Revised Nokia 2012 Market Share Projections, Revenues, Profits ASPs by Quarter

So I promised to do the update/revision (ie downgrade) of Nokia's smartphone market shares for the year 2012, based on the Nokia profit warning announcements and the Microsoft Windows 8 etc announcements. This is that blog. Yes, this is going to be painful.

TOMI HISTORY FORECASTING WITH NOKIA UNDER ELOP

For new readers - I was the most accurate forecaster for how badly Nokia's market share would fall after the Elop Effect last year February (the Burning Platforms memo which caused a Ratner Effect on Nokia sales, and the related Microsoft announcement also in February when Nokia had no phones to sell on Windows Phone, which caused an Osborne Effect. I call these two the Elop Effect, the most damaging management communication of all time). I predicted in February 2011, that as Nokia's new CEO Stephen Elop suddenly and very radically altered Nokia's long-standing strategy in smartphones, the smartphone sales would stall and Nokia's market share would crash to 12% by Q4 of 2011 (down from 29% at the time when the forecast was made - this is totally unprecedented in any industry, so there is no comparison to use, no analogy that could help with the forecast). Nobody else dared suggest that Nokia would be so badly damaged, some very cheerfully hoped that Nokia's market share would be more than twice that, some projected it as high as 28% for the end of the year. The reality was.. 12.6%.

I of course expected Nokia's CEO to pursue the most sensible and logical actions in Nokia's best interest during that difficult year of transition in 2011, so that now in 2012, Nokia could then powerfully shift from Symbian to the new Lumia series running Windows Phone. I had not anticipated how crazy Elop's management would mess up the year, and that Microsoft itself would throw a monkey-wrench into the game, by purchasing Skype and causing a carrier revolt against all Windows based smartphones. But by the time we had the first Profit Warning by Nokia and a lot of soul-searching of how badly the year was going, I made my first forecast for the next year, ie 2012 sales for Nokia smartphones. That projection had Nokia Q1 of 2012 sales hitting 11M smartphones (down from 24.2M as the latest published numbers by Nokia at the time, again the fall would be historical and record-setting if this happened in only 9 months). Nobody else projected such a low level of 11M Nokia smartphones to sell, using Lumia, Symbian smartphones and Nokia's new MeeGo OS based smartphones all combined. How was Q1 of 2012? Nokia sold 11.9 Million smartphones.

THE CURRENT (TO BE REPLACED) FORECAST

Based on that background, this is my still-current forecast for Nokia unit sales, revenues, market shares, profits. For context, you can also see the historical data for last year:

OLD AHONEN FORECAST BEFORE LATEST NEWS
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

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

For the full year, this is what the numbers would then translate into as annual numbers:

Full year 2010  . . 100.3 M units . . . 34%
Full year 2011  . .   77.3 M units . . . 16% . . Lumia 600,000 total 2011 shipments
Full year 2012* . . . 35.3 M units . . .   5% . . Lumia 19 M total 2012 shipments 
* forecast, all others actual
Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting May 1, 2012
The above may be freely shared

The above forecast is an unmitigated disaster. Please understand, it is a world record in management failure. Nokia had a profitable smartphone unit that was growing sales - yes growing that means increasing - sales when Elop took over, in Q4 of 2010. Elop inherited a market share of 29% in smartphones when Nokia was bigger than its nearest competitors - Apple's iPhone and Samsung's all smartphones - combined. That is far bigger market domination than General Motors or Toyota, bigger than Boeing or Airbus, bigger than Coca Cola etc. And that 29% market share Elop destroyed with world record speed, as it is 8% today, one year later. I had projected it to fall even further to just 3% by Q4 of this year 2012, and for the full year for Nokia to end with 5% of all smartphones sold this year. Lumia based smartphones sold have sold 7 million units in the fourth quarter and 19 million overall this year. This would have been a world record failure for any market share leader. Unfortunately, the situation will be worse still.

