Are We Ready for the Numbers? Nokia Smartphone Market Share Projection 2012 ends year at 3% (updated)

Have you braced yourself for the shock? Lets do updated (downgraded) forecast for Nokia smartphone market share, average price and revenues for 2012. The quick version? Nokia's current 8% market share in smartphones, that was 29% just over a year ago, will fall to 3% by year-end. Nokia's smartphone unit will not return to profits and while the industry grows by over 50% this year, Nokia's smartphone unit revenues will be cut almost in half. But here is the how and the why.

(Note - there is update to this story at end, after Nokia shareholder meeting on May 3)

I called the Nokia market share collapse last year almost to the dot. In February 15, four days after the fateful Elop Effect of 11 February, when the existing data for Nokia suggested still growing smartphone numbers and many predicted foolish Nokia+Microsoft partnership performance of over 20% (one went as high as promising the partnership would produce 28%).

To understand how drastic my doom-and-gloom forecast was, please remember, at the time I made this forecast in mid-February 2011, the latest Quarter that Nokia had reported, had Nokia smarthphone market share at 29%, unit sales had grown by nearly 2 million from just the previous Quarter, to reach 28.3 million units sold in the Quarter. The Nokia smartphone Average Sales Price (ASP) had grown by nearly 20 Euros to 155 Euros. Nokia's smartphone unit revenues were 4.4 Billion Euros for the Quarter, profits jumping massively to 548 million Euros with a 12.5% profit margin. All the Nokia numbers were going up at the time I made this forecast. Yet I said on February 15, that Nokia's smartphone unit would end the year 2011 with:

TOMI FORECAST ON FEB 15, 2011 FOR Q4 NOKIA RESULTS

Q4 2011. .  12% . . . . . . . . . .  17 M . . . . . . . . 116 Euro . . 2.0B Euro . . . (loss-making)

ACTUAL NOKIA Q4 PERFORMANCE

Q4 2011. .  13% . . . . . . . . . .  19.6 M . . . . . . 131 Euro* . . 2.6B Euro* . .  (loss-making)

* without Microsoft bonus payment of $250M which is not paid by end-users and is not actual handset business income

Note, Nokia has established a world-record collapse of a global industry, Fortune 500 sized giant who led its market, in a one-year crash of its market share. This projection was made when there was no analogy in any industry ever, to learn from and use as a model. Never before has a global industry leader towering over its rivals, fallen so massively in a period of less than 12 months. Yet I essentially nailed the numbers. Nobody else projected the fall to be that bad, and on this blog you can go see how many people left comments saying I was being too hard on Nokia and too much the pessimist.

Now, how did I project this Q1 that just was reported? My forecast for Nokia 2012 numbers came on July 26, 2011, after we had seen one full Quarter of the damage of the Elop Effect and I forecasted this outcome of Elop's management to Nokia smartphone business unit. Note this was my 'Ultra Positive Optimistic Scenario' where I hoped Nokia Lumia would be well-received and Nokia smartphones unit would recover to profit-making by this Q1 quarter:


TOMI FORECAST IN JULY 26, 2011 FOR Q1 NOKIA RESULTS ('Ultra Positive Optimistic Scenario')

Q1 2012 . .   7% . . 11 M units . . $172* . . . . $1.9B . . . .  2.3% . . . $  43M profit

ACTUAL NOKIA Q1 PERFORMANCE

Q1 2012 . .  8%** . 11.9 M units . $165***. . . $1.95B*** . . -32%*** .  $ -638M loss*** 

* original forecast split it out at $164 for Symbian, $180 for Windows Phone, their weighted average = $172
** preliminary market share estimate
*** without Microsoft bonus payment of $250M which is not paid by end-users and is not actual handset business income

Again, nobody else has published a forecast from the summer of 2011, of Nokia's smartphone unit sales falling to this low, market share to this low and ASP to this low (and revenues this low). But even I got it wrong, expecting better Lumia sales - I forecasted Nokia to sell 4 million Lumia in Q1, not the 2M it did, and in my optimistic scenario, I projected a modest profit. Yet out of any published forecast last summer, this was by far the most accurate for Nokia smartphones to Q1.

