Paging Truth Police: One Last Time - the Reality of Nokia when CEO Elop Took Charge as CEO, and What Was Not Broken

There is a pervasive myth about Nokia that says Symbian was dead and Nokia dying in smartphones, when new CEO Stephen Elop took charge. Like any good myth, there are elements of truth that make the story so compelling. But this blog deals with facts in mobile, not wives' tales. Here is the absolute truth about Nokia when new CEO took charge and what he caused, once and for all. First, lets look at Nokia branded smartphone sales. Please look at this picture.


(Update May 4 2012 - there is now a lawsuit by shareholders in USA against Elop and Nokia. See end of this blog for details)


Here are the three biggest smartphone manufacturers of today, Apple, Nokia and Samsung, not necessarily in that order. Here are their quarterly sales for eight quarters from Q1 of 2009 to Q4 of 2010. Note the dotted line, that is when Elop took charge, just before Q3 of 2010 ended. Tell me which company is 'in trouble' in smartphones. Each of the three giant smartphone makers added about 2 million more smartphone unit sales from Q3 to Q4:



Source: Tomi Ahonen Consulting based on company data
This slide may be freely used and shared


I have taken public info as close to 'apples to apples' comparisons as possible, but unfortunately these three companies do not report exactly the same data. But yes, please consider: the 'Blue Company' grew smartphone revenues 22% in that period, grew average sales prices for smartphones up 14% from the quarter before, and the 'Blue Company' grew net profits in the smartphone unit up 65% from the period before.

Then consider 'Red Company' which grew revenues up 16% from the previous quarter. It grew average sales prices by 1% and the Red Company grew corporate net profits up 39%.

Finally consider the 'Green Company' which grew revenues up 19% from the previous quarter. Its Average Sales Price for all handsets was down by 2% and the profits in the handset unit were down by 23% from the quarter before.

Which of these three companies is 'in trouble' ???  All grew unit sales about the same level, after the big Christmas Quarter when usually after-Christmas sales are weak - all grew about 2 million more unit sales. All grew revenues strongly. All generated a big profit. Blue company also increased average sales price which for Red Company was flat and for Green company declined. Net profits exploded for Blue Company, gerw nicely for Red Company and fell for Green Company. But each generated a strong profit.

So? Which company is in trouble? Anyone? Which of these three is the magnificent Apple that dominates the world of smartphones, mobiles, profits and tech? Which of these is the dominating superpower Samsung? And which is the loser-company Nokia whose smartphones were undesirable and failing in the market?

Please look at those graphs and think, if you were given one of those three companies to run, which would you most love to run? For which of the three would you like to be CEO? All see growing sales, growing revenues, all generate a healthy profit. But Red is 50% bigger than Green. And Blue is bigger than Red and Green, combined. Who is strongest of these three?

I totally understand, from all the bullshit revisionist history written about how Symbian was dead and nobody wanted it, that you might think Nokia is the Green Company and Apple is the Blue Company. But the truth is - please feel free to read ALL the Quarterly Results from 2009 to 2010 - that the Blue Company is Nokia, the Red Company is Apple and the Green Company is Samsung. Yes. This is the situation, more than a quarter after Elop had taken control of Nokia.

The 'undesirable' Symbian based Nokia smartphones were growing sales from Q3 to Q4 - as they did in 7 of the past 8 quarters - and generated a profit once again, as they had in each of the past 8 quarters. Note, that 'dominating' Apple iPhone also had a declining quarter in sales in this period, as did the strongly surging Samsung, also for one quarter.

Nokia's Symbian based smartphones not only grew sales strongly - as strongly as Apple and almost as strongly as Samsung - Nokia did it while growing its ASP strongly (Samsung's fell, and Apple's was flat). Under Stephen Elop's leadership, Nokia's profits in the smartphone unit grew at a Nokia-record level.

ELOP WAS REWARDED

The Nokia investors appreciated the first five months of Elop's leadership so much, that the Nokia share price had climbed 11% since he took charge! Previous CEO Kallasvuo had seen Nokia share price drop 55% over a 3 year period (and was fired for that). In just five months, and while the world was still recovering from the global economic crisis, Elop had already recovered back one tenth of the share price losses, what Kallasvuo had lost. Elop was a 'hero'. The Nokia credit ratings by all three ratings agencies were one notch from the best possible. Nokia's brand was rated 8th most valuable on the planet. Nokia's new phones were winning awards.