NOKIA REVISED (DOWNGRADED) FORECAST BY TOMI AHONEN IN JUNE 2012:

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 2.0 M
2012 Q2*  . .   8.4 M units . . . 5% . . . . Lumia 4.0 M
2012 Q3*  . .   5.2 M units . . . 3% . . . . Lumia 3.1 M
2012 Q4** . .   5.3 M units . . . 2% . . . . Lumia 5.0 M**

* forecast, all others actual
** Nokia Q4 2012 forecast for Lumia sales increase assumes at least 2 new Lumia smartphones released by November that run on Windows Phone 8
Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting June 27, 2012
The above may be freely shared

This is now my revised forecast, based on the latest news that Nokia is not finding market traction currently (as Elop told us in his Profit Warning two weeks ago) and then that the Lumia series is now Osborned by Microsoft - and we find that some operators have quit selling Lumia totally like T-Mobile the biggest operator of Germany and in markets where Lumia sells, it is now discounted as low as the flagship Lumia 900 that launched less than 3 months ago, is slashed to a price of 1 US Cent ($0.01) as on Amazon in the USA.

So I project Nokia smartphones to fall from the current 8% market share to 5% in Q2, then 3% by Q3 and down to 2% by Q4. I am assuming that Nokia will launch at least two Windows 8 based Lumia smartphones for Christmas, and release them by November, else this 2% level in Q4 cannot be met. The transition from Symbian (and MeeGo) will be almost complete by Q4 and total Lumia sales peak by Q4 will be 5.0 million units only as increasingly carriers/operators refuse Windows 8 because of Skype integration and others punish Nokia for the Lumia, Symbian and MeeGo fiascos and prefer to sell Androids (and soon Tizen) based smartphones by other manufacturers. Nokia's 'comeback' with Windows Phone 8 can only start from that modest 2% market share and 5 million unit sales level into year 2013. Nokia sold over 28 million smartphones per quarter when Elop took over (and did this profitably, with growing sales).

For the full year, the revised forecast now looks like this:

Full year 2010  . . 100.3 M units . . . 34%
Full year 2011  . .   77.3 M units . . . 16% . . Lumia 600,000 total 2011 shipments
Full year 2012* . . . 30.8 M units . . .   4% . . Lumia 14.1 M total 2012 shipments 
* forecast, all others actual
Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting June 27, 2012
The above may be freely shared 

The fall is far FAR worse than that rapid collapse which killed Siemens, and that which killed Palm, and that which killed Motorola in mobile phones. This level of disaster will result far more layoffs at Nokia still to come. Nokia has already shut down many factories and started to retreat from markets and reduce sales. Those all will accelerate as these problems add up.

As to Nokia revenues, average sales prices and profits, here is my revised ASP and revenue projection for Nokia smartphones (excluding Microsoft's marketing contribution).

2010 Q4 . . . 28.3 M units . . . 155 euro ASP . . . . 4.4 B Euro revenues

2011 Q1 . . . 24.2 M units . . . 146 euro ASP . . . . 3.5 B Euro revenues
2011 Q2 . . . 16.7 M units . . . 141 euro ASP . . . . 2.4 B Euro revenues
2011 Q3 . . . 16.8 M units . . . 131 euro ASP . . . . 2.2 B Euro revenues
2011 Q4 . . . 19.6 M units . . . 131 euro ASP*** . . 2.6 B Euro revenues

2012 Q1 . . . 11.9 M units . . . 127 euro ASP*** . . 1.5 B Euro revenues
2012 Q2*  . .   8.4 M units . . . 136 euro ASP*** . . 1.3 B Euro revenues
2012 Q3*  . .   5.2 M units . . . 152 euro ASP*** . . 1.0 B Euro revenues
2012 Q4** . .   5.3 M units . . . 140 euro ASP*** . . 1.0 B Euro revenues

* forecast, all others actual
** Nokia Q4 2012 forecast for Lumia sales increase assumes at least 2 new Lumia smartphones released by November that run on Windows Phone 8
*** ASP in Euro, excluding Microsoft marketing contribution of 250 million US dollars per quarter
Above data actual Nokia through Q1 2012, rest are forecast by TomiAhonen Consulting June 27, 2012
The above may be freely shared

The Nokia smartphone unit was generating about 18 Billion Euros (23 Billion US dollars) of revenues on an annual basis when Elop took over. They generated a profit of about 2 Billion Euros (2.6 Billion US Dollars) on an annual level. This year 2012 the Nokia smartphone unit will generate revenues only of about 4.8 Billion Euros (6 Billion US Dollars) so Elop's 'strategy' has wiped out 74% of Nokia smartphone revenues already. This happened while the smartphone handset industry grew at 60% per year!!!!

