Honestly, I do NOT want to make this blog only about Nokia and its madman CEO Stephen Elop. But the story took such a bizarre twist today, I HAVE to comment on it.
Remember the Star Trek (original series) episode where Captain Kirk returned to the Starship Enterprise on the transporter, to find himself in a parallel universe where his staff is evil and sadistic, Spock had a beard etc. The episode was called Mirror Mirror. Anyway, Kirk had to think real fast to adjust his behavior, so that his evil crew in that alternate universe did not notice that they had accidentally received a 'kind' Captain Kirk rather than their evil one..
That is the kind of utter total twisted sense of reality we now face. The definition of delusion says that the person will look at overwhelming facts to the contrary, and still hold onto a false image of reality. So I ask you, our readers, is this not delusion in Nokia CEO Stephen Elop? He was interviewed in South Africa by the daily financial newspaper, Business Day. And Elop said that Nokia was no longer on a burning platform.
Because Elop has openly admitted to authoring the February 9 Burning Platforms memo - the costliest management memo of all time (I just calculated last week that it has cost Nokia in just one year, 3.9 Billion dollars of profits lost, directly attributable to the memo) - and he now says Nokia is not in the Burning Platforms memo situation. Lets compare the two and you tell me, is this evil Kirk or gentle Kirk. Who is delusional.
On November 9, 2011, one year ago, a few days after Nokia's latest quarterly results were released, we found out the following: Nokia's smartphone unit sales had grown 48% in the previous year. Nokia sold literally more than one out of every 3 smartphones on the planet. Nokia's total smartphone sales were more than twice as big as its nearest rival (RIM) and Nokia also sold well more than twice as many smartphones as Apple sold iPhones. Nokia corporation revenues and profits had grown, and the driver of Nokia revenue and profit growth was the smartphones unit. Nokia had by far the biggest market share in the world of smartphones, selling the most smartphones on five out of the six inhabited continents: Europe, Asia, Africa, Oceania and Latin America - only in North America was Nokia not the bestselling smartphone. Nokia was so dominant in China, the world's biggest smartphone market country, that Nokia's market share was 76% and Nokia was by far the most desirable smartphone brand.
Elop lectures us about the future of the smartphone wars being won by 'ecosystems' rather than handsets alone. Nokia's ecosystem was by far the biggest by installed base, by developers, by new sales of handsets, by carriers/operators covered, by language support etc. By downloads, Nokia's Ovi store was second, to Apple's iPhone App Store but closing the gap. Nokia's migration from dumbphones to smartphones was well ahead of the global level at 25% vs 22%. Those smartphones that accounted for 25% of Nokia's total handset sales, generated 34% of Nokia's revenues and nearly half of Nokia's profits. In the first five months that Elop had been in charge, the Nokia share price had gained 11% - a very strong growth level well ahead of the global economy or the telecoms market overall for the same period.
And into that context, Nokia had just in Q4 of 2010 launched a new operating system version, called S^3 for Symbian, which had set a Nokia record for most new sales in the first quarter, of 4 million units, led by the N8, a flagship touch screen smartphone that won numerous awards as the best phone of the year.
This is what Nokia CEO Stephen Elop calls a total Nokia corporate disaster so bad, he says it is a 'Burning Platform'
Now today, one year later. Nokia has released its latest quarterly data which tell us that Nokia overall smartphone sales have collapsed, they fell 31% from this time a year ago - while the global smartphone industry grew by 63%. Nokia's market share has crashed from 33% to 12%. Where just a year ago Nokia smartphones alone were more than twice as big in unit sales as all iPhones, now Apple's iPhones are almost exactly twice as big as all of Nokia's smartphones. Nokia has not just fallen behind Apple, it has also fallen behind Samsung in smartphones. Nokia corporation now generates a loss, which is driven by the biggest loss-performing unit of Nokia... its smartphones unit! This while Apple, Samsung etc all find smartphones the most lucrative part of their corporations - as Nokia did itself just a year ago. The smartphone unit now drives Nokia's losses! Nokia has retreated now from market leadership positions and is no longer the biggest on four out of the six continents, having lost the leadership in Europe, Latin America and Oceania (as well as North America) and only leading in Asia and Africa. In China Nokia's market share is crashing, with only 18% of Chinese now even wanting to buy a Nokia branded smartphone.