These are the facts. There is no truth to the myth that it was the iPhone that killed Nokia's smartphones. It is true, that the iPhone killed smartphones - it killed Palm and Windows Mobile based smartphones, but not Nokia (nor Blackberry, it was Android that killed Blackberry).

Take one more look at that graph in the picture. Imagine being Boeing. Or Toyota. Or Levis Jeans. Or Pepsi Cola. Or Burger King. Or Nike or Timex or Sony or United Airlines or whatever global brand. If that picture was your market, all three giant rivals are profitable and growing, and you could be one? In every case, those CEOs of those giant companies would want to be Blue Company. Literally bigger than the nearest two rivals, combined (as long as the business itself was profitable, ie your leadership was economically sustainable).

WHY THE WIDELY SPREAD STORY THEN?

Ok, why the prevailing story then? First. This blog story is about smartphones. Nokia is much more than smartphones. The corporation of Nokia had become unprofitable in 2010. That was because the networking unit, NokiaSiemens Networks generated a big loss and the profits in the handsets division - smartphones and dumbphones - was not big enough to cover the loss. So yes, you are VERY correct to remember that Nokia had been in trouble, it was so, across the whole corporation but its smartphone unit was very healthy when Elop took charge. Nokia's smartphone unit delivered only a third of the total revenues of Nokia corporation but almost half of its profits by Q4, 2010, the first quarter that Elop was in charge. At an annual level, the profits generated by the smartphone unit (548 million Euros/Q4) would be worth about 2.75 Billion dollars per year. So the Nokia smartphone unit profits alone, would rank 175th biggest profits of the Global Fortune 500 in 2011. (Nokia's ranking by sales revenues in 2011 Fortune Global 500 was 143rd; thus the smartphone unit performance was remarkably strong even in a global corporate context)

SYMBIAN

Secondly, Symbian is not same as Nokia smartphones. Symbian is often considered synonymous with Nokia, but not all Nokia smartphones ran on Symbian (there were other OS platforms even before Windows Phone based Lumia, such as Maemo and MeeGo). Not all smartphones made on Symbian were Nokia branded. Earlier Symbian family included smartphones from SonyEricsson, Siemens, Samsung, LG, Motorola, etc. Even in 2011, there were still many electronics giants producing Symbian based handsets like Panasonic, Sharp and Fujitsu out of Japan. 

You may have seen dramatic decline of Symbian's market share, globally. That is true. Nokia invented the smartphone, it started initially with 100% market share. Then with Symbian, Nokia invited all of its rivals to join and co-develop the OS platform, hoping to avoid a 'platforms war'. It almost worked. Only a few North America-based rivals refused to play nice, and we had rival platforms such as Palm, Windows Mobile and Blackberry. But Symbian controlled over 60% market share still when the iPhone launched in 2007, but after that, the Symbian partnership broke apart. The partners bickered about what should be Symbian's development path and Nokia ended up buying out its partners and turning Symbian into an open source foundation. Most of the facts you may have seen, of the continuous decline of Symbian market share was not Nokia losing market share. It was the Symbian partners shifting away from Symbian, and joining Google's new Android OS. Even so, by Q4 of 2010, the end point of the diagram I drew for you, the world's bestselling smartphone OS was still Symbian and the world's biggest installed base by a wide margin was Symbian. Those are the facts.

USA MARKET

And thirdly, USA. Yes, Nokia has failed in the US market, but that happened YEARS BEFORE there was any iPhone in existence. Nokia had died in the US market long before anyone had used the iPhone App Store etc. So there are those who think because Nokia has not recently had successful smartphones in the US market, it is therefore true, that Nokia died globally. What those analysts do not know, is that USA is a backwater tiny market in handsets, home of obscure standards, crippled phones, bloodthirsty carriers, and truly outdated handsets.

You love the iPhone? Think it was the best thing since sliced bread? Sure. But the original iPhone in 2007, what is now known as the iPhone 2G, the phone known as Jesusphone? That one. It was the hottest tech story in the USA in 2007. In Europe it was launched, and failed. Only the far improved model, iPhone 3G, that launched in 2008, was able to succeed in Europe, because Europe is and was more advanced than the US market. And what of Asia? The original iPhone 2G was literally obsolete for the world's most advanced handset market Japan. Yes. When American analysts ooh'ed and aah'ed about the Jesusphone, its 2G technology was literally phased out from Japan and no such old obsolete tech phones were sold in Japan anymore. Even the iPhone 3G failed in Asia, and only two editions later, with tons of fixes and upgrades, the 2009 model of the iPhone, the 3GS, was finally able to succeed in Asia.