NOW HOW 2012

Now we have the first insights into Lumia sales and we can make a reasonable forecast for 2012 Nokia smartphone unit performance. This is my official forecast for Nokia smartphone unit sales and market share (and I will include for context, the 2011 numbers)

2010 Q4 . . . 28.3 M units . . . 29% market share

2011 Q1 . . . 24.2 M units . . . 24%
2011 Q2 . . . 16.7 M units . . . 15%
2011 Q3 . . . 16.8 M units . . . 14%
2011 Q4 . . . 19.6 M units . . . 13% . . . Lumia 600,000 

2012 Q1 . . . 11.9 M units . . . 8% . . . . Lumia 2 M
2012 Q2 . . .   9.2 M units . . . 6% . . . . Lumia 4 M
2012 Q3 . . .   6.8 M units . . . 4% . . . . Lumia 6 M
2012 Q4 . . .   7.4 M units . . . 3% . . . . Lumia 7 M

Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting May 1, 2012
The above may be freely shared

Note, by the end of 2012, essentially all Nokia smartphone production will have shifted to Lumia ie Windows Phone based smartphones. Thus the 'comeback' for Nokia (and Windows Phone) can start in year 2013. That comeback starts not from Nokia's powerful position it had when Elop took over in 2010 of 33%, it starts from literally only one tenth that, at 3% of the smartphone market. No handset maker has ever survived this type of comprehensive collapse and it would be foolish to think Nokia could achieve that miracle.

The damage will continue to be brutal. In terms of full-year shipments, this is what it looks like:

Full year 2010 . . 100.3 M . . . 34%
Full year 2011 . .   77.3 M . . . 16%
Full year 2012 . . . 35.3 M . . .   5% . . Lumia 19 M total 2012 shipments

Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting May 1, 2012
The above may be freely shared

Now, what will happen to Nokia ASP and smartphone revenues and profits? Here is my forecast of the ASP (again with historical data)

Nokia corrected ASP (when Microsoft subsidy is removed)

Q4 2010 - 155 Euros (202 US Dollars)

Q1 2011 - 146 Euros (189 US Dollars)
Q2 2011 - 141 Euros (183 US Dollars)
Q3 2011 - 131 Euros (170 US Dollars)
Q4 2011 - 131 Euros (170 US Dollars) *

Q1 2012 - 127 Euros (166 US Dollars) *
Q2 2012 - 136 Euros (177 US Dollars) *
Q3 2012 - 140 Euros (182 US Dollars) *
Q4 2012 - 140 Euros (182 US Dollars) *

* Above ASP calculated with Microsoft $250 million US dollar marketing support payment has been removed, the above reflects actual market price that Nokia branded smartphones actually acheived per quarter

Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting May 1, 2012
The above may be freely shared

So for Q4 2012 the Nokia smartphone unit would have this kind of business:

Q4 2012 . . 7.4 M units . . 3% share . . $182 ASP . . $1.3B revenues . . -2% margin . . $26M loss

Thats my forecast. Oh, and Nokia's smartphone ranking will be no better than 7th biggest smartphone maker where it is 3rd now and was the world's biggest smartphone maker still 15 months ago. The most rapid collapse of a global market leader in recorded history of human economic activity. Quite literally, CEO Stephen Elop has been in charge of setting the World Record in destruction of a global brand. Or to put it another way, his management has set the world record in scaring away loyal customers. He set the world record in business failure. Now every day Elop is allowed to remain in charge of Nokia, he makes that despicable world record even worse. He took charge of Nokia when it was twice as big as Apple in smartphones, three times as big as Samsung. Already today, Nokia is half the size of Apple and a quarter the size of Samsung. By the end of this year, in smartphones, the future of Nokia and the whole handset industry, Nokia will have abandoned 9 out of every 10 customers it had. Going from 29% to 3% in two years. That is pathetic.

WHAT OF MICROSOFT

If you want to consider Windows Phone as the so-called 3rd ecosystem (in reality no better than 5th or 6th), then as we just heard, LG is now not continuing Windows Phone production either, following Sony's earlier pull-out of Windows Phone commitments, this 'Third Ecosystem' is proving a bigger farce every day. What can you add from the Samsung and HTC partners to the above Lumia numbers. Maybe half a million per quarter if we're lucky, more likely half that number. So your Windows Phone new sales are pretty close to what you see here. Microsoft will end 2012 selling perhaps 19 million Nokia branded smartphones, if you toss in 2 or 3 million more by all other Windows Phone partners, even 22 million will not get you more than 3% global market share of new sales and Windows Phone 'Third Ecosystem' would end the year with under 2% of the installed base of all smartphones. Does this smell dead to you?

