Communities Dominate Brands

Smartphone Form Book 2012 part 2 - For Apple it is 'Splitwatch'

I am posting a series of the 'Form Book' for the major smartphone rivals on this blog. I am proceeding in size from the largest, and started yesterday with Samsung. Now its turn for number 2 in the global race for smartphone supremacy: Apple.

APPLE

Apple the USA based former PC maker who now calls itself a 'mobile' company, was briefly the world's largest smartphone maker in Q2 of this past year, but saw Samsung snatch that title in Q3. The iconic smartphone maker also has its own OS, iOS which in smartphones had 15% market share in Q3, but the reach of iOS is about twice that when the other Apple products running iOS are added - the iPad and the iPod Touch.

Worldwide, the iPhone ecosystem is the third biggest smartphone platform now by reach of installed base, behind Symbian and Android, having passed Blackberry. If measured by global web users, the iPhone ranks second behind Symbian, and if measured by smartphone app downloads, the iPhone is ranked first ahead of Android. Apple doesn't manufacture any basic phones (dumbphones) so Apple's share of all new phones sold is currently only 4%, roughly about the same as the Macintosh PC had of the global PC market most of the past decade. Apple is a premium luxury product that sells well in affluent countries but is well beyond the reach of most of the planet. Obviously Apple's best market shares are in the USA, Western Europe, Australia and some advanced Asian countries.

The short version of this blog is this - for 2012 we await Apple's inevitable announcement that they will split the iPhone range and offer the world at least two distinct iPhone models, one premium model to follow up on the current iPhone 4S, and a separate cheaper and physically smaller iPhone for the emerging world markets and as the 'entry model' in the wealthy countries. I have been calling it conceptually as the 'iPhone Nano' to indicate that this strategy would be similar to what Apple did with the iPod music player market earlier in the past decade.

And before we go into that. Lets be clear. Apple had a great year. They started the year retaking the crown as the world's biggest computer manufacturer, if all user-programmable devices with computer chips and an operating system are counted (the classic definition of computer) ie when smartphones and tablets are included in the definition of computer (many other computer-counters have also reported that fact, but you learned it first on this blog). While Apple with only the Mac was not even big enough to qualify in the top 5 biggest PC makers worldwide, when we add smartphones and tablets and the iPod Touch (kind of pocket PC) then Apple jumps to the head of that chart, ahead of HP and Nokia. Its a long time since Apple last was the world's biggest PC maker - that was long before the Mac, it was nearly 30 years ago, in the time of the Apple 2 series of personal computers.

In 2011 Apple became the biggest tech company by profits and was briefly the most valuable company on the planet by its market capitalization. But we also saw the death of Steve Jobs and many pundits now ponder how can Apple navigate the ever more challenging interconnected digital markets without the visionary guidance and unparalleled management acumen of Mr Jobs. Even with that, if you make more profits alone, than all profits of all your rivals combined - in that part of your business where you see is the future - for Apple that is obviously mobile - that is a comfortable place to be in. As past rival giants in smartphones before the iPhone continue to stumble (RIM) or disappear (Palm) or implode (Nokia), Apple continues to be a profit-generation machine. It has the highest consumer satisfaction levels, highest loyalty and lowest churn rates.

The only major hassle being forced upon Apple in 2011 was by the carrier community - the delay of the new model launch from late June to mid October. What we originally expected as an 'iPhone 5' was planned to be the first Apple smartphone without a physical SIM card - but the carriers revolted and told Apple in no uncertain terms, that such a phone would never be supported. Apple had to rush back to the design table and came up with what is pretty modest upgrades to the iPhone which we know now as the iPhone 4S. Nonetheless, the iPhone 4S is obviously the best iPhone yet, and will set new Apple sales records in Q4 and Q1.

MARKET SHARE PLATEAOU

This whole Apple 2012 preview blog can be best summarized into one picture. This is Apple's market share from the launch of the original iPhone 2G in June 2007, to today, end of December 2011 (these market share numbers are by the annual numbers, not separated into quarterly numbers, to keep the picture very clear).






There are two distinct periods for the iPhone. From 2007 to 2009, the iPhone gobbled up market share and establishing a world record for new smartphone brand growing in the market for two years. When averaged over the 19 months from the annual levels, the iPhone picked up 0.79 market share points - per MONTH ! That is nearly 1 market share point every month!

That came to a screetching halt right at the start of 2010, when the iPhone market share hit a plateau. The market share has been virtually flat for two years straight (yes, its picked up one market share point in 2010, and is likely to pick up another one market share point in all of 2011 - but compare that to the first two years, when the iPhone gained one market share point per month, almost).

If the iPhone growth pattern of 2007 to 2009 had continued at the same speed, the iPhone today would have (and indeed it should have) picked up 19 points of market share more, rather than 2 points. If Apple had pursued its advantage and momentum from 2009 into 2010 and 2011, the iPhone would today have 34% market share rather than 17% globally. So rather than where Apple will end at about 80 million total iPhone units sold in 2011, Apple could have (indeed it should have) sold 160 million total iPhone units! And all this with the same profit margins as it currently has.

I love Apple and I hate to be a downer, after the spectacular year Apple has had, but look at that picture. WHY did the dramatic growth stall from the start of 2010 and has stubbornly refused to budge? Yes, the numbers are so clear, that this year Apple will end in the 16% to 18% range for the full year depending on how excellent its Christmas season Q4 of 2011 turns out to be as we'll see when January numbers come out. To understand how much growth I have given Apple in this model now - I have used a preliminary number for the iPhone for Q4 Christmas Quarter of this year as 26 million units - a massive 50% jump over its Q3 numbers of 17.1 million and far above the previous iPhone peak of 20.3 million.

Even if Apple does 26 million iPhones to close the year, the overall annual market share for the iPhone for the full year 2011 will be .. 17% .. which is yes, only a one percentage point gain of market share in the full year. And just two years ago Apple was devouring rival market shares at nearly one percentage point every month! And remember, this 2011 has seen both the spectacular collapse of RIM and the self-induced market suicide of Nokia. Why has Apple not picked up tons and tons of global market share as those two giants - both of which were bigger than Apple last year 2010 - have crashed and burned?

WHEN YOU EXHAUST ALL OTHER OPTIONS

Since 2009 we have seen Apple try everything conceivable, short of splitting its model range. We saw the launch of the App Store, and mindbogglingly high download numbers of apps. That didn't move the needle. (Don't even try to argue that the app store download number or the number of apps in an app store translates into actual smartphone sales. Why is the iPhone stagnant then if that was the case? App store download numbers are only of interest to us geeks, not the normal consumers of the world).

We saw the phenomenally successful launch of the iPad - and bearing in mind that previously when Apple introduced a completely new product type to bear the Apple logo, that would help legacy product sales like the iPod helped improve Macintosh PC sales. But for all its global world-dominance stats, the iPad has not moved the needle for the iPhone.

There was so much more after 2009 such as the radical cool sexy new iPhone product the iPhone 4 in 2010 and its upgrade the iPhone 4S in 2011. Loved the world over and the most desired smartphone brand with the highest loyalty and satisfaction - has not helped move the needle.

Is software, or apps, or the web or the cloud 'the key' to more sales? Cool software and service gimmicks like Appletalk or Siri have not moved the needle. What am I forgetting? The iPhone White? Did not boost sales. Neither did the iPhone CDMA version. Neither did the massive spread of the iPhone carrier availability to Verizon and Sprint in the USA, KDDI in Japan etc. The iPhone market share has stayed stagnant stubbornly for two full years. Nothing has changed the picture.

I think its time to admit, that the reason for the iPhone 4S sales plateau today globally, is its price. When we remove the artificial pricing gimmick of the handset subsidy (which carriers force consumers to repay in a two year monthly payments contract hidden into the two year contract) the real price that all consumers the world over pay for a new iPhone 4S today is about 600 dollars (plus local taxes etc). The real price for US consumers who seem to pay 199 dollars for example is the same 600 dollars as anywhere else on the planet. About 600 dollars is what Apple receives from AT&T or Verizon or Sprint when they buy iPhones 4S models. And dear USA-based readers - please note that most of the world features mobile telecoms markets where phones are not subsidised, and we consumers pay full price for the handset, and there is no monthly contract 'jail' for two years with astronomically high prices.

And 600 dollars for a new phone IS expensive. We white-collar fully employed adults in the Industrialized World can easily afford to buy a 600 dollar electronic gadget, our big screen TVs cost more etc. But most of the planet has a population living in the 'Emerging World' countries where often the average daily wage is 2 dollars or less. They still have mobile phones but for them a 600 dollar iPhone is as impossible a dream as is owning a Rolls Royce or a private jet.

There is a natural ceiling to the global market for luxury cars like Rolls Royces. There is a larger market for 'premium' cars like BMWs and Audis and Cadillacs and Jaguars. And there is a far bigger mass market for mid-priced cars like Toyotas, Fords and Volkswagens. And in the Emerging World there is a far far bigger car market for low-cost basic and small transportation with brands like Proton, Tata, Kia etc.

THE CAR ANALOGY

I have often said when comparing Apple and Nokia, is that where Nokia is the Toyota of mobile phones, Apple is more like the Porche of mobile phones. Nokia makes smartphones and featurephones and very basic and utilitarian dumbphones. Apple only makes smartphones. Nokia offers many models to suit many tastes and segments, like Toyota in cars having different versions and styles of its popular models, with diesel, gasoline and hybrid engines, etc.

Apple offers us one iPhone model per year, and up to recently, they would not even give us the iPhone in more colors than one, which now has been expanded to two with the iPhone 4 line (Black and White). Nokia phones come in all sorts of colors and often even feature user-interchangeable covers. The analogy is not perfect, but Apple has been far more like Porsche than like Toyota in mobile phones, and Nokia has been far more like Toyota than like Porsche in mobile phones.

What Apple now has to do, as Porsche did, when it noticed it had reached a natural limit of its sports-car oriented product range - is to expand it. A few years back, Porsche introduced its SUV model which became Porsche's bestselling model. That is what I argue for Apple. I WANT Apple to return to giant growth in its market share. And that can only be done now, with the split of its model range. I return to this picture.

I think anyone who looks at that picture, sees that something is wrong. Remember, in year 2011 so far, Samsung has more than doubled its market share in smartphones. It can be done. But go to your phone dealer, you'll see one iPhone model but a wall full of Samsung Galaxies of every form and type and function, plus many other cheaper Samsung branded smartphones. This is exactly how Nokia used to play the game when it was bigger than iPhone and Samsung smartphones combined (as recently as December of last year).

I am not arguing that Apple should saturate the market with dozens of iPhones to create tons of fragmentation. In fact, my iPhone Nano strategy recommendation has been very explicit in not causing any further fragmentation to the iPhone ecosystem than already exists in terms of screen size, resulution etc. I have also explained how the jump in market share is achieved by a lower cost model that is not going to cannibalize the main top-model flagship model sales and profits. And that the actual profit margin on the Nano model would be about the same as what Apple already earns from its iPhone model line.

And one last point - offering last year's model for half price is not the same. That is selling obsolescence and it will not serve Apple well. Apple can very easily do a miniaturization and re-energizing model update to the older model, give it a couple of sexy new features, and give it a new model name - and sell thus a totally new but cheaper iPhone, where most of its guts and components are a year old - meaning Apple can generate a huge profit while selling it at far lower cost than a year ago.

In a perfect world, this is how I would do it. Launch a new sexy iPhone 5 for June 2012. Make it a 4 inch screen size phone but with the same 'retina display' resolution as the current iPhone 4S. Offer it with a 12 megapixel camera, WiMax ie 4G and LTE for superfast speeds, and NFC ie Near Field Communication (for whatever Apple will call its money, iMoney probably). Keep the form factor outwardly size almost exactly the same as the iPhone 4S is now. It would make sense to make this iPhone 5 model physically distinct from the past iPhone 4 models.

Then for last week of September, launch the iPhone 4 Nano, which takes all of the current iPhone 4S features except Retina Display, and offer it in a smaller case, and a new design, where it is instantly recognizable as the Nano iPhone. It cannot be confused by outwardly appearance with any older iPhone model. Give it still a 3.2 inch screen which will be close enough to 3.5 inches, so that all apps will still work the way they were designed, but with the older iPhone 3GS screen resolution (so causing no fragmentation in the specs, for developers).

Then use most of the other guts of the iPhone 4S ie processor, memory, sensors etc. But make the casing less expensive ie not the two-sided glass with steel design of the iPhone 4 line. So the camera resolution of the Nano would still be 8 megapixels, it would come with the two cameras, with Siri etc. Then add at least one new feature that the 2011 model of the iPhone 4S does NOT have but the new 2012 flagship iPhone DOES have. The obvious part would be NFC if Apple launches its mobile money in 2012. There should be something 'better' in the Nano than the past flagship (NFC) but also something less than the previous flagship (screen resolution). Physically the Nano would need to be clearly smaller than the iPhone 4 models in height and width (it may be 'thicker' if necessary, that is not as critical at this price point).

The marketing point is, that if the three phones are placed on a table, it will be clear to anyone unfamiliar with phones, that all three are different iPhones, even if they are turned off. The iPhone 5 has to be clearly the sexiest newest flagship, and the iPhone 4S must seem like last year's phone, and the Nano must be physically the 'baby' of the series, exaclty like they do in cars, the Porsche Boxter is clearly the cheaper smaller version of the Porsche line, compared to the 911 for example. Or how the BMW 3 series is clearly smaller and cheaper than the 5 series etc.

Any existing iPhone user of the iPhone 4S will not bother to buy the iPhone Nano for himself or herself to replace the 4S, because the Nano is legitimately a step down. And there is a brand new glorious iPhone 5 with the 4 inch screen, the 12 megapixel camera, WiMax 4G and LTE and NFC etc. So this Nano model would not (in any meaningful way) cannibalize existing iPhone user base. Anyone who owns an iPhone 4 or 4S (or 3GS) will want the new sexy hot super-spec iPhone 5. And because that consumer had been able to afford to buy the previous iPhone at its full price (with or without subsidy) clearly that consumer can also afford to pay 600 dollars for the next iPhone. In fact, if Apple really wanted, they could even HIKE the price of the iPhone 5 a little bit, with the incredibly strong Apple loyalty, to say 700 dollars haha.

But here is my kicker - for the true Apple loyalist, who wants two phones - they can DEFINITELY see the Nano as their second phone, for the tightly-fitting jeans when going out partying, when the larger iPhone with its fragile glass screen is not really convenient. I am sure the Nano would sell well into the existing iPhone user base as their second phone. Having only one new phone model per year EXCLUDES this opportunity - and in all advanced markets the affluent young employed all walk around with two phones (think Blackberry user as the work phone who also has an iPhone as the private phone). In Europe we've passed the point where half of Europeans have two phones already.

And for those who want to give iPhones as gifts. If the new model is too expensive, and giving last year's model seems cheap, the Nano is the perfect hristmas gift. And for the youth who - against Nokia executives' hopes - have not grown tired of the iPhone - where the iPhone is highly desired but often too expensive - this lower priced Nano will be the first step into a lifetime of Apple ownership. Use the Nano as the 'bait' and that consumer will soon buy the next version of the top line iPhone 5 model, and an iPad and a Mac and an Apple iTV etc..

I have said that even conservatively when the Nano version is launched in parallel as the second new iPhone model in any one year, it will boost Apple smartphone sales by 50% from that point on. Considering how big and strong is China already (China passed the USA as the world's biggest smartphone market) and how strongly India is growing etc, and how much more price-sensitive those customers are, the time to launch the Nano is now, to turn that flatlined market share curve back into growth. Apple has forever abandoned at least 10 points of market share it can never recover but if it launches a Nano model in 2012, that market share curve will return to growth once again - and the gross sales revenues and profits by Apple will take a giant bounce once again.

That is why I say, this is the year of 'Splitwatch'. Any reasonably intelligent executive who sees that graph, will decide to try the product line split sooner or later. Apple has tried all other gimmicks and they did not help. And Apple has done this with the Mac and with the iPod, so don't bother to write that it is somehow 'against Apple philosophy' haha. And the product line fragmentation has already started with Retina Display, I am not adding to fragmentation with this Nano strategy. It is time. No, it is past time. But I trust Apple will do this soon and lets hope it happens in 2012.

(And separately, Apple should do a third version - take the premium iPhone 5, and add a QWERTY slider version that is yes, 25% more thick but otherwise same form factor and all other specs the same - and charge 100 dollars more and massively increase the profit MARGIN Apple makes per handset. This is sure to be a hit product and gain a large additional iPhone user base of those like me, who are so addicted to messaging we cannot do without a real QWERTY keyboard, no matter how clever a touch screen keyboard or voice recognition could be. We need the ability to type single-handed, blindly and silently. No touch screen allows that and voice recognition is not usable in silent situations)

There are many exciting things happening with Apple for Apple-watchers from the iPad to Apple TV but this blog is not an Apple blog. I look at the smartphones in the Bloodbath series. In smarpthones, Apple has stopped growing its market share for no sensible reason. It is time for Apple to resume its strong market share gains and the only way it can do that, it has tried everything else (without obviously cutting prices, which would be stupid) is to split its product range. That is why 2012 for Apple will be the year of the Split-watch. This split is inevitable. But every quarter that Apple waits, it is gifting potential life-long Apple fans to Samsung, HTC, SonyEricsson, etc

ABOUT COMMENTS

When I post anything about Apple I get the most comments on this blog and very often they are very hostile. I don't mind that. I have a rule on this blog, that you can comment provided you remain civil in your tone, and your comment is relevant to the blog - and that you illustrate that you have read the actual blog article where you are posting your comment.

It is my policy to try to respond to everyone (I have fallen seriously behind on that this past year due to very heavy travel). If my response to you would require me to write 'but if you read what I wrote in this very blog article' - that kind of response by me is pointless, it wasts the time of my readers and in some cases, even some of my regular readers will waste their time coming in to point that out. I will have none of that. Any comment left on this blog (on any topic) if it indicates that the person didn't read the full blog posting, will be deleted without mercy and if there were other 'valid' points in it, those will be lost. You have been warned.

DOES TOMI HATE APPLE

And with that, I need to make a few very specific Apple-related comments. Some visitors to this site think that I hate Apple. I do not. I love Apple. I was employed as a Macintosh trainer for an Apple authorirized reseller early in my career when I was working on Manhattan. I have always loved Apple. The signature book for this blog, Communities Dominate Brands, has as its very first case study the iPod and iTunes and the book clearly makes the point that what Apple did there was textbook execution of creating a new market space - ie my case study is a case study of excellence - that is how much I love Apple. And if you think I don't 'understand' Apple, read my tribute to Steve Jobs when he stepped down from the CEO's position. I am not an Apple experts, I am a mobile industry expert, but within that context, I do understand Apple quite well - specifically because I have admired the company from its very beginning.

And I do not hate the iPhone. I was the first person to say that the iPhone is so important that it is the mobile phone handset that will cause a demarkation of time in this industry, of the time before the iPhone and after the iPhone (as so many tech pundits nowadays refer to the smartphones space or even the total telecoms industry, in words like 'but that was in the time before the iPhone') etc. I said that first on this blog, in the landmark blog about the full impact of the iPhone - before one iPhone handset had been sold and nobody had played with the device is when I wrote that! My blog is the origin to the term 'Jesusphone' (even though I did not use that term, it was mistakenly attributed to me and that blog posting).

I have said since time and again, that in mobile there has been no other phone as influential as the iPhone was. And I have celebrated all further improvements and advances of the iPhone and its ecosystem from the iPod Touch to the App Store to the iPad.

I am also a forecaster. As every forecaster knows, we cannot be totally 'correct' - EVER. It is not possible to know the future. EVERY forecaster makes mistakes ALL THE TIME. And on Apple I have been wrong many times, such as my forecast in early 2010 that the iPhone market share will turn from growth to decline. I have been wrong on other smartphones such as my prediction that one of the biggest beneficiaries of the Nokia market share collapse this year would be Blackberry. Every forecaster gets it wrong all the time. It is impossible to be right always, and those forecasters who get one forecast exactly right, have been lucky.

The professional forecasters will be open about this. No forecast is iron-clad. We can assign probabilities to our forecasts but even then we get it wrong from time to time. What is the aim then? The aim is to be insightful. To have more of the forecasts right than wrong. To have the main themes of the forecast to be more right than wrong. Ie, if you forecast a growth, and your exact growth number is not spot-on, but you did forecast correctly the growth, that is good and if the reality turned out to be a decline, that is bad.

We try to be better at forecasts than the mainstream. It is easy to join all colleagues in a consensus view, the gutsy move is to break with the colleagues and forecast a deviation. And the most difficult challenge in forecasting is to pinpoint a change in direction - to forecast that a growth curve turns into a decline or vice versa. It is easy to prolong a current trend and think that because in the past year something grew, it will continue to grow into the next year (and in most cases of forecasts, to forecast that the growth RATE will slow down, is always the safest bet, that happens mathematically the most often).

TOMI FORECASTS AND APPLE

So a short summary of Tomi's forecasts relating to Apple on this blog. I was the world's first forecaster to say that the massively growing iPod music player market was about to be overtaken by 'musicphones' ie music-playing featurephones - and that this would happen within a year. I said so in 2005. I was quoted with that forecast in the Financial Times for example saying that musicphones will outsell all Apple iPods. I was crucified on this blog for daring to say that. I was proven right. And for those who try to argue the point now five years after the fact, I only refer to Tim Cook's statements when he admitted that the iPhone was developed explicitly because Apple saw that the musicphones such as SonyEricsson's Walkman series were indeed cannibalizing iPod sales. I was vindicated. But that was a gutsy move to forecast that while iPod sales were still setting new sales records, that the era of iPod dominance had come to an end. No other analyst dared to say that in the early Autumn of 2005, that during 2006 the iPod's reign would come to an end. That was going against all 'conventional wisdom' consensus view forecasters, and I was proven right - they were proven wrong.

Incidentially, in 2006 I also said that Apple had to release its iPod-phone (what turned into the iPhone) by 2007 to enter that market. I was right but I was not the only one calling for Apple to release a mobile phone handset.

When the iPhone was announced and Steve Jobs said it would sell 10 million copies in a year, most mobile industry analysts laughed and said that was impossible (especially with the very high price tag). There were Apple loyalists who boldly claimed Apple would do far better than that. I ignored both views, and wrote my two analysis blog postings of why Apple would pass 10 million but not much more - and that it would take significant marketing costs to achieve that. I was proven right, Apple had to drop its prices severely to achieve that 10 million unit sales in 2008, its first full year. There were other analysts who did say yes, Apple would hit 10 million. Most picked numbers far below. But I don't recall any who said the 10 million was to be achieved WITH major marketing costs (price cuts) by Apple. Note that I wrote those blogs before Apple had sold one unit and none of us had played with our first iPhone.

Also well before the first iPhone was sold, I gave a global iPhone market breakdown for the first year. Where the iPhones would sell better and were worse, and why. I have not seen any other analyst give an international breakdown of where Apple would achieve its sales - that was published before the iPhone started shipping. And was I right? I was dead-on.

There were early pundits who asked Apple to split its product range (and some who suggested similar strategies to what I describe as my Nano concept). I was vocal early in 2007 and 2008 that it was NOT the time to waste designing cheaper versions because the top-line iPhone was still gaining sales. So I have not always been asking for the Nano model.

I changed that tune when the iPhone market share growth stalled. That means I am not a dogmatic person, I look at the real world and am willing to adjust to the market realities.

For the iPhone insights, my two most relevant postings came in early 2010. As I said, the easy (and lazy) forecasting option is to continue a trend curve. As Apple was growing iPhone market share strongly in 2008 and 2009, it would be very easy to forecast at the start of 2010 that Apple would continue to devour its rivals in 2010 and that Apple would end the year 2010 with about 20% or 22% or even better market share. If you go back to forecasts about Apple iPhone market share that were published by any analysts of the tech space in late 2009 or early 2010, nobody predicted that Apple's growth would stall. All forecasts were rosy growth into the 20 percent and above market share range for the full year 2010 and beyond.

I was literally the world's first analyst or forecaster to say that the dramatic growth had stopped. I pinpointed the end point accurately and after I made my call, many other analysts came with similar projections in the Spring and Summer of 2010. In my forecast I said Apple's growth in market share would turn to a decline in market share. I correctly forecasted that the growth was over, going against all other forecasters (brave) and pinpointed the exact point in time when a long-running trend broke (most difficult to forecast). But I was too aggressive in my forecast, Apple's market share did not decline, it plateaued.

So yes, those who like to gloat, I was obviously wrong on the detail. I was right on the major point. How much was I wrong, in fact? By one percent! In the forecasting profession on annual forecasts if you are within a percent, you are considered to be perfectly accurate haha..

But what happened? That January-March quarter of 2010 something happened that had never happened before in smartphones, that impacted Apple heavily. I was on this blog first, long before anyone else would write that 'Tomi Ahonen was wrong about Apple' - I came on this blog, and wrote that the Jan-Mar Quarter of 2010 had numbers from Apple which were in conflict with my published forecast. (Is that not honesty and a sign of respecting my readership). I said that my forecast had not been invalidated by the new data, but that it placed my forecast in doubt and said what to look for in the rest of the year, and promised I would keep my readers up-to-date.

Note, for that January-March Quarter Apple sales, ALL forecasters got that quarter sales wrong (including me). But my forecast was one of those with the smallest error. Not the most accurate (the smallest error) but out of about 30 analysts who published iPhone sales projections for that quarter, I think there were 3 or 4 whose error was smaller than mine. I was still in the group who were less wrong than the most.

I went on a search for the truth. I also found it. I was the first analyst in the world to spot a brand new phenomenon in smartphone sales, that the January-March quarter would yield a kind of 'Second Christmas' sale period, but specifically in China, because the Chinese do not have Christmas-time (December) as their gift-giving season, but rather the Chinese New Year, which occurs in late January or early February every year. So the Chinese gift-giving season shifts Chinese gift sales from the October-December quarter that most other countries witness, to the January-March quarter for the 'Greater China' region where the Chinese culture is dominant. I was the first analyst to say this meant increased SMARTPHONE sales for the Jan-Mar Quarter, for those smartphone brands that were strong in China (like Nokia, Apple, Motorola etc, but not Blackberry for example).

