The Ten Million Dollar Man - Stephen Elop Costs Nokia 10 Million Dollars More of Lost Profit - Every Day He Remains as CEO of Nokia

This is a long blog (10K words). I will attempt to calculate a 'minimum' level of how much the misguided Microsoft strategy is now costing Nokia, after we find that the strategy cannot revive Nokia's smartphone market share and in the absolute best case, would only get Nokia to 7% by end of 2011, a bottom of 6% in mid-2012 and recover to at best 8% by Q4 of 2013. Nokia is currently at twice that - 15% today and was almost twice that still, at 29% market share as recently as February 10th of this year.

This is what I have done. I have created a 'base case' of the bare absolute minimum level that Nokia would have been selling Symbian (and from mid 2012, MeeGo) smartphones, at the bare minimum average sales prices, and minimum profitability, to build the base case of what level of Total Unit Sales, Market Share, Total Revenues, and Total Profits, the Nokia smartphone unit would have generated, if Stephen Elop had not announced his Microsoft alliance on February 11. We can never know the true scale of that 'opportunity cost'. But we have enough absolute concrete data, that I can make a base case on the utter minimum assumptions, to get us a base case. It is VERY conservative, the real Nokia, even if run by some clueless clowns, would have done better than my base case. But I want to make the base case believable to even the most ardent critics.

Then I have plugged in the real numbers of what the best case scenario is for Stephen Elop's new Microsoft Strategy (as per my blog yesterday) through year 2013. And again, I have taken the absolute best case stats, the best most rosy and borderline-plausible numbers, to suggest if all went totally perfectly for Stephen Elop's magical strategy, what would that produce for Nokia in total Unit Sales, Market Share, Total Revenues and Total Profits.

Then we can compare what is the 'absolutely lost' opportunity. If the base case is extremely conservative, and the Elop strategy is the most optimistic possible, then the difference between the two will be the absolutely minimum acceptable difference - and any real cost to Nokia will be more than what I calculated. I think you will be aghast, when you are done with the analysis with me. Stephen Elop is now destroying Nokia at the value of roughly 10 Million dollars of pure profit abandoned every single day he is allowed to remain as Nokia CEO. Not 10 million dollars of 'revenues'. He is destroying 10 million dollars of profits. PROFITS. So as Nokia reported a loss of 487 million Euros in Q2, now today, July 26, you can add another 10 million dollars more of a loss he has personally achieved, just in his smartphone unit mismanagement today (there are more losses he is generating in the featurephones ie 'dumbphones' unit, but I won't even try to calculate those. The majority of the damage Elop is doing, is in the smartphone strategy with Microsoft). So yeah. On July 21 Nokia reported its Q2 quarterly results (ending June 30). Just in the five days since that press conference and conference calls with investors, Stephen Elop has now destroyed another 50 million dollars of Nokia profits. This is not 'shareholder value' as in the price of the share price (who can guess how huge that damage will be, by the time Elop is done). No. I mean just by Being Stephen Elopovich, he causes 10 million dollars of eliminated profits every day. He is the very definition of management poison.

So. Nokia Board? The CEO is destroying actual Nokia value at the rate of 10 million dollars of profit per day - that level is by the way increasing also - so how long will you put up with the 'Microsoft Muppet' - and when will you fire him. No matter what contracts and escape clauses and penalty clauses there are in Elop's contract or the Microsoft partnership deal - this damage is so severe, Nokia you have to fire Elop now! But lets get to the math.

BASE CASE

Lets create the Base Case. To see what was Nokia doing just before Stephen Elop started to mess with success on Feb 11 ie middle of Q1. Here is the actual performance of Q4 of 2011. Nokia smartphones unit grew unit sales by 7% from the quarter before (23% annual growth rate). That was real growth, it was not done with gimmicks like price cuts (that Nokia had tried before in attempting to boost market share) or by high marketing spending. Why do we know that? We know it, because the Average Sales Price (ASP) of Nokia smartphones went up. So there was no price cut to achieve artificial growth. And we know the other marketing efforts were also not used in excess. Why do we know it? Because Nokia profitability went up (this was the information we did not have under previous Nokia reporting when Nokia did not give details of the profitability of the smartphones unit, but Nokia has offered that info now in July, after the re-organization, and gave historical accounting data for all of the year of 2010).

If there is unit sales growth, added with ASP growth and a simultaneous growth in profitability, the unit sales growth is honest, real and valid. This is absolute proof that Nokia had a hit product with Symbian's latest edition, S^3, which was released for Q4, and which powers such phones as the N8 - which in turn became Nokia's bestselling new phone launch ever. And the ASP? It not just grew, where Nokia trend was a decline in the ASP of about 7% per quarter, for Q4, the ASP jumped an unprecedented 14%! This has never happened at Nokia. The N8 was truly a hit phone using Symbian, which powered all of Nokia's smartphones.

How much? The profitability leaped up a growth rate of 32% quarter-on-quarter from Q3 and hit 12.5%. That all meant that Nokia smartphones total revenues grew by a healthy 22% and the profits - my oh my - Nokia smartphone unit profits skyrocketed by 68% in just one quarter! reaching 548 million Euros (713 million US dollars) in just one quarter. On an annual level that is equivalent to 2.2 Billion Euros of profits - and yes my American readers, that is 2.8 Billion dollars of profits. For context, the latest Fortune Global 500 issue of the biggest corporations on the planet, reported that Nokia total 2010 profit was... 2.4 Billion dollars. By Christmas, powered by the hit new version of Symbian S^3 and Nokia's new hit phones led by the N8, the smartphone unit was driving so much profit, it alone would grow Nokia's total profits (bearing in mind that there is also the 'featurephones' unit and NokiaSiemens Networks and Navteq - these three units generate twice as much revenues as the total smartphone unit, so one third was able to generate essentially all of the profit by Q4)

You the reader may think that Symbian was a dead OS, it was undesirable, it was failing in the market, it was obsolete etc. That all may have been true of the older versions of Symbian, up to September 2010. It is not true now. The facts are irrefutable. From October 2010, Nokia had an honest hit OS that powered increasing sales, increasing ASPs and most importantly for Nokia - dramatically increased profits! Only a complete fool would step on this incredible success, and kill it.

You might say that Nokia problems started years before. Fine. That point is moot about Q4 Symbian S^3 and Nokia N8 etc success. No matter how much the Nokia ASPs and profitability and market share had declined, in the past, under previous Nokia leadership etc, if Nokia suddenly reverses all the trends, turns unit sales, ASP's and profits into growth - that is a hit product. Undeniably.

You might say Nokia market share was in decline and maybe even that "Nokia was losing to Apple's iPhone" Sure, if you measure profits, every tech company on the planet is losing to Apple. Apple is a profit factory. That is hardly a fair comparison, Google generates less profits than Apple, etc. Nokia should not be compared to a niche premium phone maker like Apple which only makes luxury phones, Nokia should be compared to its real rivals like Samsung, LG, Motorola etc who make all types of phones, smartphones and 'dumbphones.' That is the fair comparison. The appropriate comparison for Toyota's rivals is not Porsche a niche luxury car maker with essentially one product and massive profits due to the incredible loyalty - Toyota's real competition is Volkswagen and Ford and GM and Nissan etc. And when compared against its real rivals, Samsung, Motorola etc Nokia's profits towered over those of its real rivals. The Apple argument is utterly bogus, Nokia cannot ever become Apple and should not try. I am not saying Nokia should not try to make desirable phones. I am saying that Nokia cannot abandon all of its huge advantages of scale, to try to become a niche luxury phone maker. That would be as stupid as Toyota ending the manufacturing of the Celica and Corolla and HiLux pick-up and Landcruiser etc.

But lets look at Apple and Nokia. If you measure unit sales and market share - back in Q4, Nokia was as big as all Apple iPhones and all of those Samsung smartphones combined (Apple has just passed Nokia and many analysts including me, expect Samsung also to have passed Nokia pushing it from number 1 to number 3 this past quarter, Q2 of 2011). As big as Apple and Samsung, combined. If that is failure, please give me some of that failure.

Nokia invented the smartphone 15 years ago. That means, Nokia started with 100% market share. It cannot hold, the moment ANY competitor arrives, whether Palm or Compaq or HTC or Motorola or RIM or Samsung or Apple or whoever - the market share for the inventor will have to come down. That is normal. That is what is happening to the Apple iPad right now! Nothing wrong with that. It is normal competition. What is amazing, is that 14 years after inventing the smartphone, and with such global giants as HP (HP is twice as big as Nokia) and Microsoft and Google and Apple and Dell and Lenovo and Compaq and Sony and Ericsson and SonyEricsson and Siemens and Philips and Panasonic and Sharp and Toshiba and Fujitsu etc etc etc - all attempting do do smartphones - by Q4 of 2010, Nokia was still far and away - the runaway market leader - massively bigger than its rivals. MASSIVELY bigger. And that Nokia was growing sales - yes, it was growing slower than the market, but Nokia was still growing sales - and Nokia was increasing its average sales prices by a huge 14% in just one quarter and boosting its profits by 68%. This is legitimately called a juggernaut.

Nokia was by far the biggest smartphone seller in the world's biggest mobile phone market: China. (Just China's biggest mobile operator/carrier, China Mobile - one of three Chinese carriers - alone is as big as all US carriers put together - and that number doubled again! Yes, more than twice as big as all of US cellphone subscribers on all US networks). Nokia was not just big in China, it dominated that market. Canalys told us in 2010 that Nokia's market share of smartphones in China was - get this - 76%. Similarly India, the world's second biggest mobile phone market. Who was the dominant market share leader in India? Nokia. What of Russia, of Brazil, of Indonesia.. Nokia, Nokia, Nokia. And don't think its only the Emerging World markets. In 2010, Comscore did a comparison of market shares of the big European markets. Nokia in the UK, Germany, France, Spain and Italy - the big 5 nations of the EU which have a combined population bigger than the USA. Who was the top brand in every one of those 5? Nokia, Nokia, Nokia, Nokia and Nokia, with the worst market share of those big 5 European nations they had in France of 41% and the highest they had in Italy of 76%.  