In ecosystems Nokia has terminated the migration path for its developers - which angered the developers. Nokia has sold its advertising unit. Nokia broke its promise of another 150 million more Symbian devices. Nokia has rebranded (or unbranded) its app store. Nokia has switched from the biggest ecosystem that it controlled, which was based on open principles, for the smallest of 8 mobile ecosystems, Microsoft's disasterous Windows Phone, which is shrinking in size, where Nokia is slave to Microsoft, has to pay Microsoft a license, and a system which itself is not based on open principles. Where Nokia's own ecosystem was growing by 48% a year ago, the Microsoft Windows Phone ecosystem has been shrinking the past year, and was last measured at less than 1% in reach. Nokia's migration from dumbphones to smartphones has been reversed, now Nokia lags the industry which is at the point of 33% of all new phones sold being smartphones, but Nokia has regressed where only 17% of its new phones are smartphones. The smartphones account for a minor fraction of Nokia revenues anymore and yes, generated a huge loss to the corporation. In the past 12 months since the Burning Platforms memo, Nokia's share price has fallen by 55%.
In the past quarter, Nokia launched its new Lumia smartphones on the new Windows Phone operating system in the most expensive and massive marketing launch of any new smartphones ever. Using all that Nokia marketing could do, Nokia then had hundreds of millions of dollars of Microsoft's marketing money to boost that - including giving away free Xbox 360 gaming consoles for those who bought Lumia smatphones. Yet the new flagship Lumia 800 and its sibling the Lumia 710 did not sell more than 600,000 units in Q4 (passing 1 million sales when counting the added sales of January). The Lumia launch is probably the weakest Nokia flagship launch in history and the Lumia 800 did not win any significant awards - it is so despised, some like the UK newspaper the Guardian who used it are already returning it and others like the Germany newsmagazine Der Stern suggest Nokia fans should drive to another country to buy another Nokia new smartphone called the N9 running the MeeGo operating system - that is not even sold in Germany, rather than this lousy Lumia on the failing Windows Phone - that is how disliked Lumia is. Meanwhile analysts like Morgan Stanley project further crash of Nokia market share even with Lumia to fall from 12% today to 8% a year from now. All ratings agencies have repeatedly downgraded Nokia and its prospects.
And this today, is Nokia's situation that CEO Stephen Elop says is 'not a burning platform' anymore. That Nokia's future is 'secure'. And yes, after Samsung sold nearly twice as many smartphones - very profitably - than Nokia in Q4 - and is now poised to pass Nokia as the world's biggest overall handset maker this Spring - Nokia's CEO says he is not losing sleep over Samsung.
Is it just me? Is this not an alternate universe? If your product is utterly dominating its rivals, growing massively, and making huge profits, that propel your company share price to jump - when ALL the numbers and trends are good - that is a platform on fire? But when your product is failing in the market place, dwarfed by your rivals, losing massively, making huge losses, that propels your share price to collapse - when literally on every measure the good has been reversed to bad - that is a platform today somehow suddenly 'not on fire'?
What planet is Elop on? (please read his interview of utter total denial in Business Day of South Africa) and if you want to read my analysis of the reality - yes the truth - behind the Burning Plaforms memo, my blog is here.
He is not just an incompetent CEO - he is looking at the facts, and making absolutely opposite conclusions to the reality. Elop is truly delusional. He is destroying Nokia due to his deliberate wanton disregard of the facts. Elop must be fired now!
Stephen Elop is not only delusional. He is incompetent.
Think about it: his first goal was to promote the "third ecosystem" -- Windows Phone. He bet the farm in this platform; if Windows Phone fails, Nokia fails.
Now, let's suppose that the Microsoft ecosystem thrives, and the market is split as follows: 1/3 iPhone, 1/3 Android, and 1/3 Windows.
This would be a dream coming true, right? Wrong!!!
Even in this rosy scenario, Nokia would split the Windows Phone share with other manufacturers -- because in his crazy strategy Elop invited other companies to abandon Android and adopt Windows Phone.
So, what would happen in this unlikely success of Windows Phone?
Nokia would have 1/3 of the Windows Phone market share; HTC, Samsung and others would have the other 2/3, plus everything they sold in the Android side.
Conclusion -- in the best scenario, Nokia would end with 1/9, or 11% of market share, which is well below it used to have.
That's a losing strategy -- except for Microsoft, that would jump from zero to 1/3.
Posted by: F. OO | February 13, 2012 at 09:48 PM
Elop's goal was to make a strategic shift. Having done that, he isn't about to go out and claim that he shouldn't have done it, and that they would have been better off staying the course.
Nokia has made their strategic bet, and their best course of action, from where they are today, is to stick with it. It is impossible to go back to Symbian/MeeGo. Intel, for one, has moved on and is courting Samsung. The Symbian talent is mostly gone. All a new CEO could do is decide between Windows Phone and Android.
