We have already heard from 3 of the 4 big analyst houses, on their count of the total size of the smartphone market for Q2. I await for the last of the 4, then use their average as my 'official' number and will be doing the market shares and analysis of each brand as usual when we get it (hopefully tomorrow or very soon).
But a lot is happenin' in the smartphones space in this Year 2 of the Bloodbath. So some musings in no particular order about some of our brands in the news (or perhaps, not in the news, but could be/should be).
APPLE, WHAT HAPPENED
So, Apple became the biggest smartphone maker in Q2, by a big margin too. Nokia the previous number one (was 30% bigger than Apple in smartphones just one quarter before) has been crushed. The whole range of Nokia branded smartphones is now 20% smaller than Apple's iPhone. And yes, we cheer and celebrate. But lets dig a bit into the situation. Apple is proud of its huge annual growth rates in smartphone sales. But the industry itself has also experienced hypergrowth. Who noticed what happened to Apple in the past two years?
In Q3 of 2009 - two years ago this quarter, Apple's iPhone market share of smartphones was 17.4%. That had grown to a massive.... 17.6% by a year later, Q3 of 2010. And now in Q2 of 2011, the iPhone market share had managed to capture a total of.... 18.6% (note that is preliminary as we await the final analyst count). But still. So in the first two years, Apple iPhone rockets to the stage, takes market share in giant gobbles, and captures one out of every seven smartphones sold in the world. While iPhone's market share growth had not been linear (due to releasing only one iPhone model per year, so Apple always has a kind of 'ladder' shaped growth curve) in its first 8 quarters, Apple grew 17 points of market share. Over 2 market share points per quarter, if averaged over the first two years. And then it stalled. In the next two years, Apple has grown less than one and a half percentage points of market share - in TOTAL ! Apple averaged that every quarter-on-quarter, now it can't match that level of growth even in two full years.
To put it in another way, the global smartphone market grew by (about) 8% from Q1 to Q2. And Apple's iPhone grew 9% from Q1 to Q2. That is essentially the same as holding steady to the market growth. Motorola and SonyEricsson did just about the same, SE grew 8% and Moto 7% from Q1. I don't think Motorola and SonyEricsson followers are superbly giddy about how well their brands are managing the growth in this era of hypergrowth in smartphones. But Apple, of course Apple is Apple, so no matter what Steve Jobs does, that is always perfection..
And lets not forget, Apple is the most profitable tech company in the world while Moto and SE are perennially tinkering around making losses, so it is NOT a fair comparison. But we should be honest, and Apple is growing unit sales in smartphones yes, and it has the best loyalty and customer satisfaction, yes, but is it growing faster than the market? No. The iPhone huge growth engine stalled two years ago and since then, Apple has only held station.
SO ACTUALLY NOKIA FELL
So, when we look at the Q2 results, while yes, Apple sold more iPhones than Nokia, the reason that happened was that Nokia sales collapsed. This is like the Marathon runners, where one is clearly far behind the other, then the leading runner has a muscle cramp and stops. And then the number two guy continues on his own pace and eventually passes to take the lead. This was not really a victory that Apple 'fought' to achieve, it was Nokia abandoning the race. So Nokia gifted this win to Apple (and let Samsung past it as well)
ITS THE 5, STUPID
So its all about the iPhone 5. What makes the above so special, is that typically in Q2, when Apple has before launched the new iPhone model in late June, they sold about 3 million new iPhones in the dying days of June for the Q2 sales. This year we had none of that. So imagine if there was a new iPhone 5, we'd have had long lines at all Apple stores in June, and rather than Apple selling 20.3 million, they'd have sold maybe 23.3 million new iPhones in the quarter. And they'd have about 21% market share. This is what Apple is now abandoning with the delays to releasing the new iPhone 5. Apple REALLY needs to get the new iPhone model (some say it will be called the iPhone 4G or 4S) onto the market before the end of September, to get some serious growth now and capture the opportunity.