Nokia smartphones had a continental market share lead in every continent but one, North America. So yes, I understand many of my readers feel that "Nokia had failed" and feel that "Apple had defeated Nokia", when the only market where Nokia has been weak for years before there ever was an iPhone, is North America. So North American analysts tended to get the Nokia picture a bit wrong. Nothing wrong with their views, its just that it was colored by what they saw at home, and they mistakenly thought also earlier that Palm would rule the smartphone world or that Motorola had defeated Nokia and Nokia was lost because Nokia did not do a Razr clone etc.

I am not trying to say that Nokia did not face challenges. Nokia's previous CEO, Olli-Pekka Kallasvuo had foolishly pursued a mad strategy of buying market share with deep price cuts and marketing support of the reseller chain. That came back to haunt Nokia which approached the brink of reporting a loss by the summer of 2010, and OPK was fired as CEO. So Nokia's big problem, when Stephen Elop came along, was not what operating system it had in its phones, it was the profitability. And what did Stephen Elop inherit. Thanks to the careful nurturing of Nokia's Symbian S^3 OS and the new N8 smartphone - which was delayed by Anssi Vanjoki - when it launched, it was a hit. And Nokia's profits skyrocketed by 68% in one quarter. If you were a competent CEO, you would say that Symbian S^3 and the N8 are actually 'solving your problem' - come on, 548 million Euros of profits (712 million dollars) - when Nokia's total annual profit was little more than 3 times that. When your profit jumps 68% in one quarter, you celebrate and boost that success. You don't go killing the profit engine and firing the 7,000 people who made that miracle happen that exploded profits.

But yes. Lets be clear. Nokia HAS HAD PROBLEMS. Nokia has had problems WITH PREVIOUS MANAGEMENT. Nokia has had problems with MARKETING and with EXECUTION. But the facts are, that Nokia's Symbian OS, in its newest version for Q4 was LOVED by the market, bought in huge amounts, boosting unit sales growth, average prices, profitability, total revenues and total profits. This is the ultimate win-win-win that is very rare in marketing (mostly you have to cut price to increase sales, etc, but understand how strong Nokia was in Q4 - they increassed sales WHILE INCREASING PRICE and while boosting PROFITS. That almost never happens unless your company is named Apple haha)

SO WHAT TO USE GOING FORWARD

What numbers can we use? I could easily say, that since Nokia grew 7% from Q3 to Q4, it would be fair to use 7% growth rate in our base case model. There is a lot of good evidence saying that is fair. The N8 had not even been sold in most countries for a full quarter yet, and was selling like hot-cakes in January in China for example. Then there was the E7, a superphone, even more expensive than the N8, running of course the Symbian S^3. The E7 was receiving a huge positive reception in late January and early February. Then there were many good Nokia premium phones coming down the pike, including the new X7, which powers Nokia's next update to Symbian, called Anna - already hailed as the best Symbian OS ever.

I am not going to pick 7% as the growth rate. I want to build not a credible model, but a really conservative model with minimal assumptions of the absolute worst case for Nokia. So lets go back to history. What of market share? Nokia's market share has been in gradual and steady decline since it invented the smartphone. The historical rate of decline for Nokia's market share has held almost exactly the same, at about 5 percentage points of market share, per 12 months. Every year, pretty much exactly 5% decline in Nokia's market share in smartphones compared to the year before. That pattern was broken only once, when OPK had his ill-advised adventure to try to buy market share, but after that mistake was corrected, you know what? The Nokia market share corrected itself - as we might expect - and returned - EXACTLY to the level it should have been. That decline brings Nokia to 29% market share (globally, obviously) at Q4 of 2010. And that model says Nokia should be abandoning 1.25 share points every quarter since.

This is what I will use. That brings us to 33 million quarterly Nokia smartphone sales by Q2 of 2012. And what growth rate on average would get us from 28 million in Q4 of 2010, to 33 million smartphone sales in Q2 of 2012. A mere 3% growth rate - I am using a model where Nokia's growth rate it had in Q4 - that 7% growth rate I could have used, will be cut by more than half! Is this fair? I am using such a bare-bones minimum model, it cannot be denied by anyone. Even when Nokia faces its best Symbian OS ever, having a superhot N8 phone with Nokia's best new phone launch ever - with many better phones coming in short succession - I am ignoring all that and cutting Nokia's growth rate in half. Is this not fair? As a minimum level, even the most incompetent fool could have managed as 'caretaker' CEO of Nokia to achieve that level of growth for a year and a half. So this is how I project Nokia market share and unit sales of Nokia smartphones from Q4 of 2010 to Q2 of 2012 for my base model:

Q4 2010 . . . 29.0% . . . 28 million

Q1 2011 . . . 27.8% . . . 27 million
Q2 2011 . . . 26.5% . . . 29 million
Q3 2011 . . . 25.3% . . . 30 million
Q4 2011 . . . 24.0% . . . 36 million

Q1 2012 . . . 22.8% . . . 34 million
Q2 2012 . . . 21.5% . . . 33 million

I think that is very conservative and cautious. This is a good base model. Some will never like anything I say, haha, but I think most fair-minded people will agree, Nokia should under any competent management, manage better than this.

THEN LETS ADD MEEGO

Why do I end at Q2? That is the original point in time, when CEO Stephen Elop said he would end Symbian sales and have all Nokia smartphones switched to Microsoft Windows Phone 7. If Nokia can manage the switch-over from Symbian to WP7 by end of Q2, and Nokia needs to change tons of specifications and use different chips (Qualcomm's Snapdragon CPUs rather than Texas Instruments ARM CPUs etc) - and the first WP7 phone won't even be ready until end of Q4 of 2010 (and wont' even be made in Nokia's own factories, it is outsourced to Taiwan) - then certainly Nokia can manage the same transition from Symbian to Nokia's home-grown OS, MeeGo. MeeGo was ready as an OS by Q1 of this year and the first MeeGo phones have been ready to sell for a long time. The first MeeGo handset, N9-00 (since cancelled by Elop) was ready to ship in February. The second MeeGo handset the N9 (internally known as N9-01) was ready to sell in Q2 but was delayed by Elop to Q3. And the third MeeGo handset the N950 is already shipping now in small quantities. Nokia arguably has a 'fourth' handset that could run MeeGo (and has run it in prototype tests) called the N900, an earlier variant of the N950 and with lesser specs, could be sold as a discount version as an 'entry level' MeeGo device today.

If Stephen Elop can expedite Microsoft WP7 adoption at Nokia - he could have done the same for MeeGo (instead he has repeatedly and consistently delayed and postponed MeeGo launches, gutted its staff and resources and actively torpedoed its market attention - this to the effect of several top MeeGo execs resigning in protest, and Nokia's CTO, yes Nokia's Chief Technical Officer resigning also in protest. He is now on 'indefinite leave' until the end of the year when his contractual obligations end to Nokia)

So I am assuming from Q3 of 2012, the sales of Nokia smartphones will be MeeGo based. And that Nokia will transition from Symbian to MeeGo (just like Elop expects to migrate from Symbian to WP7). Except that I give a longer migration time for MeeGo as it would have started in Q2 of 2011 of course.

And what do I expect Nokia to do with MeeGo? You may have read that MeeGo is the hottest newest most impressive OS out there, many Apple loyalists call it the first Nokia phone they have ever wanted, its that good. Many US based tech reviewers call it superior to Android and on par with the iPhone! Some have even compared it to how the iPhone is called the jesusphone, now giving the N9 with MeeGo the monicker - godphone. Is there any way to trump the iPhone? Lets play some poker. If you bet 'jesusphone', I can call your bet,  raise you that, and call this 'godfphone'.

I am not here to say the N9 with MeeGo is a godphone, please don't get upset. I am reporting what OTHERS have said. I am not here to say N9 with MeeGo will be an iPhone-beater, that would be a very big ask. I honestly do believe - and have said repeatedly - that nobody will ever make a smartphone that is more desirable than the iPhone. That is Apple's core competence. But this side of the iPhone, go read the reviews of the N9. They are positively glowing, every single one of them. It is BY FAR the most loved new Nokia phone, ever. It is miles above the best that anyone writes about the latest Motorolas or HTCs or Samsungs or Blackberries or SonyEricssons or any other smartphones (except iPhones, although there are plenty who call the N9 Nokia's first iPhone-beater).

So, what will happen when all Nokia phones are MeeGo based? Remember, MeeGo has a migration path for all Nokia's 400,000 strong Symbian developers (world's biggest army of mobile app developers) by using Nokia's development tools called Qt. No other OS platform has gone through this trouble to provide a migration path. Not even Microsoft bothered when they switched from Windows Mobile to Windows Phone. (Bizarre, as Microsoft did it on the PC side, migrating from DOS to Windows. Oh, that was in the era of Bill Gates when Microsoft knew what it was doing. Now in the Steve Ballmer era, Microsoft is interested only in screwing everybody, including its own developers). And yes, Nokia's world's best (or arguably second-best) ecosystem with by far carrier relationships - over 130 carrier billing relationships ! (what all app developers prefer to get maximum payments from their customers). Something so valuable Microsoft wanted it to its ecosystem. The world's most used mapping on Ovi maps. The worlds' second-most used app store (at the time in Q4, now after Elop sabotaged Nokia/Symbian/Ovi etc, Ovi has fallen to third). An installed base of Symbian phones in use that is twice as big as the second biggest smartphone platform by installed base. And thats not counting the S40 phones, many of which can use Ovi services and other Nokia services. And so forth, and so forth and so forth. If Stephen Elop had bothered to celebrate Nokia's massive lead in ecosystems, he would have huge love and loyalty from it. Instead, Elop went to pains to hurt and damage and destroy his own ecosystem, replacing it with the weakest, that of Microsoft.

What do I project after MeeGo is on all Nokia phones? I think its obvious Nokia's gradual market share decline will turn into growth. If MeeGo today - today - is far better than say Blackberry's OS or Palm or Windows Mobile or - many say - better than Android - and Nokia push that and develop it even further - this is the newest OS, it is fully open source, it is Linux based - then its fair to assume it will be very competitive by summer of 2012.

