Why Microsoft Cannot Afford to Let Nokia Fall Into Hands of Any Rival

Ok, now that Google bought struggling Motorola Mobility and its thick patents portofolio, the really big prize waiting to be picked is Nokia, badly undervalued due to horrendous management mistakes (see Elop Effect). So I speculated a day ago about who might want to buy Nokia, and also illustrated that due to its rather diverse interests in mobile hardware and software, whoever would buy Nokia would probably immediately divest some parts of it.

MICROSOFT SAW IT COMING

Well, the front runner in the race is no doubt Microsoft. And let me say a few words about Microsoft in mobile. Apple saw the shrinking computer, launched its 'Newton' what many call the first modern PDA (and while technically brilliant and loved by its users, the Newton was far ahead of its time and ended up a rare Apple commercial failure). But perhaps due to this failure, Apple was not too keen to get into the PDA-sibling category of smartphones, and when many of its rivals like Compaq, HP, Danger, Palm and Sharp went to smartphones, Apple rather went to re-invent the portable musicplayer market, with the iPod. Apple was a very late convert to the smartphones space, entering it in 2007.

How about Microsoft then? Microsoft had powered early PDAs and pocket PCs from an early 'palmtop PC' reduced version of its MS-DOS operating system more than two decades ago - used for example in the classic Hewlett-Packard LX100 palmtop PC. That OS then evolved to be a Windows PDA version and yes, now a decade ago, Microsoft entered the smartphone space, so Microsoft has been here for more than twice as long as Apple.

A DECADE OF.. FAILURE

Microsoft launched its smartphone operating system, that soon became known as Windows Mobile with HTC out of Taiwan (after ditching its first partner, UK based Sendo in a messy dispute that ended in a lengthy court battle that destroyed Sendo). Then Microsoft collected major handset makers to join the Microsoft family, and at one point Microsoft had four of the five biggest handset makers producing Microsoft Windows Mobile based smartphones - Samsung, Motorola, SonyEricsson and LG. Unfortunately for Microsoft, those four also made smartphones on other platforms and all of them made far more smartphones on Nokia's Symbian platform.

While the Windows Mobile based smartphones did record some success in the North American market, globally Microsoft was always only a bit-player. It was very briefly the worlds' second biggest smartphone OS, as Palm was losing market share and just before RIM took over from Microsoft. That moment of success did not last twelve months even. And how big was Microsoft's peak market share in smartphones? A measily 12%. This moment of glory was just prior to Apple launching the iPhone, and even at this time Nokia's Symbian outsold Windows Mobile by 4 to 1.

Then Apple came and changed everything. And the first casualty of the iPhone was not Nokia (nor the Blackberry) it was Palm. The second smartphone OS that started a rapid terminal decline after the iPhone came along was... Windows Mobile. It lost a third of its customers in less than two years, to the iPhone (this while Blackberry actually grew market share and Nokia only lost less than one in ten customers). The widely-held myth says that the iPhone killed Nokia's smartphones. That is a nice story but doesn't square with the facts. Nokia and Symbian didn't experience any greater loss than what was the normal gradual decline of its market share (Nokia invented the smartphone and started from 100%, so it was only going to go down) but it was not until Android came along, that Nokia and Symbian were severely hurt. And Android stalled Apple's growth as well. Did you notice that while the iPhone gobbled up market share on average more than two points of market share per quarter (on average) for the first two years, eight quarters - then in the next two years from Q3 of 2009 to Q2 of 2011, Apple has only managed to add 1.4 points of market share cumulatively in the past eight months. Apple's iPhone market share has been essentially flat. The dramatic growth by Apple was cut indeed by Android. It was not the iPhone that was killing Blackberry either - in the strong Apple growth period from 2007 to 2009 - the market share of RIM's Blackberry actually grew! Yes. It was not until Android came along, that Blackberry was damaged.

But yes, we don't deal with myths here, we deal with the facts. So lets return to Microsoft. Microsoft had 8% market share in smarphones in mid 2009 (with Nokia's Symbian now outselling Microsoft by 5 to 1). And then Microsoft did one of those 'only Steve Ballmer would do something this dickish' move. He decided to screw his smartphone maker partners all, and the whole Windows Mobile application developer community. After version after version of Windows Mobile updates and revisions, suddenly Microsoft announced that for the next version (to be called Windows Phone), there would be no migration path.

SUDDENLY: NO MIGRATION PATH

Most recent MBA graduates would be able to say that it is a bad move, especially if you try to build a platform, an ecosystem, or run an operating system across many brands of manufacturers. In fact Microsoft should have known better - it was the genious of the migration path from DOS to Windows, that allowed Microsoft to hold onto its world-leading OS market share from the early days of the PC, to the modern era that was ushered in by Apple's Macintosh. Windows was Microsoft's clone of the Mac OS, but the genious of the migration path (which at times was technically quite clumsy and took about a decade to complete) helped expand Microsoft's lead in PCs from one decade to three. And still today, we just heard from Canalys a few days ago, that Microsoft's Windows OS on the PC side delivers half of Microsoft's total profits and has a profit margin of over 70%. That is what you get if you bother to build a migration path from the world's leading platform.

Ah, but that was from the time of Bill Gates. It seems Steve Ballmer is far more interested in screwing everybody than doing whats right. No wonder Microsoft is called the Evil Empire. (and as a side-note, yes, Nokia had learned from the DOS-Windows transition, why do you think Nokia built a 'migration path' - yes - from the outgoing Symbian OS to the brand-spanking-new and hot MeeGo, the world's newest smartphone OS powering Nokia's N9, that now is the rage among tech enthusiasts)

How did the Microsoft announcement of no migration path go down with the handset providers? Not very well. Motorola was so disgusted, they left the Microsoft partnership totally, doing only Android. LG, which had only months earlier committed to 'strategic focus' of Microsoft Windows Mobile rather than Android - reversed its decision and now does more than 90% of its smartphones on Google's OS. HTC, Microsoft's launch customer and the smartphone maker that had always produced the most Microsoft based smarpthones was so upset they said they would not even release smartphones on the next edition of Windows Mobile (but would do some Windows Phone based smarpthones at some point in the future). And Samsung was not exactly wholeheartedly in the Microsoft camp, but they fast-forwarded their own bada OS which they launched a few months before Windows Phone.

So Microsoft had held 8% market share, then it announced it didn't bother with the migration path anymore and what happened? In less than a year, they lost five out of every eight customers they had. Their market share dived to 3%, by the time the first Windows Phone OS smartphones were ready to ship. (And Nokia's Symbian was now outselling Microsoft by 12 to 1).

Obviously we can see here, that Microsoft was never big in smartphones and where it had some success in sight, they then utterly messed up their chances. But maybe there is a silver lining with the brand new OS, Windows Phone, which is technically quite good, its users do like it and there are plenty of developers, apps etc. Maybe Microsoft could get back its market share with this new OS that has been sold for almost a year now. Surely the world's biggest OS maker could use some Microsoft magic, all that synergy across its platforms like PC Windows and Xbox etc, and use its deep pockets for marketing and promotion and create a comeback.

Not. Steve Ballmer said it himself, that a year ago Windows Phone OS had a market share which was 'tiny' and its current market share is still 'tiny'. How tiny is tiny? Five percent? Four percent? Three percent, the same as Windows Mobile had? Two percent? Cannot be, can it, one percent? Yes. Microsoft Windows Phone today, almost a year from launch, has been such an underwhelming market success, it has 1.1% market share of the global smartphone unit sales in Q2 of 2011. It is doing so badly, Microsoft's Windows Phone sales are not growing, they are declining! While the global smartphone market is exploding.

We can understand that Nokia's market share is tanking because of the Elop Effect. But Microsoft has been trying every trick in the book to boost Windows Phone success, from trying to convince the media that Microsoft (with Nokia) will be the third ecosystem (in fact they are now no better than 6th) to giving away new Microsoft Windows Phone based smartphones sold for a dollar this spring. Yet there were no takers.

Oh, and even after Burning Platfoms and all, the supposedly obsolete undesirable failing Nokia Symbian still manages to outsell all Windows Phone smartphones now, in the latest quarter by a ratio of 14 to 1. Even if we add the older Windows Mobile smartphones, the total 'Microsoft' market share of the two incompatible operating systems, has less than 2% of total smarpthone sales worldwide. Only one out of every 50 smartphones sold worldwide runs on any type of Microsoft software. After a decade if thats all you can do, that is failure pure and simple.

