - thanks! :-)

Baudrillard - yeah. When will they wake up? I have some thoughs of how to wake them up haha.. stay tuned.

Sami - on 'firing Elop won't save anything' - you say declining market share is now locked in. Please consider this: First, that the resellers are in Nokia boycott - even Elop admits it (carriers are reducing inventory, haha, euphemism). The CUSTOMERS would be HAPPY to buy N8, E7, X7 etc phones if the resellers were not switching the buyers to Android and iPhone devices. Remember Q4 results, it was premium phones that were up, jumping ASP by a Nokia-record 15% in one quarter and boosting smartphone profits by 65%. The devices are good, the OS is good, the customers want the phones. Of course by now the N8 is not the hot phone of last Christmas but there is a slew of newer Symbian phones already out too. If the reseller boycott could be lifted, Nokia Symbian sales would instantly rebound - to some degree. Never back to 29% they were before Feb 11, but far above the dismal 15% where Nokia is today. Even if Nokia Symbian sales 'only' grew to half-point, ie to 22%, and at only today's 142 Euro ASP, that would mean added revenues of 1 Billion Euros - and at the Q4 profitability rate which we now know thanks to Nokia's new accounting - at 'only' 12.5% - that would give the smartphone unit 132 million Euros of profits. If that happened now in Q2, Nokia's smartphone unit would be only 10 million in the red, not 142 million Euros.

So the key is to end the boycott. That means killing Microsoft WP7. If Elop were to say 'hey, I was kidding, we won't do MS' - nobody will believe him. The only way Nokia will be believed that MS is dead, is if Elop is first fired. Even then, its not enough. Then Nokia has to have a CREDIBILE story why Symbian is resurrected. And that is MeeGo and Qt (and Ovi). So fire Elop, new CEO (or interim CEO/Chairman Ollila) announces return of MeeGo+Symbian strategy, that and I believe only that, would restore the reseller channel's belief that Nokia will not pull a bait-and-switch on them in a few months and launch MS after all.

What do you think, Sami. If Nokia did that, and key to it is firing Elop - Nokia could recover some of the lost Symbian sales - because the handsets and OS and Ovi are fine, the customers want them, but its the resellers who are now strangling Nokia.

As to blaming Elop. You are totally right that there were severe problems with Nokia years before Elop came along. You and I have debated here many times those issues, and you remember well my long blog about how I would fix Nokia - all about the marketing and execution, not the OS haha.. And I recall you also agreed with some of my suggested moves back from the blog in January, long before Burning Platforms. But Elop did now cause the terminal catastrophy. Nokia was mildly on the mend by Q4 with Elop newly in charge. Not fixed and solved by any means, but on the mend. And there were tons of things that needed to be done. Changing the OS was not the way to do it. That would only add to unnecessary complexity and change and disruption, without any perceivable benefits over Nokia's existing strategy of Symbian+MeeGo. you'll also remember I argued here a bit before the Microsoft announcement, that Nokia had the best smartphone strategy and would be crazy to abandon it haha.. (and it was)

So I have to blame Elop. He found Nokia near the edge of the canyon. And he pushed Nokia over the edge. All the trouble now is because of Elop and starts form Burning and Feb 11 Microsoft, and has been made worse since.

Boris - thanks, very funny.

peter - I agree, but if someone from the Board says now in public that Elop has to go, I think that Board member would get to stay :-)

Sad - some very interesting observations there (Guantanamo etc) and I appreciate your background. But on Microsoft having 40% with Nokia and partners in two years - that was a plausible (but unlikely) scenario back in February. It is now utterly impossible for a vast range of reasons. I will be blogging here a specific story to explain, so don't worry now, just please come back in a few days and read that blog, and lets discuss there, ok? Just wait, I have to do several blogs now so it will take me a bit of time. But I will explain why 20% by Microsoft - half what you believe - is impossible even by end of 2013. Not unlikely. Impossible. But don't worry, I will explain in full. Coming shortly.

Thank you all for commenting. I will return with more comments soon. Keep the discussion going.

Tomi Ahonen :-)

[swap]