Again, there were many who came to this blog to argue that point calling me foolish. Some said I didn't understand China and others said this was not relevant to smartphones. I was vindicated, however when Nokia released its numbers a few weeks later, where Nokia both admitted that China sales were stronger than they expected (so even for Nokia who owned that market having more than 70% market share in smartphones in China) and Nokia explicitly wrote in its Quarterly results that this was because of Chinese gift-giving for the Chinese New Years holiday period.

I was the first to identify where Apple's surge came from in the January-March Quarter of 2010. Remember EVERY forecaster got that quarter massively wrong. Where were the others? But not just identifying where the surge game from, I was then also the first to explain WHY China had behaved like this. And I was the first to point out why this had never happened before - as China was so small in smartphone sales prior to 2010, because it was only in 2009 that China launched its 3G networks into full production so this phenomenon had not been possible in previous years.

If you want to say I have been wrong, that is true, but that is true of every single person who earns a living as a professional forecaster, whether in tech forecasting or economic forecasting or weather forecasting. That is a pointless charge.

If you want to think Tomi is incompetent to comment on Apple future developments, and think this 2010 instance is proof of it - I point out that no other analyst spotted that Apple growth had stalled. Nobody. Not a one. Every other Apple forecaster was off by DOZENS OF MILLIONS of iPhone units. I was not right, but I was BY FAR the least bit wrong. Everyone got it wrong but my error was smallest. I was least wrong. If that is not a value to you as a reader, perhaps you should not bother with any forecasters haha.

And the only reason why I ended up missing my forecast by one percent, was a surprising development out of China which surprised even the world's biggest smartphone maker, Nokia, who sold more than 7 out of every 10 smartphones in that country. Even Nokia didn't expect this to happen. Every forecaster got it wrong that time and I was among those for Apple forecasts, whose forecast was among the least bit wrong.

Then of my ethics. I was on this blog the moment there was contradictory data, informing my readers that my previous forecast was now in doubt, because of new data that had emerged. I then informed my readers whether I stood with my forecast in light of this new data or not (I did) and I promised to track the numbers as they came in (which I did) and in the end, I was off by one percent. If that is cause to crucify me, when all other forecasters had Apple with well above 20% market shares, then you do not undestand the science of forecasting. And I went on to spend my time to study the issues and long before Nokia published the first confirmation that there is a 'China Syndrome' to smartphone sales after Christmas in the January Quarter, I was the world's first analyst to bring that insight to Apple (and other) smartphone analysts.

I was on this site clearly when the final numbers came out for the full year 2010 and was the first to say, that yes, I was wrong in that part of the forecast saying Apple would see a decline in its market share for the year, and calculated my error too. I see precious few analysts or forecasters drawing attention to where they had it wrong. I publish every single result of every single forecast I have made, where I happened to be reasonably close to right, and where I have been obviously wrong. I do not hide from those errors.

Back to Apple. I am not infallible, obviously. For example my iPad forecast was far too pessimistic. I also was clear in my forecast that my prime competent is the telecoms/mobile/handsets side of the tech industry, not the PC side, where the iPad is more an ultraportable tablet-style personal computer, than a large-pocket-sized mobile phone.

But if you look at Apple's performance in smartphones, there are three truly significant points in time that would need a forecaster. Would the original iPhone grow dramatically to 10 million units sold in 2008, its first full year. When will the dramatic iPhone market share growth stop. And will new moves by Apple bring in new growth for the iPhone market share. On all those three points, I was right. You will not find any other forecaster who had those three points right, forecasted year 2008 during 2007; forecasted that 2010 stopped the growth (forecasted any time during 2010) and that forecasts during 2011 any moves by Apple including iPhone White and CDMA and Verizon etc - will not restore the growth back in smartphones. If that does not make me 'credible' to comment on the iPhone, I am at a loss.

Nobody is perfect in forecasting. I would dare to claim, that in Apple-related mobile industry forecasts, I am one of the most accurate, if not the most accurate forecaster.

I am sorry to be so pedantic about this, my past with Apple and the iPhone. I know what kind of responses we traditionally get on this blog whenever there are stories about Apple. I am only trying to pre-empt some of the nonsense. I would prefer we have intelligent discussion here on what to expect from Apple in 2012, and why Tomi thinks this is the time of the Split in the product line, and why it should be the Nano model. I would love to hear ideas of how Apple can gain more iPhone sales if there is any other thing it could do (but do not repeat the things they have tried in the past, like the App Store or CDMA model etc as obviously those ideas did not work). Give me your thoughts but don't bother to remind my readers that Tomi has been wrong on some detail of some forecast at some point. Such comments are now clearly ADMITTED by me so if you make such comments, they are a waste of time of my readers and your total comment would be removed. Lets stick to the real points here, how can Apple come back to a growth pattern in smartphones and would my recommended strategy of a Nano model be a practical way to achieve it.

We have done Samsung and Apple, next in this series Nokia, RIM, HTC and later coming Google, Microsoft, Sony etc 

Smartphones Form Book 2012 part 1: for Samsung it is 'Leadwatch'

As we headed into 2010, I predicted the smartphone wars would heat up and I labeled the year one of Bloodbath. And we had both carnage and intensified competition.

Among the early casualties in 2010, we saw the end of Palm (bought by HP) and Microsoft's Kin. And Google killed its Nexus One but changed its mind, and came back again with more Nexus by end of year. We saw the launches of bada from Samsung and Windows Phone from Microsoft, to replace its older Windows Mobile OS. 2010 saw the launch of Nokia's Maemo on the N900 as yet another new smartphone OS and also its end, when Maemo merged with Intel's Moblin to form MeeGo.

For 2011, I expected more and called it the Year 2, Electric Boogaloo of the Smartphones Bloodbath. We saw even more deaths and ever more intense competition. Gone now are Motorola, HP and Ericsson (who sold their share to Sony). And Nokia killed the world's bestselling smartphone OS, Symbian, while it was the leader. During 2011 the global lead in smartphone operating systems occurred (Android took over from Symbian), and the title for the individual largest smartphone manufacturer of the world saw the year with three different leaders (Nokia, Apple, Samsung) in three quarters. Nokia launched the N9 on MeeGo which was then promptly terminated as an OS and as Samsung replaced Nokia with the OS platform, the MeeGo project will now become Tizen. For Intel its the third separate smartphone OS in three years. Microsoft felt frustrated that Windows Mobile was still outselling Windows Phone, and ended its public mentions of Windows Mobile (which still sells in modest numbers). HP ended development of Palm WebOS turning it into an open source project. Meanwhile we heard that Nokia was not done building new operating systems, their next will be called Meltemi, designed for low-cost smartphones.

But some of the early fights are now over, and we can start to see the clear first and second tiers of the smartphone handset makers as well as the operating systems. Lets look into 2012 to see what kind of factors we should look for in the upcoming year. I am writing a series of blog postings as the form book for 2012, when we look at Year 3 of the Bloodbath. And we start with the biggest, Samsung. I think 2012 for Samsung will see several very close races for the leadership position by several metrics, so for Samsung it will be the year of the Leadwatch.

SAMSUNG THE LEADER

South Korean Samsung is currently the world's biggest smartphone handset maker. Globally world's second largest mobile phone handset maker and the biggest provider of Android smartphones, Samsung has two of its own OS's - bada is over a year old with about 2% market share of new sales, targeting low-cost smartphones, and Tizen being developed with Intel as an OS for premium-priced smartphones for 2012 release. Samsung is the only brand of mobile phones that has a number 1 or number 2 position on every one of the six inhabited continents but its market share of smartphones is still below that of its market share in dumbphones. Samsung seems to be on the rising side of most
trends of the industry.

Samsung played most of its cards just about perfectly in 2011. For 2012 we will have several intriguing storylines to follow. First, in January we get the Q4 results and it will be neck-and-neck between the iPhone and Samsung on who won the title for the fourth quarter smartphone sales. The race is also tantalizingly close for the full-year 2011 final numbers - between Apple and Samsung on who took the world's biggest smartphone maker crown for the full year 2011 (for 2012 it will not be close, Samsung will tower over Apple by this time next year). Nokia is now out of that race and relegated to third place for the year and falling more in 2012.

Samsung will intrigue us all year with mesmerizing battles both on smartphones (against Apple) and very likely also against Nokia for the title of world's biggest overall mobile phone handset maker. If Sammy takes that title from Nokia, perhaps the most unlikely scenario is what we will end up seeing - that Samsung will not be the biggest dumbphone maker - leaving that title to Nokia. To understand how implausible that seemed just a year ago, in the fourth quarter numbers last year when Samsung was closing in on Nokia's overall numbers that was done on the side of dumbphones - in smartphones Nokia outsold Samsung smartphones by 4 to 1 as recently as December of 2010. Now Nokia smartphone sales have collapsed and Samsung has been firing on all cylinders to capture the lion's share of those abandoned Nokia sales.

But that is the macro competitive picture. What to look for within Samsung in 2012? The three details to observe are Android, bada and Tizen. Samsung is currently the overwhelmingly largest Android manufacturer, grown far bigger than number 2 in Android: HTC. Meanwhile Samsung promised 10 million cumulative bada sales in its first year and only did about 6 million. Samsung shook up its bada organization but has not recently given public statements of its intentions with bada. The global average price for smarpthones continues to decline, and bada is well poised to capture the mass market side of smartphones in emerging markets from China and India to Egypt and Nigeria. Samsung will also be monitoring the statements that came from Sony(Ericsson) and Motorola both which boast high percentages of migrating dumbphones to smartphones - Sony will complete its migration to all smartphones by 2012. For Samsung to do that profitably and with a long-term view, they will need to bring bada to full status. We may well see Samsung numbers shift so, that bada becomes the biggest OS on Samsung smartphones and if that happens, bada will definitely become the third ecosystem during 2012 (not Microsoft Windows Phone with Nokia).

Then there is the new parent to MeeGo. After Nokia jilted Intel and announced rudely that they would not make any more MeeGo devices even if the N9 is a huge hit product, Intel went and found a new partner. Samsung stepped in and to show how they play hardball, on the very day that N9 sales started, Intel and Samsung announced the end of MeeGo and the launch of its replacement smartphone operating system, Tizen. Tizen phones should start to appear during 2012 and those are likely to be high-end smartphones similarly to how the N9 and N950 were high-end MeeGo devices. Tizen would be the logical high end OS of preference for Samsung if and when it wishes to move away from building Google's Android army. Expect Tizen to be built with plenty of family ecosystem thinking with bada and Samsung's app store, much like how Nokia's MeeGo strategy was supposed to work with Symbian and Ovi.

SOON BIGGEST OVERALL

On the handset side, Samsung has been pushing the envelope already with the world's first pico projector on a smartphone, the largest display on any semi-pocketable device - the Samsung Galaxy Note with its massive 5 inch screen, and just now in December, Samsung announced the world's first smartphones by any major global brand, with dual SIM slots. This is well in line with Samsung's past, the company was also the first to do the dual SIM phones on the dumbphones side among major global brands. Expect Samsung to take more of a leadership role and I would not be surprised if Sammy brings some 'superphone' spec devices at price points well above that of the iPhone. Just look at how the Galaxy series compares to the iPhone, and how much the Galaxy Note could be seen as a big brother rival to the iPod Touch. Don't you get the feeling that Samsung is giving us what we hoped would be in the next Apple product?

Expect Samsung to show us a direction on its strategic vision for mobile phones towards the middle or end of the year. Up to now, and into the first half of 2012, we will see Samsung continuing to execute faithfully their diabolical plan for world domination. I have said before that the Samsung strategy in mobile is just like they have had in other industries - they study the market leader meticulously - then they copy every aspect of the market leader's strategy in every minute detail, without bothering to question whether that strategy was wise or not, simply because everything the market leader did, had given it the market leadership position. And Samsung feels their South Korean heritage and incredibly rapid implementation speed will allow them to execute that same strategy inherently better than the market leader. This means, Samsung will inevitably catch up and pass the market leader.

In mobile we saw Samsung leapfrog three rivals during the past decade from fifth place to second biggest mobile phone maker. In smartphones they have already taken first place, and if current trends hold, Samsung will become the world's biggest overall mobile phone maker by the spring or summer of 2012, and most importantly, compared to their global rival Nokia, it will be Samsung who has a bigger share of the more lucrative smartphone segment - where the future lies, while Nokia will hold onto the bigger share of the older featurephone segment which reflects the past. Exactly like how Nokia rapidly took Motorola's leadership in the late 1990s when Nokia's handsets had the lead in digital phones while Motorola led in older analog phones.

I wrote when Nokia had its moment of madness in February with the Elop Effect, in my long analysis of how will the Nokia dividend be distributed among the smartphone maker rivals - that it most of all depended on execution - which of the Nokia smartphone rivals was most capable of ramping up and pushing smartphones at every price point, on every carrier, in every country. We see now that it was obviously Samsung who executed that tactical move to perfection, while others - most notably RIM - who were equally poised to capitalize, utterly failed to take advantage of the Nokia dividend (after all, for essentially all Nokia Symbian E-Series users, the obvious rival handset was the Blackberry. If Nokia E-Series was about a quarter of Nokia smartphone sales, why is RIM not today as big as Apple and Samsung?)

Now Samsung is poised to take the world leadership title in the truly big battle of this era, that of all mobile phone handsets. And that will bring a new era for Samsung. No longer able to copy the rival, Samsung will need to chart a strategic course for world domination. If Nokia could do it for more than a decade, surely Samsung must do so for the next ten years or so. And we should hear early signs of that new strategy towards the second half of this year.

Expect synergies here between the various units that Samsung is involved in from TVs to PCs and tablets to mobile, but also lessons from Samsung's South Korean domestic market, such as the digitally connected automobile and mobile money. Intel's Moblin-MeeGo-Tizen project had collected many electronics and automobile makers to join that ecosystem and it will give Samsung opportunity to differentiate - and to bring such benefits again back to Samsung flat screen TVs, tablet PCs etc. And if Apple's TV initiatives turn out winners, expect Samsung to have a rival up on the market soon as well.

So its the 'Leadwatch' for Samsung. Who is the global market share leader for Q4, for all of 2011, for Q1, for Q2, Q3 and Q4. By the end of 2012, it will be clear that for the full year, the global smartphone leader will be Samsung.

Then we watch in Q1, Q2, Q3 who is the world's biggest total handset maker. Samsung will be catching up to, and passing Nokia. Then there is bada. How will it fare against Microsoft's Windows Phone as Nokia ramps up Lumia sales. Then we have Android. How will Samsung do among the Android army against HTC and a surging LG and the others.

All of these will also yield local versions of the contest. Will Samsung continue to be the bestselling mobile phone handset in the USA? How big will its lead be in Europe. Will it lead in China? Can Samsung take Nokia's lead in India. How long will the market share in dumbphones continue to be bigger for Samsung than that in smartphones. And how rapidly will Samsung ramp up the transition of its dumbphones to the bada OS.

2012 will be a great year for those of us following the smartphones races, and Samsung is proving a remarkable competitor that is capitalizing on its opportunities.

Next up in this series: Apple, Nokia, RIM etc..

NOTE - For those posting comments - I love discussion on this blog. But because I will be publishing a series of articles about individual companies, I will be limiting all comments in these articles to related to that one company. So do not post comments about Apple or Nokia or Microsoft or RIM here in this thread. This discussion will be limited to Samsung. All comments that attempt to discuss non-Samsung aspects of the smarpthones races, will be deleted. You may, of course discuss Samsung in the context of whatever rival you want, but make sure you frame your comment to be about Samsung.

The Science of Santa Claus: Lets get some things straight...

Its that time of year, when little children are eagerly awaiting Santa Claus, perhaps a bit apprehensively too, as some might have a bit of a guilty conscience and fear that Santa might not come and bring presents this year. And then there are some nasty older kids who tease them and say things like 'Santa isn't real' - even as they know he is, but they say such things to try to make little children cry. But that is children, isn't it. At least they are kids and kids are kids. They are not mean.

But then we have some irresponsible adults who say stupid things on TV, like that Santa cannot travel to every home on Christmas Eve, he would have to travel so fast the air resistance would burn him up. Or that the size of the load of gifts is too heavy. Or like now, on CNN, that nasty travel and business man, Richard Quest has been saying that Santa's raindeer create more carbon than all of British Airways flights in a year. Come on, Richard, maybe if you flew in your first class style, you could burn that much carbon, but Santa isn't like that. Santa loves the planet and he would not create such tons of carbon! You just haven't thought this through, Richard!

And then we have those stories in America, that Santa comes from the North Pole. I know it makes sense and they can actually monitor Santa's flight on their early-warning radar - but that radar cannot see beyond the North Pole. It only looks like Santa came from the North Pole. In reality, if you sit in the USA, and look North, what is behind the North Pole? Finland! Santa comes from Finland, from his mountain called Korvatunturi, in Lapland, in Finland. Korvatunturi means literally the mountain of the ear. Ear mountain. Korvatunturi. Its not named ear mountain because it looks like an ear. It is named ear mountain because there is so much noise on Christmas Eve because of Santa's heavy travel, that you have to protect your ears. That is why it is called 'Korvatunturi'. Sounds funny, doesn't it. Korva-tun-turi. That even sounds like a mysterious place far up in Lapland where you need a raindeer just to move around.

And when Santa does fly to America, he of course is in a hurry, so he flies the shortest route - and children, if you take out a globe and look, the shortest route from Finland to any part of the USA does go... over the North Pole. That is why American TV news on Christmas Eve report Santa coming from the North Pole. Obviously their radar cannot see Santa beyond that. Where I come from in Finland, our radar sees Santa as he flies from Europe and heads to America. So we see the 'other side' but from our viewpoint, it looks like santa landed on the North Pole.

But yes. There are those who doubt the actual flight science. How can Santa take all those millions of gifts, to all those millions of children, in all those countries around the world, and bring all those gifts in just one night. The weight of the gifts is more than can be carried by the biggest airplane - that new giant super-jumbo Airbus 580. And if you think a couple of raindeer can pull that weight - at speeds several times the speed of sound - that seems quite unreasonable. Santa has been doing this for more than a hundred years, so he doesn't even have jet engines and certainly not rockets.

That is where the very first problem arises with the lay-people who do not understand Santa Claus as well as we Finns do, as we tend to all know some elves who work for Santa or have worked for Santa or have done some summer apprenticeships for Santa etc. I mean, Finland is Santa's home - we even have a Santa Claus amusement park near Rovaniemi where you can actually come and visit Santa (but not on Christmas, obviously when he has to do his travel). But yes, you can visit Santa any time of the year, even during the summer, and see his elves and take a ride with a raindeer-pulled sled etc.

Anyway, let me explain this weight-to-flight power ratio. Santa does fly to visit the homes yes. And Santa brings the gifts yes. But Santa of course doesn't carry all the millions of gifts from his mountain in Finland on that one night of Christmas Eve ! No. That is why he has his elves to help him. Its patently obvious. You all know, kids, how Santa sends his elves to spy on us all to see if we have been naughty or nice? Yes, those same elves also then bring gifts to Santa's secret storage facilities that he has in every country. The gifts are not all carried in one enormous sack Finland on Christmas Eve. That would be silly. No. Santa of course has organized the gifts well in advance, using his elves to help him. That makes perfect sense. Why else would he need so many elves? Santa only carries a small sack a short distance from the nearest warehouse of course. His elves help him, they keep the list of whose been naughty - and gets no gifts - and whose been nice. Then the elves have to make sure that Santa has the right gifts to the right people.

And this can be very complex and difficult when you think about Santa's job around the world. Take me, for example. My name is Tomi Ahonen. Tomi, is of course a man's name.. in Finland. But did you know children, that the same name, Tomi, is a girl's name in Japan. That is true! Now if the elves only give Santa a gift that reads Tomi, and they are not careful to make it the right gift, to the right Tomi, I might get a girl's gift! Or some very nice girl in Japan named Tomi would get my gift, a gift for a boy! She would not have a happy Christmas, would she, if she got a gift that Santa had intended for a 51 year old man, would she. No she wouldn't. She would not like to receive black mens socks now would she. And what would I do with a nice pink Hello Kitty pencil case intended for a schoolgirl?

You see why it is so important that the lists are well prepared and the gifts are all organized, locally in the countries. Now. With that, the actual weight that Santa has to carry is only himself and a normal sized sack (or sometimes he carries a couple of sacks in his sleigh for some trips, if its a big apartment building for example). He then again would have one of his elves waiting by the building to help old Santa, he can't really carry more than two full sacks of toys by himself. But he always recruits very strong elves to help him, they can lift as many as five full sacks of toys. I have seen one former elf demostrate that to me once in Finland. They are so strong, you would not want to try to arm-wrestle an elf. Especially not one who had been accepted to work for Santa Claus.

But yes. Now we have sorted out the weight and the localized gifts. Then there is the time of the night. How can Santa Claus visit all the homes of all the people on the planet, on just one night. Again, this takes science to fully understand. First there are two clever tricks that Santa uses. First there are some countries who have kindly agreed to move their gift-giving dates to other nights, not Christmas Eve of December 24. So for example in Holland Santa doesn't come until I think it was in January. And in Russia, Santa comes at New Year's eve. I am sorry, children, this is not my speciality as I am more of an expert on mobile phones, but I remember there were several such countries. So Santa really doesn't have to fly to absolutely every country in that one night. But it still leaves him a lot of homes to fly to.

Next there is a bit of bad news, dear children, that I have to confess to you. You children are Santa's special friends, and he does visit all children who (had been nice) on Christmas Eve. But us adults, if we live in homes that don't have any children, we have to wait until the next day. That is a sacrifice we adults without children have to accept, so that Santa has enough time to visit all of you children. And you know, we adults tend to have a bit more of an ability to wait for Santa's visit. We have seen Santa for 20 or 30 or 50 or 80 or 90 years already so we know he will come, and one night later is not really that vital for us. But Santa knows, if he waited one night for some of you children, especially the younger ones, they might become afraid that Santa would never come. So he always makes sure he has enough time to visit all of you children on Christmas Eve.

That means that there really are far less actual homes to visit. Like grandmom's house. Santa doesn't have to visit grandmom's house on Christmas Eve, he can come the next day, and grandmom and granddad will understand.

And then there is the other process of elimination, of course Santa doesn't have to stop at those houses where the children had been naughty. That is a lot of homes where Santa doesn't have to go visit at all, this year.

So when we take only those houses that have children, and of those homes only the ones with children who have been nice - the number of homes is quite reasonable for one trip to reach them.

After that it is mere logistics. And again, I have to bring some science in here, but the planet is divided into 'time zones'. When it is daytime in America, it is night time in China. When it is morning in Europe, it is evening in Australia. The time zones are in exact sequence, they start from the Pacific Ocean, and the day starts from New Zealand and Japan, and then moves West, next it comes to China and India, then to Africa and Europe, then to South America and last to North America. In America the day starts on the East Coast first, in New York and Florida. Then it proceeds to the middle of America, like Chicago, St Louis and Dallas. Then it moves West to Los Angeles and San Francisco. And the day ends in Alaska and Hawaii.

Here is now the logic of how Santa travels. He starts his day in New Zealand and Australia, then moves with the time zones to Japan, China, India, etc and also in Europe, he goes to Russia before Finland, then Germany, then Britain, before he flies to America. And so forth he moves always flying more West until he reaches Hawaii and Santa has covered the whole planet. But this means, if you do the math, that it is not one night of 8 hours for Santa. He gets the 24 hours of the full day, plus 8 hours, so Santa has 32 hours to deliver his gifts, and because of time zones, in every home he visits, it is night time. Remember when it is night time in China, it is still daytime in America.

And there is one more geographical gimmick. If you look at any normal map, it would seem like the direct route from Moscow Russia to New York City in the USA is directly over the Atlantic Ocean, and would fly right over London in England, right? Take a look at a map. Yes, a straight line - what is of course the shortest distance between any two points - from Moscow to New York would go through England and London. Now take out your globe again and find Moscow and New York and look which is the shotest distance.

Isn't that amazing! The shortest distance is actually over Iceland, over Reykjavik. And that trip touches Finland, Sweden, Norway before Iceland, and then again touches Greenland and Canada before coming over Boston to New York. Isn't that cool? The shortest distance from Moscow to New York is not what appears to be a straight line on a map. If Santa had used a normal map and flew over London, he would be wasting a lot of time, and create a lot of unnecessary carbon emissions too, Richard Quest!

This is what airline pilots learn in pilot school. And that is what Santa Claus, and his forefathers, have known for centuries. Because there is a shorter route, he doesn't have to fly the long way. He takes the shortest possible route. And you know what. If you count the shortest distance from everywhere that there are homes with children, to everywhere else - and I mean everywhere, Toronto and Miami and Paris and Rome and Instanbul and Hong Kong, Singapore and Tokyo, Sydney and Auckland, Timbuktu and Ouagadougou. If you actually calculate every possible connection - and trust me, children, I once had to do this for my geography professor at the university, it took me two weeks to calculate using a computer - the best possible place to locate yourself, to have the shortest possible distance to fly 'everywhere' is... have a guess where? It has to be on the Northern Hemisphere because that is where most of the continental mass is and most people live - the Southern Hemisphere has more ocean and Antarctica which doesn't have many children. And on the Northern Hemisphere it would need to be near the North Pole, but not on the North Pole. There are more people in Europe than North America so it has to be on the European side, and Asia would be too far. The exact geographically optimal point is located in Finland - on a mountain called Korvatunturi.

It is no accident that Santa Clause picked Finland to set up his toy factory. I mean, Santa could have selected any place on he planet. He would much rather wanted to live somewhere warm like in Brazil or Malaysia or or Kenya. But no. Santa - and his wife too - have decided to sacrifice and live in the cold, at the Arctic Circle - where they have snow on the ground most of the year, and it is never warm enough to be in swimming trunks - but he lives there for the simple reason, that it is the shortest distance to all children of the world. Thats the kind of man Santa Claus is.