Need any more evidence? So tell me, how many months have you had in your pocket a smartphone with a built-in pico projector? Like those from Sharp and Samsung for example, that we have here in Asia. The Europeans are getting their Samsung Beam smartphones about now. The US market may get their first pico projector smartphones late this year, or next year. I've had mine here in Asia for 18 months already. Who leads, who follows? The US market is not the leader in telecoms, definitely not in handsets or smartphones.

It is true that Nokia had failed in the US market, but that market is not the biggest smartphone market (which is China) and it is not the most advanced handset market (which is Japan). The Apple iPhone was not, and is not currently the bestselling smartphone of China, Nokia is. Nokia was more than 20 times bigger in China at that time, in Q4 of 2010, in smartphones. Meanwhile in the US market? How much bigger was the iPhone than Nokia? Five times bigger. Only five times bigger in the US market, while in the bigger Chinese market, Nokia was 20 times bigger than Apple. Who was winning this race? And Japan? Betcha you didn't know that up until February 2011, Japan's biggest carrier, NTT DoCoMo - half of Japan's market - specified the Nokia Symbian OS as its standard operating system for its phones, manufactured by such Japanese handset brands as Fujitsu, Sharp and Panasonic. Today yes, the iPhone is big in Japan, but at the time of that picture in that graph, the overwhelming dominating OS used in Japan, was Nokia's Symbian and Android and iPhone and Blackberry and Palm and Windows Mobile were literally nowhere.

You may have seen statistics such as those published often by ComScore of US smartphones and seen that Nokia was tiny or nowhere. Therefore it is a vaid belief, that Nokia was failing. But until you understand the global market, it is an incomplete picture. But there is still more. Nokia was having plenty of trouble, in its delivery schedules, many Nokia handsets were severely delayed. There were smartphones that were admittedly failing in their design, like the N97. There were problems with the marketing and sales and customer satisfaction. All was not well at Nokia, I am not suggesting that. But the facts are, that globally Nokia was growing sales roughly at the same speed as Apple and Samsung - witness the picture in the above - and Nokia was profitable, its average sales prices were growing and Nokia's profits jumped at a Nokia record level, after Elop took charge.

GLOBAL FOOTPRINT

Now lets understand regional markets. Lets look at them by size.

OCEANIA = NOKIA, SYMBIAN, iPHONE APP STORE

Oceania (Australia, New Zealand and Fiji) is the smallest of the six continents by population. Their total population is under 30 million, that is 'one Canada' in size. Their smartphone migration rate by Q4 of 2010 was about 60%. The bestselling smartphone brand was Nokia. The bestselling smartphone OS was Symbian. The biggest installed base of smartphones were Nokia and Symbian. The bestselling app store of Oceania was the iPhone App Store. The biggest rival to Nokia in Oceania was Apple's iPhone. The bestselling dumbphone brand in Australia was Nokia (meaning future transition potential to smartphones) as well as the installed base of dumbphones.

NORTH AMERICA = RIM, BLACKBERRY, iPHONE APP STORE

North America is the second smallest of the six inhabited continents. Yes, I know it hurts, but its true. If you want to count geographical North America, ie Mexico and the Middle America region, you can get North America to about 500 million people, but most count North America by cultural divide, ie USA and Canada only leaving Mexico into the culturally similar Latin America.. North America when counted as USA with Canada has a population of about 360 million, so North America is 12 times bigger than Oceania by population. North America was at about 40% migration rate from dumphones to smartphones by end of 2010. The bestselling smartphone was Blackberry as was its OS, the installed base most smartphones was Blackberry as was its OS. The bestselling app store was the iPhone App Store. The biggest rival to Blackberry in North America was the iPhone. Among dumbphones the beststelling brand was Samsung, but the biggest installed base of dumbphones was Motorola.