AND WHAT OF NANO
So also, there are rumors of the cheaper parallel new model, possibly smaller in form factor, that could be called a Nano iPhonem to be sold at roughly half-price of the iPhone (ie 300 dollars vs 600 dollars in unsubsidised price). That Nano model would do Apple very much good right now, as Nokia is struggling and the market is shifting to cheaper smartphones. Android smarpthones are now appearing in the sub 100 euro price bracket. I hope Apple gets its Nano act together, a Nano was not the right thing to do back in 2008 (as I wrote on this blog) but it is now desperately needed to expand the fight that Apple can do - and it would not cannibalize iPhone 5 sales if done right, and it would expand Apple's reach to lower-cost markets and consumers, and add a ton of more profit to Apple, and build first-time loyalty to the Apple religion, sorry, brand, into the future, in the Emerging World markets. A Nano buyer today is an iPhone 6 buyer late next year haha..
WHATS WITH SAMSUNG
So, we had two analyst houses (IDC and Strategy Analytics) count 19 million Samsung branded smarpthones for Q2, but Canalys only gave Samsung 17 million, only edging Nokia there. And Sammy itself is being tight-lipped about their total sales. It makes me queasy. If they have honestly passed Nokia ie sold more than 16.7 million Samsung branded smartphones, surely Samsung should be celebrating this and kicking their dear rival of a decade-long battle, while its down. Why all the silence from Seoul? And how is bada doing? My calculations said we passed bada installed base at 10 million many moons ago, but no word from Samsung. The stats say Samsung grew 51% in just one quarter in smartphones. That is a monster quarter. But why no official word. I am a bit suspicious of those instances where the company won't commit to a number. It may well be less than the 19 million we heard. It might even be less than the 17 million. I wish they'd give us a number..
WHATS WITH MICROSOFT
But if Samsung has some news that might not be quite as good as we expect, Microsoft is having news that is worse than we expect. Microsoft partners sold 1.6 million Windows Phone based smartphones last quarter. Canalys now pegs the number down, to under 1.5 million - so Microsoft is truly losing not just market share, but losing actual unit sales, with its new wonder-platform. It may still be that even in Q2, Windows Mobile their obsolete platform outsells Windows Phone.
TWO HUNGRY CHINESE
And then we are likely going to see a switcheroo happenin' in the Electric Boogaloo. Two long-term veteran top 10 smartphone brands, Sharp and Fujitsu out of Japan, are likely to be dumped by two young and hungry Chinese brands, ZTE and Huawei. Huawei recently upgraded their 2011 smartphone sales target from 15 million to 20 million total units, that would put them safely bigger than Sharp or Fujitsu now.. ZTE is not far behind.
HTC TALKS THIRTEEN
And HTC tends to be very solid on its short-term guidance. They sold 12.2 million smartphones in Q2 and their guidance is now that they expect to sell about 13 million in Q3. Thats RIM right there, as their target, we will see a nice race to who ends up bigger in Q3. I think the trajectories are clear, HTC will certainly pass RIM but will it be in Q3 or not until Q4. It will probably be close.
AND NOKIA FALLS BELOW BOTH?
And meanwhile, the Nokia crash continues. In Q3 they will fall to below 12% market share, and HTC will definitely pass Nokia, the question is, how badly will RIM do, whether Nokia falls to only 4th biggest or will Nokia fall below RIM into 5th biggest smartphone maker by Q3. How quickly can we grow accustomed to thinking of Nokia as having under 12% market share in smartphones? Thats like what Palm had (well before the iPhone haha)
THE TROUBLED GIANT
And the Nokianews keeps getting worse and worse. Today Standard & Poors downgraded Nokia share price to BBB, a level two notches above junk status. And S&P gives a negative outlook to Nokia as well. And their thinking still assumes only modest loss in market share and some profits to be earned this year (dream on, that won't happen. Nokia will be giving us a profit warning shortly, all the signs say their business is worse in Q3 than it was in Q2 when the handset unit made its first loss ever).