Anyway, have you paid attention to the Windows on ARM announcements lately? I think there is a future for Windows 8 on tablets, and that was something that was sorely lacking from Nokia's previous strategy. Android so far has yet to take off (apart from the Kindle Fire). What this means is that even a new CEO (and I suspect that even if you were named CEO tomorrow) would likely stick with Windows Phone for the foreseeable future.
Posted by: KPOM | February 13, 2012 at 10:31 PM
Said it before and will say it again, Nokia's developer ecosystem wasn't the biggest. No way there were 400.000 developers working on Symbian and/or Maemo/MeeGo apps.
And Elop stating they are on the right track, what would you expect? Elop telling everybody things didn't work out and Tomi Ahonen should take over?
Elop is doing what everybody else would be and is doing, stating his interpretation of the situation again and again, until everybody is fed up and gone away to watch some new train wreck. One should never listen to those statements in the first place, it's all smoke and mirrors.
Posted by: Sander van der Wal | February 13, 2012 at 10:41 PM
Maybe,last year, Elop just saw the internal numbers, actual end user sales and reception of Symbian 3/N8. And those numbers indeed showed that it was a burning platform?
Nokia shipped 5 million Symbian 3 devices last in Q4 2010.Shipped. Not sold to end users. There is no public evidence that users bought those 5 million S^3 devices. Unless you have access to paid Analyst House reports. None of them said publicly that n8 and other S3 end user sales in Q4 were good. Not Gartner, not Strategy Analytics, not Canalys, not IDC. And there’is quite a few indirect signs of inventories piling up already, unhappy users, high return rates, etc;. Especially since N8 was shipping with a buggy pre-Anna version of Symbian then.
The big profits in Q4 2010 could have been a one quarter phenomenon, based on unsustainable shipments into the channel and previous Nokia carrier relationships. But with much lower end user sales. And Q1 drop in sales could be more about the market realities catching up, then a huge damage of Burning Platforms. After all, the old Symbian^1 smartphone sales were crashing in Q4 201 already. They sold something like 3 million less S^1 then they did in Q3. Cannibalization can not be a big factor,, given the price difference between S^1 and S^3 phones.
Also, market share loss in Q1 2011 was in line with losses in Q3 and Q4 2010. Nokia managed to grow Q4 numbers because market grew smth like 40% QoQ. When QoQ market growth stopped, and the inventories in the channel didn't move - there was nothing to propel unit volumes too. Hence Q1 drop.
You probably know about this better then me, having worked at Nokia and Elisa. Isn't there something like 4-6 week lead time in operator/wholesaler orders to OEMs? When the contracts for phone deliveries are signed and pretty hard to cancel? If that’s the case - orders for 2/3ds or, this being Chinese New Year quarter, even 3/4ths of the Q must have already been in, before Feb. 11th. And those Nokia customers who decided to cancel - had to go and find the replacements in few weeks, before the end of Q1. Which probably was an almost impossible task back then, given the demand and manufacturing capacities. So the amount of damage Feb. 11th could do in Q1 2011 should have been pretty limited?
Posted by: karlim | February 13, 2012 at 11:55 PM
It's too early. Nokia might yet do some good sales with its Windows phones. Let's see how the rest of 2012 does for them; it's only been around 2 or 3 months since the 800 was released in the UK. People I know who have them love them, so I think it's subjective. Personally I think Symbian wasn't moving forward quick enough (Belle should've been a 2010 OS) and neither was MeeGo, although I think some executives MUST be kicking themselves that they booted MeeGo out of Nokia HQ so quickly, and then saw just how popular and wonderful their N9 was, all over the world. The reviews of the N9 - even from the most chilly reviewers when it comes to Nokias, such as Engadget - were *glowing*. But they all said the same thing, 'what a shame Nokia killed it before it was even born'. Yes, what a shame. Because now we read things like "there's no Plan B" from Elop and others. Really? Man, you've got some balls. Everyone should have a Plan B, and MeeGo is one-hell-of-a Plan B. The N9 could've been Nokia's saviour, it's *that* good. But for Nokia's sake, let's hope the masses start to buy Windows phones, or Nokia could be back to making TVs before we know it!
Posted by: Stephens_Eloped | February 14, 2012 at 12:43 AM
Nokia will have huge problems selling phones in 2012, Andriod Ice Cream Sandwich phones are soon out with 720p and dual core processors with more functionality compared to 800x480 and single core WP phones. Nokia needs to lower the price to sell
What they need to do (to make some money) is to release a dual core MeeGo Harmattan Phone with 720p on all markets.
Posted by: Per | February 14, 2012 at 02:01 AM
It's time to move on and look ahead. There's no going back even if Nokia replaced Elop today with a new CEO.