I will not allocate any growth due to MeeGo. I will keep my model conservative. I only assume that Nokia sales will hold steady, that Nokia's market share will stabilize. Yes. I count no recovery, only a stabiliziation of Nokia market share. And by Q2 of 2012, we arrived at 21.5% market share. I will model that share to hold until the end of our period, to Q4 of 2013. Thus the Nokia Symbian-MeeGo market shares and unit sales will look like this:

Q4 2010 . . . 29.0% . . . 28 million

Q1 2011 . . . 27.8% . . . 27 million
Q2 2011 . . . 26.5% . . . 29 million
Q3 2011 . . . 25.3% . . . 30 million
Q4 2011 . . . 24.0% . . . 36 million

Q1 2012 . . . 22.8% . . . 34 million
Q2 2012 . . . 21.5% . . . 33 million
Q3 2012 . . . 21.5% . . . 36 million
Q4 2012 . . . 21.5% . . . 41 million

Q1 2013 . . . 21.5% . . . 42 million
Q2 2013 . . . 21.5% . . . 46 million
Q3 2013 . . . 21.5% . . . 50 million
Q4 2013 . . . 21.5% . . . 57 million

Note how modest even the MeeGo total unit sales growth will be when the market share holds steady. The growth rate is only 9% quarter-on-quarter, this is not iPhone territory. It is what RIM ie Blackberry has been doing recently until its growth stopped. That is the modest level of growth I project for Nokia using MeeGo. If Nokia has the planet's most astonishing new phone and OS (this side of the iPhone 5), and I only say it matches the recent growth of the Blackberry, thats fair, don't you think. This is not an optimistic model. This is a very conservative model.

LETS POPULATE THE BASE MODEL

Good, now we have Nokia market shares and unit sales, on a very conservative 'even a fool could do this' model up to the end of 2013, and yes, I slash Nokia's global market-leading market share of 29% in Q4 down to 21.5% market share by end of 2013, when Android would be twice the size of Nokia and Apple would have jumped ahead of Nokia too. But these three brands and their operating systems (Android, iOS and MeeGo) would control about 80% to 90% of the global market of smartphones. And yes, I am modelling Nokia to having fallen from biggest to third in the operating system wars. This is a very conservative model for our base case.

Lets add average sales prices and profitability. What level to use? Nokia's ASP was 155 Euros in Q4 of 2010 (about 200 US dollars) and it had just jumped 14% from Q3, powered by Nokia N8 sales and other premium phones. The N8 wasn't sold in every market from October 1, it was 'ramped up' so by Q1 of 2011, Nokia N8 would be selling the full quarter in every one of its markets. The ASP would definitely go up. Then there is the E7 - a phone costing 15% more than the N8 - this would raise the Nokia ASP even more in Q1. And then from Q2 we would have the X7, another premium Nokia smartphone, etc. At least in the short run, next few quarters, it is certain the Nokia ASP would go up, not down (if there was no silly Burning Platforms memo by Elop disparaging his own phones and then his ill-timed Microsoft announcement on February 11, etc). Then there are the new MeeGo phones such as the N9. The tech press reaction has been unprecedented love for the N9 and MeeGo - and bear in mind, the N9 costs more than the E7. This is priced above the iPhone. So the ASP trend would be upward from the 155 Euro/200 US dollar level of Q4. What level should I use? I think I will play this ultra-conservative. Lets say NO GROWTH.

Lets keep the ASP at a steady, even 155 Euros for the duration of the model. No growth whatsoever. Now we don't have to argue with comments on if my growth rate was too aggressive or too mild. Lets make this bare-bones. Nokia ASP growth simply stalls and holds steady.

Then what of Profitability? Again, the N8 and Symbian S^3 powered Nokia to a massive 68% jump in profits for Q4. Massive. The profit margin for the whole smartphone unit was up to 12.5%. For Q1 there would be more N8 sales, and new E7 launches and soon new MeeGo phones and even more advanced Symbian Anna based smartphones like the X7. The profit margin was on a strong growth trend. I will again say, lets make the base model with no growth in profit margin at all. Yes, zero growth. Keep the profit margin as flat, at 12.5% for the duration of the model. Is this reasonable - go read those comments on the N9 and MeeGo, how much it is desired now, and how much Nokia can sell those new smartphones at a premium. There is plenty of opportunity to boost profits. But I keep the profit margin flat.

So now we can populate the model. I get these numbers for period, market share, unit sales, ASP in USD, total revenues (in USD), profit margin, total profits ie 'contribution':

NOKIA BASE CASE (WITHOUT MICROSOFT) - SUPER CONSERVATIVE PESSIMISTIC CASE

Q4 2010 . . . 29.0% . . . 28 million . . . $200 . . . $5.7B . . . 12.5% . . . $713M profit

Q1 2011 . . . 27.8% . . . 27 million . . . $200 . . . $5.6B . . . 12.5% . . . $699M profit
Q2 2011 . . . 26.5% . . . 29 million . . . $200 . . . $5.9B . . . 12.5% . . . $734M profit
Q3 2011 . . . 25.3% . . . 30 million . . . $200 . . . $6.1B . . . 12.5% . . . $763M profit
Q4 2011 . . . 24.0% . . . 36 million . . . $200 . . . $7.3B . . . 12.5% . . . $907M profit

Q1 2012 . . . 22.8% . . . 34 million . . . $200 . . . $6.9B . . . 12.5% . . . $860M profit
Q2 2012 . . . 21.5% . . . 33 million . . . $200 . . . $6.8B . . . 12.5% . . . $839M profit
Q3 2012 . . . 21.5% . . . 36 million . . . $200 . . . $7.4B . . . 12.5% . . . $921M profit
Q4 2012 . . . 21.5% . . . 41 million . . . $200 . . . $8.4B . . . 12.5% . . . $1.05B profit

Q1 2013 . . . 21.5% . . . 42 million . . . $200 . . . $8.4 B . . . 12.5% . . . $1.06B profit
Q2 2013 . . . 21.5% . . . 46 million . . . $200 . . . $9.3 B . . . 12.5% . . . $1.16B profit
Q3 2013 . . . 21.5% . . . 50 million . . . $200 . . . $9.9 B . . . 12.5% . . . $1.24B profit
Q4 2013 . . . 21.5% . . . 57 million . . . $200 . . . $11.5 B . . 12.5% . . . $1.44B profit

That is our base case. If Stephen Elop had let a good thing be. Taken the amazing success he found in Symbian S^3 and Nokia N8, had supported fully the Symbian family, developers, the Ovi store, the migration path to MeeGo, the Qt developer tools, and launched MeeGo phones in a timely manner globally, his cash cow and profit engine, the crown jewel, Nokia's smartphone unit, would be generating - in a VERY conservative model - this year 2011, total revenues of 25 Billion dollars and 3.1 Billion dollars of profits (the smartphone unit alone generating 29% bigger profits than all of Nokia Corporation with all four business units in 2010). And that would grow to 29 Billion dollars of revenues out of smartphones in 2012 (not this would be half of the total size of Nokia when he took over only 15 months before) and balloon to a very nice 39 Billion dollars of revenues from smartphones by 2013. Meanwhile Nokia profits out of the smartphones unit, in this VERY conservative base case model would grow to 3.7 Billion dollars next year in 2012 and a very nice 4.9 Billion dollars by 2013 - yes twice the total profits all of Nokia earned last year, just before Elop took charge. If you double your profits, that is usually a very good sign of competence in the CEO. But if your name is Stephen Elop, you don't like growing profits. You want to destroy value.

This is our base case. Stephen Elop inherited a company, where its premium smartphone unit had just completed a turn-around, was greatly increasing profits, increasing revenues and increasing sales. He was on schedule to earn 10 million dollars of profits every single day of his stewardship if he just had let the success in his smartphone unit continue to happen. But he did not. He is the Microsoft Muppet. He took all that profit and destroyed it. Or thats not fair. In Q1 his Microsoft Melodrama caused Nokia smartphone unit profits to plunge to less than half, to 218 million Euros (283 million US dollars). So in Q1 his 'management' cost Nokia 429 million dollars of abandoned profits. In Q2 he plunged the smartphone unit from making profits to making losses. In Q2 the Nokia smartphone unit generated 147 million Euros of a loss ie 283 million US dollars. So in Q2 in addition to abandoning 699 million dollars of certain profits, Elop added 283 million on top of that with his moronic market moves angering his reseller channel etc - so his cost in Q2 was 982 million US Dollars of lost profits to Nokia Corporation.

So far, since February 11 (or to be precise, a few days prior to that, as these problems started with the notorious and ill-informed Burning Platforms memo where all the Nokia troubles started) the wise 'Stephen Elop Management Style' has so far cost Nokia only 1.4 Billion dollars of abandoned profits. If we assign February 4 as the starting date of the mess - Stephen Elop has destroyed 9.7 Million Dollars per day, of Nokia PROFITS every single day since February 4, Saturdays and Sundays included.

If you are an investor. Imagine how much more healty Nokia share price would be, if Nokia had generated 1.4 Billion dollars more of profits in the past two quarters, rather than now reporting a huge loss? And if you are a Board Member of Nokia, if this Microsoft Muppet causes Nokia a daily drain of almost 10 million dollars of lost profits - every single day - how many days will you put up with his tomfoolery? Lets do the math. Elop costs Nokia 291 million dollars of abandoned profits every month! (abandoned profits means, this is what Nokia would have generated in 'ceteris paribus' conditions. Nokia 'automatically' earns that and only active intervention by the CEO would eliminate that. You have to take active measures to destroy it. If Elop had done nothing. If CEO Stephen Elop had been in a coma from February to now, Nokia would now be generating 291 million dollars more of profits every month than the losses it now makes. What is that in a quarter you ask? Easy to do the math for you, per quarter Elop now costs Nokia 873 million dollars of abandoned profits. And yes, since his February delusions, Elop has already caused Nokia irretrievable never-to-be-recovered damage worth 1.4 Billion dollars of pure profit. Pure profit. Please consider the biggest swindlers and hoodloms of history. Bernie Madoff the Wall Street swindler who stole billions of US investor money. While Stephen Elop so far has only destroyed his first Billion dollars so far, if we let him continue, he will soon be rivalling Madoff for the world record biggest heist in US corporate financial scandals. For we can now calculate what damage Elop will do with his moronic Microsoft Strategy.

CAN MICROSOFT SAVE NOKIA

No it can't. The Microsoft strategy was announced on February 11. There were many who said immediately this was madness. There were others who felt it was a good move by Nokia. Many others felt that Nokia should have gone with Android. And those who were more familiar with Nokia details, knew that Nokia Symbian S^3 was actually very strong and competitive (see above) and had performed a remarkable come-back, and because of the migration path to MeeGo, Nokia would be a fool to abandon the world's best ecosystem (some would say second-best) and go with the weakest ecosystem out there, that of Microsoft's Windows Phone.