Meanwhile Nokia is trying to be in the news with some other news. They bravely announced today that they are scrapping the current naming scheme as too complex and difficult for customers to understand. So what does Nokia think? It thinks them numbericals they be good, but them alphabeticals they be bad. Apparently if an E-series phone for 'Enterprise' is too complex to understand compared to say the N-series as Nokia's top consumer phones or X-series for entertainment phones, now we'll only get numbers. The first new phone, the Nokia 500 is launched with this principle.
And the news from all corners is bad for Nokia. Just today German newsmagazine Handelsblatt reports that Nokia, previously dominating Europe's biggest smartphone market of Germany, has fallen to fourth place there, as HTC has passed Nokia now also in Germany. The sales boycott of Nokia Symbian phones is strangling Nokia..
WE LIKES THEM NUMBERS. NUMBERS IS NOT CONFUSING
And yes. We on this blog celebrated when Nokia's new Chief Marketing Officer, Keith Pardy, came from Coca Cola, a genuine consumer marketing brand, and one of his first decisions was to change the cryptic Nokia naming scheme and introduce real names for Nokia phones. Unfortunately, Keith is no longer with the company. And now the engineers have taken over the asylum. If a 'name' has too many of them complex alphabeticalisms, then yes, a pure numbers-oriented naming scheme fits nicely with them engineering brains. Smart move Sherlock, going EXACTLY the opposite way of what the top consumer brand marketing guy told you to do. And is it just me, Stephen Elop is destroying everything he can find of Nokia heritage of any kind. So the N8 and N9 were flagship phones. No more. Next expect a 903 or an 872 or whatever number they come up with. I'm sure it makes sense in the first dozen phones but three years later, are you really going to remember and fondly recall your Nokia 781, or wait, was it the 872, or the 767 or the 794. And all this while Rome burns, eh? I am reminded of the phrase rearranging deck chairs while the Titanic sinks.
Well, its one way to be sure the Nokia PR people cannot even accidentially be promoting Nokia's hottest phone, the N9 (or its highly desirable cousin, the N950) but rather to further underline how obsolete they are, they even have the old-fashioned Nokia names. Stephen Elop is certainly an evil genius, he'd make a Bond villain proud for his psycopathical obsession with destroying Nokia.
Thats whats on my mind today. I will return with the smartphones market share analysis, all the numbers and rankings and my grades for the different brands in how they did in Q2 of 2011. Stay tuned..
Tomi, thanks again for the insight.
Regarding Nokia's new numbering scheme, I'm afraid they are no longer contemplating what will happen three years down the line...
Posted by: Earendil Star | August 02, 2011 at 03:49 PM
Tomi, Maybe Elop could just put his beautiful mug on the front of the new Nokia boxes with his email address and the tag line, if for any reason this phone fails to perform up to your expectations please let me know. Nokia stands behind every product it makes because we care about our natural, social and corporate environment and our customers. As far as the mug, I have the following one in mind for the "Great Listener", although he really should be in a Maoist jacket!
http://en.wikipedia.org/wiki/File:Stephen_elop.jpg
Anyway, what is your progam like as far as diet in the next few weeks of your vacation. I need to loose some weight or a bunch of weight would be more accurate in three weeks and my current duties are light enough that I could be described as being on vacation myself so I have time and will power to change my own food and beverage routines; the thing is my Mother is visiting in 20 days and I look like a cubical victim/internet startup hero: 45 pounds overweight and full onset of spinabiffida pseudomundus. Anyway, again old chap, cheers to you on your vacation and stay away from diet Coke; I hear that ex-marketing guy went back to Coke and they're going to start giving names to Coke products now, so regular diet Coke is going to be called "Charles"! Kind of scary when you think about it, and I'm trying to clear my head so that I can become more receptive to wisdom and self-censorship! No wonder these are called "the dog days of August." I remain your avid follower, Sincerely etc.,
Posted by: Eurofan | August 02, 2011 at 04:27 PM
tomi, android phones have the highest return rate. thats why samsung won't reveal its numbers. 15%-30% return rate is normal among htc, samsung, mot.