IF YOU CAN'T DEFEAT THEM..

So, Microsoft are smart people. If they answered honestly, they would have said that Nokia is by far the strongest smartphone maker - not the most desirable premium smartphone, that is obviously Apple, but worldwide, remember, just as recently as half a year ago, Nokia alone sold more smartphones than Apple and Samsung added together. Microsoft would have admitted that Symbian (and its migration path to MeeGo) is the (or now with Android, 'a') dominant platform and that no matter what Microsoft does, it is no match for it. But no CEO would be that stupid to admit their own systems are worse than rivals (except if your name is Stephen Elop)

I know there will be many who will yell that this is patently false. Again. I don't deal with myths here, I deal with facts. Microsoft's Windows Phone was launched at the start of Q4 of 2010. It is an all-new, from ground up fresh, modern smartphone OS that is optimized for smartphones and it was designed for touch-screen operation. It is supported by five of the ten biggest smarpthone makers and seven of the ten biggest 'dumbphone' makers.

Symbian released its (then) newest version called S^3 at the exact same time, at the start of Q4 of 2010. Symbian is a creaky old OS, it was created when there were no color screens on phones, far less touch screens. The system has gone through tedious costly time-consuming modifications to try to get it modernized and now the S^3 is finally touch-screen based. How many of Nokia's smartphones used it? Only three models, and only one of them the N8, was sold for the full three months of the quarter. This is the same Symbian that so many say is obsolete, undesirable, outdated, unwanted, hated by users etc. How did it do? Symbian S^3 sold 5 million copies in that quarter (which was only one sixth of Nokia's total smartphones that quarter).

And how long did it take Microsoft's army of HTC and LG and Samsung and SonyEricsson and ZTE and Huawei and all the others to sell 5 million units of Windows Phone smartphones? They did not do it in less time than Symbian S^3 - if they had, you could legitimately call Microsoft's OS the more successful one, right? Maybe the same amount of time? No. Maybe a month more time to sell 5 million units? No. How about one quarter longer? No. How about two quarters longer? No. Up to today, from the start of October to now, August 17, 2011, Microsoft has still not managed to sell 5 million cumulative units of Windows Phone based smarpthones! Nokia did it in 3 months, 92 days on only three handsets of which only one sold for the full thee months. By current trends it won't be until September of this year, that Microsoft finally sells its 5 millionths Windows Phone smartphone and matches the performance of that 'obsolete' Symbian update version. Makes you think, doesn't it?

Oh, you say Symbian S^3 not desirable? Nokia grew unit sales of smarpthones - yes - grew unit sales in Q4 - and this with price cuts? No. With a Nokia-record jump in average sales prices - Nokia was able to charge more for its smarpthones with this new OS. So Nokia did it with price cuts and marketing gimmicks? No, Nokia profitability of the smartphone unit exploded growing by 64% from the previous quarter. No marketing gimmicks, no handset discounts created the growth. The N8, with Symbian S^3 and the various other new smartphones were truly a hit phone (until the CEO decided to put an end to the success with the Elop Effect).

So, what can we learn from this? First, that Microsoft was smart enough to see the smartphone opportunity coming (arguably more smart than Apple at it). And Microsoft planted its seeds early, and recruited a big army to support its OS. Then Microsoft went about its business of being the Evil Empire that it is, and managed to upset and annoy just about every partner it ever had bankrupting some and just angering others. I should say for those who are not familiar with the details, that Microsoft's Windows Mobile and Windows Phone operating systems are traditional type of 'paid' licenses, so any manufacturer has to pay a license for every copy sold in any smartphone. But for example Nokia's Symbian is an open source foundation, it is free; Google's Android is also open source and free; Intel's (and until recently Nokia's migration path OS) MeeGo is also open source and free. And yes, Microsoft's operating systems are not open source of course, they are tightly controlled by Microsoft alone. So not only is Microsoft behaving like the bully it is, Microsoft fully expect you to pay them a nice licence fee for every copy of its OS, while all other major rival OS systems are royalty-free.

Then we can see, that even when the smartphone market was still relatively calm, before the current level of hypergrowth and hypercompetition (I counted back before the iPhone that only 7 of the Fortune Global 500 corporations were smarpthone makers; by 2009 it had exploded to 23 of the biggest companies on the planet - I doubt there has ever been any industry where 23 of the Fortune Global 500 have been involved in competition in the same industry, globally, and certainly no industry has expanded giant corporate rivals so rapidly in a two-year period) - even in the 'good old days' Microsoft was never able to exceed 12% market share and after the iPhone and Android came along, its been in low single digits at best.

So if you can't beat them, join them. There is one more way for Microsoft to get back into the game in smartphones. It wants to get those royalties from the licenses. It is not an advertising company like Google who can afford to give away software (or services like search, email etc) for free, but make it back with the advertising. And Microsoft is not a handset maker like Apple, RIM or Nokia, who could bundle the OS as part of their handset and make the money on the package. No, for Microsoft to have a significant business presense in smartphones, it has to have some handset vendor(s) willing to pay the license fees, who can also generate big unit sales numbers.

Some will say Stephen Elop was a mole, a Microsoft agent who came in and rigged the game, so Nokia would of course select Microsoft rather than Android or its own MeeGo OS. But it is possible, that the decision was made on facts and on merit and on the best available info at the time, and perhaps by a very slim margin, Microsoft's Windows Phone - as it seemed at the time when all looked peachy, and nobody knew yet how badly it was performing in the market - emerged as the winner in early February when the final decision was made. One could be cynical and say, that Elop did know, both how incredibly well Symbian's S^3 was doing, and how badly Windows Phone was failing, and he'd need to rush the decision before the facts came out (and further if you like conspiracy theories, that Elop also know MeeGo would defeat Windows Phone coming and going, so Elop had to rush his Burning Platfoms memo and delay MeeGo etc just to give Windows Phone some chance).

But we know that Microsoft has tried with every other player willing to dance with it and has failed. It now has Nokia under contract. To make sure Nokia cannot wiggle away, Steve Ballmer even paid Nokia 'billions' in marketing support funds - this angered the remaining Microsoft Windows Phone partners, many of whom struggle with losses, why would profit-generating Nokia be given money for joining Microsoft. But now the big billions paid or promised are a strong hook to keep Nokia in line with Microsoft.

WORLD RECORD MARKET SHARE COLLAPSE

So now we had the Elop Effect from February 11. Nokia was by a huge margin the world's biggest smartphone manufacturer at the time with 29% market share, literally more than 70% bigger than its nearest rival, Apple. Nokia was growing smartphone sales (but not as fast as the industry, so Nokia was gradually giving away some market share). Nokia was not in decline. Nokia was GROWING smartphone sales. Its average sales prices just jumped more than in any single quarter. Nokia's smarpthone revenues were growing strongly and its profits exploded by 64%. This very desirable successful smartphone maker giant dominated over its rivals far more than what Toyota does in cars, or Airbus in airplanes or Hewlett-Packard in personal computers etc.

Microsoft thought it was going to get "that" Nokia. That all it would take, is to switch the operating system and release those same spec cool Nokia phones with the new Microsoft Windows Phone software (this transition would take more than a year, technically as Microsoft needs different components from Qualcomm rather than Texas Instruments etc) and Microsoft would suddenly have one partner who alone made almost 3 out of every 10 smartphones sold worldwide. So even if most of Microsoft's other handset partners were 'miffed' by Microsoft's new love, they'd also chip in with a couple of million smarpthone sales, and Microsoft should have gained about a third of the market. Roughly what Android had at the time.

This would be similar to what Microsoft had with the Xbox. Its a far cry from the PC based Windows with over 80% market share but one third would be very good in the smartphone market, where Microsoft's own initiatives had netted low single digits by now. And if Microsoft held one third of the market in year 2012, then it would certainly motivate all of its staff to fight for every slice of the market to grab more by every means possible including lawsuits and penalty payments of patents etc.

Microsoft knows it made its fortunes riding the operating system for the personal computer, and for three decades, theirs was the bestselling OS in the PC market. Now the PC is migrating to smartphones, and the only way Microsoft can remain viable, is if they can have a (paid) slice of that. And they had Nokia's signature on the contract.