You know what when someones platelets count in blood decreases because of some disease he gets weakened.He gets more weakened before he could actually realize the weakness. So when he finally realizes there's something wrong he rushes to hospital. Now hospital starts treatment. Still his platelet count goes down day by day.But when treatment starts the rate at which this count goes down becomes lower still damage continues until comes the day when you see very small decrement. And then slowly everything starts to become normal.
Apply this to Nokia.They were screwed up very badly. Even before Apple talked about iPhone/iOS, these Fins were working on touch UI. Maemo was there but it was not widespread nor it was widespread. Much hyped S60 Touch UI turned out be disappointment.Yes Nokia was still holding its ground but that was purely because of non-touch S60.With N97, S60 5th Ed.was screwed up further. A commenter here,'Sad day for europe' said in this comment "used to work for them but when I suggested that the Nokia N900 should have GSM capabilities, Ansi Vanjoki called me an idiot, his words were: No one would buy a big touch screen phone...". Yes even before Elop became CEO Nokia never put too much efforts behind Maemo.It had USB OTG from long ago and nobody knew it,atleast me. Nokia's attitude was don't fix it unless it's broken.They are the victim of they invented. Smarthone market was never fierce until Nokia release N95 which redefined smartphones. Their real fall-down started with N96.Then N97.Two consecutive N-series flagships were not received that well.In fact 5800 was much better in terms of software and sales than N97. They had screwed up Symbian development badly. It wasn't the Nokia signed program that did it. Developing for Symbian had become painful task ever with complex Symbian SDKs. You should try development. Even the Symbian OS itself was screwed because of different teams working on different parts of the OS and no coordination between them. Elop said it right, at Nokia software was considered as just another component of phone. That's the reason it took it so long to Symbian appear in its latest S^3 form. Cutting off ropes for Symbian from companys need of time. You know what Nokia was the biggest spender on R&D in whole Europe. It spent even more than Ford without any innovation at all. Most of their expenses were because of Symbian.Discontinuing Symbian has saved them many dollars. Though they will have to pay royalty to MS for every phone they make it'd be significantly lower than what it would cost them for every Symbian phone. I can say that because Nokia won't have to work on development tools n all and the WP7 is using the same programming languages which are used to develop desktop MS apps. So app development will be the MS' part to worry. By switching to WP7 Nokia is saving money on whole R&D thing. When Nokia was using Symbian it would customize their OS differently for every phone. They never kept it uniform. Not even for single series like N-series. N97 and 5800 had totally differently customized OS.5800 didn't have widgets support then. This thing was one more reason to complex and slow Symbian development and FW upgrades. Beside you couldn't upgrade your OS from current level to next one something which all OS could or can do including WinMo. Repeated Alarm was first introduced on N95 which was running on S60 3rd Ed.FP1 a feature which was there on Nokia featurephones from long ago. Why it took so long? Beside that feature and many others were not given to phones running on S60 3rd Ed.initial release like N73.Was it that hard? Yes. They would have to make whole OS compatible and optimized for older devices again.Resource wasting business.
Yes WP7 wasn't doing that well.But it's growing with baby steps.It's uniform across all phones.So wat's Nokia getting in this deal. They are getting special permissions to interfere with WP7 software which no other manufacturer has got.That's why you don't get HTC Sense UI on WP7.Besides the customized WP7 will run on phones other companies too.Nokia's excellent map services will on run many other phones.They can earn money there. Besides MS guidelines ensure that UX on all WP7 phones will be smooth and won't take 'another' learning curve when switching to another company.Phones will be upgradeable to newer WP7 versions too just because of required hardware which is already there. Android in this case is pretty bad. Companies use Android 2.2,some will even dare to use 2.1 to make phones using some pretty cheap hardware and then they will simply refuse updates. Look at how thoroughly MS verifies its WP7 and then only they release it to customers which also makes it(WP7) very stable.
Yes Qt is not supported by WP7 right now. But WP7 isn't ultimate. It's just 'meantime' release. Actual things will start when Windows 8 will arrive.It's said to have Qt support. With Win8 there will be support for ARM and SoCs so I won't be surprised if WP7 will be merged in or replaced by Win8.
MeeGo as everyone says is the only savior for Nokia isn't quite true.Nokia doesn't develop whole MeeGo just the handset part of it, though they were biggest contributor of MeeGo project. Besides that core MeeGo isn't ready to step in the market. What you see on N9 is the Harmattan UI which does magic. It's absolutely right that Elop announced his WP7 plans for company much sooner than needed. He should have held it until end of Q2 then another two quarters wouldn't have made much difference.
Right now what I see is damage is being done by the previous wrong decisions taken by previous CEOs. Yes they are bleeding but they are not yet dead. There are peak points and bottom points.Everything that goes up has to come down and then again has to go up.Nokia had seen peak points and in this rapidly changing industry nobody stays at top for very long. Nokia wasn't at peak, what we saw is when Nokia was going towards peak so it was all good.Now we've to see when they are going down. Last few statements look much irrelevant but that just came.

Regards

[swap]

Everyone says Feb.11 was bad day ever for Nokia but it was right time and right words to bring Nokia out of it's own dreamland where everything looked pretty.