Complaints are
poor battery life,
too hot when gaming,
drop phone calls easily,
gps doesn't come with built-in maps and turn by turn,
Symbian can really come back to compete agaist android.
Nokia can run better without a CEO for months to come.
The only thing nokia need to do is to dump crap Elop now.
Posted by: Peter | August 02, 2011 at 06:18 PM
fire elop without granting golden parachute NOW
and hire a CEO LATER is absolutely okay for nokia and nokia board Chairman Jorma Ollila.
Posted by: Peter | August 02, 2011 at 06:28 PM
Peter, you clearly aren't an Android phone owner :D
really? No maps? How about Google Maps & navigation? Also HTC comes with their own offline maps (they have a deal with Route66).
Posted by: virgil | August 02, 2011 at 06:35 PM
And I thought Apple fans are crazy.
Where have you got this 15-30% "normal" numbers? There are hundreds of Android phones on the market so it's entirely possible that some have returns 30% or may be even more. But "normal"? Sorry, any salesperson will explain to you that 30% return product is sales loss product. You just don't sell it - if it all possible. And even 15% is problematic case.
Just as few days ago Tomi explained how high return rates lead to actual Nokia boycott:
http://communities-dominate.blogs.com/brands/2011/07/thinking-the-unthinkable-what-value-if-nokia-returned-to-symbian-and-meego-our-movie-today-back-to-t.html
And if "normal" 15-30% Android rates don't produce this effect then what does? 90%? Nokia is truly doomed then...
Posted by: khim | August 02, 2011 at 07:04 PM
@virgil, most of android phones do not have built-in (offline) maps. With att/verizon cut 3G download size to 2GB/$15/mo, More and more users will complain and switch to Nokia N8/Meego N9. that's the trend. Esp. for us market, Navteq rules over telenav maps.
Android can not compete and win over nokia in the long run.
1. android lacks big patent portfolio ( OEMs face huge potential royalties charge from nokia, apple, microsoft );
2. android doesn't have built-in maps (when 3G download size become more expensive);
3. andriod apps are slow by using java VM that requires faster CPU, more memory which shorten battery life-span and becomes hot when gaming;
Posted by: Peter | August 02, 2011 at 07:12 PM
@virgil,
even "HTC comes with their own offline maps (they have a deal with Route66). "
1. its offline maps lack the life-time free update!
2. it might have eu maps but how about NA, ASIA maps ?!
3. online gps from google become increasingly expensive due to the limited network data flow per $15 !!!
Posted by: Peter | August 02, 2011 at 07:29 PM
I'm not sure you quite "get" Apple, Tomi. They came from nowhere and redefined the smartphone proposition, but for the last 2 years have been content to grow with the market. I don't think they ever intended for the iPhone to have the same degree of domination that the iPad currently enjoys. They don't make cheap products, and having consistent large market share growth beyond what they have done would require going downmarket. They haven't even entered China yet (and that gives them potential for one more massive boost), and I don't see them ever getting significant traction in some emerging markets where $30 phones are the norm.
The iPhone 5 will bring a nice pop in North America and Europe, but China will be the next major market, and so whatever phone that is (iPhone 5 or 6) will be the big driver. Beyond that, I see them holding steady or shrinking slightly to protect their margins.
Posted by: KPO'M | August 02, 2011 at 08:11 PM
Smartphone competition is about talents competition.
When apple worked with MOT for porting iPod to RAZR, apple learned whos were best talents in MOT and hired them later to do IPhone 1.
When google worked with apple to port google maps to iPhone, google learned whos were best talents in apple and hired them later to do Nexus 1.
Nokia bought a lot patents but failed in recruiting key talents. Nokia hired a crap who's destroyed itself within 5 months.
Patents and Talents rule in this bloodbath field.
Posted by: Peter | August 02, 2011 at 08:19 PM
Tomi:
Even assuming that you may be right about the bump Nokia received for couple of quarters from S3, the game is going to be quite different going forward.