And you know what? That is why Finnair decided to base itself in Finland. It had nothing to do with Finland. Finnair's management could have put that company into any country they wanted, but they decided that they want to have the shortest distance to fly everywhere, and then they asked the Finnish government permission to base their airline in Finland. Ifts a complete coincidence that Finnair's name starts with the same letters as Finland. Oh, they like to laugh, that is a common misconception yes.

And you know what, Santa and Finnair are so good friends, that Finnair is Santa's official airline - every year Finnair paints Santa's face onto one of its planes that it flies all over the world to celebrate Christmas. Isn't that nice. And obviously they meet each other often in the air, because they are both based in Finland, so the Finnair pilots know on Christmas Eve to be extra careful as their routes will be often the same as Santa flies. But luckily as Finnair now flies jet airplanes, they fly at a higher altitude than the raindeer-sled of Santa, so they rarely have danger of collision. I have been told by one of my uncles who used to work as a Finnish air traffic controller, that back in the 1960s, when Finnair still flew many propeller-driven airplanes, they often had to be very careful not to accidentially crash into Santa's sleigh during Christmas Eve.

So there you go. The real science about Santa Claus and Christmas Eve. Don't let anyone tell you that Santa can't do it, or that his weight is too much, or the distance is too great or he doesn't have enough time, or even that he would create too big a carbon footprint. That is all hogwash. If you really apply science to Santa Claus, you can see that it makes sense. And you know the proof is there tomorrow, because if you children have been nice, Santa will come. He always has. And that is the ultimate proof that Santa can do it in one night. Merry Christmas!

First look into Lumia launch and preliminary prospects for market success

Yeah, its yet another Nokia blog article. But this is genuine Bloodbath news and is a big story and it deserves a fair look. So this blog is not Tomi ranting about Elop madness. This is my first view to the Nokia Lumia launch and preliminary glances into its market share performance. And you know what? We have a mixed bag. Some good news, some bad news. Spoken like a true consultant, eh?

MASSIVE MOMENT FOR INDUSTRY

So. Yes we start with the historical view. Nokia invented the smartphone. Nokia's primary smartphone OS has been Symbian up to this quarter. While Nokia had flirted with other OS options in the past, the CEO announced in February that Symbian would be replaced by Microsoft Windows Phone OS, and nine months later we had the first Nokia branded smartphone using the Microsoft OS being sold. The Lumia 800 is now spreading to more markets.

A moment if you will allow it, please. So, Nokia had invented this industry and had held a dominating market lead every single year, every single quarter, every single month and every single week and every single day, ever since. Up to February when the CEO announced his intended replacement OS. So yes, even then, Nokia warned everybody that this year (and 2012) would be years of adjustment and Nokia's short-term market performance would take a hit. That is inevitable in this kind of transition. But now we have in essense 'Nokia Smartphones 2.0' haha. This is the true second generation of Nokia's smartphones. This is as big to the industry as when Sony launched PlayStation 2, or when Microsoft went from DOS to Windows. Not many were around to remember Windows 1.0 (was horrid) and few can remember that it wasn't until Windows 3.0 that Microsoft delivered any kind of major market succes, and Windows 3.1 was the first that was considered reasonably bug-free and user-friendly (but even then, not a match to the Macintosh of the time).

Sony took Playstation 2 to new heights in dominating the home console gaming world. Microsoft grew its global market size as it shifted from DOS to Windows. Nokia had 29% market share before it announced this transition. Theoretically there is nothing to prevent us from believing, that Nokia might achieve that level at some point once again, on this new WP7 platform. What we have to do, obviously, is now to monitor this period of transition to see clues to how well Nokia's new platform might perform. And that Symbian still outsells WP7 by a wide margin is no inherent flaw - so too did PS One outsell Playstation 2 for a long while, as did DOS outsell early Windows for years. But a transition to a new platform is no guarantee that the market-leading position is carried. That same timing of DOS that allowed Microsoft to transition to Windows, was also used by IBM to transition from DOS to OS/2 (a kind of Windows clone or Macintosh OS clone) which failed. And while Sony was able to hold its market lead going to Playstation 2, the next transition to Playstation 3 saw Sony losing its market lead.

In any case, the first sales of Nokia Lumia800 smartphones is a huge event for Nokia and notwithstanding this year's short-term stumbles by the former smartphone-maker juggernaut, this is also a major event for the global smartphone industry. And considering Nokia is still by a wide margin the world's biggest handset maker, and Microsoft is (by an even wider margin) the world's biggest OS maker, their partnership has the potential to produce a powerful entrant to the market.

GOOD NEWS

So lets start with the news. Lumia710 the second Lumia series smartphone was initially announced by Nokia to be available in the first half of 2012 (meaning end of Q2). Nokia then did something it very very rarely has managed before - it underpromised and overdelivered - it launched the Lumia710 also this month just before Christmas. So now Nokia has two actual Microsoft Windows Phone based Lumia smartphones shipping and selling, while both Lumia800 and Lumia710 are available only in limited countries. Still, this is a rare treat by Nokia which has become known much more for chronic delays. Congratulations!

The Lumia710 is a modest-price smartphone, the little brother to the Lumia800 so its hardly going to make the world excited about Nokia's comeback but it is a second smartphone in the line of Lumia and helps Nokia get more sales volume and market share. And its actual sales levels will be nominal during the last days of December in only a few countries, but that will ramp up during Q1 of 2012.

And there is more good news. T-Mobile USA will launch the Lumia710. Why not the Lumia800 is what everybody was saying, the Lumia710 is really a cut-price model that speaks of discount brand product but hey, at least it is one carrier in the USA. T-Mobile is the smallest and weakest of the four carriers but yes, this is a start perhaps. The timing is most unfortunate for the Lumia series, as the Lumia710 launches in February - right smack in the time when all stores are overstocked with after-Christmas products at deep discounts. The Lumia710 will fare VERY poorly against discounted iPhones, Galaxies, Blackberries and Xperias etc. But yes, at least Elop has found one US carrier to offer one Lumia, next year. It is something and this is definitely some good news.

BAD NEWS

So then onto the bad news side. First, a survey of consumer preferences by BNP Paribas of the European Lumia launch countries. Remember Nokia's smartphone market share there a year ago was about 35% to 40% and thus most 'normobs' ie normal people who might wander into a phone store now in December 2011, would have bought their previous phone around the summer or autumn of 2010, when Nokia was still strong. Those customers would have (or should have) a natural tendency to ask for a Nokia branded smartphone - perfectly oblivious to the Symbian/MeeGo/WP drama we technologists may obsess about - and should therefore have some natural market share near 35% or so. What did BNP Paribas find? Only 2% of current smartphone buyers in the launch countries of Lumia were interested in buying a Nokia Lumia smartphone. Note if you don't live in those countries, the Lumia marketing blitz - paid for by massive Microsoft marketing budget and by Elop's personal commitment to push Lumia hard - so the Lumia marketing blitz would be unavoidable. In Britain for example, Lumia is the sole sponsor of one cable TV channel haha. One of the operators/carriers is giving away a free Xbox360 gaming console for everybody who buys the Lumia800. And yet, customers who had owned a Nokia and had heard that Nokia was now launching Lumia with Microsoft - resulted in only 2% wanting to buy one. That is a huge fail. Many major analysts have downgraded their market performance for Lumia in Q4, often slashing sales expectations by half.

Then there is management delusion. Nokia Sales Director Niels Munksgaard said that the youth are "fed up with iPhones" (!!!) Wow. Lets go to the scoreboard. In the UK - a neutral market neither Apple's nor Nokia's home market, but one where Lumia has been broadly launched and has massive marketing push - how much are they tired of the iPhone? Gfk surveyed the UK market two weeks ago and the bestselling smartphone heading into Chrismas was.. the iPhone 4S. Apple had several iPhones on the chart. Samsung's Galaxy was at number two and Blackberry had several models on the list. Nokia's Lumia 800 ? Did not make the Top 10 - and neither did any other Nokia (Symbian) based smartphone either. Last Christmas the hot Nokia N8 was the top seller this time in Britain. So. Nokia Lumia managers are now living in some alternate universe utterly disconnected from reality. Fed up with iPhones? Come on.

Then Microsoft. Steve Ballmer must be proud of his Windows Phone team. Or not. He demoted the President of the Windows Phone unit, Andy Lees to 'an unspecified role'. This, say Redmond-watchers, is how Ballmer castrates those top managers who are too visible to be fired. But yes, Microsoft's CEO is so disgusted by 2011 performance of his mobile unit that the unit boss is effectively fired. This right as the Nokia Lumia phones, Microsoft's last play into mobile - are being launched - perfectly on schedule and with no reported bugs! So its the market side of WP that is utterly failing according to Ballmer's view, not the technical or roll-out schedule sides of the software.

But there is still more trouble in Lumialandia. Some customers started to complain about rapidly disappearing battery life or even batteries that stop recharging. This has a small whiff of Antennagate. So yes, we heard from Nokia - official announcement - yes, Lumia has battery problems and those will be fixed by software early in 2012. Ouch. So now sales reps have a brand new reason to tell their customers, you know what, the Nokia Lumia has battery problems, you might want to steer away from that. Let me show you a nice Android phone here from HTC or Samsung..

Oh, I hate to say I told you so, but the Lumia was a rush job. I said that this would result in production problems that Nokia was just trying to move away from. And even worse, obviously, as the Microsoft phones are not made in Nokia factories, the Nokia Lumia800 (and 710) are not even 'real' Nokia phones, they are Compal phones with a Nokia badge glued on. Even the guts are not traditional Nokia as Microsoft's Windows Phone is not compatible with some of Nokia's standard components like the CPU. So its like Porsche went to Tata and asked them to make some Tata sportscars and then put a Porsche badge on them. Not Porsche models built by Tata, not Posche engines, nothing. Yeah, this was going to be a problem and there will be more such issues I am sure. I do weep, however, that Nokia produces smartphones in Taiwan by a third-party factory while Nokia's world-leading mobile phone production capability in the most advanced factories is running at half-capacity..

Then about the sales reps. A press story from Britain tells of the customer service rep who had told a customer that Android phones cannot get viruses but Windows phones can. Now, first of all, obviously any smartphone can get viruses so that was obviously utterly false statement. Secondly, I am sure it was not 'taught' to the sales force to say about Lumia. But third - it was a genuine bit of advice that some customer service rep in Britain had been saying - no doubt to many potential Lumia customers (who will then tell their friends etc). And if one person thinks this, there will be many more who also believe it. This image comes no doubt from the PC side, where Windows is notorious for viruses. (Yet another reason why the Windows Phone branding is so stupid by Microsoft).

The bad news continues online. Two people, one from Nokia and one from Microsoft were caught having been going to legitimate reviews of Lumia800 handsets and posting very hostile comments where they found negative mentions by the reviewer. Both posted anonymously but were traced to come from Nokia and Microsoft offices. Ouch! This is something the blogosphere takes very seriously and the tech press has picked up on the story and all are strongly condemning this practise. This will hurt both Nokia and Microsoft credibility and good will. Not what you want at your first product commerical launch.

And then there are weird 'statistics' the most odd is a 'study' by 'Customer Think' which claims to take in the opinions of a massive 82,600 customers of smartphones (wow). And they find that Windows Phone has the best customer satisfaction of any OS. Now, I would be willing to accept that kind of finding but look what else this 'study' claims. This is strongly USA-biased in its survey population, bear that in mind. First, it finds that by 'customer satisfaction' Blackberry is better than both iPhone and Android? What? Blackberry has been crashing in the US market. But maybe an anomaly. Next, lets look at cameras. They found that on individual smartphone models, the Blackberry Torch has a better camera and video than.. the Nokia N8 ! Wot? Then, take this. On 'apps' the Blackberry Torch is AHEAD of the iPhone 4S ???????

I repeat myself: ??????? This is an utter bullsh*t 'study' that produces absolutely wild findings. But I bet that 'study' will be repeated in many stories as if Microsoft Windows Phone has the best customer satisfaction of any smartphone OS haha. There is some very serious reality distortion going on right now in the Nokia+Microsoft camp around Lumia, I tell you. 

HOW ABOUT RETAIL

So then a bit of very informal market research. When I had a visit to Britain a few weeks ago on business, I visited a shopping center and saw several phone shops. One (Orange) had the Lumia 800 prominently in one window display. Another store (T-Mobile) had no Lumia window display. And the independent phone store Carphone Warehouse had Lumia in one but the iPhone 4S in the other window, very much prompting the comparison of the Lumia800 vs iPhone 4S where Lumia falls on every measure - exactly what Nokia does not want consumers to do with the Lumia800. (the N9 would have stood well against the iPhone 4S but Nokia refuses to sell the N9 in Britain haha).

Then I took a bit more time to see the shops here in Hong Kong earlier this week. The Lumia800 is being sold by all major networks. How is it in the stores. I went to four shops of the local carriers/operators and two independents. The China Mobile store had plenty of Nokia basic and smartphone models in the store but they were all in the back. There was one Lumia800 model in the store display near the front but after the hot phones. No Nokia in window display. The PCCW store had plenty of Nokia basic and smartphones in the displays and also several Nokia phones including Lumia800 in the window display among many other Nokia phones, in roughly the same proportion as their other phone brands in the store. This was most like all mobile phone stores used to be in Hong Kong last year. SmarTone had only a few basic Nokia phones in the store far in the back, ut had two separate Lumia models. SmarTone had one Lumia800 quite prominently in the window display but no other Nokia phones there among many rival phones. The Three store had only three Nokia handsets in the whole store but one of them was the Lumia800. No Nokia phones in the window display.

Then the two independent stores. The Fortress store had many Nokia phones, cheap and smartphone but only at the very back of the store behind all other brands. In their window display Lumia800 was the only Nokia phone on display among many rival phones. Then at the Wilson store there were plenty of Nokia phones well among the rival phones, and Lumia800 was there too. But the window display did have a Windows Phone based phone - by Acer. No Lumia in the window display.

This is Elop's grand strategy to dominate the world with Microsoft-money on his amazing once-in-a-career type of situation to launch a totally new OS for what was at the time of the announcement the world's biggest smartphone maker. Wow. And how underwhelming. I've seen bigger new product launches by Motorola haha. And by the way, here in Hong Kong the pre-eminent phone everywhere is not the iPhone, its the Galaxy. Everywhere. HTC runs a good second.

MY VERDICT

This is the most important event Nokia has had in years. This is Mr Elop's career making-or-breaking event. This is the most important event for Microsoft's aspirations in mobile at least for a year. And the timing of the launch, the countries of the launch, the carriers/operators of the launch - the announcement of the partnership - etc - were all up to Elop. This is totally Elop's show. He had billions of dollars to waste on this initiative and a year to plan it and execute it perfectly. And he is failing spectacularly. The consumer survey from Europe that only 2% of consumers want to buy Lumia - when more than a third of them currently hold Nokia phones and Lumia is on every TV screen - is dismal. The actual sales performance from Britain is horrid news. The individual stories from sales rep 'virus' stories to now the Nokia version of antennagate - come on, Batteries? Really! Nokia which like an idiot abandoned a competitive advantage of providing user-replacable batteries - is now drawing attention to this drawback and obviously pushing customers to Androids (this Samsung Mr Customer, by the way, also has a replacable battery! I don't mean to suggest the Samsung will have any problem with its battery but that Lumia you are considering does have problems with its battery - Nokia itself has admitted it..). And my very informal and not statistically relevant survey shows quite consistently that Lumia is not anywhere near as prominent in the stores as Nokia used to be. Is there still a carrier boycott vs Nokia (and/or vs Microsoft and Skype) or is it accident. But I can tell you the signs are VERY bad. The Lumia sales for Q4, the critical Christmas season - and Nokia's other smartphone sales in its shadow - are going to disappoint. Disappoint heavily. So say all the early signs. All of them. There is so far no news that suggest Nokia is outperforming the modest launch expectations and Nokia is millions off from its previous new OS launch of Symbian S^3 and the N8 which did 4 million sales Q4 of last year. The Lumia is lucky to do one million haha and some analysts say half a million.

If the N8 can do 4 million last year, and the market is 60% bigger today, and the Lumia800 is 20% cheaper than the N8, and you get all the Microsoft goodies (like free Xbox360s) - then Elop should deliver 7 million at a minimum this Christmas. Even if he did only 4 million it is a huge flop for Nokia's most important product launch of the decade. But the signs suggest it will be brutal, and yes I would not be surprised if the Lumia numbers are below one million. If that is the case, I am sure Elop will be so ashamed that he will not release the number (and neither will Ballmer).

So for those Nokia-optimists who hoped Lumia will bring Nokia back, sorry. That won't happen. Nokia's world-record crash of destroying its own market will continue in Q4 and Lumia will only make matters worse.

The 20 Most Advanced Countries in Mobile (Updated Listing for EOY 2011)

I have been tabulating the listing for the most advanced countries in mobile and been showing it at various events and printing the latest chart in my TomiAhonen Almanac annually, etc. I have been doing updates for the various annual stats that will go into the 2012 edition of the Almanac and have just completed the index of mobile market leadership.

This index is as far as I know, the only international comparative table that uses all the major metrics for the industry as inputs - ie I use the mobile phone penetration rate per capita, the migration rate to 3G networks, the adoption ie usage of mobile data (which typically is the adoption rate of SMS text messaging in most markets) and the measure of how advanced the handsets are in that country (which in most cases is the adoption rate of smartphones).

All the numbers are normalized and indexed so that the global average is 50% and the theoretical maximum (if your country had the highest rate for all four measures) is 100%. The leader is once again Japan which has led on this table every year since I started to compile it. But there has been a lot of movement again. For the first time all of the top 3 nations come from Asia and 6 of the Top 10 nations come from the Asia-Pacific region. Italy continues to be the most advanced European country in mobile, and the only nation from the other four continents that makes the Top 20 list is the USA which is climbing up the charts but rated at 17th.

I have also a non-scientific rule of thumb that about 10 percentage points on the chart means one year of a lead. So Japan leads Sweden by one year, and leads Ireland by two years. The USA lags Finland by a year, and Hong Kong lags South Korea by a year. Usually when talking with mobile experts who specialize in international aspects of the industry will confirm that this list is very well consistent with their personal observations - ie we tend to see the most advanced mobile services, phones and innovations coming from Japan, South Korea and Singapore - and in Europe the mobile leaders tend to be Italy, Finland and Sweden. Etc. So this list seems to also find agreement by those experts who specialize in comparing international markets for their mobile industries.

Here is the latest table of the world's most advanced countries by mobile leadership.

Rank (2010) . Country . . . . Index
1 (1) . . . . . . Japan . . . . . . 91%
2 (2) . . . . . . South Korea . . 89%
3 (6T) . . . . . Singapore . . . 84%
4 (3) . . . . . . Italy . . . . . . . 83%
5 (6T) . . . . . Finland . . . . . 82%
6T (9) . . . . . Sweden . . . . 81%
6T (4T) . . . . Taiwan . . . . . 81%
8 (4T) . . . . . Austria . . . . . 80%
9 (14) . . . . . Hong Kong . . 79%
10 (10T) . . . Australia . . . . 78%

11 (8) . . . . . Israel . . . . . . 77%
12 (10T) . . . UK . . . . . . . . 76%
13T (16T) . . Denmark . . . . 75%
13T (15) . . . Norway . . . . . 75%
13T (12) . . . Spain . . . . . . 75%
16 (22) . . . . UAE . . . . . . . 73%
17 (19) . . . . USA . . . . . . . 72%
18 (13) . . . . Ireland . . . . . . 71%
19 (18) . . . . Netherlands . . 70%
20 (16T) . . . Germany . . . . 69%

Source: TomiAhonen Almanac 2012
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(Please note, in my Index I have always igrnored the tiny countries like Luxembourg or Macao or Monaco or Lichenstein etc. These tend to have very high adoption of all tech as they tend to have wealthy citizens and are very small countries to cover in terms of technology infrastructure)

What does this "leadership" mean? It means that typically, for major mobile innovations and developments, the first nations do to them tend to be near the top of this list, and then when those concepts spread, they tend to be adopted at higher rates, by nations at the top of this list.

A few concrete examples. Many US airports do not yet offer mobile phone check-in. Finnair in Finland invented it, and today more than half of Finnair's passengers use it. A survey of airline travellers by SITA found that globally 17% of airline passengers already use mobile check in. Its completely normal in all of the top 10 nations of this list.

Or take 3G. The US industry is proud that it is soon going to approach the point where half of US consumers have 3G (or faster) based cellphone connections. Japan was the first country to launch 3G and is so far on the transition - that two of the three networks have shut down their 2G networks altogether. The total migration rate to 3G has passed 95% in Japan and will reach 100% next year.

Or how about those famous smartphones? The USA has 112 million smartphones used by a population of 320 million people, so smartphone adoption rate is 35%. That seems very amazing, until you look at Singapore where smartphone adoption rate is 61% per capita and in Sweden it is 52% per capita.

Finally the mobile phone penetration rate. The USA was very proud of passing the 100% per capita mobile phone penetration rate (when measured as mobile subscribers ie subscriptions per capita, counting both prepaid and postpaid subscriptions). So the USA today has more mobile phone subscriptions than people alive, counting everyone from babies to great grandparents? And the US mobile phone subscription rate is far head of Canada (78%) and Mexico (89%). Yeah. Sure. Thats a nice number.. for North America. South Africa passed 100% penetration rate in 2010. Colombia passed 100% penetration rate in 2009. Chile passed 100% penetration rate in 2008. The UK passed 100% penetration rate in 2004. Italy passed 100% pentration rate in 2002. Taiwan passed 100% penetration rate in 2001 yes ten years earlier! The European AVERAGE mobile phone penetration rate is 145%. The UAE is the first country to pass 200% mobile phone penetration rate !

So I know, I know, the US readers may feel that the USA is a leader in mobile, what with the iPhone and Google and (and.. and.. and what? Palm? Even with HP Palm failed? Motorola? Microsoft Kin and Windows Mobile and Windows Phone?). And even those wonderful ideas like the App Store? Invented in Japan. Apple's 70/30 revenue share 'revolution' - invented in Japan where the deal is 90/10. The best smartphone app last year, as selected by CNBC, the amazing 'Word Lens' real-time translator utility using the cameraphone to translate text on your screen from Spanish to English etc? Its a copy of what was launched in 2007 in Japan as Camera Jiten and was featured in my 2008 book as a case study. That is what I mean.

It is clear that the USA is waking up to mobile, and is slowly climbing up that chart. But it is, literally, a year behind Finland and almost two years behind Japan, in mobile. Lets be very real about this. 

And on more practical points - if you are interested in mobile, then go to the most advanced markets to study it. Undoubtedly the global leader in mobile has been, and continues to be Japan. If you study Japan mobile today, you willl see what will be in your pocket some years down the line. Same is true of South Korea and Singapore but obviously ever less as you progress down that list. But what do I mean by Japan leads? You like your WiFi on your phone? First done in Japan. How about the all-you-can-eat data plan? Japan. The cameraphone? Japan. Etc. What of the future? Currently the big companies like Google, Apple, Microsoft, Nokia etc are talking about mobile money on something called NFC, Near Field Communication. Have a guess where the first mobile money NFC was launched? In Japan. Today half of Japanese have phones that include NFC and a fifth of Japanese use NFC based mobile wallets. Thats what I mean. The modern Japanese mobile phone is a wonder of future tech, the cameras are now 16 megapixel, the phones include tuners for digital TV, the WiFi connections include WiFi router funcitonality so you can plug your other WiFi gadgets to your phone to connect to the fast cellular networks - and haha, the modern Japanese phones are waterproof. Not for taking to the beach - for taking to the bath and shower.. Yes. Coming to a pocket near you soon.

If you are the 'Chief Mobilista' of your company, you should try to schedule a pilgrimage to Japan (and visit South Korea on your visit too, while Japan leads the world in mobile - and South Korea is second - in 'digital convergence' it is the other way around - South Korea leads the world and Japan comes second. These two countries form a kind of Digital Nirvana and it is where our future already exists).

About TomiAhonen Almanac 2012. The TomiAhonen Almanac is an annual statistical volume of mobile industry numbers and stats, with over 80 tables and charts. It is published at the start of the year, expected release date for 2012 edition is end of January 2012. The Almanac costs only 9.99 Euros and is only available from TomiAhonen.com website. The TomiAhonen Almanac is widely used and referenced. It includes stats on all major areas of the industry from handsets to services to networks to apps to advertising. For more including ordering information please see TomiAhonen Almanac

SPECIAL OFFER - as we approach the publication date of the next Almanac, I am offering anyone who buys the current 2011 Almanac, both editions for the same price. So if you buy the 2011 Almanac now before the 2012 edition is released, you will receive the current Almanac now, and you will also receive the 2012 edition when it is released for no further charge. This offer will end when the 2012 edition is released. Please go to the TomiAhonen Almanac 2011 pages to order.

Calculating the Elop Effect: He's already destroyed a company the size of Oracle, and profits the size of Google

I coined the term 'Elop Effect' this past summer, as the height of management incompetence, combining the ruinous path of the Ratner Effect, with the calamity of the Osborne Effect. I called it then also the costliest management mistake of all time. Now we have data and can evaluate that bold claim. I urge you the reader to consider carefully - can you recall - or discover - any management error by any global corporation that has ever existed, in any industry, ever, that has achieved this level of wanton destruction of the company, by a CEO gone berzerk.

IS NOT ABOUT SYMBIAN

Some come to this blog and say that I want Nokia to set back the clock and that somehow this is about Symbian. It cannot be. The decision to move Nokia smartphones away from Symbian was taken long before Elop had his first interview at Nokia. I have been writing on this blog about what will become of Symbian in that transition to MeeGo and what role Ovi store and Qt the app development tools were to play in that transition. The Elop Effect had nothing to do with the decision to end Symbian. Elop brought the end date somewhat earlier, and then fired Symbian staff boldly, but the fate of Symbian was sealed long before he came to town. This has nothing to do with the end of Symbian.