[joel jaeggli]

tomi,

regarding which quarter in which the smartphone implosion began.

basically everything some of the fellows observed was likely in 2007 has come to pass... It's incredibly difficult to pick the quarter in which the decline began but as far back as the beginning of the global recession the nokia smart phone business was not expanding as fast as the the industry as a whole. like and avalanche the initial slide looks minor but slide accelerates and gathers mass as it moves down hill. the pretense of not abandoning the platform might have changed to the timing slightly but the terminal velocity was ultimately going to be the same.

maemo and meego got balled up in symbian fail so long ago it's not funny, the business landscape is littered with to little to late.

[Troll Tech]

Hey, Elop is not an idiot. He is a Microsoft's agent. His goal is to kill a competitor, that's it!

[PERUS]

You think OPK or Ollila or even Tomi would handle this situation better than Elop? If yes then you are still dreaming...

I don't understand why Tomi hates Elop soooo much, ok, he's not a finn but at least he can speak English very well haha. Tomi, you better enjoy your self, take a couple of biers at Wan Chai nightclubs and relax a bit and let Elop do his job, will you?

Nokia would stay on Symbian (boring OS, new Anna? Great, but did you see behind the code? If not then better not to say anything) and Meego Harmattan (two devices in one year?) until when? Until Apple produces a cheaper variant of iPhone and takes over the whole emerging market too? This will come soon or later and when it comes, Nokia will be even more in deep...

Nokia was "falling down" already since their upper management decided not to concentrate/prioritize higher touch UI long time ago. And now, iPhone and iOS is their UI/UX "norm" and reference for Nokia UI/UX designers, what a shame actually.

[Sami]

@tomi, thanks for the points. I'm just never going to agree with you that the Symbian OS "is good". It's not. Not from a developer's perspective, not from a usability perspective, not from a flexibility perspective. It may be good for low-power-consumption multitasking but that's not quite enough now is it. Symbian cannot be resurrected, and it should've been eased out years ago. Returning to that would be a bit like (actually, a lot like) RIM sticking to their now-antiquated OS instead of moving to QNX.

Also, Ovi is not "fine".

And finally I disagree with the point that customers would still want to buy Symbian devices. Why don't you speak to, say, 20 Symbian users who have switched to Android or iOS and ask whether they'd be willing to switch back. I have serious doubts more than one or two would.

[Robert Atkins]

Always nice to read knowledgable comments on Any forum.

Just read(another) article through Reuters News on Fall of Nokia. Author was Tarmo Virki, European Correspondent. He did not mention Elop, nor have I seen much mention at all of Elop's role in this fiasco. He seemed to think, like others, that Nokia just couldn't keep pace with Apple, could not produce phones that sold anymore due to Symbian.

No one seems to account for MS terrible sales so far, the Burning Platform Memo, the Skype factor, or that the phones will be designed *in California* for an American market which is a small fraction of world market. Why do so many of them seem to think MS will save Nokia, or vice versa?

Would someone send these writers and correspondents Tomi's URL, please?

Good night now.

Robert

[Jonathan]

Nokia has fantastic operator relationships - like none other. Its hardware is incomparible. Its global reach has remained unchallenged. Nokia has failed because it failed to predict what users would want in a phone beyond features. Software retention (like the App Store). Multi-usuability (ereaders, phones, music players, app launchers, etc.

The Nokia board brought in Elop to change the company and the poor decision making process. Elop was only at MSFT for a little over 2 years. Before that, he ran companies and divisions for Adobe, Juniper and Macromedia. He was a super-star. In large part, he can be credited with pushing MSFT out of a boxed-software mindset and driving its software services to the cloud. Give him a little credit here.

Give it 1 or 2 years before writing an article like this. If it's all a failure, then proudly pronounce that you knew it all along. If it succeeds, go ahead and write an article about how big a mistake you made writting this one and how you are the superb idiot who should be fired.

(P.S. I get the feeling this is more of a Microsoft-hater article than it is a Nokia-hater one. Had Nokia gone for Android as its OS, you probably would have written a very different, sympathetic article).

[viulian]

Well, I remember a quote (I guess by Napoleon, but not sure) that said something along the lines "Power is nothing, glory is everything."

I don't know how much Elop contributed to Nokia's power loss, because Nokia's glory faded a lot before his arrival.
- Switching to Symbian V3 and imposing certificates on the developers that wanted to innovate?
- The E90 display scratched by the keyboard when closed ?
- The N97 that was so expensive and slow ?
....

We are now witnessing the power loss following Nokia's glory going down. Maybe there was still some 'glory' left before Elop's arrival, but probably not enough to conserve the power.

I guess something similar happens to Sony too...
- X10 no updates of software for 1 year - a lot of frustrated customers that did not want to buy the Arc.
- Arc developing cracks 2 months after use.
- The data loss on their network ...

We'll see..

Microsoft plays smart, if they can't beat in quality - there are still other ways to win. Patents, waiting for opportunities, etc. Very good for them ...