The Nokia smartphone unit went from profits to losses last summer and has not recovered since. We just heard in Nokia's latest profit warning that the smartphone unit will generate losses at least through Q3. I am certain with these numbers that the losses in the smartphone unit continue through Q4 (and that all of Nokia corporation cannot recover to zero profitability for Christmas either).

THE COMEBACK STARTS FROM 2%

There were utterly ridiculous forecasts that promised over 20% markets shares for the Nokia-Microsoft partenship in Windows Phone from spring of 2011. There were completely baseless projections that somehow Nokia and Microsoft would pass the iPhone and become second biggest smartphone providers. And both Nokia and Microsoft have been pushing the fantasy of Windows Phone somehow being able to become 'the third ecosystem'. No. That won't happen. If there is a Nokia still alive by the end of this year (and I don't think that is likely) then the market share 'comeback' does not start from 12% or 8% or even 5% market shares. It starts from 2% for Nokia, running on Windows Phone with the severely damaged Lumia brand.

And for the 'other' Windows 8 so-called 'partners' - Samsung will be pushing its Tizen out this year plus selling its smartphones primarly on Android and bada, not Windows Phone. HTC will not prioritize Windows Phone over Android and neither will Huawei. All current Windows 7.5 based smartphones became obsolete this past week, so their sales are tumbling. If these three other manufacturers are really nice to Microsoft, they might release one Windows 8 based smartphone this year. Maybe. More likely not. But even if they do, their total combined sales will not make a difference, and Microsoft's total combined market share in Q4 will still be only 2%, with Nokia Lumia and Samsung, HTC and Huawei all added together. Samsung's bada alone will outsell them all as per usual, not to mention Samsung and Intel's new Tizen OS that launches also this Autumn. How strong is this position for Microsoft? Well, when it last Osborned its smartphone platform, Windows Mobile, and Windows Phone finally launched, Microsoft walked into that situation with nearly a dozen Windows Phone handset partners and a 3% market share. Twelve months later, when half the partners had quit and Microsoft's Ballmer said Windows Phone was selling at 'below expectation' levels, just before Nokia started selling Lumia smartphones - Windows combined market share globally of Windows Mobile and Windows Phone was down to .. 1.3%. Don't hold your breath that Micrsosoft has some magic that wins in smartphones.

If you are an optimist, perhaps Microsoft and Nokia can grow by half their market share in one year, 2013. That would bring them up from 2% market share to.. 3%. Maybe you are a super-optimist and think they can double their sales, inspite of all the reluctance of carriers, the damaged carrier relationships, the depleted sales and marketing forces, the spent and wasted Lumia marketing (I mean, how many Xboxes can you give out, if the original Lumia launch with free Xbox 360s thrown in did not produce market success?), this partnership is not exactly loved by the industry and retail. So yeah, if you really REALLY want to believe in fairy tales, maybe in 2013 they might hit 4% market share doubling their performance from the end of this year. I don't see that happening. Far more likely is that Nokia is sold, split, and the new owners of Nokia end the silly Microsoft misadventure and bring Nokia's smartphone unit to the Android family. The Windows 8 platform sells well on the PC side but Microsoft quietly shuts down the Windows Phone experiment as another failure along the lines of the Zune music player and the Micrsosoft Kin phone series. But don't ever think this can be salvaged into a 'third ecosystem'. That won't happen.