UPDATE 3 May - After the Nokia Annual Shareholders Meeting - we heard Elop answer an investor question specific to carriers refusing Nokia sales due to Skype. Elop's reply was that some carriers will not buy Lumia but Nokia will offer other arguments to try to convince them. This puts to rest the silliness some have tried to argue, that there is no rejection of Microsoft Windows Phone, and Nokia Lumia series, specifically due to Skype. Nokia CEO has openly admitted to the Nokia Shareholders Meeting, that there is carrier refusal to sell Lumia which is due explicitly to Microsoft's acquisition of Skype. I told you so (back in last June!!). Case closed. And now, please re-consider all that idiotic speculation that Windows 8 might be better - it won't be. It will be worse, because already now, where Nokia Lumia series did not have Skype pre-installed, the carriers hate it for Skype. When Windows 8 has Skype - this carrier 'boycott' will get worse, not better for Nokia. Now. If you don't understand how big and bad this issue is for Nokia, Lumia and Microsoft Windows Phone (And Windows 8), please read this blog from last autumn, and now please accept, Nokia CEO himself has admitted this problem is real, not a figment of Tomi's imagination. Read Why Carriers Hate Skype.

Comments

[Antoine RJ Wright]

Sheesh, sales or shipments (not that it matters)?

How does installed base or replacement cycles for previous years w/Symbian (and MeeGo) devices factor into this? I remember you saying something about folks wanting Nokia but (a) carriers pointing them elsewhere or (b) returning Windows Phone at higher rates - of which are becoming mostly Nokia-branded devices, where they are being sold.

Not a good picture this post is. I wonder if there's some action from carriers that would cause this to reverse or slow?

[PhoneBoy]

Why would any other vendor but Nokia sell a Windows Phone handset at this point? Only one with any ability to differentiate is Nokia (given their "most favored nation status" with Microsoft). All other handsets are bland and too similar.

Then of course, the question is whether or not Nokia can actually sell some Windows Phone handsets, which, like you, I have my doubts as to whether that will happen or not.

[Eurofan]

Tomi has been very good so far in his Nokia predictions, but I wonder where these next Lumia sales can happen. It seems Europe is burned out on Lumia, Asia is indifferent, China is inhospitable. Minutes ago I checked Amazon. The black Lumia 900 is #9 in sales rank for phones sold with plans (subsidized phones) and cyan Lumia 900 is #47. If people were actually frustrated trying to get "sold out" Lumia 900's at their local AT&T dealers you'd think they'd turn to Amazon, where Lumia 900's are available with two day shipping. I see Nokia's WP line of phones being a total market flop even after WP8 comes out. It's going to have the same metro/live tile interface that has made so little stir with Lumia. Nokia needs a plan b.

[Earlie]

Thank you Tomi, you are such a great expert on Nokia! Think about the N9, it would have easily sold 100M units this year if only Nokia's Elop would allow it to happen. I hope you stand a chance if Nokia need a new leader for its sinking platform. You would make a great new Nokka CEO with your insight in the mobile market!

[cycnus]

@Antoine RJ Wright,

Sales or shipments doesn't really matter as most reseller now doesn't really want to stock nokia phone too much. So, do not think they will put a nokia phone on stock for 2-3 months.

@PhoneBoy

LOL...
all WP phone were the same, there were no differentiation at all.
That's why it's flop.

@Eurofan

I also admire that Tomi could predict lumia sales 10000% better than all other analyst. Tomi really prove that he's a leader not follower. I'm proud & honored reading his blog

[cycnus]

@Tomi

I was wondering about the nokia dumbphone/featurephone sales number.
I know that Asha line in Indonesia, India, Philippine, etc.... were taken a big hit by Cheap Android such as Samsung Galaxy Y (US$ 110-120) and Samsung Galaxy Pocket (US$ 95-100).

Could the diminishing nokia brand in Smartphone effect the dumbphone/featurephone?
or the lost in marketshare mainly because of it can't compete with android on that price level?

Thanks.

[Poifan]

I'm curious what factors are considered in the projection of Lumia phone growth slowing in Q4 of 2012? I'd think that the holiday season would give sales momentum with a refreshed product line based on Windows Phone 8, Pureview cameras, and coattail effects from Microsoft's upcoming massive Windows 8 marketing campaign. I'd also expect Verizon to be selling WP8 (as announced, though not necessarily Nokia) in Q4. I'm not saying WP is going to succeed in the long run, but the projection seems to fly in the face of the sales cycle.