LATIN AMERICA = NOKIA, SYMBIAN, OVI

Latin America is the third smallest or fourth largest continent by population, at about 570 million so Latin America was bigger than North America and Oceania combined, with plenty to spare. Latin America is not yet strongly migrated to smartphones but will reach 100% smartphone migration well before this decade is done. By end of 2010, the bestselling smartphone brand in Latin America was Nokia, the bestselling smartphone OS was Symbian. The biggest installed base of smartphones was Nokia, as was Symbian the operating system. The bestselling app store of Latin America was Nokia's Ovi Store. The biggest rival to Nokia in smartphones in Latin America was Blackberry. The bestselling dumbphone brand was Nokia and the biggest installed base of dumbphones was also, Nokia.

EUROPE = NOKIA, SYMBIAN, OVI

Europe has a population of about 725 million people, ie slightly smaller than North and Latin America combined, or more than twice as big as North America. Europe had passed 50% smartphone migration by end of 2010. The biggest smartphone brand in Europe in 2010 was Nokia. Symbian was the biggest OS. The installed base of smartphones in Europe were Nokia and Symbian. The bestselling app store in Europe was Nokia's Ovi. The biggest rival to Nokia in Europe was the iPhone. The bestselling dumbphone in Europe in 2010 had become Samsung but still the installed base leader of dumbphones was Nokia.

AFRICA = NOKIA, SYMBIAN, OVI

Africa has a population of more than 1 Billion. Three times as big as the USA. Africa is far from even dumbphone penetration and a tiny fraction of its handsets were smartphones. Africa will probably take into the next decade of 2020s until all of its phones are smartphones. But still, in 2010, the overwhelmingly dominant smartphone brand of Africa was Nokia. The dominant OS was Symbian. The installed base of smartphones was overwhelmingly Nokia, as was Symbian as the OS and Nokia Ovi store as the most used app store. The nearest rival, a tiny one tenth in size of Nokia, in smartphones for Africa, was Blackberry. The new sales of dumbphones were ruled by Nokia as well, and Nokia was by far the biggest installed base of dumbphones.

ASIA = NOKIA, SYMBIAN, OVI

Asia has a population bigger than the other five inhabited continents, combined. India alone is bigger than all of Africa. China is even bigger than India. Asia was early in the migration from dumbphones to smartphones but because of its immense scale, just China alone was selling more smartphones than the USA. Across Asia, the bestselling smartphone in 2010 was .. Nokia. Bestselling smartphone OS? Symbian. Biggest installed base of smartphones? Nokia. Operating system? Symbian, App store? Ovi store. Biggest rival smartphone platform Android and manufacturer, Samsung. Biggest dumbphone maker Nokia. Biggest installed base of dumbphones, Nokia.

The only inhabited continent where Nokia did not utterly dominate smartphones, operating systems, app stores, and dumbphones - is North America - the fifth biggest out of six continents. The continent where only 5% of the planet's population live. But in North America there were 8 separate domestic handset manufacturer rivals, and 6 domestic smartphone operating system rivals, to challenge Nokia. There is definitely a home field advantage to providing high tech like phones, just witness the kind of phones that Americans used to be accustomed to, that often totally failed in most of the rest of the world (like say, Palm or Motorola).

BURNING PLATFORM

Now, with all that. The facts are that Nokia smartphone unit sales had grown 7 out of 8 past quarters and declined one quarter, exactly the same as Apple's iPhone and the Samsung smartphones. The Nokia smartphone unit had been profitable every single quarter and its profitability was increasing strongly by the time Elop took charge. Nokia's smartphone revenues were growing and so were Nokia's smartphone average sales prices. By every conveivable measure, Nokia was doing very well in the enormously competitive cut-throat smartphone business, where rivals such as LG, SonyEricsson and Motorola were generating losses.

Nokia's smartphone brand and the Symbian OS was the bestselling smartphone and OS on five of the six inhabited continents, and the Nokia Ovi store the bestselling app store on four of the six inhabited continents. If you wanted to argue the future of handsets belonged to smartphones, or the software side of operating systems, or the ecosystem including app stores and digital content, Nokia dominated over its rivals including Apple, iOS, Samsung and Android.

This is where the Nokia CEO issued his infamous Burning Platforms memo, the costliest management communication ever, that was half of the Elop Effect, and caused the total collapse of Nokia's smartphone business (and far more damage to Nokia as well). Yes. When Nokia towered over its rivals and held 29% market share, growing profits. That is when CEO thinks its time for Burning Platforms memos. So lets re-visit that graph I drew for you. This is what happened in February 2011:




Source: Tomi Ahonen Consulting based on company data
This slide may be freely used and shared

That is the truth. Nokia exchanged strong consistent profitable growth of smartphones for a world-record collapse of sales, revenues, average sales prices - and plunging the strongly profitable smartphone unit into generating huge quarterly losses.