But then we have the Elop Effect. Nokia's market share in smartphones collapsed. In Q1, with only part of the period under the Elop Effect, Nokia's market share tumbled to 24%. But the very same rate continued and now in Q2, Nokia's market share has fallen to 15%. In a matter of less than five months, Nokia had taken its massive market share lead, and abandoned it to its rivals, falling so badly, two of its rivals have already passed it (Apple and Samsung) with Nokia in third place. In a very literal sense Nokia has lost almost half of its customer in less than two quarters. No market-leading brand has ever collapsed so totally. I am not talking only of technology brands here, so this is far worse than Palm or Motorola or Siemens for example in mobile phones - but any market share disaster ever - the launch of New Coke, the autombile brakes failures of Toyota, BP's image disaster with the Gulf Oil Spill last year, etc.

But its not over. Nokia has already warned that they are suffering even more. Right at the start of this quarter, Nokia announced across-the-board price cuts to its lines of phones. In the Quarterly Results, Nokia admitted that its reseller channel is 'reducing inventories' which is the marketing spin on what is openly said in many press stories that Nokia is in a reseller boycott (which is due to the Elop Effect). We heard just today from Investor's Business Daily, reporting from China, that Nokia franchise stores are struggling so much in making any business selling Nokia branded phones, that they have started to sell competitor branded phones! In Nokia stores! This is like going to a McDonald's restaurant and because nobody is willing to buy their Big Macs and Fries, they have started to stock Burger King hamburgers and Fries! This is surely the end of a once-proud brand - China is by far the world's biggest mobile phone market and Nokia was by far its bestselling phone and its bestselling smartphone. When the reseller boycott is so severe, that your own branded, franchise stores stop selling your goods and start to sell rival brands, that is total retail collapse!

So the trend is inevitable. Even Nokia itself admits their sales are falling. The Nokia market share will continue to plummet, it will be near 11% by the end of Q3 and down to about 7% by the end of this year. By then Nokia will have abandoned three quarters of its market to its rivals, due to self-inflicted wounds. Never in the history of business, has any leading global brand collapsed as comprehensively as Nokia is now doing. This is history in the making, pay attention. This is a story that will be studied in MBA classes for the rest of this century as one of the great massacres, or indeed, suicides of a brand.

But in a perfect world, that should be the worst of it, from Microsoft's point of view. They had hoped to get Nokia at near 30% market share. Now if Nokia bottoms out at around 7% it is obviously far less than they had hoped, but then the new Microsoft based Windows Phone smartphones would start to ship and sell, and from Q1 of next year, the recovery should start. And in any case, even if Nokia only limps in at 7% at the end of 2011, that is still seven times better than what Microsoft is able to do by itself.

Without Nokia, there is no path left for Microsoft. They are now on life-support, the only thing keeping Windows Phone alive, is that promise of those first 'Nokia' branded (but actually Compal-manufactured Taiwanese clone) smartphones that start to ship and sell in modest numbers before Christmas. But if you give Steve Ballmer a sick Nokia with 7% market share, and use the Nokia brand and carrier relationships and ecosystem support etc, with full Microsoft marketing and sales support, some recovery 'has' to happen. Will it grow to 8% or 10% or 12%, depends on what color glasses you wear, but yes, Microsoft can fairly expect some recovery and they might even under extremely rosy scenarios recover to what Microsoft had at the peak of Windows Mobile, maybe. 12% on the very rosy upside scenario. Maybe. And its clear that this smartphone market is too hot now, weak players will be exiting, like Motorola and Palm gone, Nokia now on the ropes and RIM quite possibly next, it will be also a game of attrition. And Microsoft has extremely deep pockets to remain in that fight for months, quarters, years, even decades probably.

What Microsoft needs is to remain in the game now. Now.

ELOP WOULD BE FIRED

So, the key to Microsoft and its Nokia fantasy, is for Nokia to 'stay the course'. To not give up on Microsoft. For Elop to keep steering that ship now towards the 'inevitable' Windows Phone.

And all would be well, if Nokia was reasonably healthy. But the Elop Effect was far bigger than certainly Stephen Elop himself expected (he admits that). And an unanticipated side-effect is that Nokia's featurephones unit also is losing sales and went from making profits to generating a loss. While they were not directly 'impacted' by the Microsoft announcement (the featurephones are not powerful enough to run the Microsoft operating system) and the Burning Platforms memo also did not really touch much on Nokia's featurephones, still the brand was severly damaged, sales fell severely, and now the featurephones unit is also generating a loss. And the networks unit, NokiaSiemens Networks, is also generating a loss. So while Elop bravely promised profits for Q2 in the single digits, he then had to come back with a profit warning only weeks later. And yes, in Q2, Nokia reported a big loss. But again Elop in Q2 results promised near zero profits/losses. That won't happen. And now they've slashed prices for Q3, to me that means bigger losses coming in Q3. Expect another profit warning any day now. And the stock market is punishing this performance severely.

The first five months of Stephen Elop's stewardship were received very warmly by Nokia shareholders. The Nokia share price climbed 11% from the day Elop took office to February 10. But after the Elop Effect, to the bottom last week, Nokia share price had then fallen more than 59%. (Now Nokia share price is wildly climbing due to take-over speculation).

I did my analysis of what kind of assets Nokia has and what kind of rivals might want to buy parts of Nokia. The big catalyst was the Google purchase of Motorola, especially for Motorola's big patent portfolio in mobile. Nokia's patent portfolio is even bigger, and its other assets are far more valuable but Nokia was valued on market cap only about 22 Billion dollars when Motorola was sold for 12.5 Billion. Many analysts said Nokia was a far better bargain, albeit a complex one where the new owner would need to sort out the mess of what to keep and what to sell.

And here is the danger to Microsoft. Any other buyer - any other - in fact any sane unbiased person - would look at Elop's recent actions (not the Elop Effect but after it) and look at the choice of Microsoft Windows Phone vs MeeGo, and conclude that Elop has not been acting in Nokia's best interest, in fact Elop the new CEO has made decisions severely damaging to Nokia's value - and will immediately fire Elop. And then, either provide full global launch of all MeeGo handsets in every market while abandoning Microsoft outright; or perhaps in the 'best case' for Microsoft, only launch MeeGo in every market immediately on every possible handset, and reserve the possibility to launch some Microsoft handsets later.

Regardless, if MeeGo is now launched on the hot new N9, not in tiny countries like Luxembourg, New Zealand, UAE and Norway, but in big smartphone markets like the USA, UK, Germany, France, China, India etc - then the newly acquired owner of Nokia will suddenly have on their hands the hottest phone of the planet (until Apple's iPhone 5 launches, obviously). The new buyer of Nokia gains an instant 'Razr Moment' for their new purchase. And as Nokia has several MeeGo handsets already fully designed and ready to roll, including the 'big brother' to the N9, the N950 - then these MeeGo handsets alone will turn Nokia's loss-making smartphones unit into making profits.

Remember, back in Q4 of last year, three handsets using Symbian's S^3 - Symbian - sold 5 million units and jumped Nokia's profits of the smartphone unit by 64%. That was not a hot phone, it was a long-awaited phone that had been hot half a year earlier. And nobody was going gaga over Symbian, not even its S^3 edition last Christmas. But now the tech press love the N9 and MeeGo. If MeeGo is given a fair launch, using Nokia's global reseller channels, in all major markets, with honest Nokia marketing push (and supported wholeheartedly by its CEO) then it will be a success. But even if you doubt that, at least if the CEO finds that the press love the new phone - the CEO cannot say he won't release it in Nokia's biggest markets. That even if the N9 is a success, he will never authorize another MeeGo phone. That is yes, in Microsoft's best interest, but it is not in Nokia's best interest. And Elop has not been acting in Nokia's best interest with MeeGo this summer. That is the primary reason why he will be fired on the day the new owners take over Nokia.

And any new interim CEO of Nokia will manage to turn the hot N9 into a big global success. It is produced in Nokia's own factories, so Nokia can control how many to make. It uses Nokia's standard components and runs on Texas Instruments chips, so no retooling is needed and Nokia gains in any increase in sales, in any bulk supplier discounts etc. This is what American managers call a 'no-brainer'. Of course if the market craves the N9 - and it is going to be manufactured anyway and sold in 29 countries, it launches in September - only a fool CEO would then say, but I wont' sell it in the best and biggest markets.

BIDDING WAR

So, any other prospective buyer of Nokia can approach the possibilty of buying Nokia 'rationally' by the honest real merits. What is the patent portolio worth. What is Navteq worth. What are Nokia's factories worth, what of its global reseller and carrier relationships, etc. But Microsoft cannot. For Microsoft this is the do-or-die issue. They became the biggest software company riding the PC wave which is now coming to an end during this decade. The next wave is smartphones. Already from Q4 of 2010, more smartphones were sold than all PCs of any kind and now the gap is only growing. This decade belongs to the smartphones. If Microsoft intends to be a big player in computer software still at the end of this decade, they have to be in smartphones. They have played all their previous cards and failed. Their last hand is now Nokia, and because of the Elop Effect, suddenly what looked so promising in February is in danger of slipping away.