IS NOT ABOUT MICROSOFT

Also this is not about Elop's choice to replace Symbian and MeeGo with Microsoft's OS for smartphones, now called Windows Phone (WP). It has been reported in the public domain, that Elop went through a meticulous process of considering all viable options, Symbian, MeeGo, WP, Google's Android and even spoke to RIM about Blackberry OS. He did the right moves and in the end, it is his right to make the call, which OS Nokia will use in the future. And he convinced the Nokia Board that Microsoft was Nokia's best option. That was no doubt a difficult call, between Android and MeeGo and WP but it was his decision to make. That decision was not what caused the Elop Effect.

WHAT IS THE ELOP EFFECT

The Elop Effect is similar to the Osborne Effect and the Ratner Effect. Both of them were COMMUNICATION errors. Not errors of management decisions. Errors of communication. Osborne Effect bankrupted the Osborne Computer Company in Britain, and the Ratner Effect almost did the same for Ratners Jewelry Store also in the UK, but they survived only by firing their CEO and changing the name of the company. Imagine how severe your troubles have to be, if you are a retailer and have to change your company name and branding. If Walmart was so poisonous as a brand, or Tesco or Ikea, that they can only survive by changing totally their corporate identity and trying to convince consumers that they are now somebody else. Ouch indeed. Stephen Elop caused the modern version of the Osborne Effect, when he announced that Nokia would switch from Symbian to WP, while at that time, he had no Microsoft WP based Nokia smartphones to sell, or even to show.

That is exactly what Osborne did with his computers. Osborne saw its sales collapse overnight. So did Nokia too. We have now seen Nokia lose more than half of its market in a matter of months - a world record destruction of a global customer base. Elop actually even made matters worse than what Osborne had done. Elop not only announced his current smartphones are instantly obsolete on that fateful February 11 day, he then told the world, that Nokia under his leadership would boldly release dozens more new smartphones on that suddenly-undesirable Symbian OS for more than a year to come. He in fact committed to 150 million more Symbian phones - which would take us to about the end of 2012 before Nokia would stop peddling new Symbian phones at us. And this, when in February he announced to the world that Nokia's own Symbian was to be terminated. What a fool! So Elop looked at the most damaging management communication about new products ever, and decided he can do better. He actually out-Osborned Osborne.

Yes. That alone would qualify us for creating a new word in his honor to commemorate this disgrace. But he was not done. Elop wanted to guarantee he will end up in the Guiness Book of Records for the most incompetent management ever, he compounded his error by replicating the Ratner Effect, except that too, he did with his Microsoftian style.

So just before his big Microsoft announcement, Elop decided to issue an internal memo to all staff, about his thoughts. This is the infamous Burning Platforms memo, the costliest management memo ever written. A memo so toxic it not only wiped out Billions in sales and profits at the smartphone unit - it even caused severe loss at the supposedly unrelated featurephones unit of Nokia (ie dumbphones). The Burning Platforms memo was so devastating it gives new meaning to the term 'poison pen'.

Again. Please do not misunderstand me. I said when I first read the memo, that I AGREE with its sentiment and I agreed then and agree still now, that Nokia had then (and still has now) severe problems that the top management has to deal with. But those problems were not with 'innovation' or 'ecosystems' or 'falling behind the USA' etc. Those problems - as previous Nokia management had admitted before - most obviously Anssi Vanjoki - and Elop himself has admitted since - were about 'execution' not about 'innovation.' This is what Elop said on June 2: "Mismanagement - not a lack of innovation - is what ails this company." I have discected the Burning Platforms memo for its factual mistakes. I have even gone to the trouble of collecting Stephen Elop's own statements later that correct 11 of the most glaring mistakes in that memo. We do not need to go into that now. Because I have said, I agreed with the sentiment, yes Nokia needed to hear that there is a new guy in charge and he will be shaking things up, and that Nokia needed to prepare for more competition. That is all good.

Whether you or I happen to agree with finer points of that memo is neither here nor there. The Ratner Effect was not about 'misanalysis' of a management challenge. The Ratner Effect was a communication problem! Remember Ratner called his jewelry 'crap'. That destroyed the customer confidence in his jewelry. Stephen Elop did the same in the Burning Platforms memo. Regardless of whether I can prove to you that Apple is indeed lagging Nokia in innovation, and that all dozen of the first changes to the original iPhone from 2007 to 2010 were all copies of older Nokia innovations that existed on Nokia phones before the first iPhone was sold. And that Apple which likes to sue everyone from HTC to its parts supplier Samsung for iPhone patents infringements - actually had to settle with Nokia and pay Nokia, because Nokia is ahead of Apple in smartphone innovations. Elop himself said this of Apple vs Nokia on June 14: "We are very pleased to have Apple join the growing number of Nokia licensees. This settlement demonstrates Nokia's industry leading patent portfolio." It doesn't matter - in Ratner's case his jewelry was in fact inferior to the competition.

But the Ratner Effect was not about quality of the product, it was a communication error by the CEO who called his products unfit for sale. MBA students learn never to repeat the Ratner Effect because if your CEO calls your own products bad, the customer will believe it. And Elop called his products crap. Not just that the phones were crap (which he said) and the operating systems both Symbian and MeeGo were also crap (which he said) but he even went so far as to say the ecosystems of Nokia (Ovi store, Qt etc) were crap (which he said) and even that the very style of doing business at Nokia was crap. Elop was so extreme in his view, that he argued that Nokia was beyond salvation - it could not be fixed - and the employees were advised to jump off the platform into the freezing sea and risk drowing, risk freezing and to seek another platform to try it there.

Obviously just like with Osborne Effect, also with Ratner Effect, Elop decided he wants to out-Ratner Ratner. Ratner at least was truthful in his commentary that his jewelry was bad. Elop actually made numerous false statements in his Burning Platforms memo that made Nokia seem worse than it was in reality. So much so, that in eleven cases, he has already had to walk back those statements and retract major points of his memo. By now he has retracted almost all that I found initially objectionable in that devastating memo.

And I should make one more point. This Ratner Effect side would damage Nokia's sales efforts in its reseller channel to a disproportionate degree. I have been chronicling the issues about sales in the mobile space including Elop's subsequent mismanagement of his sales channel like on this blog last week. So the Elop Effect is a communication error by the CEO that combines the worst new product announcement communciation ever - the Osborne Effect - with the worst own product endorsement communication ever - the Ratner Effect. I said it was the costliest management communication ever uttered by a CEO of any Fortune 500 sized company and that the Elop Effect would cost Nokia billions and ruin the once proud profit-generating giant of the mobile industry. And that was quite a severe indictment clearly. So now we can start to measure the early results of the Elop Effect. Lets take out our calculators, shall we.

WIPING OUT A WHOLE BLACKBERRY SIZED MARKET

Just before the Elop Effect, at the end of Q4 of last year, Nokia's market share was 29%. Now, the latest quarter for which we have data, Q3 of 2011, Nokia's market share has crashed to 14%. Yes. In a very real sense, Nokia has voluntarily gifted away more than half of its market! How much is that in terms of smartphones? That is the equivalent now of 11.5 million smarpthones (46 million annually). That is almost exactly the size of RIM ie Blackberry! RIM sold in Q3 10.6 million smartphones, and last year in 2010 for the full year, RIM sold 48 million Blackberries. Think about that. Nokia's CEO has just in this year, amputated a Blackberry-sized hole out of Nokia's smartphones unit! The evidence is carnage everywhere.

Lets start with China, which has just overtaken the USA as the world's biggest smartphone market. Just a year ago Canalys reported Nokias's smartphone market share in China was 76%. What a brilliant long-term strategy by Nokia to embed itself into what was becoming the most important market, and building factories there and nurturing the carrier relationships. Nokia had even secured China Mobile's support as a partner in the MeeGo ecosystem. The Elop Effect wiped all that out. Nokia's market share was down to 22% in Q2 of this year according to Analysys and Morgan Stanley reported that only 18% of the Chinese smartphone owners want to buy a Nokia branded smartphone. Total utter complete collapse in the biggest market. Its so bad, that we hear news stories that Nokia flagship phone stores have started to sell phones by other manufacturers!

Lets go to the UK, a major European market where Nokia had a strong presense and a leading European major market by smartphone penetration rate. Nokia's market share in 2010 was 33% according to Kantar. Canalys just reported that the Q3 market share for Nokia in the UK was.. 2% !!!!! The same total collapse. The Nokia hype-machine, well-trained by Microsoft has been out trying to create a false impression - so extreme that Nokia Sales Director Niels Munksgaard was trying to convince journalists that theUK youth has grown tired of the iPhone and Samsung Galaxies. But again, the truth is brutal to Nokia. The first market survey by Gfk after Nokia's massive Lumia launch in the UK, found that right now, the UK's bestselling phone was not Nokia branded, it was still the iPhone. And at number 2? Samsung's Galaxy. Nokia did not even get its Lumia800 - even when giving away free Xbox360 gaming consoles to entice sales - did not get into the top 10 bestselling phones in the UK. And Europe-wide, research by BNP-Paribas found that in the countries where Lumia has launched, only 2% of smartphone buyers are even intending to go for the newest Nokia smartphone. Last year at this time the Nokia N8 was roaring to the top of all European sales charts. Now after the Elop Effect nobody wants a Nokia.

What of North America? Elop promised he'd work at a Nokia come-back in the USA. The most bizarre thing is, that Elop had actually received that, as a gift from the long efforts of Nokia sales in North America, who landed nothing less than AT&T to be the launch customer of the X7 Symbian phone, a deal announced in January. Who killed that idea? Stephen "North America is a critically important market" and an "area of emphasis for Nokia" Elop that is who (Elop quoted on September 9, 2010). At Q4 of last year Nokia's North America sales were 2.6 Million total handsets (mostly dumbphones, not smartphones). That has fallen to 0.7 Million total handsets by Q3 of 2011. Elop had the chance for AT&T to sell and subsidise the X7 and have a genuine comeback. Instead, he has obliterated Nokia sales in North America. No wonder Nokia North America sales President Mark Louison resigned in protest. What Moron Elop did however, was he replaced the most challenging Nokia sales position with a total mobile industry novice (but former Microsoft cronie) Chris Weber. I think we have seen enough of the carnage done to Nokia market share.

I do ask you, the reader, seriously - can you recall any global major brand, in any industry, that was leading its market - and lost half of it in only 8 months? This did not happen to Coca Cola with New Coke. This did not happen to Toyota when it had problems with faulty brakes. This did not happen to British Airways with the disasterous move to Terminal 5 at Heathrow. This did not happen to BP with the oil spill, nor to Exxon with the Exxon Valdez tanker disaster. This did not happen to Ford with the Pinto with its 'exploding gas tank' etc. Please do post here in the comments if you can find any example in any industry where a market-leading brand had destroyed half of its market in less than one year. But lets move on. Market share is only one way to calculate the Elop Effect.

DEMOLISHED AN ORACLE SIZED COMPANY

Then lets look at Revenues. The last full quarter before the Elop Effect was Q4 of 2010. That is our comparison point. Note that Nokia had seen 7% unit sales growth - yes growth - from the previous QUARTER - in smartphones. Yes. GROWTH with its 'so-called obsolete' Symbian S^3 based smartphones. And Nokia saw a 14% rise in Nokia smartphone ASPs (Average Sales Price) which had reversed Nokia's previous trend which was down by 7%. A major positive development at Nokia. And Nokia had increased revenues from the previous quarter, in its smartphone unit by 22%. And Nokia's profits had jumped 64% in just one quarter.

By any reasonable analyst, the trend would then follow into Q1 of this year with more growth on those metrics. Nokia had dramatic new phones coming such as the E7 flagship phone (essentially an N8 with the QWERTY slider, costing even more than the hot N8). And later the X7 still on Symbian, and then the new MeeGo based superphones, the N9 and N950, all coming for later in the Spring and Summer of 2011. Meanwhile in the Spring if you remember, Apple's iPhone 5 was delayed, HP's Palm based WebOS smarpthones faltered and Blackberry stumbled. In many areas Nokia would have faced less-than-severe competition. And for Samsung? At that point, Nokia was almost three times as big as Samsung in smartphones! The smartphone global industry grew by about 60% this year. Any reasonable analyst would look at Nokia's all-growth numbers in Q4 and would have projected some degree of continued growth into this year. Probably not as strong growth, but would project growth.

I am not going to do that. I will set the base comparison point as 'Status Quo'. Lets take the extreme pessimistic view, that all the growth Nokia had achieved in Q4 would suddenly stall and even with all the new hot phones, and the rivals stumbling, Nokia would only stay stable this year. And then lets replace Elop (or his mad Microsoft Strategy). If Nokia only held onto its Q4 sales from last year, in smartphones, it would currently be making 8.3B Euros (11.2B US dollars) per quarter in its handset unit (smartphones and dumbphones added together).

The reason I have to add Nokia featurephones is that the Ratner Effect side of the Elop Effect has also caused a catastrophic decline in Nokia dumbphone sale prices and thus total revenues. Nokia's featurephone average sales prices fell by more than a third in the past 8 months, and when coupled with a decline in unit sales of featurephones too, the total revenues of the dumbphones unit fell by almost 40%. So today, the combined smartphones and featurephones handset units produce revenues for Nokia of 5.1B Euros (6.9B US dollars) per quarter.

The direct damage of the Elop Effect to Nokia revenues has slashed 3.2B Euros (4.4B US dollars) per quarter or yes, on an annual basis - Elop has wiped out Nokia business worth 20.4B Euros (27.6B US dollars). I think nobody could possibly grasp that point without me repeating it. Elop has wiped out almost 28 BILLION dollars of Nokia revenues on an annual basis. Wiped out so, that they cannot be recovered with his mad Microsoft strategy either. They are gone, wiped out, destroyed. How can I put it into context that makes sense. 27.6 Billion dollars is so huge in global business, that alone would be a Global Fortune 500 sized giant corporation, at the rank of 349 !

Or lets put some names. Bigger than say Mazda Cars. Bigger than Philip Morris. Bigger than Time Warner. Bigger than Oracle. Bigger than 3M or L'Oreal or Rite Aid. Its almost the size of LM Ericsson the world's biggest telecoms infrastructure maker. Thats bigger than total sales of International Paper or Staples or McDonalds. Yes. The value of the Elop Effect is as big as McDonalds global sales. That is what he's destroyed. If you remember the 1970s TV series '6 Million Dollar Man' - Elop is not a 6 Million dollar man. He's not a 60 Million dollar man. He's not a 600 Million dollar man. He's not even a 6 Billion dollar man. Elop the Colossal Flop is the 27 Billion dollar man - and has single-handedly caused the biggest revenue-assassination to any corporation in a one year period - ever.

Every day that the Nokia Board now waits in firing Elop - costs Nokia another 75 MILLION dollars of abandoned revenues EVERY DAY. I mean, even the US Congress cannot destroy money at this rate haha. If we look at the biggest corporate collapses like Worldcom or Enron or Lehman - these were caused by genuine systematic mismanagement and actual fraud etc. I cannot recall any Global 500 sized company to make one single action (or two related communications within two days) by one person that so totally demolished so much business revenue.

Note, obviously this has real concrete business impacts. Elop came in firing 1,800 people. He's since been terminating thousands more in several orgies of layoffs. He's also been selling Nokia assets like the highly trained and rare smartphone software programmers related to Symbian. He's sold parts of Nokia's patent portfolio and closed one of Nokia's biggest handset factories (in Romania). He's tried to sell the NokiaSiemens Networks unit and is currently trying to sell one of Nokia's 'crown jewels' the highly profitable Vertu luxury handset unit. And we heard from Danske Bank that Nokia is expected to sell the smartphone unit to Microsoft early next year.

If Elop was replaced by a monkey. Literally a monkey from the zoo. Who was utterly and totally unable to enact ANY decisions for Nokia. If Nokia's CEO did absolutely no decisions from February 8 - Nokia would be 28 Billion dollars bigger as a company today. Elop is the biggest management failure of all time. But at its heart, business is not about market share or revenues. It is about profits.

OBLITERATED GOOGLE SIZE PROFITS

Yes. Profits. Again using not the realistic scenario of some growth for Nokia, but just the truly 'even a monkey could achieve it' level of status quo - no growth whatsoever when this industry grew by 60% this year, how did the Elop Effect impact Nokia profits. Funny you'd ask. Lets count the ways.

The profits like the revenues were damaged again on both the smartphone side and the dumbphone side. So we count the two units together to see the impact of the Elop Effect to total Nokia branded handsets. In Q4 of last year just before the Elop Effect, Nokia handsets were generating 2.0 Billion Euros (2.7B US dollars) of profits per quarter. The smartphone unit was plunged into deep losses by the Elop Effect but even the featurephones unit has seen profits dive by 60% Yes. And overall, the combined handsets unit saw profits crash by 87% in the first eight months from the Elop Effect.

But thats just math. Lets do the relevant number. On an annual basis today, if there was no Elop Effect, Nokia's handsets divisions would be making 8.0 Billion Euros (10.4 Billion US dollars) of profits. But now instead of that, Nokia only manages annual profits at the level of 1.8 Billion Euros (2.5 Billion US dollars). So the Nokia CEO has permanently ELIMINATED 6.1 Billion Euros (8.2 Billion US dollars) of PURE PROFIT per year. Even if his Microsoft Madness might somehow succeed, the revised starting point for Nokia is the current level - that abandoned profit is gone forever and cannot be recovered even if his Microsoft strategy pans out. Wow. 8.2 Billion dollars of profits. Money that belongs to Nokia shareholders. Voluntarily set on fire by Mr Burning Platforms Elop.

Oh my gosh. 8.2 Billion dollars would rank all by itself as the 45th biggest profits of any Global Fortune 500 sized corporation - just behind Google's profits! Yes. You read it right. Nokia's CEO has wrecked so much of Nokia's pure profit as Google made all last year. See how crazy this is. The company he took over was ranked 143rd on the Fortune Global 500 list by revenues, but only ranked 193rd by profits in the current July 2011 issue of Fortune which uses 2010 financial data. So Elop took charge of a company that was ranked 193rd in profits. Then he found a profit miracle in his in-box (called Nokia Symbian S^3 and the N8 smartphone) which was powering Nokia far up the charts of profits. If he had done nothing, Nokia would be about in the top 30 in profits. And was he happy to perform such a 'miracle' ? No. He rather DESTROYED so much of the profit, that the abandoned profits alone would rank 45th most profits earned by any company in the world last year. Or yes, profits as big as all of Cisco. Or just less than all profits earned by Google last year.

This is how Elop described his job on September 9, 2010, at the press conference where he was announced as the new CEO. Elop said job to be: "My job is to ensure that we are meeting the needs of our customers, while delivering superior financial results." How can this guy be allowed to run Nokia still? He is the biggest fool of any company ever, isn't he? He wiped out 8.2 Billion dollars of profits in only 8 months! He is destroying even more as we speak. He costs 22 MILLION dollars of PROFITS to Nokia every single day he is allowed to remain on the Nokia payroll, including Saturdays and Sundays. He costs Nokia shareholders almost a million dollars of pure profit every hour including when he's asleep! But even profits are really not the final measure of a CEO. It is shareholder value.

NOKIA SHARE PRICE AT ALARMING LEVELS

Yes. The previous Nokia CEO had seen the Nokia share price fall to half its value over a three year period - and was fired. He did not plunge Nokia into loss-making. Elop has achieved the same loss - from its peak on February 10, since then Nokia has lost more than half of its share value - but Elop didn't have to wait 3 years for that drop, he achieved it in ten months. And he did compound his damage by plunging Nokia Corporation from very healthy profits to loss-making. This is independent reason to fire the CEO immediately. He has lost the confidence of the market. He is no longer believed. He is seen as a Microsoft crony. He is not acting in Nokia's best interest. He has seen the value of Nokia cut in half in barely more than half a year.

Elop is utterly incompetent and must be fired for cause - and sued by shareholders and then investigated by both the New York Stock Exchange and the Helsinki Stock Exchange. He is not fit to run any publically traded company and must receive a lifetime ban of holding corporate office of any business on the stock exchanges. He is a disgrace to all of business management and must be exposed and held to account, so others learn not to try the Elop Effect.

If the Nokia Board is not firing Elop soon, the Nokia Boardmembers and Chairman will also have to be investigated for collusion or incompetence or neglect of fiduciary duty or all of the above.

Why do I say 'alarming level' for Nokia share price. The reason is that Wall Street analysts have already calculated in June that Nokia has passed the danger level, where the value of Nokia is more if broken apart and sold for its parts, than Nokia Corporation as a whole. So someone might buy all of Nokia today, and then sell off Navteq and NokiaSiemens Networks and Vertu and the Ovi Store and the dumbphones unit etc.. And end up making a profit by splitting this sick company apart. That is what was the fictional character Gordon Gekko played by Michael Douglas in the movie Wall Street and its sequel. Or from real life, that is part of what Mitt Romney did in his previous life at Bain Capital. Find bloated poorly-run companies, buy them, split them up, sell the parts for a profit. Nokia has entered that danger-level. It is a sure sign that the CEO has passed the point of recovery. He is now a danger to the very survival of Nokia the corporation as we know it.

And its not idle gossip anymore. There have been several press reports in the summer and autumn that buyers are sniffing around about Nokia, including Sony, Samsung, Google and Microsoft. Google obviously then decided to buy Motorola instead. And we're again hearing now from Danske Bank that there are fresh rumors of Microsoft buying part of Nokia, while Nokia has admitted it has tried to sell NSN and is actively now attempting to sell the Vertu unit. This is a sick puppy. Unfortunately, it was poisoned by its CEO.

But perhaps there can be a rainbow at the end of this storm? Elop wrote in his Burning Platforms memo about how vital it was for Nokia to have a good outlook in the eyes of investors and especially ratings agencies. He wrote this on 9 February: "Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness."

Well, how did that go for Elop? Nokia held an A rating before the Elop Effect. Nokia was known for very solid and 'Finnish' reliable and profitable management. In fact, since it entered the US Stock Market, Nokia had not seen a ratings cut. Since the Elop Effect Moody's and Standard & Poor's both downgraded Nokia in April. And downgraded Nokia again in July - Moody's a full two points that time. And both downgraded Nokia yet again in August. Both ratings agencies have Nokia's outlook as negative still today. This is catastrophic! The man is a menace. He has to be fired so that Nokia can be rescued. Three separate ratings downgrades? How can he remain in office still today? No matter how beautifully he can spin stories and sell is poison as the ultimate Microsoft-trained con-man, the facts speak for themselves. He's a fraud. He's a fool. Yes, perhaps, he is a silver-tongued fool. But he's a fool nonetheless. He's the Microsoft Muppet.

AND BRAND IS BURNED

So one more measure. Nokia has been consistently in the top 10 most valuable brands on the planet ever since the Interbrand global brand rankings were published a decade ago. Nokia was ranked 8th most valuable brand in 2010. The new results came out in October and the Elop Effect did severe damage here too. Nokia fell out of the Top 10 for the first time ever, and the biggest drop it had ever seen, falling to 14th. The calculated monetary loss of that drop was 15% !

The total value of the most used brand on the planet - the only brand that has ever reached 25% of the total human population - yes a Nokia handset is more widely spread today than Levis jeans or Nike sneakers or Toyota cars or Microsoft Windows PCs or Marlboro cigarettes or Coca Cola has ever achieved in their best years. Even the 'Nokia tune' has become the most recognized piece of music that is known in literally every country. This iconic global brand, built over three decades of steady reliable work, has seen the brand devalued by 15% in a matter of months because of the Elop Effect.

THE ELOP WAY TO DOUBLE DOWN

There is a betting term in Blackjack which is called 'double down'. It is when the person gambling will double his bet on the same hand. I have explained to you what is the Elop Effect and I have calculated in this update blog what is the value of the damage he has done so far. You would think, that an intelligent person would learn from his or her mistake(s). Elop doesn't. He prefers to repeat his mistakes. There is a SECOND Elop Effect already by yes, done by the master himself, Stephen Elop the CEO of Nokia.

MeeGo. The Nokia N9 and N950. We have now seen that the N9 is a fantastic superphone, a genuine iPhone-killer candidate. The only Nokia phone ever that has been considered (by many tech analysts in many countries) better than the iPhone by its user interface - what is usually Apple's strongest suit and was Nokia's weakest. MeeGo was not still-born as Elop claimed in some very self-serving article in Business Week or some such periodical early in the year. MeeGo has received enormous praise the world over as a revolutionary and incredibly user-friendly touch-screen smartphone OS. The N950 is the QWERTY variant to the N9.

Elop repeatedly delayed the MeeGo launches and its handsets including killing the first MeeGo phone, with the internal designation of N9-00 (this is different from the N9 that we now know). The N9-00 was ready to launch for February and would have been ready to sell in April or May. So today we'd have three MeeGo devices if Elop was any normal and reasonably intelligent CEO. A whole slew of consecutive heads of the MeeGo project have resigned in protest against Elop's actions, as well as the Nokia CTO.

So the Elop Effect? On June 21 Nokia announced the N9 and showed the prototype to the world and started its launch efforts. The tech world was so amazed and astonished, that the N9 became the most talked-about and most-desired new Nokia phone ever announced. It was the first time Nokia had a global 'must have' phone that would have become a hit phone. So rare is a hit phone in the world, that Nokia has never actually had one. Motorola had one hit phone - the Razr, which propelled Motorola up 14% of market share over two years until others started to catch up. Apple had a hit phone with the original iPhone in 2007 which for two years seemed to have no close rivals (until the Samsung Galaxy came along) and propelled Apple up 16% in the smartphone market. Did you notice that since 2009 Apple has only managed to pick up 2% more in its market share haha. A hit phone is very rare in mobile. Obviously the Lumia800 and Lumia710 are very far from hit products.

But the N9 had the biggest warmest and most excited reception of any Nokia new phone announcement ever. Ever! Both the N9 smartphone handset and its MeeGo operating system. And all reports from those countries that have been lucky to get the rare handset, have reported that the N9 is indeed a superior smartphone (while obviously lacks apps because the whole Ovi/Qt/Symbian/MeeGo/S40 ecosystem had already been destroyed by Elop).