But can Microsoft save Nokia? No it can't. I have already given the clear math, that even if we take the ABSOLUTE best launch of a new OS ever, growing from zero to 11 million units per quarter - that of Google's Android - and we add the best mass-market growth of any single smartphone maker ever from 11 million to more - that of Apple's iPhone - and use both of those growth rates - Nokia and Microsoft will end up by 2013 with merely 8% of the global handset market. Nokia had 29% market share before this silliness started. Nokia has now suffered what we all knew would happen, the widely accepted technology marketing theory called the 'Osborne Effect' and Nokia has killed the sales of its own products. Less than five months from announcing the end of Symbian, Nokia has seen its market share cut in half - to 15%. This is BY FAR the biggest drop of any leading market share of any company in any industry. As I wrote, when BP had its darkest moments in the oil spill, it did not lose half its market in five months. When Exxon Valdez crashed in Alaska and caused its oil spill, Exxon did not lose half its market in five months. The worst marketing and management blunders from Toyota car brakes to Sony exploding laptop batteries to British Airways cabin staff strikes and walk-outs, none have caused half the market lost in five months. Even New Coke, launched by Coca Cola in 1985 - did not cause Coca Cola to lose half its market in five months. Pay attention to Nokia now, this is history being made. Nokia is making a new world record destruction of a brand.

So, take the world's biggest markets share by a massive margin to number two. Cut that in half in 5 months. The cut it in half again! And that is the best case - best case - that Microsoft and Nokia could hope to achieve. Remember, I used the best ever performance in smartphones, that of Google at its launch, and that of the iPhone when it really hit its global potential with the iPhone 4 model. The very best possible stats as comparison. Nobody in their right mind dares to say Microsoft the Evil Empire can achieve as good performance as Google, or Nokia the wounded giant, could hope to better Apple's iPhone. And using that as the benchmark under the absolute bright-eyed, pie-in-the-sky wishful-thinking mathematics, we arrive at 8% market share by end of 2013, after two hard years of the best efforts by Microsoft and Nokia.

So if you think Blackberry's 13% market share today is 'great' - that is still 50% better than where Nokia+Microsoft will be in 2013. No. Microsoft cannot save Nokia. But lets see how expensive is this Microsoft Madness. How much is Stephen Elop's Ego-Trip costing Nokia over the next two and a half years. I think this is illuminating.

POPULATE THE MICROSOFT MODEL

I had constructed the Microsoft + Nokia smartphone sales model yesterday, using the most optimistic, wildly too happy assumptions, if all goes perfectly for Nokia and Microsoft, truly every single bit is perfect, this is what Nokia and Microsoft will sell in the next years up to end of 2013. (please see my blog yesterday for the exact logic in buidling this forecast - and please remember, I was the most accurate forecaster of how badly Nokia market share, ASP, total revenues, total profits etc would fall from February 11. So I do know what I am doing). Here is my model from yesterday for Nokia Microsoft sales forecast as Nokia transitions from Symbian to Microsoft WP7 based smartphones:

Q4 2009 - 28 M total Nokia Symbian smartphones (actual this was 29% market share before Microsoft announced)

Q1 2011 - 24 M total Nokia Symbian smartphones (actual)
Q2 2011 - 17 M total Nokia Symbian smartphones (actual this is 15% market share today)
Q3 2011 - 13 M total Nokia Symbian smartphones
Q4 2011 - 11 M total Nokia smartphones - 1 M WP7 + 10 M Symbian (Nokia market share hits 7% by time Microsoft phones arrive)

Q1 2012 - 11 M total Nokia smartphones - 4 M WP7 + 7 M Symbian
Q2 2012 - 11 M total Nokia smartphones - 7 M WP7 + 4 M Symbian
Q3 2012 - 11 M total Nokia smartphones - 10 M WP7 + 1 M Symbian (Nokia market share bottoms out at 6% before starting painful and slow climb back)
Q4 2012 - 12.4 M total Nokia Microsoft WP7 smartphones

Q1 2013 - 14.0 M total Nokia Microsoft WP7 smartphones
Q2 2013 - 15.9 M total Nokia Microsoft WP7 smartphones
Q3 2013 - 17.9 M total Nokia Microsoft WP7 smartphones
Q4 2013 - 20.3 M total Nokia Microsoft WP7 smartphones (this will be 8% market share)

That gives us the comparison of how the current Stephen Elop strategy can do - under the absolute best case scenario - in the next coming years. It is not pretty. But that is not the full picture. What of revenues, perhaps this is good news? What of the average sales prices of Windows Phone based smartphones? What of the profits? While the market share declines, theoretically if the profitability is really good, this could still be good news for Nokia.

Yes, that is a nice fairy-tale. Lets put in the facts as we know it. The truth is brutal, it is incredibly bad for Nokia. I have reported already that Nokia reseller channel is in boycott of Nokia Symbian phones. Well, what of Microsoft? Actually, the Microsoft based smartphones were put on its own boycott in June, right after Microsoft went and bought itself a company called Skype. Skype is hated by the carriers! They saw how Skype destroyed the voice minutes, revenues, profits - especially of international calls and long-distnace calls - for the fixed landline carriers/operators. The mobile operators have fought tooth-and-nail against unlimited Skype calls on their networks (some operators sell Skype in premium packages and some challenger operators/carriers like Three offer Skype in thier bundle, but have already priced Skype into their base prices, obviously). Now when Microsoft bought Skype in the end of May, Microsoft became the carrier/mobile operator community's Public Enemy Number One. Over 70% of the global mobile operator revenue is in voice calls - and about half of their profits - and most of the profit is in the lucrative international calls that Skype targets. The carriers worldwide will refuse to subsidise and support any Microsoft based smartphones.

Please note - it is NOT what the customer wants, that gives us a market success in mobile phones. It is what the carrier/operator wants. If what the customer wanted, we'd all be using Google Nexus One phones now. If its what the customer wanted, US consumers would be using Nokia premium phones - which years before an iPhone were offering unrestricted WiFi - what the consumers want - but the US carreirs refused to support and wanted blocked. If its what the consumers want, we'd know big global smartphone success in the brand of Palm (killed by the carriers, loved by consumers) or by Microsoft's Kin phones (killed by carriers...) etc. If it was what the customer wants, and the carrier did not matter - then Apple's iPhone would not have gained any sales from Verizon. The EVIDENCE is clear. The carrier is what decides smartphone success, not whose phone is better. Yes, I agree, you and I want Skype on our phones. The carriers will not let Microsoft do that across its platform and destroy 70% of carrier revenues and 50% of their profits. This is never going to happen.

If the Nokia Microsoft strategy was seen as smart and clever in February by some, that vision of a Microsoft+Nokia paradise died in May. And there is already widely reported a reseller boycott hitting Microsoft based smartphones. Now Microsoft is so afraid to release its Windows Phone sales numbers (they have crashed) that Microsoft is not even giving us the number. It is that bad!

But lets put all that on one side. Lets use the most optimistic possible Nokia fairytale scenario in the above, and lets populate that with some reasonable assumptions of Nokia Microsoft WP7 based smartphone numbers. We do have guidance on the ASP's for example and we can make reasonable guesstimates on the profit margins etc. Lets plug it in.

What ASP? Well, we know the Nokia Symbian ASP declined 4 Euros from 142 Euros (185 US dollars) in Q1 to 138 Euros (179 US dollars) in Q2. This reflects the Osborne Effect, obviously, ie the wholesale rejection by the retail channel of Nokia Symbian smartphones after the Burning Platforms memo and the February 11 announcement of the death of Symbian, to be replaced by Microsoft WP7. Now right after Q3 started in July, Nokia announced across-the-board cuts to its prices of 15% at the top end of the phones (ie smartphones). That would suggest the Nokia smartphone ASP for Q3 might be as low as 117 Euros (152 US dollars). And Nokia is forcing 10 new Symbian phones into the market that is comprehensively rejecting Nokia smartphone sales (note in total contrast to Q4, by Q2 Nokia unit sales declined by a catastrophic 31%, Nokia ASP fell by 3% and Nokia profit margin fell by 12.4% from a positive 6.2% to a negative (-)6.2%. Nokia even included in its accounting data that they boosted marketing expenses by 6% in Q2 in a desperate attempt to generate some demand for the dead Symbian product line. So in Q4 all numbers were up, in Q2 all numbers had reversed and were down).

So. What is the verdict? I say we make this Elop scenario the most rosy it can possibly be conceived. Lets ignore the radical across-the-board price cuts (which were so hazardous they got previous Nokia CEO fired in 2010) - and lets assume Nokia Symbian phones can retain most of their prices, and the ASP would decline only 5 US dollars per quarter (it should be 5.20 US dollars to keep the Euro/US dollar exchange rate but lets keep this simple, we don't need the decimal point, and note, the model is even more optimistic because every five quarters, I am giving the Elop strategy a bonus dollar in higher ASP than what they should have). So we say the ASP for Symbian phones will decline by 5 US dollars every quarter, from the 179 US dollars it was in Q2 of 2011. That is a linear decline in ASP falling only to 154 US dollars by Q3 of 2012, when the last few Symbian phones would be sold.   

Then what of the new Microsoft Windows Phone based smartphones? We do have good guidance on that ASP. Microsoft's head of the Windows Phone division, Andy Lees, speaking to 15,000 Microsoft developers at the big Microsoft event in July, said that Microsoft smartphones had an average price of 400 US dollars recently, but that has tumbled to 200 US dollars today (Tomi comments - perhaps this is yet another sign of the reseller boycott, even as Microsoft cuts prices in half, they lose so much sales, Microsoft is now ashamed to publish the number of units sold..)

But yes, Andy Lees gives us the July 2011 number, ie Q3 number of 200 US dollars. And then he tells us how Microsoft projects WP7 phone average sales prices to decline next year. He says the prices will fall dramatically to up to half where they are now. He said ASP's for Microsoft WP7 phones next year will be between 100 and 150 US dollars.

Very good. We have solid numbers here. Lets be very generous to Nokia and Stephen Elop's Microsoft alliance strategy. Lets take the absolute top levels of that. Lets say the current ASP of Microsoft phones drops only to 150 dollars in 2012, and lets further push that to Q4 of 2012. So from 200 US dollars in Q3 of 2011, to 150 US dollars ASP by Q4 of 2012. And a linear decline, 10 dollar decline per quarter.