[Karlim]

Well, this time your Nokia 2012 forecast seems reasonable, at least for Q2-Q3. I'd say it even may be optimistic.

However I can not understand what is your reasoning for only 1 million Lumia increase from Q3 to Q4. This is a Christmas quarter where (barring major economic meltdown) all phone and electronics vendors significantly boost sales compared to previous quarter. Furthermore, Nokia will announce the next generation Windows Phone 8 smartphones on September 25th at Nokia World conference. Hopefully start shipping them within 2-3 weeks like they did last year. And there will be a major marketing push from both Nokia and Microsoft, probably much bigger then the one in 2011. During Q2 and Q3 Nokia's old Lumias will have to compete with the new Samsung Galaxy S3 flagship and reduced prices for older Samsung smartphones. In Q4 Nokia will have a new generation flagships to put against Samsung Galaxy S3. The "only" new smartphone launching in Q4 will be iPhone 5. It will be huge, but I don't think it'll be that huge to slow Lumia growth from 2 million a quarter to 1 million.

So why do you think Nokia will grow Lumia sales by 2 million in Q2, another 2 million in Q3 and only 1 million in Q4?

[Red]

From my own research Tomi might well be right but all his comments are seriously not going to change anything. Nokia will long be pass saving by the time Elop gets fired. Tomi should think seriously about getting a life since his comments can only hasten the decline, but then I suppose he can get the immense satisfaction of saying I told you so. Hitlink’s browser market share numbers, which are updated monthly shows in April 2012 Windows Phone increased from 0.42% worldwide to 0.49% worldwide, a false flickering glimmer of hope for the desperate who want to cling onto a last fragment of hope.

[cycnus]

@Red

I like Tomi compared to other analyst.
The other analyst that were bluffing about WP7 number could reach 20% by now if not countered by Tomi would only create a false positive. Which is the number will be big, but the reality is the user will hate the WP7.

So, Tomi honesty will bring a balanced review for all user.

[Earlie]

Tomi should really aim for the Nokia CEO chair! I'm sure all owners will support him by now, as he has revealed the truth here on his blog. Windows Phone is the worst mobile OS ever!

[PlatformWarrior]

I think MS might have a better chance to get into the embedded market through Windows on ARM running on laptop and tablet devices. If those devices become successful and create a strong MS based application ecosystem, it is possible that the ecosystem will spread to the smart phone market. But even in the best case it will take a long time, which can be fatal for Nokia, which is relying on MS success in smart phones.

[Earlie]

@PlatformWarrior

MS will sink as fast as Nokia. Perhaps Tomi can give us some insight on this one. There is not a sole on earth, who would use MShit voluntarily!

[Tomi T Ahonen]

Hi Antoine, PhoneBoy, Eurofan, Earlie and cygnus

Antoine - good points and questions. The returning loyal customer problem is now shifting downwards as the first customers of the Elop Effect return to stores later this year. It only makes matters worse, when ever less of the installed base of mobile phone owners, even own a current Nokia. The carrier support is critical. If Nokia were able to lift the 'boycott' against it, the sales decline would end. I can't promise sales growth by that action, but at least the carnage would end. And as I've written elsewhere on this blog, the cause of the carrier revolt is now Elop and Microsoft. Both have to be gone, before carriers return to supporting Nokia sales

PhoneBoy - yeah, we totally agree. I said something similar last year when Microsoft announced its special relationship with Nokia. Since then Samsung also got itself a special deal with Microsoft but Samsung is clearly using it only to pry some money and attention, they have no desire to push Windows Phone smarthpones beyond lip service

Eurofan - yep. Makes a lot of sense. I did my best to think of the down-ramp of Symbian, the end of Meego and the upramp of Lumia (plus some transition from dumbphones). I didn't do a regional split of where Lumia would sell, but China is pretty dead apart from the smallest carrier, China Telecom. Europe will have some Lumia sales simply because its Nokia. USA will do a million, two down the line, nothing like iPhone but similar to what Nokia did before Elop killed Nokia USA Symbian sales. Other parts, it will be small wins in some markets.