If you are a competent manager of a company that is struggling to generate a profit - and you find your company has produced a highly desirable device at the top end of the price range and a global demand for it - you release that phone everywhere. So. Elop Effect number 2? He sabotages the N9 and MeeGo. First, lets take Osborne Effect part of Elop Effect. Immediately after the the N9 was shown to the public, Elop gives Finland's biggest newspaper, Helsingin Sanomat, an interview where he states very clearly, that no matter how how good the sales of the N9 might be, there will be no further MeeGo based smartphones from Nokia. What? Is this man soft in the brain?

But yes, then the Ratner Effect part of the Elop Effect. He won't let the N9 be sold in any of Nokia's big markets for smartphones except China (that because China Mobile, the MeeGo partner, insisted). So in Europe, the biggest markets for Nokia like France, Germany, Italy, Spain, the Netherlands and the UK have all been craving to get the N9. The CEO refuses to give it to them, forcing them to take the inferior Lumia800 instead. Same for the big Asian markets like India and here in Hong Kong. Even the USA doesn't get the N9. Only very small markets by population (like New Zealand, Singapore and Norway) get the N9 or else larger countries that have small smartphone sales due to low income levels (like Kazakhstan and Nigeria).

It is extremely rare to have even the potential for a genuine global hit phone in this industry. Elop was gifted that in the N9. The N8 last year, without this level of interest had achieved 4 million sales in Q4 alone. If Elop had any inkling to do what is in Nokia's best interest (rather than what is in Microsoft's best interest) he'd immediately launch the N9 everywhere!

Even if it only did the same level of sales as the N8, that would bring 1.8 Billion dollars of bonus revenues to Nokia and get this - even if the profit margin was only that of the N8 - instead of the Nokia smartphone unit today reporting a loss of 130 million Euros - it would report a PROFIT of 310 million Euros! Just one MeeGo device, the N9, selling only what the N8 did last year this time when the global market was far smaller than today and only at the same level of revenues (the N9 is more expensive actually) and the same level of profits (because of high demand, Nokia could ask for a higher price still and boost the profitability even more) - Nokia would now make 548 million Euros (740 million US dollars) of more profits per quarter - ie 2.9 Billion dollars of pure profits. Pure profits that Elop prefers to not give Nokia shareholders, to protect his own ego. Elop doesn't want the world to see he made a mistake about MeeGo and the N9. So what does Elop's ego cost Nokia shareholders? A cool 2.9 Billion dollars - at a minimum. No wonder Stephen Elop has such a high impression of himself. His ego costs 2.9 Billion dollars.

In reality, the damage is far worse. Nokia has four - count them four - actual handsets today it can manufacture and sell today - that can run MeeGo. The N9 has its sister product, the N950, a QWERTY variant (even more expensive and profitable). While Nokia factories actually are producing this phone as we speak, it is not sold anywhere. Nokia is keeping the run very limited and only giving away a few of the handsets for some developers. So Elop gets all the costs of actually producing a complete new handset model, but none of the benefits of selling it. What a moron.

And there is the previously-killed N9-00. No matter how 'inferior' that smartphone might have been by Elop's evaluation - remember, this is the man who thought the Lumia800 would set the world on fire and thinks the N9 is not worth selling globally - so I don't put much weight in his own opinion. I do however, trust long-term Nokia execs including all who were involved with the early MeeGo project who all wanted to launch and sell the N9-00, from Anssi Vanjoki on down. That phone should be sold. It was ready to go in February! And as a gimmick, the older Maemo-based handset the N900 can also run MeeGo. So while its hardware is older, its camera smaller etc, that could be sold as the 'entry-level' model into the MeeGo line, like the older Apple iPhone 3GS is the cheapest model in Apple's iPhone range.

Any clown with half a brain, would look at the global hatered of Nokia brand today, and the global carrier boycott and the dismal consumer response to the current Lumia phones, and then see the massive appeal for the N9 and MeeGo - and release the N9 everywhere. And then that same half-wit would understand to rush into mass production the N950, the N9-00 and the N900, all with MeeGo. And if the CEO bothered to give this phone serious marketing support and attention - Nokia would face a true hit phone (line of phones) and if the Razr could resurrect Motorola and the iPhone could propel Apple to become (albeit briefly) the worlds' biggest smartphone maker - only a total idiot would refuse to sell the N9 and its siblings in every Nokia outlet.. NOW !

If the MeeGo unit was separated from Nokia and these four smartphones were all released, the minimum revenues that MeeGo/Nokia smartphone company would earn per year would be 14.1 Billion US dollars and that company would report annual profits of 5.9 Billion dollars. That MeeGo-powered superphone company would not be quite in the Fortune Global 500 yet, but would be more than 3/4 of the way into it. And by profits? This company would be ranked the 20th most profitable company on the planet!

Anyone out there? Hire Anssi Vanjoki and let him run that company for you, and watch the dollars stream in. How can Stephen Elop refuse to sell the N9 and the other three MeeGo phones in most major markets? This is the pinnacle of pigheadness. Elop is the epitome of corporate incompetence. He actively takes decisions that go against the best interests of Nokia where they serve the interests of Microsoft, like a Microsoft mole at Nokia HQ. He is the Microsoft Muppet and must be fired. Today!

SOME LAST THOUGHTS

I have to stop here because I am growing ever more despondent re-writing and re-reading and redrafting this blog article. I love Nokia and Elop is destroying it.

But any journalists out there? Here is your Pulitzer prize, isn't it? The evidence is overwhelming, Elop is currently on a killing spree destroying the company that was the 8th most valuable brand on the planet. He has already set the world record for the biggest destruction of market share, and has also caused probably the biggest fall in revenues and profits ever witnessed in any 8 month period. And he is not done. He is still costing the Nokia shareholders one million dollars of pure profit lost ever hour he is allowed to continue as Nokia CEO, Saturdays and Sundays included, and including the time he spends sleeping. He is the ultimate symbol of corporate failure. The evidence is overwhelming. Please, some 'real' journalist, take this idea and do research into this area and write your story (likely it will become a series stories) about the management lunacy that is Stephen Elop. (and if you do, please also do mention the Elop Effect somewhere, ok?)

So all of my friends over at the Financial Times, and Wall Street Journal, and the Economist, and Business Week, and Forbes, and Fortune, and the Guardian, and the Times, and the San Francisco Chronicle, and the New York Times and the Washington Post and the Seattle Times and Kauppalehti and Taloussanomat and Helsingin Sanomat and Wirtschaftswoche and Finanstidningen and Nikkei and Le Monde and CNN and CNBC and the BBC and Bloomberg and Euronews and France24 and Channel News Asia and YLE and on and on and on. Please, my journalist friends - this has to be at least the story of the year for 2012, it probably is the business story of the decade, perhaps even the business story of the century. Please research it and write it and go interview Elop for all his management madness and get his quotes on the issues so we get a record of what all he is saying, etc. I am tired telling this sad story and I am always deeply demoralized when I find myself having to write another chapter into this sorry saga. Its time some professionals start to cover the full fiasco as well, isn't it?

And you random visitors and readers of this blog? Please do contribute a comment here with me, especially, please tell me what other companies, CEO's come close to something as stupid - and specifically - as costly. I am pretty sure this is a world record in the level of corporate destruction by the CEO.

We Are Hitting Major Milestone: Time to stop calling it 'mobile PHONE'

I said this day would come, and I have been monitoring early numbers as they have started to emerge. Still, it took me by surprise that we've already hit the moment of passing the milestone. Its time to stop calling our device a mobile 'phone' (or cell 'phone' etc). The primary use of our mobile device is no longer voice calls! And no, its not that we download apps or surf the mobile internet (those days will also come some day in the future). But the first non-voice service has now passed globally the number of total users that indeed exceeds the number of voice users. I am of course talking of SMS text messaging.

So lets understand what happened. The modern mobile telecoms industry was born in 1979 when NTT of Japan launched the world's first cellular mobile telecoms network in Tokyo. A few years later several other countries launched more of these 'first generation' cellular networks like the Nordic/Scandinavian countries, and later even the USA got into the act with that famous Motorola phone sold by Ameritech in Chicago in 1983.

But on those first cellular networks the only kind of service we could use on a mobile phone (cellular phone) was 'voice calls'. It wasn't until GSM came along from 1991, the first digital network and what we now call the 'second generation' or 2G network (launched in Finland by my former employer Elisa/Radiolinja) that introduced the technical ability to do 'mobile data' services - the first of which was obviously SMS. And while some engineers sent SMS messages from PCs to mobile phones, the first consumer SMS, as a person-to-person message, from a mobile phone to a mobile phone, happened also in Finland on that yes Elisa/Radiolinja network in December 1993 (using Nokia phones, Nokia being later another of my employers before I left the corporate world and started this consultancy of mine ten years ago).

So for the first 14 years the only thing we could do were voice calls. And it was legitimate to call it a cellphone or mobile phone. But from late 1993, the transition started, and SMS started growing globally from 0% 'active users' in November 1993 to what I now measure as 83% globally. Some national SMS usage levels include leading countries such as 98% of Finnish mobile phone subscribers and 99% in the Philippines, to 91% in China, 89% in the UK, etc. Laggard nations like the USA which was very recently in the low 70%s in its SMS adoption rate, have been catching up rapidly and latest data from Pew in 2011 says 88% of US mobile subscribers are also now active users of SMS text messaging vs 70% that Pew counted just a year before. But there are countries still catching up like Canada where the level is now at 68% according to the CWTA in 2011.

But for SMS to overtake voice calls as the most used service on mobile, we do need to see a decline in voice call usage, else SMS could only in the perfect case 'tie' voice calls for 100% usage perhaps. And we have seen a steady erosion of voice calls, especially replaced by SMS text messaging, and increasingly in lower income markets and customer segments, from the youth to the unemployed. I've reported on individual 'voice usage' stats as they have emerged from very sporadic random countries over the past decade, but the trend has been solid, starting from 100% and counting down. By 2009 we found three major country surveys from Lightspeed Research that reported percentages from 11% in the UK to 13% in the USA to 30% in India among subscribers who had stopped using voice calls altogether. At that time while the trend was clear, the usage levels of voice had not fallen even in the UK yet to below SMS usage levels in 2009. And that Lightspeed survey did not explicitly ask about SMS usage, it asked only about voice calls, so it was not really a valid comparative study.

So we had not yet seen any international survey of mobile services usage, that somehow measured the national populations, to give national results of both voice usage and SMS usage, that would allow us to compare them side-by-side, in the same methodology, to any meaningful population size.

That changed this week, as we received the brand new Ofcom study of international telecoms markets. They surveyed 5,636 consumers in six major countries on three continents and part of the usage survey were questions 'do you use SMS on your mobile phone' and 'do you use voice calls on your mobile phone' And for the first time we have solid comparable measurements.

The countries are all in the 'Industrialized World' and are Australia, France, Germany, Italy, the UK and the USA. They found SMS usage levels from a low of 64% in the USA to a high of 86% in Australia. They also found voice calls ranging from a low of 68% in Italy to a high of 80% in Germany. The population-weighed average of the six countries gives an average SMS usage level of 71.52% for SMS, vs 71.48% for voice calls. So these percentages are 'per capita' and not 'per subscription' by which more often SMS usage levels are reported. The actual human consumer 'per capita' measurement is more accurate obviously, as it ignores the phenomenon of multiple subscriptions and multiple phones on the same person. And we have massive news! We have JUST passed the tipping point.

First, on the measurement, if you prefer to use the statistic of 'per subscriber' rather than 'per capita' - then the subcription-weighed numbers are even more strongly in favor of SMS ie 72.4% vs 71.5%.

Secondly, while these six countries count only 8% of the planet's population and only half of the people living in the Industrialized World - the remaining countries are strongly weighted in favor of SMS migration. First on the Industrialized World, major countries like Japan and South Korea for example have long since passed the point where more subscribers use SMS than voice calls. And for the Emerging World markets we do not have very strong global data, but for example the India statistics are quite well indicative, that two years ago the voice usage level had already fallen to 70% of all mobile subscribers. It will have fallen much more since then and similar stats are at least anecdotally true of China, Russia, Brazil etc.

So, its time to celebrate. The mobile PHONE is dead, long live Mobile! Not only is the primary need of a mobile today for most people SMS text messaging, rather than voice calls (which would typically happen first, led by heavily addicted mobile users who naturally discover SMS earlier than the laggard and older users) - but now, as of December 2011, in terms of total mobile users worldwide, that transition has also now happened. I will be doing more analysis as I dig through my various data sources and as I update my annual statistical volume for this industry, the TomiAhonen Almanac where I will have my 'formal' and final number for both SMS and voice call users at the end of 2011. But my preliminary number for SMS is about 83% and the voice number is likely to be roughly in the 80% - 82% range on first look. Feel free to report on these phenomena, and unless where reported from other sources, any data here are source: TomiAhonen Consulting December 2011.

For those who still are not sure they fully understand the most widely used communication technology on the planet - back in 2010 SMS had more than twice the total number of users than all of the internet and more than 3x the total number of television sets in the world - you may want to read my 'primer' blog about the basics of SMS text messaging. Please note, obviously the numbers for SMS (and MMS) have grown since.

Incidentially, if you need all the latest stats for the mobile industry, please look at my TomiAhonen Almanac. I always release the new annual edition around the end of January, so the TomiAhonen Almanac 2012 is expected to be released in about a month from now. It only costs 9.99 Euros so its a total bargain for the more than 90 tables and charts that it contains. But also, as is my custom, for those who now buy the previous edition (the 2011 Almanac) with less than a month to go till I announce the next edition - I'll give you both for the price of one. Get the 2011 Almanac now in December, and for the same price, I'll send you the 2012 Almanac also when that is released. To see more please go to the 2011 edition pages to see the table of contents, sample pages, etc at TomiAhonen Almanac 2011.

Don't Mess With Success! An Analysis of Nokia Carrier-Relations and Meddling by Elop

I have been critical of new Nokia new CEO Stephen Elop strategy relating to smartphones. I felt it unwise when the Microsoft strategy was announced on February 11, and from about April, I have become convinced that strategy is going to fail. So far the facts seem to prove me increasingly correct. This blog has nothing to do with the change of smartphone operating system platforms, away from Symbian and MeeGo and switching to Windows Phone and Meltemi. This blog is about sales. Nokia sales.

Note this is a long contemplative article about what very few ever write about - the carrier relationships and in this case, Nokia's sales to the telecoms operators/carriers around the world. The blog article will take you more than half an hour to read so you better get a cup of coffee before you start.

MOBILE IS NOT LIKE OTHER ELECTRONICS

Before we go on, I have to first make this statement to those who visit this blog who are not long-time readers of my writing. Why sales matters in mobile? Because the market for mobile phone handsets, including smartphones, is NOT LIKE other consumer electronics industries. It is not like the home electronics that Sony and Panasonic and Philips and GE know well. It is not like the PC industry that features giants like HP and Dell and Lenovo. The mobile phone handset business is not like the videogaming industry of Sony's Playstation and Nintendo's Wii and Microsoft's Xbox. Mobile phone sales is not like cameras or cars or clothing. In all those other industries, if you make a good product and offer it at competitive prices, you will have success in the market. In mobile, even if you have the best phone ever made, it is utterly IRRELEVANT if the carriers decide not to support it.

There is no other major consumer technology industry like mobile in that sense. The television broadcasters cannot decide against Sony in favor of Panasonic. In mobile they can not only decide Motorola over Nokia, they can decide which handset models of Motorola will be or will not be supported. This is what killed Microsoft's two Kin phones in a world-record of only six weeks. From new product launch to end of production of a family of global consumer electronics gadgets, dead in six weeks (because the carriers revolted against Microsoft). That is what killed the world's first 'superphone' intended as Google's 'iPhone killer' the original Nexus One. The carriers. That is why the iPhone was delayed this year. The intended device known as iPhone 5 was suddenly pulled late this spring, hastily redesigned and released four months behind schedule later in this past year. It was not Apple's desire to delay its most important product of this year. They did it because the carriers decided against the intended iPhone 5 (which had no SIM card slot - the carriers refused to sell it. The redesigned iPhone 4S does have a SIM card slot). Carriers decide which phone will be supported on their network(s).

Understand what I say. ABC television networks in the USA does not decide that Samsung flat screen TVs will be supported but Sony will not. If the TV functions on that standard, then you can buy the TV from any retailer and just hook it up and it will work. The TV sets on NBC or CBS television networks are not in any way different from those on ABC. Yes, internationally there are still differences, so a TV bought in Europe will typically not work in the USA (unless its an 'international' or 'multi-standard' TV) but the TV industry does not see control of the end-user sales, by the TV channels ie broadcasters ie 'networks'.

Same for PCs. If your PC runs Microsoft Windows operating system, it doesn't matter which country you bought the PC from, was it made by Lenovo or Acer or Toshiba or Dell or HP or Fujitsu or whatever maker, you can come here to Hong Kong and buy a Windows based PC and you can go back to the USA or UK and use your PC there and install local software and all works fine.

Theoretically, you can do that with mobile phones too. Except that by far the most, at least 98% of consumers, will not buy handsets for mobile networks from stores that do not specialize in them - from their home countries. So you go to an AT&T store to buy your AT&T phone. Or to a Vodafone store to buy your Vodafone phone. Or to a Telefonica store to buy your Telefonica phone, T-Mobile for T-Mobile etc. While the phone handset is the same model, you don't go to buy an Nokia handset from the T-Mobile store and then go connect it to the AT&T network, even though both networks use the same GSM technology.

A mobile phone is pointless without the network connection (note, even a TV set can well be used with a DVD player or Xbox and doesn't necessarily need the live TV broadcast feed). Without a mobile connection, your expensive iPhone is just an iPod Touch. So the consumers (and business/enterprise customers too) will buy their mobile phones from mobile telecoms stores. If not one by the operator, then from an independent - but mobile specific store like Europe's Carphone Warehouse for example.

CONTRACTS AND SUBSIDIES

In many countries the phones are sold with subsidies, tied to two-year contracts. (Some readers will be surprised to find this is not the case for the majority of the world, where people pay full retail price for their handsets - ie 600 dollars for the iPhone - upfront, but then are not locked to two-year contracts and get far cheaper phone services obviously). When phones are sold with contracts, and subsidised heavily, the 600 dollar iPhone 4S is sold for 199 dollars for example - then the carrier bundles your monthly payments into the next 24 months and charges the remaining 401 dollars - plus interest obviously - onto the base of your contract, before adding all telecoms surcharces for which they 'kindly' give you any 'free minutes' and 'free messages' buckets.

That makes sense if the carrier is subsidising your purchase over the next 24 months, that the carrier also then controls which phones it sells (it has to support these, if you have a problem, you will be calling the calling center to complain etc). The carrier is legitimately carrying part of the risk of that type of customer. Countries where most phones are subsidised heavily include the USA and Japan. In other countries the carriers offer no subsidies at all, and you pay full retail price for your handset, and subsequently you have cheaper telecoms services and minimal or no set monthly fees, like in Italy and Hong Kong for example. The trend globally is away from subsidies to unsubsidised phones, as we see in Israel and South Korea recently for example.

But even in countries where there are no subsidies, the carriers still control which handsets are supported and then the (usually independent) handset stores in those countries, will of course favor only those phones that will be supported by the carriers in that country.

It is utter folly to come from other consumer electronics industries into telecoms, and think, if I manufacture the best phone ever, I will win. That is irrelevant to market success. What matters is that the carriers will support your phone. That the early iPhone was a huge hit in the USA made no difference to its sales, once Verizon became the second network to offer the iPhone - three years after the launch of the original iPhone - the sales of the iPhone in the USA surged. Having the best gadget is not the key to success - many great phones have failed totally like the Google Nexus One that many US based technologists said was a true iPhone-killer - or similarly the last Palm using WebOS - another excellent smartphone called an iPhone-killer. Having a great phone is not the key to winning in mobile. Having the carrier relationships is the key.

IS NOT LIKE PC INDUSTRY

This is totally different from the PC industry where Stephen Elop comes from being ex-Microsoft. This is also totally different from the home gaming industry (Microsoft Xbox) or the home electronics industry (Microsoft Zune music player) etc. In all those industries, 'normal' rules of 'free competition' apply. So if you make a good product at a competitive price, you will have market success roughly in the right proportion to your competitors and their offers and prices. That is not so in mobile telecoms. Not at all. What makes sales to the carrier community even more challenging, is that the total global field of carriers is very tiny - only 600 carriers of which about 60 only are 'large' ie having more than 10 million paying subscribers and they control two thirds of the total global subscriber base.

These in turn are aligned into carrier groups (Vodafone, Orange, T-Mobile, Telefonica etc) where the top 20 carrier groups control 70% of the worlds' mobile phone subscriber base and are operational in essentially every country. To understand how powerful those are - only one US based carrier, AT&T fits into the (bottom of the) top 20. The top 5 are China Mobile group out of China obviously, Vodafone gout of the UK, Telefonica out Spain, America Movil out of Mexico and Bharti out of India. These five giant international operator groups control 32% of the world's mobile phone accounts and obviously they decide a third of the world's handset sales, among the five of them. Bharti, the smallest of the top 5, is more than twice the size of AT&T by subscribers (and by numbers of mobile phone handsets it will therefore support). China Mobile in China alone, excluding its international affiliates, is twice as big as all USA based carriers combined.

So there are about 600 carriers for about 200 countries worldwide, so obviously on average there are about 3 carriers/operators per country. In the more liberalized and open competition parts of the world, the Industrialized World, there often are more than three, as many as four or five in many cases, and obviously in some very restrictive markets its down to two or even only one carrier/operator like in Cuba and North Korea.

But if the typical industrialized country has say 4 carriers (from 3 to 5 in most cases, 3 in Japan, 5 in Britain for example) then Nokia, Samsung, Apple, RIM etc will very quickly learn who are the people in charge of buying phones at those few customers. The handset buying team is always small with carriers. Those buyers are very long-term professionals who have been doing this for years, even decades. They think long-term for their company, they know the random buyer on the street will usually come in asking for a phone model, not for the operator (they want the newest iPhone or Samsung Galaxy or Blackberry, not the latest Verizon or T-Mobile or Orange phone).

The buyers are also playing this for the long-term benefit of the carrier/operator. They don't care about the latest gimmick this month, they want the long-term interest for the carrier. Which handset supports the portfolio of services that carrier/operator is committed to, in its strategy. A music store? An app store? Mobile payments and banking? NFC? Digital TV? Picture sharing? Social networking? Videocalling? Etc etc etc.

There are more than 200 manufacturers of mobile phone handsets, who produce at any given time more than 2,000 current models of handsets worldwide. Over 70% of those are manufactured in China, most of them here withing bicycling distance of Hong Kong, across the border in Shenzhen (if you really want to understand this industry, you have to visit the handset mall in Shenzhen with the boutique handset makers and parts suppliers and repair shops and accessory guys etc). I just met up with an African phone maker brand, Mi-Phone two weeks ago in South Africa. Their phones are made.. in Shenzhen. And before you think its somehow cheap or demeaning, Nokia operates the world's biggest mobile phone factory, in China. Apple's iPhone is manufactured by Foxconn ie Hon Hai of Taiwan with most of the manufacturing done in China. The iPhone is no more a USA-made smartphone as the Mi-Phone is an African phone. Both come from China.

SALES WAS NOKIA KEY

Now lets get to the meat of my beef with Elop. If you believe that Nokia had lost the plot with its handset designs after the iPhone came along. Where the N96 and N97 etc were increasingly clunky and obsolete. Where the N8 was redesigned and bug-fixed so many times, it was literally launched a year behind schedule (the N8 released for December 2009 against the iPhone 3GS, oh my gosh, that would have been a true iPhone killer!). I know very many think the wheels came off the Nokia train sometime around the emergence of the iPhone. That is a valid criticism. And many, even ex-Nokia VP Anssi Vanjoki admitted Nokia was losing it with its recent launches and that the N97 was a spectacular flop.

Others say the Symbian OS was past its prime (I agree). And not so much because of bad hardware (Nokia typically had phenomenal cameras for example and great QWERTY keyboards etc) but it was the tired Symbian OS which was killing Nokia and was driving Nokia to its doom. This is also a valid concern and I have been doing a lot of analysis here on this blog about what was wrong, what was perhaps right, and what was the direction of Nokia OS strategy. But even me, the Nokia-lover or 'fan-boy' was fully ready to abandon Symbian (I believed the right strategy was MeeGo, not the selected Microsoft strategy) but lets not debate Symbian/Microsoft/MeeGo/Meltemi/Qt here. This is about sales. I will openly admit, it was a very fair judgement of Nokia last year, that Symbian is no longer up to par, and should be replaced. Even I was in favor of shifting away from Symbian.

Then there is a third technologist camp who is often here on my blog too screaming that again Tomi doesn't get it. Apple changed the whole game, its no longer about hardware or software, its about the ecosystem. Look at the App Store and billions of downloads. Fine. The third argument against Nokia was that Nokia was 'losing' the battle of ecosystems. This is actually the weakest of the three arguments, when placed against the facts. Nokia's Ovi store launched a year after Apple's iPhone App Store. There were dozens of other app stores yet by end of 2010, Nokia's Ovi had become the second best-selling app store on the planet, closing rapidly the gap to Apple itself. If you want to argue Blackberry or Microsoft Windows Mobile or Palm had failing ecosystems, that may be true. Nokia's Ovi was the second best-performing ecosystem out there - and gaining on Apple, not losing ground to it. But lets set this argument also to the side. There are many who honestly believe that Nokia was losing the battle of ecosystems. It was, after all, Nokia's own CEO who published the infamous Burning Platforms memo, which said his own platforms were on fire and the situation was so badly beyond repair, that Nokia staff had to jump off the platfrom into the freezing water and chance death by drowing or cold, to try to discover a better platform than the ecosystem that Nokia had built. So whether I can convince you the reader that Ovi was or wasn't succeeding, clearly there is a vast 'expert' community out there who believe honestly and sincerely, that Nokia's ecosystem was failing.