So Microsoft cannot afford to lose Nokia. If Microsoft were to buy Nokia today, they could dispense with the pretend and just make Elop the President of the Nokia division of Microsoft and take full control of the smartphones and spin off most of the other parts they don't want or need. Forget about other Microsoft partners. Then there would be no suspense and who cares if Nokia's 'Symbian' market share hits zero by Q4. Microsoft would simply say, this is a transition, wait for hte new phones next year, and judge us by that. Nokia was too weak to do it alone, but now with deep Microsoft pockets, the new smartphones will be a big hit (and they'll say, like Xbox, and the skeptical press may add, or like Kin or like Zune). If Microsoft buys Nokia, they simply take over the company fully and then run Nokia smartphones the way Ballmer (and Elop) always wanted. And they write off this year.

But anyone else who would buy Nokia, would see the huge potential of simply MeeGo, which is now. The first N9 phones ship in September. The N950 is ready to ship now as well. If only the hot N9 and N950 did as well as the N8 and Symbian S^3 did last year - only as well - then Nokia's smartphone unit would generate a bonus income of 2.5 Billion dollars (this is income Elop mostly refuses to take in by refusing to sell the N9 and N950) and even if we use the overall smartphone unit profitability from Q4 (the profitabilty of the N8 and S^3 devices was certainly much better) even at that modest profitability level, the current smartphone unit losses would be eliminated! What moron CEO refuses that? Remember, Elop has no Microsoft phones to sell now. Why on earth would he not release MeeGo in every market, as Nokia is bleeding and desperate to find any profits?

Stephen Elop is no dummy. He knows if MeeGo is given a global launch even with only the N9 - an honest true Nokia designed Nokia-manufactured smartphone, it will totally outshine and outsell any Nokia branded Compal-manufactured first, rushed-to-the-market, very likely very buggy Microsoft-phone. And Nokia can't even secure production nor sales commitments from carriers to launch the first Windows phone broadly.

Elop has pursued his Microsoft strategy meticulously. He also knows this calculation. He is personally very aware of the finer points of large corporate takeovers, in his five months as CEO of Macromedia, it was Elop who orchestrated the companys' sale to Adobe.

So Elop knows, if Microsoft buys Nokia, Elop gets to keep his toy (Nokia), he will end up owning the future of Microsoft and unless he messes up - and in Microsoft's eyes so far he has not done anything wrong - he is the front-runner to replace Steve Ballmer as Microsoft's next CEO. 

And Elop also knows, any other buyer to Nokia now, and Elop is fired instantly, withouth mercy. While no doubt he'll have his old job back at Microsoft, he is now so heavily tainted goods, the rest of his life he will be known for the Elop Effect that destroyed Nokia. No matter what heroics he might achieve in his later career, he will be hounded by that reputation as the man who made the biggest management blunder of any career. His name will be synonymous with total executive disaster. So even if he were to have a comfy job, his life of expecting to be the next Bill Gates or Steve Jobs in the media spotlight will be extinguished. And as Microsoft would lose its mobile path, Elop would also be stuck in a company whose best days were behind it, and he'd have no chance of succeeding Ballmer as CEO.

So what does this mean? Elop is very biased. If any potential suitor were to approach Nokia trying to acquire it quietly, Elop will instantly inform Ballmer and make sure that Microsoft jumps in immediately, and then we'll have an open bidding war.

Microsoft doesn't want the bloated Nokia as it exists now. They preferred that Elop sell off NokiaSiemens Networks (one half of Nokia's employees and a third of its revenue). And ideally, also to sell off the dumbphones handset unit. And fire off tons of unnecessary Symbian etc programmers (as Elop has been doing). Meanwhile Ballmer is a businessman. He doesn't want to pay more for Nokia than necessary. So the continuous dive of Nokia share price this spring has been good news for Ballmer, thinking he can soon buy Nokia at a big discount. In a perfect world, he doesn't really want to own Nokia, Ballmer would prefer that Microsoft makes all the profits in the software and Nokia makes slim profits as a box-mover, just like say Dell was in the PC world as a Windows PC provider. But if needed, Ballmer will move to buy Nokia.

So now we have an interesting dynamic. If anyone other-than-Microsoft makes a move for Nokia, then I am 100% sure, Microsoft will instantly make a better offer and we'll get into a bidding war. Who has the pockets, who has the desire. These things then get often into matters of ego etc, but it should be interesting.

But I do not see Microsoft buying Nokia secretly like Google did with Motorola. I think even Ballmer and Elop know, that if they tried that, they (and Nokia Chairman Jorma Ollila) would be investigated for all sorts of insider trading, share price manipulation etc. And with national pride at stake, in addition to Wall Street (and Stockholm) the Nokia share is traded on the Helsinki stock exchange, and with Europe involved - Nokia is a big employer in many European countries and is considered Europe's biggest IT/tech company, Microsoft could face nasty EU investigations as well. 

But Ballmer is hoping that Nokia can survive to next year, and the new Windows Phone based Nokia smartphones are released, then most of the troubles would have passed. But the situation is too dire. Nokia will see a new profit warning within a few days or weeks. Then the Q3 results will come out with ever bigger losses in all units. Then the market shares come out for Q3 and Nokia will have fallen to about 5th place in smartphones and lost its global lead in dumbhpones to Samsung. By Q4 Nokia is deeply in the red and seemingly disappearing on every measure. If a buyer does not appear soon, I think the pessimists will win the day, and Nokia's share price will resume its steep dive. But I am not a financial analyst and this is not a Wall Street analysis blog haha..

So that is how I see Microsoft's conundrum. They did see the big smartphone opportunity and they made many plays into it, with ever diminishing success. Now they have played their last hand, that of Nokia and while it looked strong in February, now that Google bought Motorola, it seems very likely that very soon we'll hear someone is considering a Nokia takeover. And if so, Microsoft cannot stay on the sidelines. Then we're in for a bidding war. And no matter how we slice it, Nokia as we know it, will be history. And in a personal story, Stephen Elop's career hangs in that balance, if he brings Nokia to Microsoft, he is the hero and next CEO of Microsoft and Nokia the brand will soon be forgotten as yet another casualty of the rapidly evolving tech industry. Or else he can't bring Nokia to Microsoft, it goes to someone else, and Elop is the biggest laughing stock in all of corporate management with his name synoynmous with catastrophic self-inflicted suicidal destruction of the company you were hired to run. The Ninja assassin with a kamikazi complex turned suicide-bomber. And he cannot use the Nazi defense from the Nuremberg Trials, that 'he was just following orders' because he was not supposed to follow orders from Microsoft. Elop was hired to run Nokia. Not to ruin Nokia.

Comments

[peter]

@Poifan, yes, mango is version as 7.1.

but in usa, .1 and .5 are equivalent for bath rooms, garages and now microsoft smartphones, haha.

[peter]

tomi, even symbian^3 nokia n8 is better than mango, why Jorma Oilla is doing this with Elop ?

[peter]

Elop is trying to justify his decision to go with microsoft:
"If I happened to be someone who was an Android manufacturer or an operator, or anyone with a stake in that environment, I would be picking up my phone and calling certain executives at Google and say 'I see signs of danger ahead,'" Nokia Chief Executive Stephen Elop told a Helsinki seminar.
"The very first reaction I had was very clearly the importance of the third ecosystem and the importance of the partnership that we announced on February 11, it is more clear than ever before,"
----------------------------------------------------------------
however nokia shareholders/investors have no argument with going microsoft or google. but the abandoning of symbian and meego and huge loyal symbian exisitng users.

nokia is not a hardware maker. nokia itself alone is the top ecosystem and growing with n8 and n9.

mango has zero competition power, zero attraction when comparing with android/iphone/n9 side by side. even worse than N8.

[samsonite]

I doubt ms will buy microsoft. Nokia is allready where microsoft wants it. Cross-licensing for patents was done before Elop. Nokia needs ms as much as ms needs nokia. So buying nokia has no purpose.

Microsoft is 1990 company. Owning hardware company goes against microsoft core dna.