Nokia has placed their bet that MSFT will not fail, and will be a consistent, battle-tested partner in the phone and tablet space. I'm not convinced yet that it was the right choice, but I do think it was a much better long-term choice than Android. Though Samsung is the dominant Android vendor, it's hedging its bets with Bada, Windows Phone, and Tizen, and its own ecosystem because of something it sees in Google's future ambitions.
It will take some more time to see how this plays out. Let us move on and focus on discerning and understanding new trends and success factors for the mobile industry. The industry has already changed and continues to change in fascinating ways.
Posted by: kevin | February 14, 2012 at 03:50 AM
@kevin
To move forward does not mean to forget. Such things should never be forgotten and it's good to be reminded of what bad management can do.
Posted by: dr zorg | February 14, 2012 at 07:08 AM
@Tomi
I think Elop only means that his platform has finally burned out. There's simply nothing else to burn :)
Posted by: dr zorg | February 14, 2012 at 07:09 AM
On the other hand, Nokia will soon be cheap enough for Microsoft to buy it and then Elop can go back to Microsoft as head of the Smartphone Unit. He's the one who is smart, as his Microsoft stock will go up, and we are the one who are dumb.
Posted by: Cayce Pollard | February 14, 2012 at 08:31 AM
Tomi, as I said in a previous post, THT Elop is NOT delusional. At all.
He is always speaking as a MS man working to ensure WP's success.
We all know that *** WP WAS THE BURNING PLATFORM. ***
After what he did at Nokia, WP is no longer a burning platform. He is right.
WP now stands the chance to grow to the top single digits.
Mission accomplished. And this is what he meant when speaking to the Southafrican newspaper.
Furthermore, THT Elop has also managed to give the following goodies to Microsoft:
Patents (see Mosaid), Maps (Navteq), smartphone know how, hardware brand (Nokia), carrier relationships (WW ex US),
former Ovi store audience, you name it. For free (payment was money Nokia had to spend in... WP Ads! Brilliant!).
Meanwhile, Nokia assets non core to WP are being divested, while Nokia is safely (for MS) morphed into a captive WP OEM.
As things are playing out, a fire sale of Nokia to MS might not even be necessary any longer.
Why should MS incorporate it (whith the associated risks), when all goals are being achieved while leaving Nokia independent?
When the transition to WP is completed, the likelihood of it being potentially acquired by someone else (hostile to MS) are minimal.
Plus, it might be perceived as too blatant an admission of the plot that has been carried out so far.
THT Elop's future in the MS ecosystem is as rosy as ever.
At the same time, what is happening to Nokia is no longer of any relevance.
Even if the usual trolls are mixing up what is better for Nokia and what is better for MS.
The market knows. That's why Nokia's shares are where they are... buoyed only by the hope of an imminent -yet now unlikely- buyout.
Nokia is now being priced as a low margin captive OEM.
Posted by: Earendil Star | February 14, 2012 at 09:14 AM
elop is a puppet, nothing more,
its scary how he cam benefit microsoft so much, while killing nokia, doenst nokia have board he have to reply too?
but i guess the board its a bunch troyans too.
bad for nokia windows phone never gotta take off. unless microsoft changes to a google like feature set.
Posted by: jo | February 14, 2012 at 10:45 AM
MS doesn't give a rat's bum about WP7 any more. They are all focused on Win8 for mobile now, something that is at least year off.
Nokia gave them an relief, saved face before investors and will be sacrificed. When Win8 arrives MS will happily embrace all Asian companies that failed on their Android tablet adventure and want to get back into market using MS Table+Phone convergence play. Nokia will be shown door.
Posted by: DS | February 14, 2012 at 12:46 PM
Cont. Why MS waited so long before introducing native API on WP7, something that not only technically disqualify it as a smartphone platform but eliminates all "digital interface to reality" category apps that are at the core of mobile apps paradigm shift?
1st. because they still leave door open for Intel, yes way more important partner form them than any of mobile companies in the longer term.
2nd. they simply ARE NOT READY. MS is not a magician and as usuall the have slept behind the wheel and now trying to find loosers who would take the damage. They've cheated 2 companies selling them their unfinished toy OS as a real contender. LG has almost died from it, Nokia is on a downward spiral.
Knowing the past any sane CEO caring about the company s/he manages wouldn't touch such a "partner" with a stick, nevermind betting the company future on it.
Posted by: DS | February 14, 2012 at 01:00 PM
You talk to much about Nokia. Who care´s about the old top dog. Tell more about the important guys like samsung and apple.