I am NOT saying Nokia had no problems before Elop took over. Previous CEO, Olli-Pekka Kallasvuo was in charge when Nokia produced its first-ever corporate loss (while the smartphone unit still generated a profit). Nokia corporation (networks, dumbhones, Navteq navigation and maps, Symbian, Ovi store, smartphones) was bloated, inefficient, bureaucratic and needed strong management in 'execution'. Nokia did not need a new operating system and the headaches it would generate to transition to it. Nokia's Chairman, Jorma Ollila said very plainly when Elop was announced, that his primary mission would be to help streamline Nokia operations to run Nokia more efficiently. Elop's job was to solve 'execution' problems, not to cause more of them by silly Microsoft misadventures.

I am also NOT attempting to claim that Symbian is fully modern and capable of winning the world, it is not. But before Elop destroyed Nokia's Symbian in February 2011, up to that point, Symbian based Nokia smartphone sales were not just growing - they were holding their huge lead over the iPhone and Samsung! Before Elop destroyed Nokia, Nokia's smartphone sales were twice as big as those of the iPhone and three times as big as those of Samsung. Today Nokia's smartphone sales are one third the size of Apple or Samsung.

Nokia had a clear announced migration path from Symbian to MeeGo and Meltemi (Linux based, open source operating systems). This migration path included Nokia's developer tools Qt and the Ovi store. The immensely strong positive market acceptance of MeeGo OS (powering Nokia's much beloved flagship smartphone the N9 and its sister phone the N950) is confirmed the world over in comparisons where it is seen far superior to Windows Phone and Symbian, and far ahead of Palm, Blackberry, Android; and is rated usually roughly on par, in many cases better even, than the iPhone iOS. That is strong praise indeed.

The Windows Phone OS is not compatible with Nokia's Qt developer tools. The Windows Phone is not compatible with past Microsoft smartphone operating system Windows Phone, and early gossip says it will also not include a migration path to the next Microsoft OS, Windows 8. Microsoft based smartphones and the Nokia Lumia smartphone series are under reseller boycotts reported from China to the USA, from Finland to France to the UK. Nokia smartphone sales are now collapsing, as you can see in the second diagram. This while both Apple and Samsung global sales are exploding. Nokia had victory in its grasp, but Elop snatched defeat from the jaws of victory.

Since the Elop Effect, Nokia has now lost more than 60% of its share price value in only 14 months. Elop's predecessor lost 55% value in 3 years and was fired. Now Elop has lost 60% in half the time! Nokia's credit ratings have been cut many times and now on all three credit rating agencies, Nokia is at the last level just above 'junk' status. Nokia's brand value dropped out of the global Top 10 for the first time since the ratings were reported globally.

Note that just a few weeks ago, Elop said that today Nokia is no longer having a Burning Platforms problem! So when Nokia smartphone unit sales collapse, revenues crash, average sales prices fall, the profits are changed to losses, and Nokia's market share is down to 7% ie literally one fourth of what it was just a year ago - 'now' there is no problem at Nokia!! Now today, no platforms are on fire. Now Elop is satisfied and can sleep soundly. Now Nokia is safe. What a moron! 

But anyone who claims that Apple killed Nokia, does not know what he or she is talking about. In North America, Nokia was already dead years before the iPhone. Rest of the world, look at the evidence. Nokia utterly dominated its rivals. Dominated until the fateful Elop Effect. You can say that Nokia had problems in its marketing and execution. You can say Nokia was bloated and slow to bring innovations to the market. But the facts are irrefutable. Before and after Elop took charge, Nokia was growing its smartphone unit sales, its smartphone revenues, its smartphone average sales prices and its smartphone profits. Only after the Elop Effect, did all those turn into disasters. The causes of the profitability problems at Nokia corporation or Nokia's Networking unit may be many, but the only cause of Nokia's smartphone unit collapse - is new CEO Stephen Elop who demolished that hugely profitable business unit. How bad is that? Ignoring the troubles in the other Nokia business units, the smartphone unit today (Q1 of 2012) generates a loss of 311 million Euros, or at an annual level about 1.6 Billion dollars. How big is that? In the Fortune Global 500 the smartphone unit alone, as managed by Elop, would be the 11th biggest losses of the year! Shame! Going from 175th biggest profits to 11th biggest losses on the planet. This is a disgrace!