If they are going to by someone it is rim (blackberry). With rim they get 20000 patents that they do not have any deal on right now. Nokia deals are thight and nokia needs windows phone 7 so it will not slip. Rimm has strong presence in north america, nokianhas developing markets, eastern europe and south america. Nokia has has some presence in enterprice and rim is really strong there. Rim messenger, office and exchange would killer in north america business sector.

By the way q4 proves nothing. It was chrismas where nokia was allways strong. They got N8 which everybody was waiting.

N8 was vanjärvis vision of smartphone. It did satisfyi current nokia users, the rest took it as dissapointment. It was the final straw. Nokia was beyond hope. So we had vanjärvi efect, he was in helm when nokia drove outnof the road. Let me repeat there is nobody that is more responsible nokias dire straits than your man vanjärvi. His vision and excution on smartphone was total failure. Smartphone is something else than great cameraphone. N8 sold nicely in some countries, but it was not what once giant among dwarfs has hoped. It was the end to earlier strategy.

Look nokias development before elop. Writing is on the wall. The free fall had started years before.

I hope that nokia has done changes within. Slowness in changes has been disease within nokia. Slowness with razr, slowness with double sim, slowness with touchphones, slowness with wp7. It is arrogance. And it lethal now.

First time in years they seems to have a vision and strategy. N9 will not be published to keep message and focus straight and clear. This is not nokia that throws stupid gimmicks on the wall to see if they stick. It might be wrong moves but at least they have an clear direction with not much to speculate.

[Janne]

@LeeBase

"Google is just as likely to go down with the purchase of Motorola as they are to make a go of it"

I don't believe that Google will shoot themselves in the foot. Following Linux/Android strategy they may create an open hardware platform. Google is not Microsoft/Nokia/Apple and they work horizontally rather than vertically. They begun their enterprise on the Internet.

Maybe Tomi can do analysis on Google for a change as a mobile player? The speculation is based on the paradigm of closed hardware and software development, and Google's acquisition may be the beginning of something else and new.

[peter]

@samsonite,
" but at least they have an clear direction with not much to speculate."
--------------------
that is a clear direction to its death, are you 3 years old kid ?

[Eurofan]

@ Earendil Star: Thank you for saying whatever you said to LeeBase because you shocked him into boiling his message down to its essentials,
1) "Nokia came to the decision that Meego would not be ready in time -- that's why everything else has happened."
2) "Nokia ALREADY married Msft. It is a fait accompli. I think with Msft there is a CHANCE. The best chance of all the non-Apple, non-Google chances. Which isn't MUCH of a chance, I'll agree."

This is truly Lee's message, which he repeats every time. Let me demolish it, too, Earendil Star. Maybe if everyone offers Lee their own critique of his (1) and (2), we will finally get it into his thick skull that he is wrong on both counts and we are tired of hearing his same every time position. I'm starting to wonder if he wrote the Business Week piece on Elop or is the PR maven who got that piece written. Or if he is Mr. Elop, writing from Washington State to defend her husband in his "impossible" mission. Anyway, Lee, or Mrs. Elop, as the case may be:

1) As A.S. explains to you and as everyone understands, it makes no difference if the N9 is kosher Meego. Meego is a joint effort of lots of groups and is supposed to be open sourced. The platform that will be the basis for Meego hand sets going forward may take some further time to get squared away to the point Nokia can start attaching UIs to it. That is the way it is with collaboration, you've got to wait till everyone agrees before calling anything good and then you go to the next step and do the same thing, until the whole project is complete. It takes time but sometimes such efforts result in great, history changing software, such as Linux, which is slowly destroying Microsoft, like a bad dream for MS. So the N9 is really Maemo 6/Harmattan, so what? Maemo 6/Harmattan is ready, more than ready from so many delays, and it is going to make a huge splash in the smart phone world. You will see that by the end of THIS year. People want a Linux phone. And even though you don't get this, UNIX is the mother ship of OS's. iOS comes from UNIX via NeXTSTEP and OS X. It's pretty popular. Android comes from UNIX. Its pretty popular. WebOS is very highly rated and has a chance. It comes from UNIX. Meego, which everyone understands Maemo 6/Harmattan is the closest approximation we have right now (for phones), is owned and run by THE LINUX FOUNDATION, which is to UNIX the way GreenPeace is to Mother Earth. That's kind of saying Meego comes from God or Jesus or Budha or Hillel. No wonder people are calling the N9 a potential God phone. What does WP7 and WP8 come from? It's such a sausage of crap that I dare anyone so provide a short summary of what went into that proprietary MS OS. It's typical MS OS: a thousand lines of code to do what UNIX does in a hundred. Just throw a faster CPU at it, right? No one will notice. Well people have noticed and their expectations for software have been raised by Linux and by Apple and now by Android and now they want the same seamless, robust and thoughtful (do I dare say soulful) OS experience on their phones. People are never going to buy a MS OS again willingly if they can help it. Its like a religious reformation and the old, corrupt church is loosing members every day.

2) Nothing is ever permanent in business. If the WP line doesn't sell, Nokia can't stick its head in the sand and pretend its Symbian and Maemo/Harmattan/Meego lines aren't selling or aren't sellable and not sell them any more. Nokia is too big a company to be able to pretend that is true. What about other markets? No contract with MS can enforce such behavior by Nokia. Nokia must sell what is selling and what it has to sell and adapt its plans accordingly as it gets feedback from the market. I like how you have moved the year of decision to 2013. Why not 2015? WP7.5 Mango is an improvement on WP7, which Tomi says has a 1.1% market share. So at the end of 2012 WP will have a 1.5% market share if they are very lucky, which I doubt they will be. What then? Stop a slightly upgraded N10 from coming to all markets along with its slider companion the N1050 and its cheaper younger sibling the slightly upgraded N950 Communicator (for kids and the young at heart) so the market can remain fallow for the coming of the WP8 line of phones? Are you freeking kidding? People hate MS OSes. People hate MS Internet Explorer. People hate MS Word. No one who was ever loyal to Nokia and Symbian would ever become a MS lover. Thats like the NY Yankees and the Boston Red Socks. Two different teams with two totally different, non-overlapping emotional attachments. If Nokia's WP line of phones gets adopted by somebody it won't be by old Nokia fan boys. And who else is dissatisfied with the now proven choices from Apple and Android which cover so many price points? Only Linux fan boys and they are the last to ever agree to use an MS platform phone.

Nokia's only hope is kids, young minds with no prejudices and heavy need for a cheap, good for messaging, good for Google searching, good for Facebook phone. Maybe the Nokia WP line of phones will be the new Kin, only a successful Kin. But kids like sliders and they like cheap, so Nokia's WP phones must deal with these two preferences. I hear the on screen keyboard of the WP OS is very good and that certainly is a plus for heavy messaging users, like kids. That's Nokia's hope with WP in North America, a Dr. PePPer-like advertising campaign aimed a kid users for cheap, subsidized phones, say 15$ after carrier subsidy, for great onscreen keyboard, easy to Facebook, easy to web browse phones by the cheap phone maker, Nokia. Be a Pepper. Be a Nokia. Not everyone has to drink Coke or Pepsi, etc. Well good luck with that campaign, Nokia and Lee (if you actually care about Nokia and aren't just a short, hoping MS has poison-pilled Nokia so it can't be taken over and the stock boosted by that). But even such a campaign and strategy is no reason not to also promote Symbian unlocked phones and the N9, N950, N900, N10, N1050 both locked/subsidized and unlocked. Get real. This stuff is ready to sell and can be sold now to Nokia fan boys and Linux fans, who are both willing to pay more than $15, who are adults and ready to commit to a type of phone for many years.

Lee, you don't upset me. You bore me with you hopeless perm Nokia short attitude: "I think with Msft there is a CHANCE. The best chance of all the non-Apple, non-Google chances. Which isn't MUCH of a chance." Every time you essentially say that with some other fluff to try to defend the absurdity of the first part of your claim, that MSFT offers a chance. Yeah, a chance to have a very cheap line of subsidized smartphones reach a 2% market share world wide. You're just a short hoping that Nokia stock never gets above $7 again, whether from it's own efforts or from a takeover. I get that.

But Nokia management and Board oversight upset me. Why do they care more about MS phone OS market share more than their own employees and shareholders welfare? It's disgusting.