Then lets take Andy Lee's number for the bottom assumption, but use that for 2013. So lets not assume the prices fall again by half for 2013. Lets say Microsoft's ASP only falls to that 100 dollar level by Q4 of 2013. This is an extremely rosy interpretation of Microsoft's guidance on its smartphone ASP.

And finally what of profitability? Thats the toughest one. Nokia was very strongly profitable in its smartphone unit back in Q4 but now is making a big loss in that unit. Stephen Elop promised in his Q2 results that Nokia would generate a zero loss plus/minus two percentage points, so Nokia could do as high as 2% profit or as badly as 2% loss. That is some kind of wizzard-magic, Elop has been watching too much Dumbledore. (Why is it madness to expect Nokia zero loss for Q3? Because first the smartphone unit reported a nominal loss of 147 million Euros ie 191 million US dollars. By 'nominal' I mean, that the loss is mitigated by a one-time royalty payment by Apple for IPR infringements that happened over Apple's use of Nokia patented properties without permission since 2007. So that one-time payment covered 16 quarters. And its value was 430 million Euros (560 million US dollars). Yes. You understood it correctly. Nokia's real operating loss was 430 million Euros / 560 million US dollars worse in Q2 than reported. That is the point from which Nokia has to start to 'recover' in Q3. Nokia did not produce a 247 million Euro/321 million US dollar loss from its handset unit. In reality Nokia produced nearly a 677 million Euro loss ie 880 million US dollar loss in the handset unit!

From that, we hear that the NokiaSiemens Networks unit (loss-making in Q2) is doing so badly, that even after half a year of attempting to sell NSN, all buyers have walked away, knowing Nokia is doing so badly, they can buy NSN for much less if they wait.

Then yes, the handsets unit (both smartphones and 'dumbphones' or 'featurephones') generated nearly a Billion US dollars of operating loss in Q2, after we remove the one-time royalty payment from Apple. With that, now Stephen Elop's 'management' has cut Nokia handset prices by as much as 15%. If you generate a loss - and you cut prices - your losses will get bigger. That is not a way to produce a profit.

There are no silver bullets in sight. Nokia would have a magical profit-making smartphone - Nokia's N9 with MeeGo but Elop refuses to release that in most of Nokia's big markets like say Germany, England, France, Spain, India etc - and so. Nokia forces undesirable Symbian phones to the market. So is there any honest chance of Nokia managing a 'zero profit' in Q3. This is not a financial analysis blog, but I think its pretty safe to say, Nokia will report huge losses in Q3. Expect a profit warning soon from Nokia. And please judge the competence of Stephen Elop when that comes, why on earth would he promise zero losses now with Q2 results? Did Stephen Elop fail basic mathematics in prep school?

But for our model? Lets suspend reality, lets accept this "Elop Economics" based forecast, that somehow Nokia returns to zero losses in Q3. And lets say, that means the smartphone unit - before any Microsoft phones are sold - also returns to zero losses (zero profits).

And lets say, even as the Symbian phones become ever more toxic, ever more undesirable, ever more hated, lets say somehow Nokia manages to keep the smartphone unit at zero profits when selling Symbian phones until the end. I think this is absolutely implausible, when the unit is ramped down, but lets say he manages the miracle and Symbian phones produce a zero profitability till the end of Symbian.

(Let me contrast this to the Nokia Symbian+MeeGo scenario in the above. Because Nokia offers a migration path from Symbian to MeeGo, the whole ecosystem will support the migration and there would be no reseller boycott and that is why the profitability would stay stable. This loss of profits is directly due to the Osborne Effect and incompetent Elop management)

Then what of Microsoft Windows Phone 7 based smartphone profitability? Thats the biggest unknown here. We do know some things. We can see that for example the first Windows Phone based smartphone is a clone of the N9 (but adding one button for differentiation I guess). The specs are mostly similar to the N9 so the costs should be similar. But we also know the Microsoft WP7 operating system is very demanding of the CPU, memory etc resources. Nokia will have to buy faster and more expensive CPUs from Qualcomm and place more memory on the phones just to be able to run WP7 effectively. These will increase costs. Also look at the massive market failure of all WP7 based phones and how much the market prefers the MeeGo powered N9 compared to the first WP7 based Nokia phone sample.

So Nokia has less demand, it has to push the WP7 phones more so invest more marketing. Microsoft already tells us the demand is so weak that prices will fall to half in just one year. And the costs go up with more expensive components. What is worse, Nokia owns the world's biggest capacity of mobile phone factories in nine countries including China, India, Brazil etc. Now half of their smartphone factories sit idle, but what does Stephen Elop do? He outsources first WP7 smartphone manufacturing to .. Compal of Taiwan! How inefficient is that? Stephen Elop came to Nokia, all Nokia analysts, and the Nokia Board and the Nokia investors said Nokia's primary problem is in execution, its efficiency is a problem. What does Elop do? He adds complexity, he adds inefficiency. And this helps execution exactly how?

But lets be optimistic in the Elop model. Lets say WP7 based smartphones can achieve the same level of profits Nokia did in the last quarter when Elop was in charge, and Nokia managed a profit with its smartphone unit - ie Q1 of 2011. At that time the profit margin of Nokia smartphones unit was 6.2% essentially exactly half what it was when Nokia had the success of Symbian S^3 and the N8 one quarter before. Is this fair? It should be clear, that because Nokia has to add more costly components, it cannot make smartphones on WP7 as cheaply as on Symbian now. As Microsoft admits no demand for their phones clearly Nokia marketing costs have to go up. And most of all - because Nokia never had to pay a royalty when using Symbian (or MeeGo) but Nokia has to pay a royalty for every licence of Microsoft WP7 - then yes, if we say Nokia's smartphone profitability with Microsoft would be half that of the best that Symbian could do at its recent peak - I think 6.2% is a fair profitability to assign to the Microsoft WP7 phones at least in the first two years when they are ramped up and introduced to the market.

Now we can populate the Elop Microsoft Strategy model with the ASPs, Revenues, Profitability and Total Profits. It gets interesting.

NOKIA MICROSOFT SCENARIO - ULTRA-POSITIVE OPTIMISTIC CASE

Q4 2010 . . 29% . . 28M Symbian . . . . . . $200 . . . . . $5.7B . . . 12.5% . . . $713M profit

Q1 2011 . . 24% . . 24M Symbian . . . . . . $185 . . . . . $4.5B . . .   6.2% . . . $278M profit
Q2 2011 . . 15% . . 17M Symbian . . . . . . $179 . . . . . $3.0B . . . - 6.2% . . - $185M loss
Q3 2011 . . 11% . . 13M Symbian . . . . . . $174 . . . . . $2.3B . . .   0.0% . . . $    0M profit
Q4 2011 . .   7% . . 10M Symb/1M WP7 . $169/$190 . $1.9B . . .   0.6% . . . $  11M profit

Q1 2012 . .   7% . . 7M Symb/4M WP7 . . $164/$180 . $1.9B . . .   2.3% . . . $  43M profit
Q2 2012 . .   7% . . 4M Symb/7M WP7 . . $159/$170 . $1.8B . . .   3.9% . . . $  71M profit
Q3 2012 . .   6% . . 1M Symb/10M WP7 . $154/$160 . $1.7B . . .   5.6% . . . $  98M profit
Q4 2012 . .   6% . . 12M WP7 . . . . . . . . . $150 . . . . . $1.8B . . .  6.2% . . . $115M profit

Q1 2013 . .   7% . . 14M WP7 . . . . . . . . . $137 . . . . . $1.9 B . . .  6.2% . . . $119M profit
Q2 2013 . .   7% . . 16M WP7 . . . . . . . . . $125 . . . . . $2.0 B . . .  6.2% . . . $123M profit
Q3 2013 . .   8% . . 18M WP7 . . . . . . . . . $113 . . . . . $2.0 B . . .  6.2% . . . $125M profit
Q4 2013 . .   8% . . 20M WP7 . . . . . . . . . $100 . . . . . $2.0 B . . .  6.2% . . . $126M profit

There you have it. This Microsoft ultimate best case scenario of super-duper wishful-thinking market love, will produce at best, by Q4 of 2013, yes in two-and-a-half-years, a minimal profit of 126 million US dollars, on smartphone sales of 2 Billion US dollars. That in a quarter where Nokia has clawed back market share to 8%, selling Microsoft-powered smartphones that have an average price of 100 dollars.

To put it in annual numbers, by this model, Nokia's new Microsoft strategy would produce in 2011 total Nokia branded smartphone sales of 11.6 Billion dollars of revenues (down from about 20B in 2010). That would be cut further in 2012 to 7.3 Billion US dollars with a slight upturn by 2013 to 7.9 Billion US dollars of total revenues by the smartphone unit. How bad is that? Remember RIM, the company who makes the Blackberry and all analysts seem to think RIM is now dead? RIM sold... 19 Billion dollars of smartphones last year! And Stephen Elop's Microsoft 'strategy' would trade a giant Nokia smartphone empire for a tiny bit-player less than half the size of RIM. He IS on a mission to destroy Nokia!

What of those profits. Yes, 2011 smartphones at Nokia would by this supremely optimistic scenario still produce an annual profit (and please, PLEASE do not assume that will happen. Nokia's profits of smartphones this year will not materialize, this year will produce losses). But yes, lets give Stephen Elop every conceivable benefit of the doubt. Lets say he is honest and accurate and really he did not fail basic mathematics - then yes, this scenario says Nokia smartphones will produce a modest 104 million dollar profit in 2011. Now we are in Motorola and SonyEricsson territory of meaninglessly small, truly miniscule profits.

And just one quarter of Nokia Symbian S^3 powered smartphones like N8 yielded profits of 713 million dollars in Q4 when Elop took over! How mad is the Microsoft Muppet? He trades 713 millions every quarter for 104 million once per year? That is only 28 times worse! He HAS failed math!

But lets look beyond this year. Maybe there is a silver lining. What of 2012? Yes. 2012 is better, according to this super-rosy scenario. How much better? Nokia's Stephen Elop Microsoft strategy gets Nokia smartphones unit to produce an annual profit of.... 328 million. The Nokia before Elop destroyed it, was generating that much profits every 5 weeks. Now he struggles with his Microsoft buddies - under the very rosiest scenario imaginable - to produce that level in one year - not this year but next year.