So. You may think that the Ovi store was a failure. You are entitled to that opinion. Yet the facts are, that on four of six inhabited continents, it was the most used app store. You may think Symbian is obsolete and useless. You are entitled to that opinion. Yet the facts are, that on five of the six inhabited continents, Symbian was the bestselling smartphone OS. And you may think that Nokia's smartphones are not fit to sell in any market. You are entitled to that opinion. The facts are, that until Elop destroyd the brand just 12 months ago, Nokia branded smartphones were easily selling more than all iPhones and all Samsung smartphones added together - and growing at about the same rate, while growing profits too. The real paying customers in China, rest of Asia, Africa, Latin America, and to a lesser extent, in Europe and Oceania - were snapping up those Nokia smartphones quite happily. And today, that most award-winning 808 PureView superphone, it also runs on Symbian, on tech so advanced you cannot build the same phone on an Android or Windows Phone OS. Symbian is not dead (yet). 

With this, I end my lecture, and if you wanted to know how Nokia might be saved, I have that blog for you as well. It is here: Nokia can be saved.

PS - there is a follow-up now, 'Nokia is on a Certain Road to Death' which explains why this current path and management cannot lead to salvation  

UPDATE May 2 - Welcome Kauppalehti/Nokialandia readers (thanks Pekka Nykanen for mentioning this blog article). If you want my latest projection of how bad it is at Nokia, note that I just released my official forecast for how Nokia smartphone market share will go in 2012 - it falls from 29% a year ago to the 8% it is now to 3% by end of year. Read it all here: Nokia 2012 Forecast.

UPDATE May 4 - A 'class action' ie group lawsuit has been filed against Elop and Nokia by a group of USA Shareholders for violations against US regulations about the stock market. Please see more including links etc at this link: After the Shareholder Meeting Situation is Far Worse. 

 

Comments

[ChrisD]

And... Nokia debt rating cut to Junk by Fitch: http://www.bloomberg.com/news/2012-04-24/nokia-debt-rating-cut-to-junk-at-fitch.html

The highest junk rating, BB+, but still.

[JD!]

All I can see is a sinking ship which was made with best material in the world but driven by the worst Captain!

The ship is already hit not sure if is allowed another trip "around the world in 80 days" with same captain. :-)

[Foo]

@karlim "Ok. I do agree that the facts that you provide are irrefutable. But they certainly are not all the facts. Only the selection of facts to support your theory.

Here is another set of hard facts that you have ignored.

Nokia market share losses 5% in Q3 and 5% Q4 2010. From 39% to 34% to 29%. And in Q1 2011"

I think everyone agrees that Nokia was loosing market share to iPhone and Android. BUT Nokia was still *growing*.

Elop was hired to accelerate the growth rate, not to perform an U turn in the corporate strategy.

If Elop did nothing, Nokia would continue to grow, albeit slowly, and not crash and burn as it started to happen after the Elop Effect.

"And all Nokia Q4 positives - increased sales, profits, ASP, even the unit growth - come singularly from those 5 million Symbian 3 smartphones shipped into the channel and recorded as sales."

Considering that Elop was already in charge in Q4, this "stuffed channel" theory can be partly attributted to him.

But he made the problem worse by declaring Symbian dead. Suddenly the channels were stuffed with obsolete material! That explains the boycott.

"Btw, if the catastrophic Nokia Symbian unit volume drops in Q1 and Q2 2011 were caused by Elop effect, how do explain even more catastrophic drop in Q1 2012?"

Poor execution of a bad strategy.

Lumia is good, but not great; but Nokia needed a great smartphone to compensate for the declining Symbian sales.

And the worse part is about to come: if the rumors are correct, Lumia devices will not be able to run the next Microsoft operating system, so the channels will end up stuffed with another obsolete smartphone from Nokia.

Expect a new boycott.

[RobDK]

Is it not true that Nokia had been stuffing the channel up to Q4 2010 and Q1 2011? And that they took an extraordinary write down on this inventory? And that several senior managers departed or were fired? The channel stuffing had started before Elop arrived.

[Foo]

@WMT "This post is a great example of a failure to grasp reality. Nokia died when it failed to respond to changes during '05-08. All senior management during this period are at fault. It can recover but it will be a different company. All Elop did was pull the cover off of the dead corpse."