Nokia is just the latest victim of MS efforts in mobile OSes. There will we more victims for the Redmond vampire. If Nokia goes under, MS will buy, hostilely if necessary, RIM, not Nokia. Mission will have been accomplished: Meego phone delayed two more years and its best exponent, Nokia, taken out of commission. RIM's markets, kids and the enterprise, more closely mirror MS's strengths now and RIM is cheaper than even a bankrupt Nokia. Nokia can't be sold even at the end of 2012 for less than $25 B. Nokia's parts are too valuable, regardless of its market share at the end of 2012. Nokia is not a souring turd. Nokia is a comatose Sampson and its hair will grow back and the little vampire squid Elop will be removed from Nokia's mouth so it can breathe again. RIM could be had next year for cheaper, they will be very strung out by then with the new OS introduction, just as Nokia was last year trying to get Meego out the door. RIM is closer to Redmond and maybe MS will learn not to use their name in branding, to just sell under the Blackberry name. Microsoft has negative value as a brand name, don't you people get that?

Apple would be smart to buy Nokia and run it as a Linux and dumb phone maker as a market share"buffer" against Android and newer upstarts, like WebOS and RIM's new OS and as a reservoir of talent and ideas and IP. Product differentiation could assure that Apple's iPhone remains the highest margin Cadillac of phones while Nokia remains the Chevrolet. Of course Chevy makes the Corvette and standard cop cars, which are high margin, so Nokia could always make one or two Linux God phones with kind of a brawny, big tail pipe connotation to scare away little old ladies and soccer dads, who get to stay with the iPhone. I'm convinced Steve Jobs has a secret love for Nokia and the Linux Foundation and would want Nokia to continue in business as a Meego phone maker, especially if he gets to share the Nokia patent war chest. As Peter says, Apple could meld Meego phones from Nokia into its own Meego expanded ecosystem for further profits and further compatibility to its computer line. I don't think MS will be a bidder for Nokia. Its the Koreans, the Chinese, and Apple who have a need and the cash and the balls to make that play. MS is counting now on WP8 to be successful and this whole Mango thing is already written off with the hope that it takes Meego with it to the foggy bottom.

I hope the Board wakes up next year, calls quits on the WP plan A no plan B strategy, cans Elop and the Elopians he's got in his Leadership team and restores Nokia to profitability by allowing it to sell and promote the most profitable unlocked phone ever to hit the scene ever, the N9, and allowing Nokia to sell locked and unlocked the N950, the N10, the N1050, etc, etc. How stupid is it not to be making billions of dollars in profits off this line and hundred of millions off Symbian^3 while waiting for the Meego project to get to the point that even Lee will admit that these are Meego phones? Elop's ingenious insight that having a biggish apps catalogue and other ecosystem bells and whistles is necessary to launch a very successful line of super phones will be disproved by the end of Q4 of this year when N9 smashes all records for profitability and market penetration. People who pay $1000 for a phone want it to a) never crash, b) never get viruses/slow down, c) be great for email, messaging and web access, d) be rewarding to navigate for calender, settings, etc. Simple things don well for people too rich or too smart to be bothered by stupidity.

That's why all the best selling OSes now come from UNIX. UNIX brought quality (a) to the world in the 1970's from Bell Labs and the rest of those qualities in UNIX derived OSes have been built up from (a). What is MS famous for? Not ever being able to deliver (a) except almost, at very high price and performance trade off, for enterprise customers only. What is more UNIX than the Linux Foundation? Nothing. Meego is owned by the Linux foundation. The killing of the Meego effort at Nokia is the only thing MS is really interested in, way more than the success of WP Mango, which is already being written off by MS. MS now publicly says its all about WP8, which has no migration path from WP7, so all this Mango Tango is just to kill Meego at Nokia. Yeah it's sick. When has MS not been a sick vampire on the face of computing? What is new?

But MS will not be a bidder for Nokia this year, next year or the year after. They will want RIM, a much better fit, if it comes to taking over a phone maker if that's the only way to get their OS out there to support its future in computing. RIM also comes with patents. Nokia must save itself or learn Korean/Chinese. Or start sweetening up to Steve Jobs. Or save itself. It would be so easy to turn Nokia around into a very profitable "Meego 1.2" phone seller, Symbian^3 seller, and dump phone seller under the "Meego God phone" halo. Just fire Elop and the Elopians and wait 4 months. Instant profitability and market share rebound. Meego is that big. It is a phone blessed by the Linux Foundation. That is a huge, huge, world wide pend up demand by educated, prosperous tech savvy people. Not stupid, fickle American Jersey Shore watching kids. Smart, wealth people around the world who know what they want and are willing to pay for it. The N9 sells itself. If it sells out by Christmas this year and the Board doesn't force Elop to expand production, then...

[PERUS]

@LeeBase:

Absolutely agree with you. We just have to wait and see until some Nokia WP devices are out.

But to be honest, Don't you like conspiracy theories around this blog? Well, I don't really care if many folks here inventing conspiracy theories as long as they're based on valid fact and logical effects (better than hate messages or instigation). Some of them are quite interesting ;-)

However, don't forget also that many folks here have Nokia stocks and massively disappointed with the current progress. They could come here, read and comment something. Thanks to Tomi and couple of guys they could gain recognition and feel a bit better after that.

I do support Nokia decision with WP and hopefully they've made the right decision otherwise they'll be hunted by Ninja assassin with a kamikazi complex ;-)

[Eurofan]

The Business Week article is a puff piece to support the new Accenture plan, everyone knows that. Business Week is a glossy periodical like Time or Newsweek, and looking for real information form a Business Week article is like asking a cabby for investment advice. Don't you understand that the issue of whether Meego, a Linux like open OS, is ready yet for a UI to be put on it for phones, and whether Maemo is ready for a UI to be put on it for phones are two totally separate, though obviously related and easily confused, issues. Maemo 6 is an improvement on Maemo 5, which users raved about on the N900. Harmattan UI is obviously pretty cool. If it's too early to make true Meego phones because Meego isn't ready or likely soon to be ready, Maemo is very ready and the phone is killer, so that part of the article about Meego, no mention of Maemo, is really very sophisticated PR bullshit, as it is every time you bring up the same point. Meego may not have clothes yet but Maemo is wearing armor.

What else: Meego is not dead at Nokia. Nokia is still part of the Meego effort at Linux Foundation. Maemo 6/Harmattan is pretty damn close to what a Nokia Meego phone will be whenever Meego gets to the point Nokia can build a phone on it. Meego is on hiatus at Nokia as long as Elop is there. Of course Elop is affraid of N9 success. If the N9 sells everywhere well at $700 to $1000 and $400-600 locked, without MS ecosystem and the bare bones Nokia ecosystem it will launch with, his whole theory of the importance of ecosystem is bullshit and now proven bullshit [sorry Tomi, I'll tighten up my language], which it of course is. People who pay $1000 for a phone don't have time or emotional insecurity to surf app stores for apps to make there phone cool for their friends. They are cool themselves and their phone is a tool, and a phone that doesn't crash, ever, and gets all the important jobs done well and easily, is worth $1000 to them. A conspiracy theory is when two towers of mostly steel and some concrete, a hundred stories tall, and then WTC7, all go up in sublimating, exothermic smoke and ash like a volcano, leaving a residual mess below which is missing 9/10ths of the mass of what stood above. The fact that the initial explosions were seen 70 stories up just means the blast was focused like an anti-tank weapon and the focus dissolved as the blast worked outwards and upwards raining down on lower Manhattan and the Hudson River as micro-sized steel balls, unburned incendiary dust, ash, and unburned loose paper, as is documented in the analysis of the dust from the top of the Deutsche Bank Building by experts in their lawsuit for clean up costs, by experts who stated that the micro sized steel balls in the dust (sublimation, condensation of steel) were "characteristic" of WTC building collapse dust [at this point the insurers caved and settled and the case was dismissed, but the testimony was repeated in newsreports] , just like an anti-tank weapon. Elop is an anti-tank weapon and the tank is Maemo/Meego.

"Nokia made a deal with Microsoft to make Wp7 the direction of the company." WP7 has a 1.1 % market share in the smartphone space right now, world wide. Nokia is a company which is maybe break even at 20 % of the smartphone space world wide. Do you see a problem here?