And the end game? Yes, its a bit better. By 2013 the total annual profit generated by Nokia's Microsoft strategy in the very best case imaginable, would bring total profits of 493 million dollars. You know how ironic that is? Its almost exactly the same, what Nokia did in just one quarter BEFORE the new Symbian S^3 based smartphones. Yes, that 'failing' Symbian was so powerful, in Q3 of 2010. Nokia smartphones produced almost that amount of profit - in one quarter. And now Nokia can look forward to the Microsoft Miracle producing that level of profits in a whole year.

WHAT IS STEPHEN ELOP COSTING NOKIA NOW?

So we calculated that Stephen Elop's actions have already caused 1.4 Billion dollars of abandoned profits in just five months. He should be fired for that already. It is criminal. But it does get far worse. Now he is causing more damage to Nokia, every single day that he remains in office, and that the Microsoft strategy is held as Nokia's official smartphone strategy.

We can calculate the absolute minimum of how much Nokia loses every quarter, every year, in fact every day. And its easy. Take the absolute worst case scenario of the best case as the starting point. Then subtract from it the absolute best case of the Stephen Elop strategy. That gives us the bare minmum of how much is Stephen Elop costing Nokia, for every single day he remains at Nokia. (remember, because we made an ultra-conservative Nokia base case, and a super-rosy Microsoft scenario, the real damage to Nokia will be much bigger than these numbers.) The numbers make me weep, really. Look at this:

This very quarter, right now, Q3 of 2011, in July of 2011 - every day that the Nokia Board waits in firing Stephen Elop - he costs the company another 8.5 MILLION dollars of ABANDONED PROFITS that can never be recovered. Every day he loses Nokia 42 million dollars of abandoned sales of Nokia branded smarthphones - that can never be recovered. He is actively shrinking the company every day he is let to remain in the helm. He is destroying Nokia so fast, he kills off one tenth of the size of Nokia as it exists today, every four months! He is an assassin!

But Stephen Elop's Microsoft Madness is like a cancer, it gets worse the longer we wait. By Q4 of next year (if there is a Nokia left by next year) every day waited before Elop is fired, Nokia abandons 10.5 million dollars of pure profit. And it gets so bad, that by Q4 of 2013, Stephen Elop's daily cost to Nokia profits is up to 14.5 million dollars. Yes, just by being Stephen Elop, he of Burning Platforms and of Microsoft, he costs Nokia shareholders lost smartphone sales revenues of 105 million dollars per day - yes, 1 Billion dollars of abandoned sales every ten days, and - and - he every seven days - every week - Elop destroys another 100 million dollars of profits that can never be recovered.

NO NPV, NO IRR, NO ROI

There are standard measures that accountants use to measure the value of investments. They are called Net Present Value (NPV) and Internal Rate of Return (IRR). These are used to calculate the Return On Investment (ROI). This Mad Microsoft Misadventure by Stephen Elop has no return on investment. Its NPV is negative. It never achieves an IRR break-even point ! Hello! The Microsoft project - under the MOST ROSY SCENARIO IMAGINABLE - cannot return a profit to Nokia. This is utter madness, it is a dead end, it has to be ended IMMEDIATELY.

Understand also what that means. It means that any monkey could have run Nokia better than the damage done by Stephen Elop. Understand - it means very literally, if Stephen Elop had been in a coma from February - Nokia would be 1.4 Billion dollars better off today - not in revenues, in PROFITS. I would put it to you, my readers, Nokia's share price would be far healthier if Nokia produced strong profits. And if Elop is allowed to run Nokia for the next two-and-a-half years, he will destroy a total cumulative amount of 10.5 Billion dollars of profits. How can I put this in context. Thats more than total Google profits last year! This is what Elop will destroy (at a minimum) if he is allowed to stay in charge and pursue this suicidal Microsoft strategy for Nokia.

THE STRATEGY IS STILL REVERSABLE

But there is one silver lining. While Stephen Elop has been on a destruction rampage at Nokia HQ, firing thousands of competent people willy-nilly and badmouthing all of Nokia's ecosystem assets etc, the damage can be undone. Not completely, Elop has been the worst CEO ever and has certainly destroyed more value than any CEO in history, and will go down as the worst year ever seen, but - but - but - the damages can be undone, to some degree. 

And now we have the tools to measure at least in rough term, what kind of value would any options have. Nokia cannot ever recover to 29% market share with 28 million unit sales of smartphones and 200 US dollar ASPs and 12.5% profitabilty and 5.7 Billion dollars of sales per quarter and 713 million dollars of profits per quarter. BUT THE DAMAGE CAN BE UNDONE, to at least some degree.

Note, every single day that change is delayed, destroys PERMANENTLY Nokia existing value that can never be recovered. This guy is poison. He is destroying Nokia profits simply by existing. I am not even saying what his perception is with the carrier community who mistrust him; with the Nokia developer community who despise him for destroying the promised migration path; the Nokia employees who have lost all respect for him and think of him as a joke incompetent to run any major company.

The question now becomes - Why is Nokia's Board not reacting. By very many other analysts, not just me, Nokia's CEO Stephen Elop is a total failure and leading Nokia to ruin. Why are the Board members not acting to remove him? If the Nokia Board does not act - especially after we see the kind of massive losses to Nokia that Elop is now causing - then the Nokia Board is in collusion - and that means - yes, if the Board does not act, they are guilty too! They too must be investigated and the guilty parties in collusion with Elop must be fired 'for cause' and sued by Nokia investors.

This farce has gone on long enough. The Microsoft Muppet costs Nokia 10 million dollars of abandoned profits every day he remains in office. He is the costliest CEO in history. He is actively damaging the company by his mere presence now. He has to be fired. (but yes, this series is not done. I will come back to study the costs and benefits of abandoning the Microsoft strategy. What options does Nokia have and what would they cost now, after all the damage by Elop. Stay tuned).

UPDATE 29 July - I have now calculated the cost of undoing the damage. Much damage has been done that can never be recovered, but what if Nokia did abandon the Microsoft strategy and return to MeeGo (and continue with Symbian). What would that business case look like? Read Imagining the Impossible.

Comments

[JORGE SPAIN]

Tomi,

Nice blog as usual. The numbers are even worse than I could imagine. It's a great idea putting a daily figure to this "poison".

Any idiot could do things better, unless he has a mandate from the BoD to do what he is doing now. If I was a Nokia shareholder I would start a class action suit against "Gold Standard Ormilla" and the other Directors.

Somebody is hoping to buy Nokia on the cheap and we all know who it is - MSFT

Thanks

[Tomi T Ahonen]

First to all

I deleted a couple of pointless comments. The rules here on my blog are simple - you must have read the blog before you post comments. If you comment contains something that I would have to write 'as I wrote in the article' - that is a total waste of time for my readers and me. I delete all those comments immediately.

Specifically - you know who you are - that topic was CLEARLY covered in the blog. Don't repeat nonsense, respond to my blog article and your comment will remain. But if you ignore my writing and post drivel here, I will delete your comments like I have done with hundreds before.

To all others, please keep comments coming (hi Jorge, I'll return a bit later to respond to your comment, don't worry obviously this was not directed at you)

Tomi Ahonen :-)

[rafiii]

The board of Nokia is like the chamber 46 in the manga Bleach. The truth is that they are all dead but no one knows and the real person making the decision is the bad guy.

[Flux]

This proves that the amount of words in analysis has nothing to do with it's validity. Do you know why you got comments from people who didn't read the whole thing? It's because the entire piece is so off base that reading it is pointless from the point where you say Symbian wasn't a dead OS.

Nokia was/is rapidly using up their customer loyalty. Ever since the new generation of smartphone OS's entered the market it's been abundantly clear that symbian simply won't cut it anymore. If you sell inferior products and the only thing keeping your sales up is customer loyalty you're running on borrowed time. Claiming S^3 is a valid competitor to iOS, Android and yes, Windows Phone is foolish in the extreme. Have you read reviews of Nokia smartphones lately? The hardware has been recieving praise by almost everyone but the software has been found lacking, and that's a big understatement.

[n900lover]

Flux:

Well, I don't know about iOS or Android, but somehow claiming that S^3 ISN'T valid competitor to WP is foolish in the extreme squared squared squared. The sales numbers speak for themselves, the fact is WP isn't competitor to anyone.

You have to wait few months before Elop's work is complete and S^3 will have sales somewhere around zero, THEN WP will face competitor it can match.

[Kirill]

As an N8 owner (bought it in October) I can say that S^3 is NOT good, and it didn't advance forward at the speed that was promised.

Here's a brief history of my feelings about N8:
- Just bought it. Hardware is stellar, unique features as Zune music playback and FM transmitter, great camera, great media device overall. Software is not good, but, coming from E71, there are a lot of cool new features.
- New Year. Still enjoying the device. Waiting for the delayed software update with QWERTY keyboard and new QT-based browser.
- April. Still no update. Getting bored by the phone, but waiting for a 2nd wave of WP7-devices.
- End of July (now). No hope for the software update. X7 and pink N8 ship with Anna already, but somehow it's not available for existing N8's. Symbian^3 is buggy, stupid, and 100% outdated. As soon as 2nd wave of WP7 appears on the market, I'll grab it. If N8 breaks down now, I'll grab the most cheap Android as an interim device.

So, sales of S^3 last fall were good, because it was acceptable, and some promises have been made. Now S^3 is very old. Just look at E7 or X7. How do they sell? Bad.
Would they sell better if Symbian was still the main platform? Just a bit, because there will be more QT-based apps. But Nokia will be doomed even worse.

[Giovanni]

@Flux:
One thing is adding another OS (WP) to the list, another is voluntarily killing the current (at the time) best selling OS and it's (promising, see N9) successor to make room for the external one. What Elop has done is a deliberately HUGE criminal act.

[Kirill]

Speaking of N9 - it's NOT a "magical profit-making" device. It's a very beautiful experiment, and that is why it is loved by the press. Commercially, it's hopeless - check out the poll at http://hi-tech.mail.ru/news/misc/nokia_n9_rossiyskie_ceni.html, 81% say that N9 is too expensive. And that's Russian market, where Nokia's share increased last fall.

[Sander van der Wal]

A comment about Elop being hated by the Nokia developer community because the destroyed the Qt upgrade path. Not that I hate Elop, as far as I am concerned he is trying to get Nokia out of it's own mess. The people that are to be blamed (and not hated) are the ones who did not forbid the creation of multiple competing UI API's on top of Qt during a time when Nokia still had a change to win developer mindset. For instance.