Symbian was not dead, and, in fact, it is still the biggest seller from Nokia. Without Symbian Nokia would be dead.

The problem is that Elop declared Symbian dead months before he had anything to show, and before Windows Phone could get a any traction.

That was a colossal mistake.

If channels were "stuffed", as some of Elop advocates say, that action alone would trigger an immediate boycott, because the existing obsolete phones should be sold!

What should be the sane thing to do? Nokia should keep quiet about the Microsoft partnership, and make a surprise launch when the phone was ready.

Why didn't Elop do that? Because he was trying to do what was best for Microsoft, who needed a big endorsement. Elop not only endorsed Windows Phone, but declared that the current platform was on fire, for greater dramatic effect.

That was the costliest communication mistake, ever.

[thomas]

hi tomi,

you mixed up the different wp/win flavours:

"The Windows Phone is not compatible with past Microsoft smartphone operating system Windows Phone, and early gossip says it will also not include a migration path to the next Microsoft OS Windows 8"

should be:
" The Windows Phone is not compatible with past Microsoft smartphone operating system Windows Mobile, and early gossip says it will also not include a migration path to the next Microsoft OS Windows Phone 8"

Elop has no clue about economics and about technology.
http://felipec.wordpress.com/2011/06/21/my-disagreement-with-elop-on-meego/

He is always talking about ecosystems but he doesn't understand network economics, maybe that was not part of his mba....

[vvaz]

People are assigning to much value to Feb.11 date and burning platform memo. But it were only signs clearly visible from outside - Elop began making changes in Q4 2010 (like cutting Maemo/MeeGo team). And carriers and other high volume clients of Nokia had to know that.

That explains start of collapse in Q1 2011 - before all proles would read about burning platform or (in)famous announcement.

[vladkr]

That's funny that some people keep on telling that "Symbian is obsolete" or "past era"... I'd be curious to know what they think of Windows, OS-X (+iOS) or even Android:

- Windows is 27 years old, and no-one is shocked that it's still massively present on office/home computers

- OS-X takes its roots from Unix, which was created in... 1969, by the way, top notch iOS is closely related to OS-X, so it shares same roots.

- Android is a Linux (1991), which is inspired by Unix.

Of course you'll answer me that Windows evolved since 1985, that Windows 7 has nothing common with Windows 1, but the name.

Why wouldn't it be the same with Symbian? Do you really think that Belle and EPOC are the same thing? Don't be ridiculous.

So to MS aficionados who are convinced that Elop is the Messiah, and that he just accelerated what was inevitable, please, explain me what's the point in ruining a company so quickly, risking to harm MS reputation? Explain me in what Symbian and Meego were less modern than WP or other competitors?

[vladkr]

@Foo:
"What should be the sane thing to do? Nokia should keep quiet about the Microsoft partnership, and make a surprise launch when the phone was ready".

Exactly !

That's what Apple does... that's actually what all industries (Car, entertainment, food, electronics...) do.

[DWZ]

Keypoint for the problems is the fact that Nokia always was a hadware company - they never ever understood the dynamics of software. I had some very frustrating discussions with Nokia management in PD in Espoo in 2004 and 2005. They simply ignored the importance of software for their phones!
So the fundation of failure was created in 2004/05 onwards.
The Meego could have been a way out with the lousy and unperformant Symbian, but it was not driven agressively to become a ready to use OS. Nokia just tried to make the development of a new OS as cheap as possible - but no intention to do a serious investment in the area of operating software.
Then Apple and Google changed the rules of the game from Hardware to software as the driver - and in this moment Nokia was immediately in serious trouble.
Of course it took a while to become visible to the outsiders, but then it was already too late.
It is sad to say, but I believe we will never see Nokia coming back as a strong, innovative manufacturer with highly desirable products. The shiny NOKIA brand is history!

[Sander van der Wal]

@Foo

If Nokia would have keep peddling Qt as their main platform, and switch secretly to Windows Phone, announcing it when ready, then nobody would trusty Nokia anymore, as they had no problem at all screwing their ecosystem. You cannot expect third parties to work with you if you are completely unreliable.

Beside, such a thing cannot be kept secret very long. There's always somebody going to leak. Imagine the consequences of being shown the kind of business that is busy screwing their third party developers at a time when companies are vying for developer attention. That is insanity.