That is my revised forecast now, that we have heard from Elop in Nokia's latest profit warning, that his retail problems continue, that the Lumia sales are lackluster and the profits struggling. Then that we heard Micrsosoft won't let the current Windows Phone 7.5 based smartphones - including all Lumia series - to be upgraded to Windows Phone 8. So all existing Lumias are now Osborned. The Nokia brand is rubbish, the Nokia smartphones are facing retail problems. The Micrsoft Windows Phone based Lumia smartphones were already under sales boycott and many carriers refused selling them altogether from China's biggest carrier China Mobile to USA's biggest carrier Verizon. And while the biggest carrier of Europe's biggest country, T-Mobile in Germany had committed to selling the Lumia 900, they now ended that commitment when the Lumia became Osborned. If Nokia can produce rapidly new Windows Phone 8 based smartphones, and release at least 2 such smartphones for Christmas, selling them across their major markets by November, then - and only then - Nokia can hit 5 million Lumia sales by Q4 and 2% market share for Christmas. Else this year will end even worse than that. Remember when Elop took over, Nokia's smartphones unit was growing sales strongly, had 29% market share, the average prices were growing, the revenues were growing and the smartphone unit profits jumped a Nokia record level. Those were the days. And that was reality only 476 short days ago..

I will of course return to report by Quarter as the numbers come in, to see how close (or not) we hit the forecast(s). Everything in this blog may be openly referenced.

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Comments

[J.O. Aho]

Tomi, are you sure Samsung will still push out Bada units? Maybe it's my search engine skills lacking me, but it don't feel there been anything new since 2011 (except the sdk 2.0 release) and some media has hinted that Tizen would be replacing Bada.

Even if microsoft has been out saying they will not make their own cellphone, I think they still may working on one which they would release in for Christmas, if this happens, what kind of damage do you think it would cause Nokia?

[Spawn]

As usual great work Tomi! That means we can expect Nokia to fire Elop and change strategy end of this year latest. Shareholders should worry and put more pressure on Nokia to end this earlier.

[Dipankar Mitra]

Tomi, I think your revised forecast is still a bit optimistic. Can Lumia really go from 2 million to 4 million in Q2 2012? Well, maybe it can, but I would be surprised if it does.

[Jujim]

3.1 millions Lumia in Q3? With no new Lumia to hype the market?I think you are being kind to Nokia.

[Lasko]

"That means we can expect Nokia to fire Elop and change strategy end of this year latest. Shareholders should worry and put more pressure on Nokia to end this earlier."

Don't bet on sharesholders; they no longer care. NYSE:NOK -80%, soon to fall below 2$. Enough pressure?
Don't bet on the board either; whose orders do you think is Elop executing?

[Kenny]

I think Tomi is being too optimistic for Q2 and Q3. As for Q4, 5 million Lumia is unattainable even if Nokia does manage to come out with 2 WP8 phones.

Kenny's forecast
Q2 '2012 - 3 million Lumia
Q3 ' 2012 - 1 million Lumia
Q4 '2012 - 3 million Lumia*

*subject to Nokia releasing WP8 phones before Christmas.
The above may be freely shared :-)

[Lasko]

@ExNokian
Of course you will have to revisit projections when conditions change. That's what every analyst does, that's what every rating agency does, that's what every counsellor does.

When your own CEO unexpectedly osbornes your complete product line-up you will have to revise projections, when your partner CEO unexpectedly osbornes your complete product line-up you will have to revise projections, when your partner unexpectedly decides to compete with your costumers you will have to revise projections.

You still can decide to not too - which will result in completely abstruse and worthless projections like we had from IDC.

I have to disagree with Tomi Ahonen as well in certain assumptions, but your feud takes on a ridicoulous scale.

[BurntByAMemo]

From 30% to 2% in 2 years and what is the board doing? Fishy! Fishy :-O

[TomoTomo]

I hope Nokia stock goes under two dollars soon.

Mr. PRESIDENT OF COMMUNICATIONS, MR. "POOP PANTS POPE", how it feels now when Nokia is crumbling...

How it feels to be free as a ROLLING STONE, WITH NO COMPANY TO RETURN TO !!!