I used to think that putting Qt on top of Windows Phone would have been a good idea. It is, but not for Nokia and neither for Microsoft. It is only good for developers.

To belabor the obvious, it is bad for Microsoft because it devalues the WinPhone platform.

For Nokia it is more of a mix.

Primarily, it is bad because it creates a confusing message about MeeGo. If MeeGo is good, WP is not needed. So MeeGo is not that good.

Secondly, consider what would happen if Qt was ported to Android. Developers could move their apps to cheaper hardware, giving the hardware competitors an ecosystem paid for by Nokia. I am sure they would love that, I would, but for Nokia it is not good.

The only thing that would make sense for Nokia is that they would have more WP apps with Qt on top of WP. But then, look at the amount of time Nokia took to get Qt running on Symbian. It took years and years and years, and it is still not completely finished. I cannot image that bunch being able to port Qt to WP in a year. And with the size of the Symbian/MeeGo developer ecosystem, there won't be that many apps missing.

[n900lover]

Kirill:

And the fact that Elop is trying to kill N9 in every possible way, including pricing, supports your point how exactly?

If WP is such miracle, then why not start with same (or even higher) price as N8 and N9? It has superb UI and lots of ecosystems, people are lining up before stores just to touch it, so giving it away for 200 euros would be grave crime, right?

[John Phamlore]

Tomi,
I try to read everything you post, but I still can't understand how you can argue that Nokia should have ever even considered Linux over Symbian.

Here's another speculation (I am no insider obviously) on how Nokia's flirtation with Linux led to catastrophe: it is the root of the current problems with US carriers.

Nokia in the early 2000s deciding to switch to Linux led it to eventually ally with Intel for MeeGo. For this the US carriers would never forget and never forgive Nokia until it made its present purge and capitulation to Windows Phone 7. The reason is that Intel was also helping to back WiMAX, initially marketed as a possible existential threat to the US carriers, a threat to provide an alternative dis-intermediate the US carriers.

Intel is also being punished. Essentially the US carriers will kill off mobile Intel products and do their best to damage Intel's market for notebooks, with ARM tablets as the replacement. Just today I believe Engadget is carrying a story about an HP AMD Zacate notebook with Verizon LTE connectivity. Meanwhile Intel efforts such as mid books go nowhere.

Just today Intel said it competes with Qualcomm:
http://www.theinquirer.net/inquirer/news/2096921/intel-competes-qualcomm-arm
Not long ago Qualcomm was in full lawsuit mode vs Nokia, for their lifeblood is their tax on mobile technology through their patent portfolio. But Qualcomm has not dared to present an existential threat to the US carriers, and LTE with a Qualcomm tax is preferable to what was threatened with WiMAX.

To see how badly the Linux blunder clouded Nokia's judgement, notice how Qualcomm and Nokia's fortunes diverged over the past decade. At the start of the last decade one would have wondered if Qualcomm could continue to extract its IP tax considering that neither European nor Asian nor developing markets would be all that sympathetic to a US company. But by the end of the decade, Qualcomm had agreed to a patent cross-licensing scheme with Nokia so that Qualcomm could offer a full wireless solution on their own chips, had taken a license with ARM, and had purchased from AMD a mobile GPU division to create a complete ARM SoC.

Meanwhile Nokia did ... nothing to advance its own ARM SoC, the path that all of competitors Apple, Qualcomm, and Samsung chose. Nokia was apparently deluded that its alliance with Intel, the weakest and most hated company trying to break into mobile computing, would actually prod Intel to produce chips that could actually be used in a Nokia energy efficient phone or tablet. Also Intel has no mobile GPU solution having to license from PowerVR, a company they do apparently own a piece of but which they hardly can push around. And Intel does not as of yet offer its fabs for contract work such as Samsung can perform for Apple.

Has there ever been less gained from a technology alliance than what Nokia has gained from allying with Intel?

[Flux]

@ Giovanni
Isn't Elops timing perfect then? Nokia gets to launch their phones with mango right off the bat, they will be backed by Microsofts massive marketing department. They'll get games integration worth a damn for the first time since the original snake.
Microsoft KNOWS WP7 in it's current form isn't a real competitior. It lacks so many obvious features, multitasking for one. It will be a real competitor with mango though, quite unlike what S^3 could ever be.

Do I think what's happening now is the best that could happen to Nokia? No, of course not. There was a time when Nokia could have had a chance going their own way, sadly they failed to innovate and were consequently left in the dust. Steven Elop is trying to salvage as much as possible from a very bleak situation, without a change in direction Nokia would be reduced to manufacturing dumbphones for emerging markets. I for one believe Nokia should be a smartphone powerhouse once more, not from any misguided loyalty but because the hardware is so damn good.

[elmo]

Potentially we could spends pages and pages of virtual ink speaking about Symbian, was as terrible as painted by Elop, or as good painted by Tomi.

But if you stand on Elop side, as Nokia CEO, Timo made already a list with the 12 biggest mistakes made by Nokia CEO, now you may question some points of the 12, but still Elop made so clear mistake, like the Osborne effect, that are simply unbelievable.

You may want to think that Elop is stupid, that does not know maths, etc etc ... but I don't believe a person at that level, even if is a criminal can be stupid.

So ... Elop is a CRIMINAL, no other options.

Now, Timo is calling "Elop must be fired 'for cause' and sued by Nokia investors."

I'm with it ... Timo you are highly influence, you also own an internet space ... it would be nice to collect Nokia investors, and act against these people ... I own was what consider a lot of Nokia shares, what could be enough for by a house with garden in Finland in the good Nokia days ... I don't accept that a CRIMINAL did rubber my money, as you painted Nokia was on the possible path for make good profit every quarter till 2013, like it did always since before 2000 ... we as little nokia investor WE NEED TO AGGREGATE AND MAKE A CLASS ACTION AGAINST ELOP AND HIS FRIENDS.

Thanks

e_lm_70

[cycnus]

Tomi,

You really know how to amaze your reader :)

I really hope that it's not too late for BoD to fire elop. I know how powerfull the Nokia should have been. Do you think that if BoD fire elop now, Nokia could grow back faster (trying to catch up what's been missing), or that's part is lost forever?

As of now, I'm really confused on what spell that elop or MS has put on the BoD. Why BoD didn't react at all at elop stupidity. it's really a criminal to let elop destroyed nokia.

btw,
if you watch the leaked sea ray video, you could see that elop were breaking the fourth and fifth wall. I think when he's saying that if there's something in sales, should talk to him, he's trying to answer your writing about the boycot. so, i think the leak is intentional (thus breaking the fifth wall, because he's communicating with you).

[JS]

Wow, each blog I read Timo I want to puke on my shoes. Hand me a pot of coffee, better yet make it a triple. Having worked for Nokia throughout the 90's here in the US market under Paul Chellgren & KP Wilska (great leaders) reading your thoughts makes me utterly sick. "The Osborne effect" as you have brightly pointed out is the ultimate crime here. We never discontinued a handset model without having ramped up volume on a new unit and having carrier support/buy in on it. Elop didn't cancel just a single handset he destroyed an entire fleet of handsets. Could anyone imagine BMW telling their dealers & the world that the 3 Series will be discontinued in 24 months and never replaced, but we are still going to make millions of them and we expect our dealers to stock the inventory?! Really? They would clean house on the 3 Series model. This is product marketing 101... and Elop didn't forsee this? As if the carrier/dealer community had a vested interest in Symbian moving forward??
As far as Symbian rev3^ and Anna updates they would have been more than up for the challenge of Android and iOS, at the end of the day the carriers dictate which smartphone moves of the shelf not the consumer... with Nokia scale/volume (at least in Q4) they would have been in the ballgame to compete. Meego should have been a great highend to midrange smartphone platform to build on from mid 2011 and on.
Looking forward to what you have to say on how Nokia and it's board move this ship in a new direction. This is an utter discrace to one of the world's great brands.
Thanks

[khim]

This whole blog in the last few month is just gone crazy. RIM and Nokia were DISRUPTED. By now it's obvious. Here is good article which explains what happened and why:

http://www.unwiredview.com/2011/06/22/how-nokia-was-disrupted-part-1/
http://www.unwiredview.com/2011/06/23/how-nokia-was-disrupted-part-2/

There a lot of trouble with disriptions (read "The Innovator's Dilemma" and "Innovator's Solution" for good overview).

The most problematic characteristic is the following: usually it only becomes obvious if techlogoy is disruptive or not LONG after the fact (8"HDD, 5"HDD and 3.5"HDD were disruptive, but then 2.5" were not and 1.8" were A DEAD END). That's why we can excuse Nokia when it fumbled around with Maemo (insane Intel alliance can not be excused because by that time it was obvious that we are in the middle of disruption).

The next serious problem: the usual strategy (talk to customers, work harder, make product better) just DOES NOT WORK. EXISTING CUSTOMERS JUST DON'T NEED THINGS disruptors offer. But they lust about them. And disruptors are imporoving things. FAST.

This is ANOTHER problem of disruptive technology: PARTNERS don't need a disruptive novelities. They don't have a large enough capacity (HDD and hydraulic diggers), of they don't last long enough on one battery charge (iOS and Android smartphones), or... whatever. This is NOT what your partners are asking about. But some OTHER people want these novelities (or else disruption will not work). And their resellers, partners and subcontractors are growing and learning. FAST.

This means you usually don't have a luxiry to develop your own adequate replacement: usually it's better to buy some newcomer while you still have money and slowly transfer your activities to new department (don't try to grow nevelities in your old organization: it's a disaster 9 times out of 10). You are on borrowed time! You own cutomers are first slowly, them more and more rapidly switching. YOU MUST DO SOMETHING FAST!

And here's the cinch: you CAN NOT DO ANYTHING FAST. Your old organization is too entrenched in "we'll need to polish this or that thing to perfection before release". You don't know neither how to iterate in small steps but quickly (a-la Google) nor you know how to iterate in huge steps but rarely (a-la Apple). Instead all your improvements are small, incrementall... and often they are improving the wrong thing (who cares about quality of optic if your phone does not give you good traffic-based driving directions?).

You think Nokia can manage 0.5%/month share drop for year 2011 with SYMBIAN? I can understand why people stop reading at this point.