Posted by: Frank | February 14, 2012 at 01:34 PM
Whichever argument is thrown in, the result is always "If it wasn't for Elop....".
So if the ONLY real argument for downfall of Nokia is that Elop is madman sent by Microsoft to destroy Nokia on behalf of US carriers, regardless of other arguments thrown in, then that's sad.
There are dozens of excellent articles out there describing in detail Nokia's downfall. Here it seems that everything is based on "mythical Q4 2010"!
Yes Elop may be a case for MBA colleges around the world, but decisions Nokia's management took from 2005-pre Elop could be enough to make a decent phD thesis about mismanagement.
It wasn't Elop who brought down Nokia. It was more people like me. If after 10 or so years after being a loyal Nokia user you switch sides because company you are loyal to doesn't deliver (and deliver it didn't), then things are simple. They are even more simpler if millions of people did the same thing.
It was long before Feb 11th that people like me stopped buying Nokia. When Elop came to Nokia they were clinically dead. At least somebody had enough sanity and stopped playing the role of Norman Bates at Nokia HQ.
Posted by: michael | February 14, 2012 at 01:43 PM
@Dr Zorg:
I don't know what to add to your posts. S Elop is right, Nokia isn't a burning platform any more, just like BP's famous Deepwater Horizon platform, it was burning, but it isn't any more -> it's dead.
Maybe Eldar Murtazin is right, and Nokia won't survive year 2012 (Q1 2013 at max). That's sad; a new Samsung era began.
Posted by: vladkr | February 14, 2012 at 02:21 PM
Micheal, nice try, but a bit clumsy.
The issue is that ALL facts & figures are against your theory.
Fact: until Q4 2010 Nokia had been for years n 1 worldwide while growing in smartphone sales and being profitable (so supported by lots of people... unlike you).
Fact: since Q1 2011, well into THT Elop's tenure, it started a downfall unequalled by any other company in the sector.
If Nokia had performed like RIM, a slow decline, then your point could have had some merit (and it would have meant, in any case, that THT Elop would have been ineffective to turn the tide).
But what happened was that its CEO, THT Elop, stated in February 2011 that all its company's products, all those offered to that point (oops, those responsible for its n 1 place worldwide), were POS and had to be ditched for some other minuscule platform (oh, what a coincidence, the one produced by his "ex" boss Ballmer), which -by the way- would only become available on Compal phones (oh, yeah, just the sticker said "Nokia") after months.
Incidentally, the issue being discussed here is NOT if the previous managment did everything ok or not.
Everybody agrees that execution by OPK & Co. could have been better.
What is being discussed is if the CURRENT management is working for the best interest of Nokia or not.
Otherwise, let's blame the current Nokia predicament on Fredrik Idestam, born 1838. After all, had it not been for him, Nokia would not have existed at all and therefore would not be suffering today.
Posted by: Earendil Star | February 14, 2012 at 02:57 PM
It has just occurred to me that Elop's strategy was based on his myopic view of the smartphone market as not world based, but US based. Elop's a MS man so he views "the world" as the US. He moves to Nokia, cant understand why its not dominating in "the world" (read the US) and ignoring any semblance of business acumen proceeds to try and make Nokia a US player. He may also be driven by the fact that he wont stay at Nokia, and wants to please the market where he'll get his next job (the US). He simply cant see China, India, Russia, etc. He looks across the world and only see's the US market.
Either that or, A-He's completely incompetent, or B-Is on a deliberate mission to destroy Nokia.
The only explanations I can see for his behaviour. At any rate, Im betting the university where he got his business degree is quietly cringing in horror hoping nobody notices them.
Posted by: jack1059 | February 14, 2012 at 03:09 PM
@Earendil Star, in 2007, when Apple launched the iPhone, Apple and Nokia were worth about the same in market cap. By the time Elop came around, Nokia was in a slow but accelerating decline. Elop sped up the decline (partially intentionally, partially unintentionally) by announcing the abandonment of Symbian, but the old model left by OPK wasn't sustainable. They were "growing" sales, but only through fire sales at lower and lower margins. Elop didn't spend $8 billion to buy Navteq (which is maybe worth $1-2 billion right now - thank Google Maps Navigation for that). Elop didn't release the disastrous N97, or cause the seemingly endless delays to Symbian^3, Symbian^4, and Meego.
Elop's bet so far hasn't paid off, but few were doubting that by February 2011 they had to make a big risky bet one way or the other. They could have doubled down on Meego, chosen Android, or Windows Phone. Android actually would have been the least risky move, as evidenced by Samsung's rise (they were the main beneficiary of Nokia's fall).
Posted by: KPOM | February 14, 2012 at 03:27 PM