In any given price segment, the differences in performance between iPhone, Android, WP7, Symbian, Meego are insignificant to an average consumer. These differences may be more evident to a minority of technical people but hardly matters in terms of sales. Remember iPhone did not care for the opinion of the technocrati, it marketed straight to the average consumer.
The success for any platform going forward will boil down to marketing and promotion to an average consumer. Verizon in US successfully propelled Android to match iPhone in sales with a $200M marketing budget. This was done by Verizon to compete against iPhone when iphone was only available exclusively at one carrier i.e. AT&T. Once Android caught momemtum in US, it got momemtum in Europe and than the rest of the world.
Microsoft is planning at $500M marketing campaign for its new Windows Mango based phone. Combine this with a $120M marketing campaign to be launched by Nokia for WP7. Once WP7 catches the eyes of the average consumer, any resistance (if it exist) to WP7 from Carriers will evaporate.
Marketing muscle is needed to carve out a space that is currently divided between iPhone and Android. The lack of traction to HP's WebOS and RIM's Blackberry is due to the absence of marketing muscle. Both of these do not have any Skype related carrier issue.
This marketing muscle cannot be provided by Meego or Symbian but by WP7. In fact Meego and Symbian will benefit due to more visibility for Nokia brand from this marketing blitz by Microsoft-Nokia for WP7.
Posted by: Bob Shaw | August 02, 2011 at 09:28 PM
"tomi, android phones have the highest return rate. thats why samsung won't reveal its numbers. 15%-30% return rate is normal among htc, samsung, mot."
Wow! Those are horrible return rates if they are true. I know that all smartphones are buggy as hell nowadays. The service firms/people are complaining about the poor quality of the smartphones. All of them. They said that speed of phone releases are too fast and the phones are released to market too soon, before they have been properly tested and the numerous bugs corrected. There was a story in the news about that the other day.
Posted by: DeeDee Cupsize | August 02, 2011 at 11:18 PM
@Bob Shaw
"This marketing muscle cannot be provided by Meego or Symbian but by WP7."
Why not? It's just a choice from Nokia to market WP7 and not MeeGo. They could have and should have put that $120 million to MeeGo. And in fact they could have put more money to MeeGo marketing, if Flop hadn't made that idiotic MS deal, because Nokia would still be profitable and not making loss. Though they wouldn't need to put hundreds of millions to marketing since N9/MeeGo would sell itself so much better than WP7, if Nokia was just standing fully behind it.
Posted by: DeeDee Cupsize | August 02, 2011 at 11:45 PM
@Baron95, Nokia has about $5B net cash in hand, why do you think Nokia needs to fastly sell NSN or patents to raise money ?
Symbian sales picked up in July and Android's momentum evaporized since more and more users realized the pursuit of cpu clocks and core do not make meaningful sense now.
With the lauch of Meego N9, nokia could make a small profit IF clown Elop won't make any show in whole Q3.
Posted by: Peter | August 03, 2011 at 12:19 AM
@ Baron: You write:
"*THAT* is why Elop got upfront payments from Microsoft ..."
I read that Elop said will be payments from MS to Nokia, however I could not find evidence that MS actually paid, how much they paid or how much they will pay. Can you point me to a source that shows such a payment, a source that can be substantiated?
Thanks in advance!
Posted by: So Vatar | August 03, 2011 at 12:35 AM
@So Vatar, thats so call marketing promotion money to be used for WP7.5 mango. $128M this year. Nokia can not use the money for any other purpose. Actually this kind of moeny transfer is near the brink of bribery crime. Look at the money transfer from intel to Dell, it is illegal.
Thats why we have to fire Elop now.
Posted by: Peter | August 03, 2011 at 12:51 AM
@ Peter: Agree with all your posts and points as usual except need to raise cash. Five Billion goes quickly and Navtek would raise some money (1-2 B) and could be "mortgaged" like Ford did with its factories after Tommy Ford Jr. threw in the towel and hired a professional engineering manager from an American commercial aviation company; that's why Ford is still independent of US and Italian government ownership today. Anyway I'm not saying Nokia has to pull the plug on Navtek today, just have a plan to put in on the block and start informally shopping it around. Better safe than sorry.