Nokia's strategy did not fail. Nokia's nerves failed. I don't know or wish to know you but I will publicly apologize to you at the end of this year if the N9 does not sell out as a Super phone and make all kinds of headlines, even in Business Week. I'll also apologize to you if Nokia Mango phones get off to a good start in North America and Europe, though the effort may be delayed as Microsoft and Nokia together try to come up with some gloss on that piece of crap. You amaze me with your blindness to the total market repudiation of any phone bearing MS software and your repeated assertion that its all a marketing problem. Yeah, Lee, the marketing problem is that the market hates MS and hates the idea of running into their burning house and grabbing their MS phone before they grab pictures and letters from their loved ones. MS isn't loved and doesn't belong in the same category as Apple and Google and Samsung, which people actually feel good about. Nokia is loved and people feel good about it in many parts of the world still, those parts which don't have iPhones or Androids yet. A Nokia making Meego phones, and the Linux Foundation has given Nokia permission to call the N9 a Meego phone, despite..., will continue that love because every techy guy and gal on the planet knows the lovable image of the Linux penguin.

"NOKIA came to that decision." This is your favorite stretch. No Lee. The Board came to that decision guided by Elop, his Leadership Team, and Accenture. Three totally unreliable and unrepresentative vehicles for the truth, Elop, his LT, and Axxenture, none of which give a hoot for the values, people, or interests of Nokia as a body of professional people. What do they care about? I don't care. They are all uneducated, unsophisticated, glad-handling charlatans as far as I am concerned and their motivations don't interest me. Stupid people with too much power are too common to worry about. The question is not why did Elop do what he did, the question now is can Elop and MS successfully kill Nokia and Nokia's Meego efforts before the Board has to shake Elop off the horse because his WP plan is proven by the market to be a dud.

Sure the Board is closed mouthed now and will give Elop's plan time to show success. You say 2013 is the year now. Well I think after 2012, the Board will have to say that Elop doesn't get to have a 2013. What will be the point? The N9 will have been doubled and tripled in production at that point, each run earning stupendous mark up and profits, while your underwhelming WP line will sell for break even and make no market impact except to Walmart kids, who pick it out of the remainder bins. You want to bet once and still mighty Nokia on the next Kin phone for Barbie and Ken and the rest of the thinking world wants Nokia to sell what they've been waiting ten years for, an genuine Linux phone at whatever markup Nokia needs to keep making genuine Linux phones.

MS doesn't need Nokia. There will always be a next time and next for MS with a new OS, WP8, WP9, WP10. If no one will make phones with these OSes, MS will buy RIM and stop using the Windows brand. They want to be part of mobile, a bigger part of mobile than 1.1 percent. If they kill Symbian, Meego and Nokia they have made room for themselves for expansion in the cheap smartphone space and they will try again. They are already, as you are, writing off WP7 Mango. Nokia as we know it, the employer of many, many good, workmanlike experts and professionals, will not survive the WP first no plan B experiment. MS and Elop have no qualms about this. They have a longer view, a view circumscribed by the walls of the large intestine of the MS software making cow, the money machine Elop used to taste test every day when he was sitting on MS Office franchise. Like many have said, there is a nice office waiting for him in Redmond with all kinds of stock options when he returns to Washington State. What a creep.

[Eurofan]

Snooze...

[SoVatar]

@Lee:

Nokia told us Harmattan is step 4 of 5.
Nokia told us Qt is integration of Symbian & Maemo
Nokia told us MeeGo is the future high end platform
Nokia told us the platform is burning
Nokia told us MeeGo is an experiment for future disruption
Nokia told us Windows is their future smartphone platform
and Nokia told us many more things over the last few years.

So, who gives a s**t what Nokia tells us?

The market on the other hand told us:

Nokia is on a downwards trajectory for years and needs new leadership.
New leadership's (Elop) strategy and execution accelerated the downwards trajectory ( minus 25% share value the day after Windows Phone strategy was announced, minus 50% since 2/2011). What a fiasco for Nokia.

My gut feeling tells me that Nokia Windows Phone will be a huge market flop.

The irony is that this is not good for Nokia and not good for MS. So Elop will be a double flop.

[Eurofan]

@SoVatar: Agree with you up to not good for MS. MS would like nothing better than to stop a Nokia development of Meego phones in it's tracks. Meego phones are Kosher Linux on a phone platform, coming with blessings of happy penguin symbol of Linux Foundation. Linux Foundation is existential threat to MS crap OS's on all platforms, and MS knows and feels it already outside of phones. If Elop can continue the charade into 2013 he is doing MS work for them, torpedoing the enemy, Meego. WP 7.5 Mango is already seen within MS as a so-so and they are saying publicly that WP7 is nothing compared to WP8, therefore no migration of apps from 7 to 8. MS can use anyone to box its OS and sell on the phone market, cheap Asian players would be best, RIM second best. The whole pretense that MS has something to loose in the Nokia deal with Elop is a pretense. Phone OS is miniscule part of MS business now and the strategy for MS is long term: Kill Meego from all well know big players, especially Nokia, let the Asian no-names take it up if they dare face MS patent wars, and keep UNIX based OSes in the hands of proprietary players like Apple and Google so there will be room for MS to make its play in the future when WP8 or 9 or 10 is finally ready to play. MS is winning now every day the general public never hears about Linux Foundation Meego phones.

[Earendil Star]

@ Leebase

Yes, MS is in total control of Nokia, this is what I've been suggesting all along.

But the fact that Harmattan is not on the market has nothing to do with its maturity. It's being boycotted by Nokia (or should I now just say "MS"?) itself because it would be a serious threat to WP, if it proved more successful than WP (which should not be all that difficult, given how WP has fared so far, if Nokia had decided to back Harmattan in earnest).

You see, you speak as if Nokia had taken all decisions indipendently, after careful consideration of all pros and cons of the different strategies.
On the contrary, I simply want to highlight that this has NOT been the case. Current Nokia leadership (of which TH Elop is the figurehead) is NOT acting in the best interest of Nokia, but of MS. As simple as that. Go back and reread all my posts, and you'll find lots of facts supporting this thesis.

If you want to disprove it, please bring credible arguments, on why the current strategy should be better for Nokia. But please do not allege that this is so simply because "WP was a better choice", or "with MS, Nokia stand a chance", because that is just wishful thinking and possibly your personal hope. Unfortunately, the market -so far- is proving you wrong: WP is a total and utter Elop. And -sorry to tell you- I believe the market should be given more credit than your wishes.

If instead you really want to say that the current Nokia strategy is better for MS, then I totally agree. But please state it plainly.

[Eurofan]

Dream on, Lee: "Whatever Meego COULD have been, it WILL NOT BE, not under Nokia." Haven't you ever read any romance novels or seen a date movie? A little frustration at the beginning is always good for a relationship. Linux phone OS (Meego, the official portable device OS of The Linux Foundation) has been on a three year date with the geeky IT world and it's been a frustrating relationship of teases and turn ons. Nokia's pre-Meego efforts go back at least five years before three years ago so the desire in Nokia to get into a relationship with the Linux loving geeky world via sales of Linux OS portable devices has been almost a decade building. Now the N9 has been shown to the press and the bloggers in Singapore and the web is on fire for the N9 in comment sections for two months. Elop is the crazy farmer/step dad and he can't keep this relationship -- Nokia/Meego (hearts) the geeky world -- from coming to fruition even with his shotgun and sleepless nights patrolling the farmyard and his daughter's chastity from his perch in the barn hay loft window. This is a hollywood or a Bollywood romance for all time. Will the N9 and Meego ever come out of Nokia or will Elop bottle it up on his farm stead forever and ever???? Of course Meego will have a future at Nokia. No legal document can prevent that and stand up in court.

Tomi has shown that Nokia now has three existing form factors and tool and die set ups to make existing Meego 1.2 (The Linux Foundation's official name for Maemo 6/Harmattan, bless them) phones: the N900 (the slow, cheap, New Communicator model, flash upgraded to Meego 1.2/Harmattan), the N9 and the N950. Just putting a faster chip in each and some more memory in each 12 months from now, which any Finnish High School science standout can tell you how to do next year based on blueprints, gives you an outstanding new line for September 2012 of even more expensive N951, N10 and N1050 models, while the older models go down market in price, just like Apple does it. Fixing a few bugs and adding a few built in widgets would be nice next year but not essential. People love the idea of Meego so much that they'll put up with a little more frustration, especially since farmer Elop and his shotgun have obviously interfered with daughter Meego's coming out preparations. Geeks love Meego1.2/Harmattan -- and geeks have money all over the world and have tremendous market influence all over the world. Leave the iPhones to soccer moms and soccer dads and soccer grandmoms and soccer granddads [this is a US term for Yuppies with kids, sorry to non-US ears]. The N9 will sell itself at $1000 a pop. Geeks don't care one little bit how many apps are available. Apps are for soccer Dads and NYT columnists (same thing).