To see the fate of Nokia under "any monkey" leadership you don't need to look far: take look on Blackberry.
1. It had few new models in 2010 - like Nokia.
2. It had "solid upgade strategy" (with QNX upgrade) - similar Nokia.
3. It grew in 2010-Q4 - like Nokia.
4. It held the market share in 2011-Q1 - like Nokia.
5. It too collapsed in 2011-Q2... uhm - like Nokia.
THIS is your base scenario you should compare with Elop's reign. NOT rosy phantasyas from your article.

2011 destruction was in fact inevitable! BOTH RIM AND NOKIA RAN OUT OF TIME!

What any competent leader (who knew that it's a disruption) should do? Sell phones on new platform in 2011-Q1. It does not matter who will make them (HP, Samsung, HTC or even ZTE). They must be good (by NEW definition of good) and they must be on sale. IF NOT THEN YOU MUST PREPARE SWITCH IN SILENCE AND STRETCH YOUR OLD PLATFORM'S LIFE AS FAR AS POSSIBLE! You trump your old platform, you explain how it'll continue for years, you continue business-as-usual - and all thye preparations for new platform launch are from separale location and perhaps even with separate branch. Paint them as "an experiment" (and be ready close if by some chance your old product is accepted by market - it's possible, too).

Instead Elop have chosen a platform which is "basically good, it only needs slightly more time" (this is THE ONE THING YOU DON'T HAVE when disruption is changing the industry) and then explained how we'll drop old platform like a hot potato (this is something you should never do unless you are realy to SELL the replacement).

So yes, while your estimates of Elop competency are on-target there are nothing to change now. Nokia is too entrenched in WP7, it can not quickly switch to Android or something like WebOS (besides WebOS is not all that hot either) and RETURN TO SYMBIAN WILL NOT CHANGE ANYTHING.

THIS ship left the port. Gone. Forever. It WAS possible to slowdown Symbian destruction and stretch the life of that platform by 150 millions handsets - but for THAT Nokia should have done the EXACT OPPOSITE from what it did. And by now it's too late. Symbian's reputation is trashed, Nokia's reputation is trashed, WP7's reputation is trashed... They have one last chance - and that is to whip WP7 as soon as possible. And even this is tiny hope at best.

[peter]

@khim, you are just a bullshit. Nakia is nokia, blackberry is blackberry. complete different products. Crap Steven Elop is a total failure by any standards no matter how you paint it.

@tomi, well done again. numerous nokia individual shareholders and consumers support you.

I want to add more costs caused by crap elop's recent crime:
1. Immediate $2.9B inventory has to be written off due the abandon of the symbian;
2. 5 months chao disruppted nokia's R&D and marketing effort;
3. $10B brand value completely lost due the unprecedent self-attacking on Nokia from its own CEO;

COnclusion is simnple:
Elop is criminal, betrayed everyone including Miicrosoft, he works on an agenda from US Short Sellers who's purpose is to destroy Nokia completely, transfer wealth from all individual shareholders.
Elop needs to be sued and put into jail for life.

Jorma Ollila the second who needs to be sued.

[peter]

@khim, ask your uncle Sam to push down nokia share more, please. or nokia has a solution to liberate itself from US short sellers hands:

1. Lay off those incompetent developers and their multilayer managers ; cut 50% R&D headcount is much needed;
2. Keep Meego and Symbian as main platforms and improve them on both hardware and software fronts,
a. upgrade high-end models with highest speed 2.0 GH duo-core cpu-gpu, 1024x640 4.3 display screen, 2GB ram, 64 GB Flash memory, 2000mah battery; (meego)
b. upgrade middle-end models with 1.2 duo-core cpu-gpu, 840x584 4.0 1GB ram, 32 GB Flash memory, 1600 mah; (meego)
c. upgrade etry level models with 1.0GH single-core cpu-gpu, 640x360 3.5 512MB ram, 16GB GB Flash memory, 1200 mah; (symbian)
3. Keep MS WP7.5/8 as middle-end line which shares same hardware platform as Meego middle-end device;(Qt as porting tools)
4. Open the option with android;
5. add voice cdma support;
6. setup strong relationships with att,tmobile,verizon,sprint,uscellar,cricket for usa market;

A well managed R&D team doesn't need more than 10,000 engineers. A lot of works can share the same code base (core-os, device driver, apps, globalization, etc), cpu-gpu-dsp motherboard, case etc;

fonts have to be open for free download or even auto-downlaod when users navigate to different language web pages; treat users friendly will bring more users, it is free mouth-ads.

all-in-all, stuborn, crime-oriented ceo steve elop has to be fired first, jorma ollila second

7. bring skype, flash 10.3, silverlight 5, html5 compatible browser to ovi store;
8. bring zillow, redfin, etrade, mobile online payment into ovi store;
9. enhance ovi maps for globalization support, by default show localized maps giving users option to show translated version;
10. integrate ovi music/video/podcast/radio into ovi store;
11. bring all famous games into ovi store;
12. software tutoring, developing tools/utilities into ovi store;
13. online dictionaries, scientific calculator, office suite;
14. open android apps support;

[Earendil Star]

Quick comment on what khim says, that Nokia compares to RIM... uhm, no.

If you check RIM, it just barely goes down in total number of smartphone shipments (14 to 13 m) compared to Nokia's freefall (28 to 17 m).
If you check RIM's financials, it looks much better off: revenue: up 16% yoy, profits: down, but still a healthy +$695m, handset shipments: up 18% yoy to 13.2m, playBook shipments: 500,000 in their first quarter. Now, everybody is saying RIM is dead, but that's a clear overstatement: what is happening is that RIM is steadily loosing market share to Android and Apple, the hot OSs now. It is facing huge problems because it is loosing its "status symbol" position, but it is gearing up to come back and fight, with it's own platform, master of its own destiny. Whether it will succeed is a different story. But at least, it's trying.

Now, just look at Nokia. FREEFALL in handsets, smartphones, revenue, profits, you name it. Current platform zapped, former future platform (Meego, fresh new looking OS) zapped, boycotted by its own creator! Expectations are being aroused for this new WP (that already looks old, it has been out for ages now) that no-one is buying, and might be coming in numbers only in mid 2012. No longer owner of ANY of its ecosystem (store, maps, etc.), everything gifted to MS! No new hot product, just announcements and leaks. Tablets? What's a tablet? Is it hot? Oooops, Nokia needs to wait for Windows 8... but that's just coming in 2012... so probably they'll do another experiment with Meego in the interim. In practice the new bright future envisaged for Nokia is to become a commoditised WP hardware producer.

Come on: RIM is having a cold, Nokia is in no-return coma after a near mortal Elapse. Any comparison is ludicrous.

And all the other disruption talk? Tell it to Steve Jobs, who returned to Apple (an old company) and was able to reinvent it.

Nobody assumed TH Elop to be anywhere near Steve Jobs in ability, but what one assumes of a CEO coming to the rescue, is for him to save the place, not to put the whole house on fire. Unfortunately that's probably not what he was called for. He was put there to commit arson.

[khim]

@Earendil Star When I've compared Nokia to RIM I've compared execution of the strategy Tomi preaches (push with the old platform, continue with planned transition) with similar company attacked in similar manner (both RIM and Nokia are disrupted by "new wave" of smartphones so it's enough to have a rough estimate). As you've noted RIM is doing much better, but it STILL goes down in absolute terms - and in rosy estimates of Tomi (which he calls "absolute worst case") Nokia goes up (Q2-2011, Q3-2011, even Q4-2011). How? Why? IMNSHO this "absolute worst business-as-usual case" is actually "pretty good business-as-usual case". His main justification is the fact that Nokia grew 7% in Q4-2010... well RIM grew 14%, so why Nokia should perform better then RIM in this "absolute worst business-as-usual case"?

As for "master of its own destiny"... we'll see, but for now this destiny does not look all that great.

@Earendil Star And all the other disruption talk? Tell it to Steve Jobs, who returned to Apple (an old company) and was able to reinvent it.

Heh. Steve Jobs... Steve Jobs is MASTER of disruption. Even so, let's review just WHAT he did when he returned to Apple?
1. When he returned Apple was in the middle of long, slow, painfull project which was destined to replace old, cranky, obsoleted MacOS with a new core:
http://en.wikipedia.org/wiki/Copland_(operating_system)
1a. Steve Jobs cancelled it on the spot. In fact he and his company were brought to replace it with another OS: NextStep. This OS was used by computer "so popular" that it was no longer sold by that time:
http://en.wikipedia.org/wiki/NeXT#1993.E2.80.931996:_NeXT_Software
2. Said MacOS X was announced two years in advance:
http://en.wikipedia.org/wiki/History_of_Mac_OS_X
And even after release it was rejected by a lot of users and developers.

Looks similar to what Elop did? Unpopular OS combined with iconic, but failing hardware maker == success?

Well, not so fast.
1. MacOS X was property of Apple. Yes, Apple paid $429 million for it, but it was fully under Apple control. In fact ALL development for ALL platforms not controlled by Apple ceased on the spot. Nokia is betting on the OS it does not control.
2. Till MacOS X was ready Apple concentrated on what it WAS able to do well: hardware development. iMac, iBook, etc. Nokia abandon's the existing hardware.
3. When the times were tough Steve was able to ignore old hatred and sign a deal with Microsoft. It was critical for many reasons. Nokia decides that "Google can stuff it, we'll go with Microsoft" - only because Google refused to give them special preferences (and why should they?).
4. Old plaform got two more revisions: MacOS 8 and MacOS 9. Sure, they were incremental improvements over MacOS 7, but they showed that "MacOS X is for the future, MacOS Classic is for today". Elop managed to squash all hope for the Symbian future.
5. And Apple offered a transition path (even if MacOS Classic and MacOS X are even more different internally then Symbian and WP7). There are nothing like that in Nokia's plans.

Elop picked some ideas from Steve but added his own pro-Microsoft bias and arrogance - without thinking all the details. No wonder the result is a disaster.

As for today... Apple can not be disrupted by Android: they both offer the same "new way of life": "There's An App For That". They may compete on price, on nuances of execution, but they have the same concept in the core.

But Nokia and RIM are different: they offered totally different idea of what the smartphone is (RIM offered "interactive pager" and Nokia offered "communicator" - which are centered around different paradigms) - and THIS paradigms didn't fly. Apparently more and more people like "There's An App For That" lifestyle and that means RIM and Nokia must change (and FAST) or die.