[ds]

As for Feb 11 effect we fail to take the enterprise factor into account. In Q4 nokia Symbian was still one of dominant enterprise phone platforms in a place where IPhone effect was much delayed is only starting to be evident now a year after with BYOD.
While the announcement could have a delayed response in consumer space it could have resulted in wave of contract cancellations and resulting steep decline (esp. given that orders are usually realized at the beginning of a year) as IT managers are paid for not investing in obsolete platforms.

[ds]

@Sander Nokia has screwed its developers and consumers anyway by killing symbian without any kind of migration path. Besides most of them deflected to Android anyway as there's more in common with that platform than with WP.

[Louis]

"Why wouldn't it be the same with Symbian?"

@vlad: If iOS has vi as its main interactive application and ran only on the PDP-11 it probably wouldn't have become popular. A platform is a great deal thicker than its system call API.

If your counter-factual is that there was no design error in Symbian's kernel that would have prevented somebody willing to do the work to get it on modern hardware, and that somebody else with good taste could have built a compelling user experience and app platform on top of it, that may be true.

The point, though, is that this didn't actually happen, despite a lot of effort.

RIM tried to solve the same problem by changing the kernel, and we've seen how well that worked. Not at all, because a better kernel with an environment designed by the people who didn't get it right the last time doesn't help users.

Elop was, at least, trying to solve the right problem. (Actually, the same problem Apple solved by buying NeXT.) What's happened is that the state of the art is moving ahead faster than Nokia and MS can catch up on the "basics". (Note that the "basics" includes many things like Dropbox, a large app catalog, etc., etc., etc.)

[ejvictor]

@Karlim, @Baron95 what? You guys related to ELOP?

What is the problem with admitting that the CEO –the Captain of the ship – EOL-ing an entire ecosystem (Symbian, OVi Services, QT), shutting down retail locations en-mass, junking entire migration strategies, not having a product to sell for several quarters, basically killing the USP of the brand, bears the majority of the responsibility for Nokia’s plight (bet you were also trumpeting Job’s keen leadership and insight as instrumental for Apples success)?

In the end shit rolls up hill, the captain gets the praise and the blame. TODAY,NOW – no matter who did what,when – Elop gets the blame.

Tomi is refocusing the discussion to leadership, Android, iPhone, blah blah, blah is just noise to cover up one fact – a utter failure of leadership.

[Foo]

@ste "Tomi, can you add RIM to the graphs? They had no Elop."

Here's a comparison between RIM and NOK, in terms of net revenue:

http://oi42.tinypic.com/2sbl6vm.jpg

This chart shows that NOK net revenue started to fall in Q2/2008, and started to recover in Q4/2010.

The second big slump came in Q2/2011 (Elop Effect), the net revenue became negative in Q4/2011, and is accelerating.

So:

We can't attribute all the problems to Elop, but he did aggravate the problem by declaring the product line obsolete before he had anything new to show.

[Dziadek Felek]

Lot's of comments about boycotts, conspiracies, Elop being a trojan horse purposedly planted to lower the value of Nokia... At the same time we have basic facts at our disposal:

- the replacement cycle of smartphones is around 18 months,
- N97 in all its glory is introduced June 2009,
- Nokia market share crashes end of 2010.

Coincidence? I think not!

[ejvictor]

Hey guys.... share crashing Q4/2010 - Q1/2011 Remember this brainstorm announcement

In 2009, we established the Symbian Foundation to make the Symbian platform available open source and royalty-free. In November 2010 we announced that the foundation would ramp down its operational activities as a result of changes in global economic and market conditions.

care of http://licensing.symbian.org/

Hummmm I wonder who was instrumental in that announcement?

[ejvictor]

Killing the Symbian foundation - who killed Symbian , not iPhone, not Android, not N97... Nokia management, ELOP.

[ejvictor]

Seeing that Elop killed the Symbian foundation in Q4 2010 - a CLEAR indication to carriers, most likely accopanied by calls fielded in Espoo and "off the record" reassurance of new platform [email protected] any change of heart in your comments below?

Quote @Baron95 "You are trying to be tremendously disingenuous to suggest that *ANY* meaningful shipments reported by Nokia in Q1 could have been altered in the last 6 weeks of the quarter (post Elop memo).

You will have absolutely no credibility left if you fail to acknowledge these simple facts of the smartphone order-shipment cycle in this industry."

Brand distruction of Nokia was so systematic, complex that sometines it's hard to keep track.