So. If you honestly believe that Nokia was losing in the hardware battle, the Nokia handsets were no longer as good as they used to be, and newer phones such as the iPhone and Samsung Galaxy were now beating Nokia hardware. And/or if you believe that Nokia was losing the software battle with Symbian obsolete (and perhaps also that MeeGo was not able to replace Symbian). And/or if you believe that the ecosystem battle of apps and the app store was being lost by Nokia. Or any combination of the above. That is a fair view, one shared with many tech analysts and to some degree or another, I agree with you too! So Nokia's product, what it offered to consumers, whether defined the classic way as hardware and software, or even with the new revised definition, including the ecosystem - Nokia's product was lousy! It was failing against its rivals. Yes?

REALITY CHECK

Now lets look at the facts. Today we know Nokia has fallen to third ranking behind Samsung and Apple as the biggest smartphone makers of the world. After Stephen Elop took over, for Q4 of 2010 (exactly one year ago) Nokia was still as big in smartphones as Apple and Samsung - combined! Not just that, Nokia was growing unit sales of smartphones! The same is true of non-smartphones, so called 'dumbphones'. Nokia's two biggest rivals there are Samsung and LG. Nokia was also bigger than Samsung and LG, combined. For every year since a smartphone existed, Nokia's market share in smartphones was better than it was in dumbphones - this means literally, that as Nokia transitioned from its world-dominating position in dumbphones, to the new future of smartphones - Nokia was not losing customers in that transition like Motorola, SonyEricsson and Samsung etc - Nokia was consistently, year after year, picking up MORE customers, as it shifted from dumbphones to smartphones!

That is a fact. And Nokia did this all profitably, its handset unit was profitable every single quarter of its existence, even through the worst economic crisis the world has seen in our lifetimes, where all Nokia's full-portfolio rivals suffered so badly, the all went from profits to losses at some point in the economic crisis. Not Nokia.

I am not writing this to celebrate Nokia brilliance. I am here to make a point.

You believe Nokia had an undesirable product technically on its hardware. You believe that Nokia had an undesirable product from its software. You believe the Nokia ecosystem was failing. If the product is bad, then what caused Nokia to outperform its strongest rivals so massively, it was bigger than its nearest two rivals - combined! This is more dominance than what Toyota had ever achieved in cars. This is more than what Airbus has over Boeing. This is more than Samsung's lead over Sony in televisions. Nokia overwhelmingly dominated the smartphone space last year - if you're as big as both of your nearest rivals that is domination. And contrary to the popular myth, perpetuated by ill-informed (often USA based) so-called 'experts' - the facts don't lie. Nokia's sales in smartphones, as recently as 12 months ago, were not declining, they were growing. Nokia average prices were rising so this growth was not achieved by pricing gimmicks like price cuts. Nokia profits for Q4 in the smartphones unit jumped a massive 64% - a Nokia record - so the growth was not achieved by marketing gimmics either.

If you honestly believe that the Nokia products by 2010 were falling behind Apple iPhone and Samsung Galaxy and various HTC and SonyEricsson Xperia etc prodcuts - hardware, OS, or ecosystem -wise, then if the product is bad, but Nokia grows sales and dominates over its rivals - something else is causing that sales success.

NOKIA SALES RULED SUPREME

That is called sales. That is what was Nokia's secret to its longevity and profitablity of its handsets unit - its global carrier relationships, developed and nurtured patiently over more than two decades, in every country and every market and with every carrier (excluding a few nations with many domestic handset makers where the local rivals and local standards were used to block Nokia - ie Japan, South Korea and yes, the USA). If we exclude the countries with a strong domestic handset maker and yes, obviously we exclude then Finland too being Nokia's home yard - in those remaining countries where 90% of the world's mobile phone owners live - Nokia's market share was over 50% in dumbphones and almost 60% in smartphones! Understand this point - if there is no home field advantage like Motorola and Palm and Apple have in the USA, or Samsung and LG and Pantech have in South Korea, or Sharp and Sony and Fujitsu have in Japan - in the world where there is no domestic rival - Nokia in smartphones was bigger than all rivals COMBINED. Those are the facts. Look at 2010 sales. Nokia towered in all other countries except in the USA, Japan and South Korea. Even in many cases with a strong domestic handset maker, so countries like Sweden (Ericsson), China (ZTE, Huawei), France (Alcatel) etc Nokia still dominated.

This with the weak tech, the lousy handsets, the obsolete Symbian and the failing Ovi ecosystem. Like Sherlock Holmes said, if you elimiate the other reasons, you arrive at the truth. If the cause for Nokia's success is not a superior handset, or not a superior OS in Symbian, or a superior ecosystem, then it has to be superior sales ie carrier relationships!

Understand the point. If you are willing to argue that the Nokia N8 was not up to facing the iPhone 4 or the Samsung Galaxy last year, then Nokia sales should have been declining dramatically - not increased! If you feel that Symbian was outclassed by iOS or Android, then Symbian phone sales should have declined, not increased. And same for Ovi. If you are here claiming Nokia was losing the battle on the hardware, or on the operating system or on the ecosystem - and inspite of having fallen behind, and pushing 'obsolete' or 'non-competitive' products and services at the consumers, that Nokia was able to increase sales, raise its average sales prices and increase profits can only be caused by one thing: excellent corporate sales, business-to-business sales. The best carrier relationships on the planet. Its easy to sell if you have the best product. The true mark of great salespeople is to sustain your sales (grow them?) even when you are forced to peddle inferior products!

WHAT DOES TOMI KNOW ABOUT SALES

I know a bit about sales. I worked in consumer sales and then as a wholesale account rep in retail in my native Finland before I went to college in America to study marketing and computer science. After a stint on Wall Street after I got my MBA, I next worked in business-to-business sales, as an account representative selling computer networks in New York City, arguably the most competitive computer market at the time - just on Manhattan we had over 200 companies as direct competitors. I set the company record for sales in a single year, which I then broke twice more before I left the USA and returned to Finland. What kind of sales? Most of those computer networks went into small and medium businesses on Manhattan that ranged from ad agencies to law firms to warehouses to medical practises and accounting companies. But among my clients were such globally recognized New York City icons such as MOMA yes the New York Museum of Modern Art, the Paramount Hotel the iconic Art Deco style grand hotel at Times Square, and the United Nations Security Council. At that time the Economist Group moved its headquarters from London to New York City and their network was also sold by me, as was that of the Economist Intelligence Unit also on Manhattan. So I've done high tech networking sales, seriously, professionally for many years, and in the business-to-business environment, as an account manager, and I had won far more than my fair share of iconic Manhattan clients.

In fact most of my corporate working life was involved in sales or near sales. Yes, I also did some product development, R&D, systems integration, field engineering tech work, even actual coding in software programming but most of my work was always in or near sales. I've worked as Key Account Representative, as Sales Manager, as Product Manager, and in many sales support functions from market intelligence and competitor analysis to my very last job over at Nokia HQ where I yes, headed Nokia's Global Consulting Department. Notice, that the Nokia Consulting Department was functionally involved in 'pre-sales' and our customer visits would regularly be together with Nokia top sales reps, with our clients - the carriers - at their HQs and often with their CEOs, CFOs, CTOs and even Board Members. So my consultants that I managed were all in Nokia's pre-sales activities, closely involved with Nokia's most strategic customers - carriers/operators - and their strategic management executives. I was one of the few Nokia HQ executives so highly trusted by Nokia sales people, they would 'allow' me to meet with their client CxO's without necessarily including one of their own sales staff to accompany me. That is a rare privilege and for those who have actually worked in business-to-business sales, they know its a very rare group who are entitled to that.

I could go on to brag about how much my sales staff loved me, that is neither here nor there, it is near-impossible to prove today, more than a decade later. But I have a most unusual accomplishment among my accolades. I led the team that achieved the world record for taking market share from the incumbent. This was with my days at Elisa Group, and the sales was yes with the operator/carrier fighting for market share in Finland. Not just that my work was the best in Finland that year. Or the best in Finland ever. Not even the best in the world at that time. A genuine world record! Yes, the performance we did, winning sales from the market - this was Finland, and we were fully liberalized competition already at that time, mind you, against several dozen competitors. And yes we achieved a world record in telecoms market share. The best sales performance in telecoms competition in any country that had ever been seen. Ever! I obviously did not do that alone, but I led the team that achieved that. It was celebrated in the Finnish press and even got international press at the time. I doubt you'll find another blogger writing about mobile today - who has personally achieved a world record in telecoms carrier/operator competition. If you can read Finnish go read Kauppalehti or Helsingin Sanomat or Taloussanomat from about spring of 1998 and again in 1999 to read about 'maailmanennatys' (literally 'world record') and see what they wrote about my product branded '999'. Needless to say that was part of my 'empire' as Product Line Manager of all international telecoms services of the Elisa Group, including Helsinki Telephone, Radiolinja and Finnet International. The person who was usually quoted was Finnet International's CEO, Gunnulf Martenson - my direct boss.

So its not that you've stumbled upon some bizarre theorist who sells some weird views on his blog. I've done all aspects of telecoms and tech sales from serving consumers to corporate clients to wholesale to sales management and just about every type of sales support from segmentation to pricing to product and service bundling. And then, I've taken what I knew, and wrote about it. A 333 page hardcover book. Not just any book. 3G Marketing, co-authored with Timo Kasper and Sara Melkko, the book about how carriers/operators should do their marketing and sales - was published by John Wiley & Sons the world's biggest publisher of engineering and telecoms books (my third book with them at the time).

Not only was the first edition of the book sold out, it was in huge demand, it was several times reprinted, and achieved the very rare accolade for a tech book: it has since been translated. (Most tech books tend to become obsolete before anyone bothers to translate them). Wiley brought me to have a special book signing event at the biggest telecoms event on the planet, the 3GSM World Congress in 2005, when they celebrated 3G Marketing as the fastest-selling telecoms book of all time! And do my peers respect my views in that book? Most authors in tech books do not get mentions of their books ever. Some who do, get a few mentions years after the authors have died. So far 3G Marketing is referenced already in 7 books by other authors while the book itself is only seven years of age and of all of my 12 books, it is the book third most referenced. The book has been turned into a marketing and sales course we've run at Oxford University many times, and other course adaptations have been held at universities and educational institutions on four continents.

So I know what I am writing about when I talk about sales in telecoms. I've done it. I've studied it at the university level and have bachelors and MBA degrees (both with honors) about marketing, sales and business. I have successfully managed sales accounts in networking sales in most severe competition in New York City for many years with trophy account wins. Then in sales management I have led the team that set a world record in telecoms sales. And after more than a decade of sales and related work, I have then written a global bestselling and multple-printed and translated hardcover book about it - a book which itself set the record as the fastest-selling telecoms book of all time. And that book is already referenced in many other telecoms books. I know about sales. I can do it. I can manage it. I can support it. I can also explain how it works and write a book about it. My readers loved it. And my peers so highly respected the thinking, they are now referencing the book too.

That is who I am. That is why 15 of the 20 biggest telecoms groups have used my consulting services. And that is why I often talk to the operators/carriers at the CxO level and even Board Member level today. That is why 9 of those 15 clients have even said in public that they have used consulting services of Tomi Ahonen - and they said me, the person, not just that they used the consulting services of my company. That includes each of the Top 3 - China Mobile, Vodafone and Telefonica, which reach phones in over 1.2 Billion pockets and which three alone control one fifth of all mobile phone subscribers on the planet. I am not saying that these three are my clients. They have said in public, that they have used Tomi Ahonen. That is how much China Mobile, Vodafone and Telefonica trust me and my services to them.

I know that this blog is open, and anyone can come and comment. And with a giant corporation like Nokia and its partner Microsoft another giant global corporation, this type of blog article is likely to attract a lot of comments. And some may be knowledgable about what they write in the comments, but others are not. Please bear in mind - if the world's biggest book publisher of engineering and telecoms books invites someone to write the world's first sales and marketing book for mobile telecoms - then that author is in a very rare group of recognized experts of that rare field, not just any old technology pundit who happens to be unemployed and decides to write a blog so they can seem important. With that, lets look at Stephen Elop as CEO of Nokia and how he's dealt with Nokia's greatest competitive advantage, the sales relationships that have been developed with the carriers/operators. This is going to be painful.

DO NOT CHANGE WHAT IS NOT BROKEN

There is a standard management law saying "if it ain't broke, don't fix it". Any change you make will cost you money, time and resources. If that part of your business works to total satisfaction, ie it is not broken, then do not meddle with it. I am not in any way claiming Symbian or Nokia handset hardware or even the Ovi store was 'not broken' but the Nokia corporate sales of its carrier relationships was exceptionally good. I would say, if they can take inferior handsets, on an obsolescent OS platform and an under-performing Ovi app store ecosystem, and inspite of those three huge handicaps, still manage growth of unit sales, with increased average prices and a Nokia-record jump in profits - that is perfection in sales performance. Perfection. If you can take inferior products and services that are rated less than those from competitors - and in that environment you the sales people can deliver growth (without price cuts or marketing gimmicks) - that my friends, is the definition of 'not broken'.

That becomes vital, when the management of a company decides to voluntarily abandon a key pilar of the company and cause two years of change-related turmoil. Like when Elop announced February 11, that Nokia would abandon its Symbian (and MeeGo) based smartphone platform, and adopt the Microsoft based OS in its place. This means not only firing Symbian (and MeeGo) staff and related hardships to the organization, it also means retooling factories - the Microsoft OS requires some different components into the hardware etc, so much so, that the first 'Nokia' branded smartphone, the Lumia800, is not even manufactured in Nokia factories, it is made by a third-party manufacturer out of Taiwan. (Think about that lunacy, at the same time Nokia factories run idle so badly, that Nokia has already permanently shut down one of its big factories in Romania).

The Windows Phone based Nokia smartphones need to be completely redesigned from the ground-on up, and all new Microsoft processes have to be learned. Many Nokia 'staples' that Nokia phones have supported for many years need to be 'un-learned' such as that the Microsoft OS does not support NFC technology etc.

This is not a blog about whether the shift to Microsoft is smart or not (I have plenty of blog articles where I am critical of that). This blog looks at what happens to sales. If the CEO decides to rudimentally shake Nokia from its ground on up - all major industry experts say that the mobile phone handset industry is shifting from dumbphones to smartphones - Nokia started that trend and Sony just now announced a few days ago that they will achieve 100% transfer to smartphones and will end the making of their 'featurephones'. Motorola is also at about 80% done with that transition. All major industry experts also agree that the handset industry is 'increasingly' going to be about software, some go as far as saying the future of mobile phone handsets will eventually land on 'the cloud'. And most industry experts also agree that the battle is increasingly about ecosystems.

Nokia had a successful transition from dumbphones to smartphones - Nokia was leading all rivals in that transition up to when Elop took over. Nokia had invested heavily in its software competence, developing Symbian, Maemo and MeeGo operating systems for smartphones, and various other software projects from music services to maps to advertising to mobile money. And Nokia had started its path towards an app store years before there was an iPhone (with the N-Gage) and their several app store type of solutions were centralized around the Ovi brand. So Nokia staff the world over knew Nokia was on a long-term project to transfer the traditional hardware vendor into a smartphones maker, with its own OS, its own software and its own app store. Elop demolished all those visions in one statement when he annouced the Microsoft selection.

If we set the sanity of that decision to one side, and consider what remains. This is one of the biggest changes of any company ever. Imagine if Apple had abandoned the Macintosh Apple OS/X platform and gone fully Microsoft? That is the type of change. Like when Sony threw in the towel with Betamax and joined the VHS video recording consortium. Or imagine of Microsoft decided to abandon Xbox and start to produce Playstation-compatible gaming consoles. That is the kind of dramatic platform change that reverberates across the whole organization and its effects will be felt for years.

If you initiate such an enormous and painful change - you don't want to rock the boat on anything else! What Nokia needed on February 12, was the sure hand of management to reassure all staff that everything else is as normal (even if Elop may have wanted to tinker with some other things as well). Because the change was not forced upon Nokia, it was a voluntary decision taken by the Nokia CEO, at a time of his choosing. Because it was an 'unforced' strategic change, then it MUST HAVE BEEN PLANNED WELL. After February 11, when the Microsoft announcement was made, after that point, in every communication coming from Nokia, what Nokia needed was for all other issues to be as stable as possible, to minimize the pain of the big platform change.

DON'T ADD TO THE PAIN

This is the wrong time to tinker with the Nokia brand, such as the confused messages around the naming scheme. Nokia had announced previously they were going from letters and numbers (N8, E7 etc) to full names. Now the new CEO added totally unnecessary confusion with a new naming scheme - and bizarrely - against ALL major marketing wisdom - he went 'backwards' to pure numbers. Nokia announced they'd only sell numbered phones. A Nokia 700 and a Nokia 500 and a Nokia 701 etc. Previously the business-oriented phones were at least clearly identified as the E-series and high-end consumer smartphones the N-Series etc. None of that. Now you'd only come and buy a Nokia 643. Or was it the 634. What is the difference with a 635 or 642? Obviously a mad strategy, even numbers-fanatical brands like BMW in cars has been moving away from only numbers.

That was a moronic decision obviously and Nokia took a lot of heat for it. That didn't last long. Now Nokia has reversed that decision and announced the new Microsoft phones will be Lumia sub-branded and Nokia's low-cost dumbphones will be Asha-branded and no doubt, there will be more Nokia sub-brands. That is a far better choice. But consider how much totally unnecessary pain this back-and-forth has caused the Nokia branding and marketing and sales departments, when the story has totally reversed itself now twice in less than half a year. That took away effort from making the transition from Symbian to Microsoft as smooth as possible. All while they try to un-learn what all was advanced about Symbian better than Windows Phone, and what all was even better on MeeGo than Windows Phone, and what in Windows Phone is going to be applicable to Nokia's version - which differs from that Windows Phone that existed in February, etc.

What of the end of Symbian? On February 11, Elop announced Nokia was ending Symbian. Then the market interpreted this as an 'Osborne Effect' and it stalled Nokia Symbian sales. Elop was confused and it took him more than a month to come back and say, no-no-no, Symbian is 'not dead' and Nokia will make new Symbian phones well into 2012, and will support the Symbian OS with new releases and software at least until end of 2016. How costly was that marketing communication mess?

Then about the song. Why on earth, would the CEO pick now, year 2011, the troubled year, as the time to change the Nokia tune? The Nokia tune ie the standard default ringing tone on Nokia phones, is the world's most recognized song. More known than Elvis's Love Me Tender the Beatles's All You Need is Love or Michael Jackson's Thriller or Bing Cosby's White Christmas or Queen's We Are the Champions, or Frank Sinatra's My Way or indeed any popular songs like Oh Tannenbaum or Happy Birthday. The Nokia Tune is on phones that are on the pockets of 1.8 Billion people! That is 26% of the total planet. That is unprecedented in the history of humankind. Nokia is more widely spread  than any other brand ever, more people have a Nokia phone today, than at its peak listened to a Sony Walkman, or drove a Volkswagen Beetle, or told time on a Timex watch, or wore Levis jeans, or played Solitaire on a Microsoft Windows based PC, or smoked a Marlboro, or drank a Coca Cola, or wrote on a Bic pen. Nokia is today by a long margin the most widely used brand on the planet and its iconic ringing tone is an unprecedented identifying branding and emotional tool. You'd have to be certifyably mad to want to mess with this WHILE you also force customers to abandon one platform for another. What you want, is for the customers to feel that 'everything you ever loved about Nokia is exactly as you wanted' (while we change the OS quitely underneath). Why why why would the CEO entertain the idea to change the Nokia tune this year?

And on the stability front. What of Ovi store. Why on earth, when even such giant communcation entities as CNN regularly were promoting the CNN app 'available on the Ovi store' would Nokia CEO decide to kill the Ovi brand this year. CNN is giving incredibly valuable air time to promote the iReporter app on explicitly the 'Ovi store' not the 'Nokia store'. The Nokia app store is not going to be ended. So the Ovi store will continue. But idiot Elop wants to now add to the confusion by killing the 'Ovi' branding that had already been established. Isn't it enough hassle for the branding, marketing and sales staff to fight with the stories about Symbian, MeeGo and Microsoft, without now voluntarily throwing Ovi hassles into that mix. That is sheer madness again. No wonder the global Interbrand survey dropped Nokia from the Top 10 most valuable brands on the planet for the first time in the ten years that the survey has been published. Nokia's brand is being tortured by the CEO.

I could go on, but this blog is about sales. I want to point out, that the sensible thing for any intelligent CEO to do, if the CEO voluntarily decides to abandon a growing platform that dominates the world and is bigger than its two nearest rivals combined - when such a massive change is forced on the Nokia organization, its partners and suppliers, its resale channel (the carriers/operators and the handset retailers) and of course the customers - what you want is UTMOST, TOTAL stability in all else. TOTAL, utmost stability in all else. In ALL ELSE that Nokia does. And Elop has been doing exactly the opposite. He compounded his Microsoft Mistake with the infamous Burning Platforms memo (creating the Elop Effect) and then as the analysts and tech press and Nokia clients - the carriers/operators - and Nokia customers and most of all, Nokia investors have punished Elop for the mistakes - he has engaged in an orgy of brand destruction events. What he should have done, is painstakingly gone on every TV show and visited with every carrier, repeating the boring old same story - EVERYTHING you ever loved about Nokia continues, absolutely everything, except the OS, which we will shift to Microsoft (and this is why, blah-blah-blah). What he does not want under any circumstances, is ANY FURTHER reason to question the direction of Nokia. No other critical opinions of further stupid mistakes.

Elop is running the company like a distracted child. Every week he comes up with yet another way to mess with the organization, to cause more pain internally, to employees, to partners, to the retail channel and to the end-users. This year is the worst time to introduce any other changes - remember, Nokia was not failing in 2010 - Nokia grew sales, and in smartphones, it grew unit sales, grew average sales prices and jumped profits. So he did not need to fix what was not broken. If he had decided in 2010 that the Symbian SO needed to be changed (and as CEO he has the right to make that call, he knows much more about the company than we outsiders can know) then only a fool would compound the pain with more silly changes to everything.

YOU DON'T ASSASSINATE YOUR HEROES

So lets get to those sales reps. We've established that if the Nokia smartphone handsets were not up to par anymore, not compared to the iPhone 4 and Samsung Galaxy etc - and if the Symbian OS was obsolete compared to iOS and Android, and if the Ovi store ecosystem was struggling too - then yes, the Nokia product and service offering was not truly competitive. And if in that context Nokia achieves unit sales growth, with higher prices and a giant jump in profits - then the only way that happened, if the sales organization were the heroes. It was not achieved by great hardware not great sotware or ecosystem, and not by marketing or pricing gimmicks. It had to be good sales.

The heroes of Nokia when Elop took over were the sales reps, who handled Nokia's precious carrier relationships. It is certain that an outsider coming in to run Nokia, could not possibly know all about the intricacies of this industry. But we know that Elop asked all Nokia employees to write to him via email and he actually responded personally to everyone who did. It is also reported that his early weeks and months Elop went throughout the organization talking to very many mid-level managers to learn about the business.

He came from the PC industry with the typical baggage that PC industry players usually have when they approach mobile (look at how much traditional PC makers struggle when attempting to get into smartphones from Dell to HP to Lenovo to Acer etc). He further came with the trouble of having lived in the laggard market of mobile, the USA (if you need proof, just look at where the USA sits today in adopting smartphones compared to the world), and will not know much of the finer points about more advanced markets and what mobile is and can be in more advanced markets such as Japan and South Korea, or more relevantly for Nokia brand, advanced markets such as Singapore and Sweden, both years ahead of the USA. He will have heard time and again and again and again, what those differences were, and where Nokia had strengths - and where it had weaknesses.

He would have had to be a total idiot not to learn in that process. Look at Apple, look at Google. Both come from West Coast USA and both have adopted to the mobile market and are doing phenomenally well  (contrast their rapid success in mobile to their close rivals like Microsoft, HP and Yahoo who have for a decade tried to muddle into mobile to dismal success). But Google and Apple both recognize that Nokia is/was a leader of this industry, not a laggard - and that Japan as a nation is the foremost leader and both Apple and Google regularly illustrate by actions if not by words, that they copy both Nokia and Japan. Remember - Apple settled a patent dispute with Nokia paying it hundreds of millions, not the other way around. Eleven of the first 12 changes made by Apple in the next 3 years after 2007 after the iPhone 2G was launched, were copies of what Nokia had done - before 2007. And as I have written on this blog, if you want to see what will be in the next iPhone, go and look at a Nokia top phone from a couple of years ago (which itself is a copy usually of what Japan had even before that - remembering that NTT DoCoMo the Japanese carrier/operator was Nokia's partner on Symbian and most of Nokia's chief designers have held their primary desk at Nokia's small Tokyo office).

And Elop would have to be mentally deficient not to instantly observe and learn, that inspite of technical product and service shortcomings, his sales staff were the internal heroes, they were bringing in the massive handset contracts from the carriers around the globe.

SALES HEROICS

We don't hear much about the actual sales heroics, its a very murky world of very few people within that club. And talented sales reps are a rare breed and will not want to 'publicize' any possible arguments with management, because they know that the sales rep's reputation is his biggest asset and if they don't like this boss, they may want to go work for another company, so most sales reps depart very quietly. But a few stories have leaked out from Nokia. Lets start with Superman.

The ultimate achievement for a salesguy is to win back the lost client. That is the pinnacle. That is what separates the brilliant from the good. And Nokia had lost its way in the USA more than six years ago. And by 2010 Nokia was selling low-cost phones and its brand was severely tarnished in the USA. Where once it was the second biggest phone brand behind only Motorola in the USA, it had fallen out of the USA Top 5 and its share was down to single digits. The Symbian based Nokia smartphone market share had become so bad, it was a couple of percent in the USA, and those were the cheapest versions.

