Brief Commentary on Today's Nokia Bad News Day (updated 3x)

Today we have heard from Nokia about the news. 10,000 jobs will be lost in addition to the many thousands Elop had eliminated since he joined the company less than two years ago. My heart goes out to those who lost their jobs today or will soon hear of losing their job. This is a very hard time at Nokia. I wrote a little bit of advice a year ago to Nokia staff that were fired then, and reposted it with an update today here: Advice to anyone at Nokia who was fired today.

I will look at the rest of the news and do some very quick analysis. The firings are bad news but also kind of 'good news' in that it reduces Nokia headcount and potentially brings costs under control. I would assume that Nokia investors will like that. I am worried, that the cuts have already gone too far and too deep and now are cutting the meat, not just the fat. Nokia cannot remain a premium phone maker if it has a skeleton staff.

But lets look at the rest of the news. Elop is panicking. He fired three senior VPs which now means nearly all who were in senior positions before he arrived have either resigned in protest, or quit to join other companies, or been fired. That means he has ever less real world long-term experience to advice him at Nokia HQ. The newly promoted will see how quickly Elop fires people and will be very timid not to argue with the boss. This is all bad news at Nokia top management.

The worse news is the guidance about Q2 profit warning and Q3 smartphone sales problems, that was hidden in the story about layoffs. So before, in Nokia's profit warning, Nokia said it will have problems with the handset unit profitability (producing a loss) in both Q1 and Q2. The losses for handsets in Q2 were supposed to be similar to Q1 ie -3%. Now we hear that Q2 losses will be bigger than 3%. This is VERY BAD NEWS. It really means that Nokia is falling into the hole and the rate of the fall is only increasing.

And even worse - is the news that Nokia smartphone profits in Q3 will also be negative ! So there is no silver lining. Nokia is dying. I warned when we first saw the Lumia series introduced, that Elop had one chance to make that risky Windows Phone strategy work, and the first Lumia models were not up to the task. Now we see Nokia guidance to the third and fourth quarter of smartphone sales - that both quarters are worse than Nokia previously thought. And this, Lumia launch, was what Elop just recently said was 'below expectations'. This, Lumia series, as Elop admitted to the Nokia shareholders - is being rejected by the carriers, some carriers even refuse to sell any Windows Phone based smartphones because Microsoft bought Skype. (Currently Lumia does not come with Skype preinstalled, this gets even worse with Windows 8 when Skype is integrated).

UPDATE - I learned from the comments before had time to research it myself, that the Ulm Germany unit was the place where Meltemi was being developed. This means Meltemi is now dead (and is partly why Mary McDowell was fired, she was a vocal supporter of the Linux based Meltemi OS project for low-cost phones like for Africa, at price points and basic tech, where Windows Phone is not suitable). This is VERY bad news too. Meltemi could have saved Nokia's featurephone business in Africa, India etc but now that is dead. Elop is killing all possible ways to save Nokia. He is actively ruining the company. And a quick comment came on Twitter by @bleeters that killing Meltemi is a victory for Samsung (whose bada is the best OS out there currently for low-cost smartphones, far better suited for it than Android is).

UPDATE 2 - (sorry I forgot to write about this the first time around) And if you thought things might be getting better with Windows, Nokia's Lumia series, and after Elop has completed his strategy, the worst news of today, considering Nokia ability to recover is this - Chris Weber named global sales boss. A Microsoft dude who never sold a phone before in his life before he joined Nokia a year ago. Elop's ex cronie. Why is this so bad news? Microsoft current and ex staff has explained that the carrier community didn't like Microsoft before it bought Skype last year, and the carriers have become even more hostile (there is a sales boycott against Microsoft Windows Phones, admitted by Elop himself at the Nokia shareholders meeting). Elop has separately complained many times that the retail channel is not supporting Nokia overall (after his Burning Platforms memo) and specifically, not supporting Windows Phone sales - again, this was something he re-iterated at the Shareholders meeting last month. Microsoft's attitude to sales has been bullying and intimidation. Nokia old trusted top sales guys left or were fired - the ones that gave Nokia over 30% market shares. Elop replaced the top guy now with Chris Weber the ex Microsoft guy. He knows nothing about Nokia carrier relationships, or about Nokia phones, yet now is top dog? This will not make the carriers happy or trusting of Nokia. This makes matters worse for Nokia handset sales in general - those carrier relations are built over decades - and makes Nokia Lumia Windows Phone strategy even more ruined. This is a boneheaded move if Elop wants to repair the damaged carrier relationships and bad retail support of Nokia. This is madness. But Elop wants a buddy to be on the top with him, someone who is a Microsoft Mafia member. This is the worst news in the short term for Nokia. Nokia's handset sales, featurephones and smartphones - will suffer because of this change.