Earlie - your comment seems to be sarcastic, but on the off chance you were serious - the 100 million N9 sales level is utterly impossible. Nokia did 100 million Symbian smartphone sales in 2010, with an average sales price of about 200 US dollars. The N9 has an average sales price twice that. So probably the scale of N9 market potential, if Elop had marketed it broadly, would be in the scale of 20-25 million per year, 5-6 million units per quarter - roughly in line what the N8 (and E7) did before the Elop Effect of February 11, 2011.

cygnus - great point about inventory. Yes, looking at Nokia price slashing and horrid return rates, you are totally correct. The retail channel does not want to be caught holding Lumia in inventory. PS thanks on kind words

Keep the discussion going, I will return with more comments

Tomi Ahonen :-)

[space cowboy]

Omg... this forum should be called the frustrated and bashing Nokia club. I have a lumia 800 and I really love. Even over my (dual core, but traditional) Samsung Galaxy II. If u dont believe me, read some reviews about the Lumia's. Even Steve Wozniak likes WP7 and the Lumia 900 over Android and on some aspects even over i-phone. Taking numbers from the past (Nokia's Lumia 900 is only on sale for one month in the US only), and forecasting the rest of 2012 and even 2013 with them is quite silly. I's say, give Nokia and Microsoft some time to proof they are on there way up again.

[Earlie]

@ space cowboy

Listen to the pros, get rid of that phone and change it to N9!

[observer]

This is a horrible picture Tomi, absolutely awful. I hope that you are wrong, but your numbers look inescapably reasonable.

I do wonder about pulling out the $250M from the numbers - personally I think it should be excluded from ASP but included in divisional numbers, but Nokia includes it in ASPs so I think by not including it you are opening your figures up to additional noise. Would it be possible to have ASPs listed with and without?

Knowing you Tomi, I assume you have thought about this somewhat. Any ideas why Nokia might want to include it - it obviously masks the real numbers somewhat but are there any other reasons?

[Giacomo Di Giacomo]

So, you think that Lumia sales will increase sequentially in the next quarters? My personal feeling, as a user, is that they are going to peak maybe in the next quarter and then fall, due to the decline of the momentum of the launch and to people realizing that WP is not that good (as you can see when you search for used Lumias on ebay). Also, you seem to estimate that the 808 PureView will sell no more than about one million units in 2012, while I think it is going to sell several millions (mainly to former N8 users awaiting for a decent successor). This is only what I feel from a user's point of view anyway (but I felt that Lumia would have failed miserably and that's what happened, so let's wait and see).

[Giacomo Di Giacomo]

Baron95,
Nokia is (was?) incredibly bloated indeed. I cannot understand what all those people are working upon. Heck, I designed all the hardware of a VHF radio transponder myself, alone, in about six months. Add two people working on the software and some days of my colleagues working on the mechanics. The same holds for Microsoft, by the way.

But on the other hand, they do design good hardware. Even if we look only at their recent products, when they introduced high-spec phones they succeeded: look at the N8 and the N9. They are unanimously considered good pieces of hardware. The problem is that the phones that sell the most are the highest-spec phones, such as the iPhone and the Galaxy Sn, with n = 1, 2, ... .

What is currently Nokia offering in this range? Nothing, except maybe the N9, that is sold nearly nowhere and anyway is beginning to lag behind others in terms of performance. Symbian phones are all alike and all mid-range, also the upcoming 808 (not that they are not good, I own a 603 and it's amazing, especially for its price, but people look after super-specced devices even if they will never use the features for which they are paying a premium). WP phones do not match the best in class either, also because they cannot use higher resolution (they are stuck at 800x480) nor multicore CPUs (that are only useful on multitasking machines, such as Android and, ironically, Symbian).

So, how can Nokia sell, if it does not offer devices that people want? Add to this the Elop effect and you're done. The only way out I see is a) kicking Elop off (and the board with him, if this is what is needed) and b) offer some really powerful phones, as the N8 was when it came out, based on OSs that allow Nokia to do something really outstanding (ie Symbian and Meego), obviously with some marketing, not like the hype that surrounded the Lumia launch, but rather highlighting the real strengths of the devices.

[Rob-o-bob]

Tomi is wrong about Windows Phone only getting 3% market share in 2012.

The real analysts (iHS Suppli) say Windows Phone will get 9%.

http://www.isuppli.com/Mobile-and-Wireless-Communications/News/Pages/Lumia-900-Introduction-to-Trigger-Smartphone-Renaissance-for-Nokia-and-Microsoft.aspx