[Eurofan]

Geeks and power executives both like the same thing: intelligence in their tools. A tool which never crashes, never. A tool which doesn't lose connection or information. A tool which copies and pastes and excels at email. A tool which is well sorted and intuitive. Then for geeks: a tool which can be hacked and played with. Then for power users: a tool which can be well integrated into their company IT systems. Linux on a portable device. The solution for geeks and for power users. Meego at Nokia is done or as done as needs to be for the next two years. Nokia already has Meego1.2/Harmattan and you'll see that the only profits Nokia makes in the smartphone space for the next 12 months will come from it and the old still selling Anna N8, god love it, barring hideous accounting revisionist history. Wishing won't make it go away, Lee. The N9 is way more important to Nokia than Elop and his theories and his agreement and his people. In 12 months the N9's successors will roll themselves off the assembly line with slightly faster, maybe even dual core! chips, just a slight improvement and voila, amateur geeks and amateur power users will feel green lighted to give it a try joining real geeks and real power users. You think Google got to the top of search from marketing muscle, Lee. No. Google was a clean, simple, powerful, foolproof tool whose time had come. Exactly like Meego.

Nokia is so smart to charge a ton for it. Why not? Nokia needs the money. A N9 which sells out by Christmas 2011 at high margins is obviously something real and something important and worth another round of production, wouldn't you say, whatever the contract with MS says. The Nokia WP line, if it comes out before Christmas will go nowhere in the market place just like non-Nokia WP phones. If the WP line comes out after the new year it will still go nowhere in the marketplace. That is so obvious. It will sit under glass next to iPhones and Androids and Blackberries and the sales person will say, "I've been promised and extra $10 in my paycheck for each one of these new Nokia's I sell, but you know something, I will never be able to look those customers in the eye again if I sell this phone to vulnerable, uninformed people. The fact is the OS is from Microsoft and people get tired of using it really quickly, just like all Microsoft products. These Blackberries and these Androids and this older iPhone are all very close in subsidized price and have much higher long term satisfaction. Why don't you give me one dollar and I'll write up a contract for one of these other phones. If I do this ten times in a row I'll feel better about myself than if I sell you a WP phone, OK?"

Anybody can get into a contract. Lawyers, guns and money get people out of contracts that other idiots got people into. Lawyers, check, Nokia has them, they just beat up on Apple's lawyers. Guns, check, Nokia has an awesome patent war chest. Money, well it takes money to make money and if Nokia wants out of the Microsoft contract all they have to do is break it and start paying lawyers from the proceeds of Meego1.2 phone sales. Its that simple. There are no olympic prizes yet for Industrial Double Flop, ok, so Elop can strip off his tummy hugging girdle and get off the stage. Nobody believes him and his magical microsoft ecosystem bullflop any more. He's starting to sweat on TV like Nixon in his debate with Kennedy.

Elop on SeaRay, so not believable: http://www.youtube.com/watch?v=F6oidCTUw4s

Marko Ahtisaari introduces N9, a 10/10 performance: http://www.youtube.com/watch?v=oU8kYwqZKgM

Compare and contrast. Who is more confident, who is more sincere, who makes more sense, which product is going to be a hit? It's not hard to figure out.

[Eurofan]

@Earendil Star: I agree %100. Lee, if you can't stand my enthusiasm for the team at Nokia which produced the N9, on older hardware and on a touch screen only design and who plan to market it at a high price point (which is brilliant, b/c it avoids all criticisms [every reviewer said the N9 is plenty fast and not laggy as it is], sets itself up for significant profitability, and sets up so easily next years models, basically faster chips (same manufacturer) more memory on existing N900, N950 and N9 models without need for any programatic support within Nokia during the next ten months. Ok.

Listen to Earendil Star: Who at Nokia is working for Nokia and who at Nokia is working for Microsoft? Is there a difference in interest between these two groups? Which group has a plan for full employment and market innovation. Which has a pipe dream for profitable gutting of engineering teams and miraculous market success via the least successful smart phone OS out there? Elop was at the helm for what 4 or 5 months before he changed strategy from [transition to Meego] to MS's WP platform as primary smartphone OS for Nokia starting in 2012. 4-5 months. When his memo came out and he introduced his thoughts to engineers at Nokia, they walked off the job, thousands of them, like he was some sort of crackpot dictator. Elop is not Nokia. His salary after his two and an half years with benefits is equal to ten or twenty years of a Nokia engineer's salary. Elop has different values than a Nokia engineer. Elop and his team changed the plan and sold the change of plan to the Board, who themselves were feeling guilty for loosing % 75 of Nokia's market value in the proceeding 3 years, so they were willing to take a chance or look like they were willing to take a chance with this new leader.

But the N9 team outsmarted Elop. The N9 is going to sell at a high price point in limited markets, runs very well on two year old tech, and will be a total hit, smuggled on the grey market into USA, Britain, China, India and other world geekdom hotspots. The N9 is child's play to improve upon and market 12 months from now, that is built into its current design, as three separate phone models, without the need for an institutional development program for 10 of those 12 months. New models could be engineered and readied for production in two weeks, when the word is given in the summer of 2012. Those Nokia Meego software engineers Elop has laid off will by that time have hacked and hewed themselves each a new summer log cabin in that time for 10,000 euros each supported by Finland's generous retraining stipends and their own fury. Next year's upgraded chips from the same manufacturers [Google/Motorola chips, weren't they? -- you think Google/MMI would be adverse to sticking it to MS? by hustling a bunch of new chips to the N10 team next summer?] stuck into the same three Maemo/Meego phones Nokia already knows how to make now. Release world wide this time next year, with or without advertising, but with carrier subsidy when carriers are game for it in the US, perhaps upstart carriers looking to make new sales with a hot word of mouth phone: cricket, virgin mobile?.

Lee: How long dated are your puts? and how much of your portfolio have you invested in them. You seem to have two nightmares, one that the N9 is a big hit and gets sold well beyond its 100,000 unit quota making big bucks for Nokia and winning a follow up line of Meego phones next year, and two that Nokia gets bought out next year for a nice premium over current market value by deep pockets, eg Huawei or even, horrors, Apple.

[n900lover]

I heard some ms fanboys here were interested in example of disagreement with Elop's lies:

http://felipec.wordpress.com/2011/06/21/my-disagreement-with-elop-on-meego/

[Eurofan]

@n900lover: I check the comments on that posting every day. They are up to 301 now. A really good post and each comment, all three hundred and one, so far, is worth reading. Totally agree with recommendation to visit that blog for a understanding of what the N9 represents.

http://felipec.wordpress.com/2011/06/21/my-disagreement-with-elop-on-meego/

Most recent comment, the 301st:

"André Zunido says:
August 18, 2011 at 1:19
The N9 IMO has the best, most intuitive UI in the smartphone market. Paired with the beautiful hardware and screen its just the perfect match.
The camera seems to be really awesome also, everyone seems to be praising it (In anantech I caught a nice reference in the ‘T-Mobile MyTouch 4G Slide’ review: “…I’d still put the Nokia N8 at the top (and the N9 even higher when it releases), but this definitely in the conversation for second best, along with the Galaxy S II (which we’re still testing)…”.

I want this phone so much!

I Just hope Nokia will keep updating and developing maemo6/meego together with “their” WP7 which I don’t really care about."

Very typical comment on a very sober site. I also like:

http://konttoristhoughts.blogspot.com/2011/06/respect.html

Latest 2 comments:

"shekar said...
@konttori, i have a couple of questions for u plz reply
1) does alien dalvik for android apps come with d phone or downloadable??
2) there r a few photo leaks of d n9 in WHITE... do u hav any idea abt tht.
thanks
11:44
Konttori said...
Official statement is that we don't comment about white, so I won't either.

Alien Dalvik is 3rd party activity and as such may or may not end up as a downloadable (I sure hope it will, as it's excellent project), but there is no official support from Nokia for it.
00:24"

[Eurofan]

Also a useful summary as of 6/22/11 of what's known about N9 functionality:

http://talk.maemo.org/showpost.php?p=1036166&postcount=1

Author of above post, shallimus from Toronto, uses tag line:

"A fatal exception WTF has occurred at EL0P:BALLMER in ROADMAP MEEGO. The current hopes and dreams will be terminated.
If I wanted an iPhone, BB, Android or WP7 phone, I would have bought one already.
Please do not feed the trolls. They are on a special diet of misery, WP7 marketing and their own hot air."

[UK]

@eurofan: Proud of the team which did the N9? You mean the subcontractors Nokia slaved to insane deadlines?