There were other news from Nokia. Nokia announced it sold the Vertu unit. It also bought a camera imaging company Scalado of Sweden. I would argue, that if Elop is struggling to run his company and is forced to fire - 10,000 - people, now is NOT the time to buy other companies that have to be integrated to Nokia. But you be the judge of that. At this point I report on the news.

UPDATE 3 - I should have mentioned this before, but yes, obviously, I will do a full analysis of what this means to Nokia. My quick vibe means, that my very pessimistic forecast for Nokia smartphones this year turns out to have been too 'rosy' ie I have to downgrade that. The overall sales of all Nokia handsets will also decline and Nokia's competitiveness suffers even more with chaos, layoffs, horrid employee morale, the boss cutting all corners, bullying the retail channel and pursuing a dead-end strategy. Yeah, Nokia is far worse after today than it was yesterday. And we are now at that point from which there is no recovery possible. Even if Elop was fired tomorrow and all of his announced strategies instantly cancelled, I do not think Nokia can survive - it will be sold to some buyer very soon as the share price continues now on its downward death-spiral. Whether Elop has a career, depends 100% on whether Microsoft buys Nokia (or the Lumia unit) - in that case Elop will be President of Microsoft Lumia. Else whoever else buys Nokia, Elop will be fired and become unemployable as the most incompetent executive of all time. But yes, I will write a full analysis of what and how and when this all means from today. I hope to do that blog for you soon (maybe even tomorrow) but stay tuned to this blog...

I wrote an analysis of how Nokia got to this disasterous position. The article has five graphs that may explain the situation rather fast for you, if you would like to see why Nokia is so much in trouble today. Read the blog: Snatching Defeat from the Jaws of Victory. 

UPDATE 15 JUNE - I have now written the full analysis version of what all happened yesterday (this issues and more) and what we now know about Nokia strategy, current situation and Elop's intended remedies (some are actually inherently contradictory) Read full analysis of Nokia news.

And if you are interested in specifically the smartphone side of Nokia's business, the part most in trouble and where Nokia is losing to Samsung, Apple etc, you might enjoy this blog article also with good diagrams to summarize the market situation: understanding smartphone wars 2012.

Some resources for you. If you are just interested in mobile, I have a great free resource for you, the 2010 edition of the annual statistical report, TomiAhonen Almanac 2010. You can download the 2010 edition at Lulu and share it with your colleagues, the pdf file is not copy protected (the 2012 edition is a paid ebook at 9.99 Euros at my website). Get your free TomiAhonen Almanac 2010 here.

If you are interested specifically in the mobile phone handset industry, I publish every 2 years the TomiAhonen Phone Book. The new edition will be out soon but there is a special deal, you pay 9.99 Euros and get both the 2010 edition and the new 2012 edition for the one low price. Get yours here: TomiAhonen Phone Book 2012.

And for those serious into the industry, if you want the four-year forecast of the mobile industry, covering 110 data points (440 data points forecasted in total) by the most accurate forecaster of this mobile industry, check out my TomiAhonen Mobile Forecast 2012-2015. Its not cheap but its far far cheaper than most other industry analyst forecasts haha, and likely you'll get better data too. See full table of contents etc at TomiAhonen Mobile Forecast 2012-2015 

Comments

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Good article. A difficult period for Nokia.

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