Nokia's previous CEO, Olli-Pekka Kallasvuo had made it his mission to return Nokia back to the US market and in his three years of leadersship he had failed and this was one of the reasons why he was fired (the bigger reasons were the fall in Nokia share price and perilous decline in profitability). So, what Nokia wanted more than anything else, was to land a major US carrier to subsidise one of Nokia's flagship smartphones.

And in January that incredible come-back feat was accomplished by Nokia's sales staff in America. They didn't land the smallest of the big four, T-Mobile, but one of the two giants: AT&T. And the phone that AT&T agreed to sell with subsidy was none other than the X7, scheduled for Spring 2011 launch, the follower to Nokia's flagship hit phone of 2010, the N8. This was a superb achievement! This was what three consecutive Nokia CEO's had hoped to land for more than half a decade, to no avail. And now the new CEO was gifted this amazing 'win-back' achievement. Nokia was to be back in the USA, in a big way, in the Spring of 2011, and on AT&T the iconic USA network (original launch network of the iPhone). And the CEO of AT&T was to come to the world's biggest telecoms event GSM World Congress in Barcelona in February to celebrate this new dawn for Nokia, to share the stage with Elop.

If Elop cared about Nokia's success, he would have taken that stage and enjoyed the moment. Except that the X7 would run Symbian. And Elop wanted desperately to move to Microsoft. Not just to move to Microsoft (which wouldn't happen until November at the earliest, so in February there was no need to announce anything about Microsoft) he wanted to share the stage rather with his former boss and idol, Steve Ballmer the CEO of Microsoft - rather than 'just some CEO of a carrier'. Clearly Elop idolizes Ballmer.

So, after years of failing, when the win-back is finally achieved, on AT&T's giant network to be the launch customer of the new X7, the deal is killed. By AT&T? No. By Nokia! Elop would rather step on the stage to announce the Microsoft deal - where he had no phones so this would only damage Nokia sales - and thus he wouldn't take the stage with the AT&T CEO to announce another Symbian based phone for America.

I don't know which is worse - the ego of Elop eloping with Microsoft to Nokia's damage, or the permanent damage to the sales rep's relationship with AT&T - but this one act alone is enough to disqualify Elop as CEO of Nokia. If he will take a win, no not a win, a win-back - in a market where Nokia was failing before and Elop himself has said he wants Nokia to come back - and Elop torpedoes that rare heroic achievement. He is incompentent and must be fired. You don't assassinate your own heroes.

Put this in a sports context. You're the coach of the NFL team in the Superbowl. Your team had fallen behind by half-time. Your team has not scored. Then, finally, your superstar quarterback throws a perfect touch-down that launches your come-back. What do you do? You don't pull the quarterback off the field and bench him? You celebrate with him and encourage him to go on, and lead your team to victory by throwing more touchdowns!

WHO DO YOU PICK

It gets worse. At this time in January-February 2011, the USA was still the world's biggest smartphone market (that has since been taken over by China, no surprise). Again, we do not hear of all the finer details, but later this spring we heard that bizarrely, Elop had decided to replace his USA Nokia sales boss. And relocate the Nokia USA sales HQ.

Ok. First, if you have that hero salesguy who won AT&T for you. That is your USA sales chief forever, until you perhaps promote him for global sales head. You don't let him leave for any reason at any cost. He is the exceptionally capable and rare sales talent. He is able to win-back lost customers, and of such giant scale as AT&T, a carrier so big it qualifies by its size in the top 20 biggest mobile carriers of the world (remembering that Verizon Wireless is 55/45 owned by Verizon and Vodafone, so with its global footprint, yes UK based Vodafone is far bigger that AT&T but USA Verizon's mobile customers without the Vodafone part are far smaller than AT&T). You bend over backwards to hold on to this superhero! Incidentially, what did Nokia USA President Mark Louison do on February 11 in sheer frustration. You betcha! He resigned. I woulda done that too, Mark, I'm with you on this one. When you see your CEO is mad as a hatter, you are better off jumping off that non-burning platform even if you have no other job in sight. You will land safely somewhere far better than performing heroics to the CEO who will then destroy your work.

Secondly, back to Elop. If. If after your massive efforts to bribe and charm and convince your superhero salesgun to stay, and if, for some reason this superhero guy retires or is headhunted to run another company or I don't know, goes on maternity or paternity leave or something - then who do you appoint? The number 2 guy on that AT&T account team of course! Or then you go down the line, take the top guy from the Verizon team at Nokia or Sprint sales head; or go further down the line and hire someone else from Nokia's top sales guys perhaps from the Vodafone team from the UK - ie Verizon tie-in or the T-Mobile team from Germany.

Why? Because mobile telecoms is the most complex technology ever - more complex than rocket science - no thats not fair. Mobile is FAR FAR more complex than rocket sciense. And the BUSINESS of mobile is the most complex big business that has ever existed - and the sales competence required is very time-consuming to acquire, takes literally a decade or more, to know the networks standards from 1G to 2G to 3G to 4G and beyond; then the network operators/carriers including MVNOs and their operating models and business models; handset sales including subsidies, handset features and abilities; the operating systems; apps, services; the radio environment including base stations, indoor coverage issues, capacity, coverage etc; SIM cards, app stores; then the end-users from consumers and youth and senior citizens to enterprise/corporate customers etc etc etc. The sales guy is expected to know by heart all the details of every single Nokia handset ever made (a numbering jungle nightmare as you can imagine) and which ones had what problems with that carrier that one time, with that particular network equipment like a cell tower, etc etc etc.

You don't bring in a novice! What you bring is someone supremely competent in a) mobile telecoms business, b) carrier business, c) handsets, d) networks, e) the subscribers of the carriers ie the end-users. And obviously all that happened both on the Nokia side and the carrier side of that relationship. So if for some reason, the right competence is not available (almost inconceivable for Nokia after several decades of selling handsets in the USA) then you go to another HANDSET maker top guy who has years of success selling to the carriers in the USA, ie headhunt the top guy from Motorola or RIM or Samsung's top USA guy or LG's top USA guy etc.

What did Elop do? He brought in his buddy Chris Weber from Microsoft. Yes. A guy who has never ever sold one handset in his life. He's been involved in Microsoft's sales of software, to PC makers. The sales is not through carriers and dedicated handset stores. Microsoft sells most of its software as either pre-bundled on the PC or else sold through 'VAR's ie Value-Add Resellers (My New York networking company I mentioned in the above where I sold networks, was a Microsoft VAR among many other brands). These VARs are essentially Microsoft slaves, tiny companies that Microsoft bullies at its whim. It is the exact opposite relationship to what carriers have with handset makers - just look at how quickly Kin died, or how rapidly Apple - come on Apple - had to redesign the iPhone 5. Someone who thinks the reseller world of mobile is like that of Microsoft is in for a rude awakening and only a moron would appoint such a total novice to head Nokia's big come-back to the US market.

The PC makers are also slaves to Microsoft because they have no credible choice, at least not with Windows. The carriers have literally choice of over 200 manufacturers and they can tell any one of their current suppliers to go jump off a cliff. So the relationship of Microsoft 'sales' to its VARs or its PC makers is that of the typical cruel dictator that we've seen in public in Steve Ballmer regularly, and what has given all in the tech world to call Microsoft the 'Evil Empire'. And would you know it, when you read what press Mr Wunderkind has achieved for Nokia in US newsmedia so far, the word 'tablet' is nearly as frequent as 'smartphone' in those stories. What? He is peddling tablet rumors when he should be selling Nokia's smartphone story? (Note, there is no formal announcement of any tablet project and Nokia would be surely pinheaded to work on a tablet in this mess, before getting its smartphones house in order - just look at how many carcasses sit in the tablets wars vs iPad. But this is not a blog about how futile it would be for 'we have never made PCs Nokia to attempt a tablet where even Nokia's reseller channel is the wrong one for tablet sales' strategy. This blog is about sales.) So, this Weber guy, another Microsoft Muppet is your new USA head of sales, Stephen Elop? You've gotta be kidding!

Go back to the sports analogy. Its not that you the coach have seen your star quarterback lead the team to the first score for your side to start your come-back and to do it throwing a beautiful touch-down pass. You not only bench the QB, you then send in the replacement. Not your backup quarterback. No. Not your third-string quarterback either. Not even anyone else on your existing team who knows how to throw a football. You bring in a star athlete from another sport who has never played one game of football! You bring in a champion figure skater!

Elop is the most incompetent CEO ever. He has to be fired.

But wait, it gets worse. Look at the Nokia USA office. They had their office in upstate New York, very close to the HQ of Verizon. A good place to be near to one of the biggest carriers. And by time zones, being on the East Coast gives you some overlap time with Finland where the Nokia HQ is.

Now where did Chris Weber decide to move the sales HQ of Nokia USA? If its not near Verizon, then where? Not near to the AT&T's office. Not near Sprint's office. No. He has set up his Nokia USA sales head office to... Seattle? Duh?

Where the Nokia USA sales HQ is as far as possible from any USA carriers so they can no doubt collect a lot of airmiles? - and where they are on the opposite time zones as Finland is, to make it as difficult as possibile for the sales guys to talk to Finland, or the Finnish guys talk to USA sales. What a mad mad MAD move!

But that office is right next to Microsoft. Haha, yes. And who are the Nokia sales people selling Nokia to? Are they supposed to sell Nokia handsets to USA carriers? Or to try to sell Nokia corporation and Elop's 'magnificent' achievements to Microsoft? This is the epitome of madness. Look at a map. Verizon Wireless is based out of Baskin Ridge New Jersey (Verison parent HQ is located on Manhattan). AT&T is based in Dallas Texas. Sprint Nextel is based in Overland Park in Kansas. T-Mobile the smallest of the four is of course the wholly-owned subsidiary of T-Mobile of Germany. And this is your first step as a Nokia employee, Weber? To move as far away from your work as possible?

CHINA RISING

That was the soap opera known as Elop in America. Lets now go to another soap called China Rising. Yes, we know by now, that China has eclipsed the USA as the world's biggest smartphone market and will rapidly grow to be at least twice the size of the USA. And in China, Nokia owned that market, had over 60% market share just a year ago. Nokia was performing awesome sales growth gaining market share with the new Symbian S^3 based smartphones like the N8 and E7 up to February 11. The sales were so strong, that while the rest of Nokia smartphone sales shrunk for Q1 following Elop's Microsoft Madness, China had managed growth ! So here is another superstar superhero sales guy, who bucks the trend and brings in supersales.

And then in Q2 we see China smartphone sales crash heavily. Hey. That was not a China Syndrome. Nokia smartphone sales crashed GLOBALLY. Nokia lost 30% in one quarter! Yes, China's fall was the biggest of any region, but that was only because China was also strongest growth with the new phones that sold in Q1, and due to Nokia's very strong Symbian position, the Nokia sales would of course crash right at the time that China was in its ascendancy and taking over the title for world's biggest smartphone market.

And what does Elop do? He fired the China team! Did that work? The guy who came to repair China sales was Nokia's global head of sales, who also is the past China sales head, who really knows the China market and carriers and end-users. Did he manage any better. Of course not. The crash in China was not because of bad sales effort - it was only due to the Elop Effect. The team that had achieved 60% market share before Elop meddled int the smartphone market is now being replaced with expert when Nokia's market share is less than half it was and falling further. Nokia in China is now so poisonous that Nokia's own, branded Nokia franchise 'flagship' stores, have started to sell handsets made by other brands! Imagine going to a McDonalds and seeing hamburgers and fries wrapped in Burger King paper, sold by the McDonalds staff. That is total collapse of Nokia in the biggest smartphone market of the planet. And Elop had winners there, and he fired them. And where Nokia would need their top salesguy to go help America recover, he is now doing pointless repair work in a ruined market. What is Elop doing? He is incompetent and needs to be fired.

The latest sales numbers from November are so dismal, that of the ten bestselling smartphones in China, only two anymore are Nokia branded, ranked 5th and 9th. And they are 2 of the 3 cheapest smartphones on the top 10 list. A year ago Nokia owned the high-priced end and only a few ultra-low-cost Chinese manufacturer smartphones by ZTE and Huawei made that list,

Elop killed the China market on February 11 announcing Microsoft (China Mobile the world's biggest carrier, had been Nokia's partner on MeeGo the smartphone OS to replace Symbian. What will China Mobile think of this way of being stabbed in the back by a 'partner' called Nokia. You can be sure China Mobile will not forget and will favor any other brand smartphone ahead of Nokia.) So. Would the Nokia China sales team hear about the three Chinese clients and how angry they were? Of course. Would the China sales guy talk to Elop. Of course he did. And what does the smart CEO who cares about his company do? Especially the sales guy whose client is by far the biggest in the world, and who alone accounts for 10% of the world's phones? You listen to that sales rep like he was reading from the original stone tablets containing the ten commandments. You do not question that guy ever ever EVER. And you do not fire him or her!

The China team firing was a skapegoat for Elop. He didn't like to hear being told he made a mistake, and rather than think of Nokia's best interest, he let his ego do the talking and fired the team serving the most important client in the industry - and with the carrier where Nokia had been winning more sales than all other smartphone makers combined! Where the partnership had been so intensely solid, that the carrier had agreed to specify Nokia's new OS, MeeGo as its default smartphone OS and where the carrier itself would be a developer partner. Elop put his own ego ahead of the interests of his company.

Elop is incompetent and has to be fired.

There are more stories like this but they tend to not be out in the open. I hear some stuff privately that I can't talk about but the sales professionals of the best sales team in telecoms is quite demoralized that they have a lunatic running their company and who is not only making their work more difficult regularly causing totally un-needed hassles to an already difficult year; and he is that most dangerous of CEOs in that Elop is even destroying some of their hard-won sales contracts like that of AT&T.

DON'T FIX WHAT ISN'T BROKEN

So lets turn to other sales and marketing efforts. Over in Britain Elop then decided to terminate the contract of the local wholesale agent for Nokia handsets and replace it with a company that is an expert not in mobile phones but PC sales.

What did I say about "if it ain't broke, don't fix it"? Again! Elop took a sales organization that had the Nokia contract for a decade, and knew every player - and which is an expert at handsets, and replaced it? What? Now? This year when Nokia itself is causing incredible troubles with the shift to Microsoft? What was not broken at Nokia was sales. This is absolutely the wrong move (once again).

And what does Nokia get for its money? I was just in Birmingham three weeks ago and with a bit of extra time I stopped by at a shopping mall. It had three phone stores. The Orange store featured the Lumia800 prominently in its window - with the free Xbox offer for all who sign a contract. But the T-Mobile store had no Lumia or Nokia anywhere on its two display windows. And the neutral Carphone Warehouse did have the Lumia800 but that was on one window on one side of the door - the other window display had a similar-sized iPhone 4S ad, which is exactly the comparison Nokia does not want. The Lumia800 is the first Nokia flagship ever that has no redeeming factors when compared to its contemporary iPhone (the N95 beat the original iPhone 2G by almost all of its features and not just rated better, the N95 outsold the iPhone 2G; the E90 Communicator outclassed the iPhone 3G and in most head-to-head comparisons was rated better, the N97 did suffer badly when compared to the iPhone 3GS but had a QWERTY keyboard and better camera etc; and with the N8 compared to the iPhone 4, Apple had closed the gap but at least the camera of the N8 totally outclassed that of the iPhone 4 and many European comparisons gave the choice to the N8 last year).

So now with that side-by-side advertising, any customer who walks into a Carphone Warehouse will automatically think of comparing the Nokia with the iPhone 4S and of course in that comparison the Nokia Lumia800 falls very flat. Its the first flagship phone by Nokia ever that has nothing to beat the current Apple offering and by contrast the iPhone 4S beats the Nokia Lumia800 in most areas. And in the UK Nokia has a long history of loyal Nokia customers. Many are now being pushed to the iPhone. Apple must be laughing all the way to the bank.

So this is what your Microsoft 'Billions' of marketing money buys you Stephen Elop? The early analysis by people who study the market are telling that the reception of the Lumia800 is disappointing all over the early markets and Nokia won't come anywhere close to its previous similar launch of the Symbian S^3 and the N8 model last year this time when Nokia did 4 million sales on its then-newest version of its OS. The analysts have been downgrading their estimates for Lumia sales anywhere from 2 million to under 1 million units.

THE PINNACLE OF INCOMPETENCE

When Stephen Elop decided to cause the self-inflicted double wounds of both the Osborne Effect (February 11 announcement of Microsoft when he had no phones to sell) and the Ratner Effect (the Burning Platforms memo the costliest management communication of all time) - and this unprecedented management madness is now called the Elop Effect - he did cause a world record crash of market share in any industry. In seven and a half months Nokia had lost half of its market share and fallen from a massive lead at number one, to ranked 3rd and falling. The projections show Nokia to be near 10% by the time this Q4 is done and that would mean Nokia lost two thirds of its market in less than one year. This is far worse than New Coke or the problem with Toyota brakes or Jet Blue jailing its passengers onboard its planes on the tarmac. Obviously Nokia's share price crash has been as rapid. The previous CEO saw Nokia lose half of its market value in a period of three years - and was fired. This new CEO has destroyed more than half of Nokia's share price in only 11 months. The only reason the Nokia price climbed the past few days is because Danske Bank is now expecting Nokia to sell its previous crown jewel unit - the now loss-making smartphone unit - and Danske Bank expects the buyer to be (drumroll.....) Microsoft of course. Danske Bank expects this to happen in the first half.

IS HE A MICROSOFT MOLE?

If Nokia new CEO Stephen Elop causes Nokia's world-leading market share in its smartphone unit to be crashed deliberately with glaring mismanagement - and that damage is used as an excuse to sell that unit to Microsoft, Elop's previous employer - then Elop is clearly guilty of his fiduciary duties and having not served the best interests of Nokia. If there is any confirmation of any talks however secret of a Microsoft buy-out of any Nokia unit - that must be prevented by all stock exchanges involved as a clear breach of Elop's duty to Nokia. And that this kind of rumors surface, suggest that it is being quietly prepared. And that means that Nokia's Board of Directors is also potentially guilty and has ignored its duties to supervise its CEO.

ELOP IS INCOMPETENT AND MUST BE FIRED

But the decision to switch away from Symbian and MeeGo to Microsoft was a choice by Elop, and he could select the timing of when to do it. He knew what he was doing. He planned it. Any graduate of business school knows, if you decide to inflict such severe damage to your company - that in your official Nokia results you warn that the transition-related problems will last for two years - then you minimize all other changes. You act as the epitome of stability for those two years, you do not rock the boat. You do not cause additional pain and stress to the company, its employees, its suppliers and partners, its sales channel and customers, and its end-users. You don't make any other changes unless absolutely necessary!

And for whatever problems, real or imagined, Nokia may have had in its handset hardware, its operating systems and software, and its ecosystem - Nokia's sales were true heroes. They achieved growth with inferior products and services when Elop took over. These were the best asset that Nokia had. If Elop caused the self-inflicted wound with his Elop Effect, then the worst possible thing he can do, is to compound that error - by firing some of his best sales people (or letting them leave) and related sales organizations.

I wrote before that the Elop Effect is like finding your friend has a heart attack, you start to strangle him, and then to be sure, you take your shotgun and also shoot the friend in the face (like Vice President Dick Cheney).

What Elop is now doing with his sales force, is seeing a doctor rushing in to try to help your friend, and you then pour gasoline over the doctor and set him on fire...

Please pay attention to Stephen Elop and the Nokia saga. We are witnessing the world record in incompetence in managing a Global Fortune 500 sized company. He is single-handedly destroying the company and we have a front-row seat. This story will be reported in future MBA textbooks as the ultimate folly in running a tech company and I promise you, future students of business will be so incredulous about all the silliness, many will initially not believe the case study is true, some of the madness is so ludicrous that some students will think there are typos in the textbook.

This was only about the sales silliness. I will return with the big picture and the failure of the new Microsoft strategy. Elop has to be fired! Nokia Board! Why are you asleep on the wheel. If you don't act soon, you will be accused of being in collusion with this clown, this Microsoft Muppet.

ABOUT COMMENTS

I usually welcome all comments on my blog under some basic rules (ie you must have read the blog to discuss it. If my reply to you requires me to write 'if you had read the blog article' those types of comments are deleted without mercy). In this case I will insist that the discussion be limited to the sales and marketing of Nokia and its rivals. Do not include any discussion about the iPhone vs Nokia phone models or any discussion about app store ecosystems or Symbian as an OS. There are plenty of blog articles on this site about those issues, post your comments there. This is a rare discussion about sales with handset makers and I will enforce clearly a limit of the discussion to those topics. But as usual, I warmly welcome discussion about this blog so please do comment. What do you think, is the matter of carrier relationships ie the sales at Nokia a true asset and has that been now unnecessarily damaged by Elop this year with meddling and mismanagement? Or do you think Nokia is doing a great job in its sales to the carriers and independent handset store chains?

Smartphone Penetration Rates by Country! We Have Good Data (finally)

Thank you Netsize Guide and Informa! Thank you Google and Ipsos! We have finally some solid international data on smartphone penetration rates, broken down nationally. Not every country yet, but we can do a very solid analysis of 42 major countries, that cover 72% of the world's mobile phone subscriptions with countries included from all six inhabited continents.

The data from the two sources is not really measuring exactly the same things, and there are considerable discrepancies on some of the data, but digging into both sources, we can get pretty good clarity on the actual national per-capita rates of smartphones, which should be very useful data for those who are interested in smartphones, their users and the related ecosystems. We also can calculate the national migration rates for those countries (which is a less-useful measure than per-capita penetration rate, but a number more likely reported nationally).

WHAT THEY MEASURE AND HOW

First what they measure. Please note, both sources are free in the public domain. Google and Ipsos released their smartphone penetration rate website in the Autumn and it was current as of this summer. It is survey data conducted by Ipsos for Google. They measured for most countries the proportion of smartphones used by actual mobile phone subscribers, so its not a national per-capita rate for smartphones, but we can calculate out that number of course. For the countries in the emerging world markets, however, the measure is not national penetration, they only measured the big cities (ie for China, India etc). So in the Google/Ipsos study, the Industrialized World numbers are quite 'realistic' but the Emerging World country numbers are too high, because of course most rural population tend to be poorer than their cousins in the cities, and thus smartphone penetration rates in rural areas are lower than in cities. Google and Ipsos gave us 30 countries they had measured. Also remember, some consumers do not know what kind of phone they have so this measure may under-count the total number of smartphones, but in those cases, the phones that might be missed, would almost certainly not be used 'as smartphones'.

Then for the Netsize Guide. Its mobile telecoms numbers come from one of the most complete global comprehensive databases of mobile numbers, those of Informa. So the Netsize Guide numbers are Informa numbers. Informa has not surveyed end-users on the smartphone penetration rates like Ipsos, but rather measured from mobile operator and national regulator data the number of smartphone 'subscriptions' ie who has all-you-can-eat or Blackberry or other smartphone accounts. Note, that this will under-count total smartphone handset populations where some might own a smartphone but is not paying for a smartphone subscription, but in that case, the smartphone is used like a dumbphone, so this is also a very good measure of what smartphones are actually used as smartphones.

In the Netsize Guide there are unfortunately several of its surveyed countries that do not supply a smartphone unit count number, including several countries that are usually listed among the leaders in most mobile statistics (Finland, Norway and Denmark) and which are high among Google's survey of smartphone adoption rate (Switzerland). Plus some others that probably do not have high smartphone penetration rates in any case (Morocco). Even so, after those are eliminated, the Netsize Guide gives smartphone counts for 34 countries. As the two have mostly overlap but not completely, and after some of my best analysis on which numbers we can use, I come up with 42 countries that we can rely on these numbers to be very close to the truth, enough so that I can call these my 'official' national penetration rates according to TomiAhonen Consulting. I have indicated for you my confidence on the numbers (the more stars, the less I am confident in the accuracy of the number: no stars is most accurate, five stars is least accurate)

42 MAJOR COUNTRIES RANKED BY SMARTPHONE PENETRATION RATES

So here are the 42 countries, ranked in order of their smartphone penetration rate percentage, per capita. You also see the ranking, the name of the country, the national population rate, the national mobile phone subscriber count, and the migration rate of mobile subcribers to smartphones; and finally the rate of smartphone penetration per capita.