Peter: Your four reasons for return were golden nuggets, hugely valuable info in today's new Anna environment. Anna may not be so "easy" but she repays affection like nobody else and is practical. A twelve year old could design a marketing campaign for the E7 around those four return reasons, contrasting "dorky" looking E7 with "other phones" on those four points, eg all day at the beach, etc. Great info.
I heard this morning at the tire shop that new north am campaign for Nokia WP7.5 will be, "Easier to use than a pet rock." A Nokia WP7.5 and a Pet Rock will be shown side by side on bar counters and profession ex-athletes and reality tv celebrities will compete to see who can learn to use each of the two product fastest. This should be good for years of profitable sales and brand good will just as Miller Light Tastes Good vs Less Filling TV ad ran for 5 years, eventually giving way to Miller overall brand implosion not fault of the ad, brought about by general public distaste with filtered dish water beers and turn to micro-brews and "local" brews, eg Sam Adams ("Boston") and Rolling Rock ("PA"). Anyway, lets not think past three years, also the new order from above.
The Lankku is going to be sold to Herman Miller to sell next to Eames Chair as super profitable design statement, enduring value, no ad budget, etc. I read that every Eames Chair ever made is still being used today, somewhere. They can be reupholstered and new goose down stuffed into those timeless leather cushions (only foam stuffed cushions put in them today, believe it or not, without very special order to factory, so used H.M. Eames Chair is worth more than new, and we're talking a 3$ thousand dollar chair here new, folks. Charles Eames best friend was Eero Saarinen (Illinois Institute of Technology Campus, General Motors Research Campus, Yale Hockey Rink, Washington Dulles Airport terminals, MIT Chapel and MIT Auditorium; father Eliel did Helsinki Central Railway Station, Cranbrook Academy and was one of the giants in Finnish art history)).
Don't worry about advertising the Lankku, worry about supplying demand.
At tire shop I learned this morning that eFlop will be assigned to Navtek's new global warming/earth changes observation platform on a drilled out North Sea oil rig; supposedly this new super new Navtek project will launch this winter as "real time Earth Ecosystem data stream" or something like that with eFlop at the helm of the rig until he quits. No golden parachute for quitters according to contract. Golden parachute only if fired by Board, or something, that's the rumor.
Peter what is your dietary regimen? Your notes exude health. I have decided to cut back/eliminate carbs after breakfast. I tried this today and feel better but now my farts are fantastical. Yin and Yang.
Sisu.
Posted by: Eurofan | August 03, 2011 at 01:11 AM
@Peter:
My question was directed and Baron95 and I asked for sources that can be substantiated. I still have nothing tangible to show that MS has paid any amount.
I am an engineer by training, I do have strong opinions, but I want to base my opinions on verifiable information. Information like Tomi provides in his blog posts. I am sorry, but I think your following statement comes out of thin air: "thats so call marketing promotion money to be used for WP7.5 mango. $128M this year. Nokia can not use the money for any other purpose."
Or show me the source of this information!
Posted by: So Vatar | August 03, 2011 at 01:39 AM
@So Vatar, never saw your comments here before.
why do you want this kind of precise information ? it is biz secret as the exclusive partnership between MS and nokia.
you can simply google it by nokia windows phone marketing
Posted by: Peter | August 03, 2011 at 02:37 AM
Tomi, Since September 2010, I have been reading your Blog, congratulations to you and thank you for your time and your deep analysis.
But...Meanwhile Elop, like an Ultra Dictator, destroy any sample of history and identity in Nokia, and Nokia itself also!.
Where are the Nokia Board Members that can stop this "crime", and dismiss this cowboy!
The Nokia Board Members are aware of this catastrophic situation at Nokia?,
You know if they or any of them read this blog, and what they think of your analysis?.
It is very sad to be a spectator of the destruction of a company like Nokia!
...
Posted by: Rino | August 03, 2011 at 03:58 AM