Rank . Country . . . . . Population . . Subs . Sm'phones . Migr.Rt . . Per Capita

1 . . . . Singapore . . . . . . . . .   4.9 . . .   8.1 . . .   4.4 . . . . 54% . . . . 90%
2 . . . . Hong Kong ***  . . . . .   8.0 . . . 14.0 . . .   4.9 . . . . 35% . . . . 61%
3 . . . . Sweden . . . . . . . . . .    9.3 . . . 13.6 . . .    4.8 . . . . 35% . . . . 52%
4 . . . . Australia  . . . . . . . . .  21.6 . . . 29.8 . . . 10.2 . . . . 34% . . . . 47%
5 . . . . Spain  . . . . . . . . . . .  45.5 . . . 58.9 . . . 20.8 . . . . 35% . . . . 46%
tie 6 . . Denmark *  . . . . . . .    5.5  . . .  7.6 . . .   2.4 . . . . 32% . . . . 44%
tie 6 . . Israel ***  . . . . . . . .    7.0 . . . 11.0 . . .   3.1 . . . . 28% . . . . 44%
tie 8 . . Finland *  . . . . . . . .    5.4 . . .   9.6 . . .   2.3 . . . . 24% . . . . 43%
tie 8 . . Norway *  . . . . . . . .    4.9 . . .   6.2 . . .    2.1 . . . . 34% . . . . 43%
10 . . . New Zealand ** . . . .    4.3 . . .   5.5 . . .   1.8 . . . . 33% . . . . 42%

11 . . . UK . . . . . . . . . . . . .   62.1 . . . 82.4 . . . 25.0 . . . . 30% . . . . 40%
tie 12 . Italy  . . . . . . . . . . . .  60.2 . . . 87.8 . . . 22.8 . . . . 26% . . . . 38%
tie 12 . Netherlands  . . . . . .  16.7 . . . 19.7 . . .   6.3 . . . . 32% . . . . 38%
tie 14 . Austria  . . . . . . . . .    8.4 . . . 13.0 . . .   3.0 . . . . 23% . . . . 36%
tie 14 . Taiwan ***  . . . . . . .  23.0 . . . 31.0 . . .   8.2 . . . . 26% . . . . 36%
tie 16 . Greece ** . . . . . . . .  11.2 . . . 15.6 . . .   3.9 . . . . 25% . . . . 35%
tie 16 . Ireland ** . . . . . . . .    4.6 . . .   5.6 . . .   1.6 . . . . 29% . . . . 35%
tie 16 . Portugal ** . . . . . . .  10.7 . . . 17.0 . . .   3.7 . . . . 22% . . . . 35%
tie 16 . USA . . . . . . . . . . . 319.1 . . 319.4 . . 111.8 . . . . 35% . . . . 35%
20 . . . South Korea ***** . . . 48.6 . . . 54.0 . . . 16.4 . . . . 30% . . . . 34%

tie 21 . Canada ** . . . . . . . .  34.1 . . . 26.5 . . . 10.4 . . . . 39% . . . . 30%
tie 21 . Switzerland * . . . . .     7.6 . . .   9.7 . . .   2.3 . . . . 24% . . . . 30%
tie 21 . France  . . . . . . . . .   62.8 . . . 66.0 . . . 18.8 . . . . 28% . . . . 30%
tie 24 . Germany . . . . . . . .   82.0 . . 107.7 . . . 23.0 . . . . 21% . . . . 28%
tie 24 . Belgium* . . . . . . . .   10.7 . . . 12.8 . . .    3.0 . . . . 23% . . . . 28%
tie 26 . Poland **  . . . . . . .   38.0 . . . 49.2 . . .   7.1 . . . . 14% . . . . 19%
tie 26 . Malaysia ** . . . . . .   28.1 . . . 36.6 . . .   5.2 . . . . 14% . . . . 19%
28 . . . Russia **  . . . . . . .  140.0 . . 234.4 . . . 25.0 . . . . 11% . . . . 18%
29 . . . South Africa  . . . . .   50.6 . . . 58.8 . . .   8.7 . . . . 15% . . . . 17%
tie 30 . Czech Rep ** . . . .   10.4 . . . 14.2 . . .    1.7 . . . . 12% . . . . 16%
tie 30 . Hungary ** . . . . . .   10.0 . . . 11.4 . . .   1.6 . . . . 14% . . . . 16%

32 . . . Thailand **  . . . . . .   68.3 . . . 78.3 . . . 10.0 . . . . 13% . . . . 15%
tie 33 . Japan ***** . . . . . . 126.9 . . 126.8 . . . 18.1 . . . . 14% . . . . 14%
tie 33 . Brazil ** . . . . . . . . 197.7 . . 229.5 . . . 28.0 . . . . 12% . . . . 14%
tie 33 . Romania **  . . . . .    21.1 . . . 31.0 . . .   2.9 . . . .   9% . . . . 14%
36 . . . Turkey . . . . . . . . .    76.0 . . . 66.3 . . .   8.3 . . . . 13% . . . . 11%
37 . . . Ukraine **  . . . . . .    45.0 . . . 52.1 . . .   4.5 . . . .   9% . . . . 10%
tie 38 . Indonesia **** . . . . 229.0 . . 212.0 . . . 18.1 . . . .   9% . . . .   8%
tie 38 . Mexico ** . . . . . . . 111.1 . . . 99.3 . . .   8.7 . . . .   9% . . . .   8%
40 . . . Slovakia ** . . . . . . .    5.4 . . .   6.5 . . .   0.4 . . . .   6% . . . .   7%

41 . . . China ** . . . . . . . . 1360.0 . . 961.3 . . . 77.1 . . . .   8% . . . .   6%
42 . . . India **  . . . . . . . . 1220.0 . . 973.0 . . . 33.2 . . . .   3% . . . .   3%

 (no star) average of both studies (best number)
 * using surrogate data for Netsize, then averaged (second best number)
 ** using only Netsize/Informa data
 *** only using Google/Ipsos data
 **** Indonesia: using only half of rate from Google/Ipsos (because surveyed only city penetration)
 ***** Japan and S Korea: These numbers are NOT indicative of how advanced phones are in those countries, while technically are reasonably accurate measures of 'only smartphones'

Source for above: TomiAhonen Consulting Analysis December 2011, based on raw data from Google/Ipsos, the Netsize Guide/Informa, and TomiAhonen Almanac 2011 reported data. You may quote the above table and any data from it, redesign the data, reorganize it and set it in any graphical form including use in Infographics and White Papers, as long as you list as the source: TomiAhonen Consulting 2011. If you mention the data, please include a link to this blog.

While 2009 was the year when Hong Kong new sales of smartphones passed featurephones, 2010 that happened in Western Europe and in Q1 of 2011, that milestone passed in the USA, we now have three countries where smartphone total installed base is also above 50% of the total population - Singapore, Hong Kong and Sweden - countries that tend to populate the top of most mobile related statistics obviously.

Perhaps surprisingly strong is Spain, and perhaps surprisingly not in the top ten are Italy, Taiwan and Austria, usually top 10 type of mobile countries, but each of those is already within the top 14.

Japan and South Korea are listed far below their 'usual' rankings, but remember, both Japan and South Korea have strong domestic phone maker industries, that use domestic standards and offer very advanced phones, which have not really 'needed' to be smartphones, because both countries have very modern ecosystems where content providers get returned typically about 90% out of every dollar out of Japanese mobile internet services and in South Korea between 80% and 85%; compared to only 70% on the iPhone App Store. Standard 'featurephones' in Japan and South Korea have far more advanced features as standard than most Western 'smartphones' such as NFC, digital TV tuners, up to 16 megapixel cameras, HDMI outputs, and they often are waterproof for shower and bath use. More advanced phones in those markets have features such as in-built pico projectors, 'glassless' 3D displays, 3D stereoscopic cameras, WiFi routers, etc. So a measure of smartphone penetration rates per-capita for Japan and South Korea is not indicative of how advanced their domestic phone markets are. Most industry analysts rate both Japan and South Korea phone markets ahead of those in Singapore, Hong Kong and Sweden.

And yes, in Singapore there is a smartphone for 90% of the total population alive, here in Hong Kong there are smartphones for 61% of the population. A total of 11 countries have passed 40% per-capita adoption rate of smartphones ie in alphabetical order: Australia, Denmark, Finland, Hong Kong, Israel, New Zealand, Norway, Singapore, Spain, Sweden and the UK. These countries are all mature enough to do mass-market smartphone apps and will all proceed to 100% per-capita penetration rate of smartphones within a few years from now. The rest of the world will follow according to that table, but clearly in the rest of the world, you are better off with mobile web and other simpler mobile services than apps.

BUT WE HAVE MORE

Hey, we have even more data we can now calculate. First, the above countries cover 72% of the mobile phone subscriptions on the planet. And it includes all of the larger markets in terms of volumes of smartphones sold. So we can calculate out of the total 575.6 million smartphones and then take reasonable estimates for the remaining nations - like say using the average of Brazil and Mexico to estimate the smartphone penetration percent for the rest of Latin America, etc. And we find the world has... 745 million smartphones in use (as smartphones). This is a very solid number.

Note, that there also are smartphones used as non-smartphones, ie second hand phones mostly in Africa and the poorer parts of Asia and the rest of the Emerging World markets. I estimate that at 175 million more used handsets which technically are smartphones - and could perhaps be used that way in the future, but are not new smartphones with data plans in use today. Those are obviously 90% Nokia branded Symbian phones as hand-me-downs from the UAE and Western Europe etc.

But yes, the world has 745 million smartphones in use today in a way we all know smartphones, so excluding Japanese superphones that may have Symbian OS but are not technically open for user-installed apps (and thus are not classified as smartphones) or are not second-hand smartphones that usually are not on data-plans and not used for apps or web browsing etc. That means also, that we know the migration rates. Out of all mobile phone subscriptions (5.9 Billion) today 13% already own a smartphone. And of actual handsets-in-use (remembering some have many prepaid accounts but may use only one phone and switch the SIM cards to optimize telecoms costs) which my consultancy estimates at 4.6 Billion total handsets in use at end-of-year 2011, that means 16% of all phones in use are actually smartphones.

REPLACEMENT CYCLE IS.. 11.5 MONTHS !

And then we can calculate the average replacement cycle.. The full smartphone population is less than 23 months old (complete replacement of total smartphone installed base). Thus the average replacement cycle of smartphones today is.. 11.5 months! Yes, the average smartphone owner replaces the smartphone annually. Compare that with the average replacement cycle for all mobile phones (smartphones and dumbphones) which is about 17 months, or just under a year-and-a-half. Obviously it means we have tons of very recent smartphones cluttering our closets and falling to waste. Why not donate yours to charity and for example used in Africa as a first phone? But back to our numbers. We know the replacement cycle and.. that also means.. that we can calculate:

MARKET SHARES OF INSTALLED BASE OF SMARTPHONES

Wow, this is so cool. We now have reasonably accurate total number and replacement rate, and we know very well what phone models and what OS platforms were sold in that period, so we can do accurate market shares by smartphone brand - and probably of more interest to my readers - by smartphone OS platform too. Note, this kind of info has previously been almost impossible to find and reports like Admob etc have been used as proxy where they have had totally distorted views of the existing smartphone installed base. Note, this analysis now is calculating the last 23 months back from Q3 of 2011, ie latest available data, the global installed base of total (new, not second-hand) smartphone base:

Brand . . Installed Base . . Market Share
Nokia . . . . . . . 168 M . . . 26%
Apple . . . . . . . 113 M . . . 17%
RIM . . . . . . . .   93 M . . . 14%
Samsung  . . . .   77 M . . . 12%
HTC  . . . . . . .    62 M . . . 10%
Motorola  . . . .   28 M . . .   4%
SonyEricsson .   26 M . . .   4%
LG . . . . . . . . .   24 M . . .   4%
Others  . . . . . .   57 M . . . 10%
Total . . . . . . . . 649 M

Source: TomiAhonen Consulting December 2011

(none of the others reach above 2%). Please note, that the earlier number of 745 million reflects the installed base at the end of 2011, ie after Q4 sales. The current market shares by installed base, are based on the latest available info, ie up to Q3 of 2011, so we are counting the November and December sales of 2009 which were far smaller than what we expect now for this Christmas Quarter. That is why this total is not 745 million, but rather 649 million.

And here are the numbers for the operating systems:

Android . . . . . . . . . 190 M . . . 31%
Symbian  . . . . . . . . 190 M . . . 31%
iOS . . . . . . . . . . . . 114 M . . . 17%
Blackberry . . . . . . .  93 M . . . 14%
Windows Mobile  . .  17 M . . .   3%
bada . . . . . . . . . . .    8 M . . .   1%
Windows Phone  . .    5 M . . .   1%
Others . . . . . . . . .   33 M . . .   5%
Total . . . . . . . . . . . 649 M

Source: TomiAhonen Consulting December 2011
 
(None of the others reach 1%) First, for those who are not regular readers of this blog - that is counted by smartphones only, so understand, I am explicitly excluding any tablets and other gadgets that use those operating systems as well, including Samsung's Galaxy Tabs and Apple's iPads and iPod Touch's etc. That is strictly smartphone OS market shares.

Very interesting. Even eleven months after Nokia CEO killed Symbian as a 'burning platform' it is still tied for the world's most prevalent smartphone OS (arguably still called the first ecosystem); and similarly eleven months after he picked Windows Phone as the new OS as the supposed 'third ecosystem' we find that at BEST, the Windows Phone OS is the seventh ecosystem, totally dwarfed even by its incompatible older Windows Mobile OS haha..

And as the new sales now are so much more than unit sales of smartphones used to be just two years ago, the current market leaders like Apple's iPhone have also now passed the installed base of what used to have the comfort of a large installed base built over years - like Blackberry.

PS remember if you want to have all the data about the mobile phone handset market, my 2010 TomiAhonen Phone Book covers all the data to the end of 2010 over over 90 tables and charts. I will eventually be releasing a new edition of that statistical volume around summer or autumn 2012. If you need to know how many cameraphones are out there, or the market shares of new handset sales by year, or views of handset installed bases regionally, take a look at TomiAhonen Phone Book 2010.

How Bad Will Nokia Q4 Be in Smartphones? Worse Than You Thought

Lets start today with Nokia and smartphone market shares for Q4 now that the first Microsoft Lumia phones are selling in some countries. I was one of the first to offer quarterly forecasts for Nokia smartphone market share performance this year, right after new CEO Stephen Elop announced his Microsoft strategy on February 11, 2011. This blog article will give you a preview of roughly what to expect out of Nokia smartphone performance in Q4 of this year, the Christmas period.

When I wrote that long blog where I forecasted catastrophic crash of Nokia market share this year - and many experts said that I was being too harsh on Nokia - I also wrote that it was my 'best case' ie most optimistic scenario. I was proven wrong - the reality did turn significantly worse than even I was able to forecast at the time. As that February forecast was my 'optimistic' scenario, and we had disasterous Nokia results out of Q2, I did an update of my numbers which we can now call my 'pessimistic' scenario. What turns out - is that actual Nokia Q3 performance was almost perfectly the mathematical average of those two forecasts. See how it went for Q3.

Original (Optimistic) Forecast:

Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q3 . . . . . . . 16% . . . . . . . . . 21.0M . . . . . 126 . . . . . Euro 2.6B Euro

Revised (Pessimistic) Forecast:

Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q3 . . . . . . . 11% . . . . . . . . . 13.0M . . . . . 138 . . . . . Euro 1.8B Euro

Actual Nokia Performance

Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q3 . . . . . . . 14% . . . . . . . . . 16.8M . . . . . 131 . . . . . Euro 2.2B Euro

Mathematical average of my optimistic and pessimistic forecast:

Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q3 . . . . . . . 13.5% .  . . . . . . 17.0M . . . . . 132 . . . . . Euro 2.2B Euro

Wow. That is not bad haha.. The average is so near, it could be used for actual management of the company haha, in terms of paying sales bonuses, approving budgets to hire staff, etc...  (and well, I tend to know this industry pretty well haha)

So. We don't need to make any corrections now for Q4. We can see that if we use the two forecasts, my pessimistic and my optimistic views, and calculate their mathematical average, we get a reasonably good short-term forecast one quarter ahead. So what do we get for Nokia smartphones in Q4?

My Optimistic (original February) forecast
Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q4 . . . . . . . 12% . . . . . . . . . 17.0M . . . . . 116 . . . . . Euro 2.0B Euro

My Pessimistic (updated) forecast:
Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q4 . . . . . . . 7% . . . . . . . . . . 11.0M . . . . . 134 . . . . . Euro 1.5B Euro

Mathematical Average and thus likely Nokia Q4 actual performance forecast:
Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q4 . . . . . . . 10% . . . . . . . . . 14.0M . . . . . 125 . . . . . Euro 1.8B Euro

That is what the Elop Effect caused for Nokia in just over ten months. Nokia took a 29% market share and voluntarily destroyed it, and will end this year with 10% market share (all Symbian smartphones plus all Windows Phone 7 based smartphones plus even all MeeGo based N9 smartphones - combined!). This is by a wide margin the biggest destruction of a world-leading market share not just in mobile phones or telecoms or tech - in any industry ever! The unit sales have been literally halved in a year when the industry grew by far more than half. To hold onto what little it can, the Nokia average sales price (ASP) has fallen dramatically and Nokia's smartphone unit sales revenues per quarter have crashed to less than half they were at the start of the year. Obviously as I predicted, not just Nokia's smartphone unit went from making huge profits to making losses, but even all of Nokia was plunged into loss-making and as I predicted, the dumbphone unit would be the only (slightly) bright spot left for Nokia. It is, as I wrote on February 15:

Nokia will change to become only be a low-cost, low-brand provider, somewhat like the K-Mart of handsets. Nokia, the Easyjet of smartphones. Yes, Nokia will probably still be the world's biggest handset maker at the end of this year, but its quite possible Nokia will no longer even be the biggest smartphone maker.

I AM A NOKIA FAN (while not fan of new CEO Elop and his management style)

I love Nokia. I come from Finland, I have always had at least one Nokia branded phone in one of my pockets, often both of my phones have carried the Nokia brand. I am an ex Nokia executive and Nokia was so good to me, they made my first book an 'official' Nokia book, sold on the Nokia website. They have also kindly been a reference customer of mine as I became an independent consultant, what was now ten years ago. (PS for that nonsense going somewhere on the web that I was 'disgruntled' or 'fired' haha, in that case Nokia would never have used me in public to represent them or do events for them etc as they have for almost a decade).

I weep inside when I read that above prediction from February, and find it all came true. As we know, not just Apple has overtaken Nokia as the world's biggest smartphone maker in Q2, now in Q3, Samsung leapfrogged both and became the biggest smartphone maker and relegated Nokia to third place. Just before Elop announced his Microsoft strategy still in February of this year, Nokia was bigger than Apple and Samsung combined in smartphones. We have witnessed the world record in self-destruction of a global and market-leading brand. As I said from the start, this will be the standard case-study for MBAs of the future to study on how NOT to run a company.

Lets be clear, there are many who will say 'but Tomi, Nokia was in trouble before this.' Yes. Nokia was so much in trouble that yes, in the biggest economic crisis of our lifetimes, where all other full-portfolio mobile phone manufacturs like Motorola, Samsung, LG and SonyEricsson (by full-portfolio I mean obviously those handset makers who make both premium smartphones and lower-cost 'dumbphones' ie its not appropriate to compare a full-portfolio maker like Nokia to a pure smartphone maker like Apple or HTC or RIM, just as it would not be the right comparison of Toyota vs Ferrari or Porsche. Toyota's primary rivals are Ford and Volkswagen etc, and Nokia's primary competitors are Samsung, LG etc).

But yes, among full-portfolio handset manufacturers - all of the rest of them reported losses in their handset units at some point - only Nokia reported solid profits in its handset unit in every single quarter up to when Elop took over. Nokia which invented the smartphone and thus started at 100% was of course seeing a decline in its market share, that is inevitable in any competive situation as Apple now is witnessing with tablet PCs for example. But yes, Nokia did not perform perfectly through the troubled times of the economic downturn - when many companies went bankrupt (Shearson-Lehman) or needed government bail-outs (General Motors), Nokia corporation reported profits in every quarter bar one, when its networks unit pushed Nokia briefly into losses - even then the handsets unit was very healthy. Yes. Nokia's then-CEO Olli-Pekka Kallasvuo (OPK) did witness a dramatic loss of Nokia share price, roughly losing half of its value, over a 3 year period. And he was fired, and replaced by new CEO Stephen Elop who came from Microsoft.

WHEN YOU EXCHANGE SUCCESS FOR FAILURE, JUST CALL IT ELOP

In his first five months, executing Nokia's old strategy, Elop witnessed a growth in smartphone sales (yes, growth!) and an increase in its ASP (so the growth was not phony achieved by price cuts) and an increase in Nokia smartphone unit profitability (which means the increase in sales was not achieved by marketing gimmicks either). Elop had a hit phone in the N8 - a phone voted for example as the best phone in its class for the year 2010 in Britain - and the best touch-screen version of Symbian ever made. He saw his flagship business unit - the future of phones is smartphones - grow unit sales by 7% (yes, this is true! check the facts!) in just one quarter, and increase his average sales price by a Nokia-record of.. 14% ! (wow!) and increase the profit contribution of his smartphone unit by a staggering Nokia record of ... 64% !!!!

This was the proverbial goose that lays the golden eggs. He had growth in sales, increase in average prices and most importantly a record-setting jump in that unit's profitability. Where the smartphones accounted for a quarter of Nokia's handset unit sales, and a third of Nokia Corporation total revenues (remembering that the networks unit delivers also a third of Nokia revenues), the smartphones unit alone delivered half of Nokia's total profits. This was the goose that lays the golden eggs.

The Nokia owners rewarded Elop's early stewardship of Nokia by increasing Nokia share price by 11% since he took over, up to February 10, 2011. By any measures, Mr Elop was proving to be a success at the helm of Nokia.

Then he imploded. He initiated the Elop Effect (both announcing the obsolescence of his existing products like the Osborne Effect, and compounded his mistake by calling his own products rubbish like the Ratner Effect).

This is what Elop achieved. He took 7% unit sales growth per quarter (compounded it would be 23% over three quarters) - and instead he gives us a loss of 52% in unit sales. He took a growth in ASP of 14% per quarter (compounded would be 48% over three quarters) and instead gives us a decline of 14%. He took quarterly sales revenues of 4.3 Billion Euros (6 Billion US dollars) and instead he now gives us sales revenues of 1.8 Billion Euros for Q4 (2.5 Billion US dollars) so he has already cost Nokia 3.5 Billion dollars of revenues per quarter! (yeah, Mr Most-Incompetent-CEO-Ever is costing Nokia now 28 Billion dollars of revenues per year!) How big is that? In the current Fortune 500 Global issue, those abandoned revenues alone would have produced a company ranked as.. number 343 among the biggest global giants! Thats the size of Ericsson (globally) what Elop has destroyed already! Thats more than Time-Warner or Oracle or Lenovo or Alcatel-Lucent. For its 2010 revenues, 28 Billion dollars is slightly less than Google! Imagine your CEO destroying so much of your company, it wiped out the equivalent of Google!

And the biggest crime is profits. He exchanged a growing reliable profits unit which earned 548 million Euros (767 million US dollars) of profits per quarter ie 2.2 Billion Euros of profits per year (3.1 Billion US dollars of profits) and replaces it with ... a LOSS of 130 million Euro (182 million US dollars). That is of course an annual level of a loss of 520 million Euros or 730 million US dollars. The total transition means he's personally caused damage to Nokia shareowners worth 2.9 Billion dollars bottom-line profit already! (just in smartphones, I am not even talking of the other damage in other units).

How is this CEO allowed to remain in office? The share price? When the Nokia share price lost half in a three-year period, previous CEO, OPK, was fired. Now from its peak in February, right after Elop announced his mad Microsoft strategy, the Nokia share price has been in free-fall. It is now under 4 Euros and has lost half of its value in ten months! HP's CEO Apotheker was ruining his company and the Board promptly fired him. Why is Elop still standing? Is Nokia's Board asleep at the wheel?

NO SILVER LINING FROM MICROSOFT PHONES..

If there was some silver lining in this, then perhaps he should be allowed to remain in charge. But there isn't. Nokia has a legitimate hit phone, called the N9, running on Nokia's own new OS called MeeGo, which is highly desired and receiving global praise. The CEO refuses to sell it in most of Nokia's major markets.

What he instead is pushing is - due to his Microsoft legacy no doubt - the flawed Nokia Lumia 800 phone that runs the severely incomplete Microsoft Windows Phone 7 OS. The Lumia 800 is the only Nokia smartphone that they will sell this year. It is only available in a few countries and not on all networks there. The sales reception has been mixed, the pundit reviews mixed and the Lumia 800 is far from the saviour that Nokia hoped for. Most of all, because it is not sold in all Nokia markets and by all Nokia carriers/networks, it cannot hope to match the previous Nokia record for a new phone launch, the N8 from a year ago. (Please please do not be deluded about the mad Microsoft strategy. It will NOT rescue Nokia. A year from now, Nokia and Microsoft based smartphones will have something like 8% market share. Read this to understand why that is what we now face)

So be prepared for these numbers when Nokia reports in late January. Expect total Nokia smartphone unit sales to be very close to these:

Mathematical Average and thus likely Nokia Q4 actual performance forecast:
Quarter . . . Market Share . . Unit Sales . . ASP . . . . Total Revenues
Q4 . . . . . . 10% . . . . . . . . . 14.0M . . . . . 125 . . . . . Euro 1.8B Euro

Note also - if Nokia market share is this low, Nokia will fall further, definitely below HTC to fourth place, and might even fall below RIM/Blackberry to fifth ranking in smartphones. A year ago Nokia towered over all others. As RIM itself is also struggling, I cannot be sure if that happens, but you heard it here first, that Nokia will now during Q4 fall further from third place to fourth place at least, among world's biggest smartphone makers.

Elop has mismanaged his company in every turn he has had, not just in the mad Microsoft strategy but in refusing to sell his legitimate hit product, the N9, and even more criminally, refusing even to sell - while he is manufacturing it in small numbers - the sister product, the N950 also running MeeGo. I have calculated that if only those two phones were sold globally and only on normal Nokia channels - if Nokia was run by any sane CEO - Nokia would now be reporting a modest profit in its smartphones unit, not a huge loss. This is incompetence in management and sheer pig-headedness. Since the N9 and N950 are true flagship phones sold at far higher price points than the Lumia800, they would not even cut into Lumia sales, but because of the outwardly family resemblance of the N9 and the Lumia800, at least Nokia would gain a flagship product effect to have the N9 help Lumia800 sales. He is incompetent! The Microsoft Muppet.

Please understand what I say, and what I am not saying. I am not claiming Nokia was not in need of true changes, I wrote how to fix Nokia on this blog (the problems were in execution, not on the platform). I am not claiming that Nokia should have stayed with Symbian - I was writing long before there was a guy named Elop at Nokia, that Nokia was indeed on the right path to shift away from Symbian, to its own new OS called MeeGo - which we now can see is indeed the best OS out there, this side of the iOS on the iPhone (and some have even called the N9 running MeeGo a better phone than the iPhone! That is rare praise indeed).

So when Q4 results come in, we will hear that Nokia smartphone market share crashed further to about 10%, and Nokia's ranking has fallen to fourth place in the best case, or as bad as fifth place. The Nokia unit sales are literally down to half they were only a year ago - this while the industry had its best year of hypergrowth ever - and Nokia average sales prices hit a record low. The total revenues of the smartphone unit will be down to 1.8 Billion Euros generating only about a fifth of Nokia's total sales. And profits? The smartphone unit will continue to be in the red and all of Nokia will struggle to achieve zero profitability for the end of the year Christmas quarter.

That is what Nokia smartphone market share looks like for this current quarter. I will return with other thoughts about how the Nokia strategy is imploding in other ways, from sales management to brand to loyalty to ecosystem. But lets post this blog first.