[khim]

@ExNokian I just don't want to read Tomi saying "I predicted this already in 2011!!!!!!" and refer to this article:
http://communities-dominate.blogs.com/brands/2011/07/stephen-elop-costs-nokia-10-million-dollars-more-of-lost-profit-every-day-he-stays-with-nokia.html

Wow! Just how low can you go? Yes, Tomi adjusted it's forecast in 2011 - so what? YOU refer to this article, not Tomi. Tomi links to OTHER article which was written few days after February 11 and which ALREADY predicts aforementioned 12% market share for the end of Y2011: http://communities-dominate.blogs.com/brands/2011/02/when-things-get-even-worse-than-you-thought-1st-preview-of-potential-for-nokia-microsoft-partnership.html

I don't know why you feel the need to falsify facts but this does not make you messages more believable.

Tomi does not always admit and discusses his past errors (for example his spectacular failure of prediction in December of 2009 when he said "The Android based smartphones are, and will absolutely definitely be for at least the next year 2010, a smaller niche smartphone segment, than even the iPhone") but this is just usual human vanity: we all like to recall our successes and don't like to recall our failures. What you are saying instead if that Tomi lies to us - and this is factually incorrect.

[Lasko]

@ExNokian
Well, but he was absolutely right in what he said: Elop is a huge burden to Nokia and he will continue to damage Nokia.

Osborne of existing product line-up: direct effect from Elop.
Osborne of existing product line-up again: direct effect from Elop due to excusive Windows Phone strategy.
Deterioration of carrier relationships: direct effect from Elop due to Microsoft strategy.
Lumia marketing and launch disaster: direct effect from Elop due to rushing due to osborning existing prodcut line-up.
Consecutive downgrades, stock collapse, cash burning and impending liquidity problems: direct effect from Elop due to previous effects.

So with the moronic decisions made one could anticipate that ELop will keep wreaking havoc. And he did.

[@don_afrim]

If this isn't a deliberate destruction of Nokia by some powerful people then I don't know what is!

Anyone with a right mind knows that keeping this strategy is fatal.

[Tona Aspsusa]

Thanks for an interesting blog - which I read purely for entertainment, as I'm not either an investor or a techie. I first found you about a year ago, I don't really remember why or how.

At that time I was in dire need of a new smartphone, and wondering why Nokia had so totally disappeared from my radar - even though I live in Finland, and my phones 1996-2005 were all Nokias.
Your blog gave me the explanations and reasons for why since my first touchscreen (Palm Treo 650!) there never was a Nokia on the market that enticed me, and why there probably never would be.

It is indeed a sad story. It was a saddish story in the years before Elop, and the last years have been a tragedy.
My early-adopter techie friends who go through phones like a teenager through H&M clothes got briefly enthusiastic about Maemo and Meego - but then Elop made sure there would be no follow-up. Nokia is just dead dead dead wrt smartphones.

But "featurephones" - Tomi, could you please write a bit more about those? Is that part of Nokia also now killed off for good? Why? How could anyone be so stupid?
(I still a year or so ago spied OLD (early noughties 6000-series) Nokias in use in taxis in Germany. Why? Probably because of good build-quality, dependability. And it is only a year since my mother consented to give up her 5210 for a newer phone.)

This is a bit off-topic for this post, but reading through your last few posts and all the comments over the last days, I've been thinking more and more about what Nokia _could have_ done with and for the "emerging world".
The roots, GSM-out-of-NMT - good and usable phone (&SMS) functions for challenging environments - should actually be a strong asset when it comes to Africa, South America and less developed parts of Asia.
If non-techie people in Europe still love their very old Nokias, what would happen if you introduced the same build quality and usability in a more powerful format and with features and functions tailored to the developing and emerging world? You would of course have the low-end cheap but robust models, but you could also have more expensive but revolutionary models: GPS-tracking á la hunting dogs in Scandinavia for cattle herds in Africa is just one thing that springs to mind. (But the last few years whenever I read about interesting mobile phone based projects in Africa or SAmerica, it is almost always android-based systems, with no or very little (through SMS) integration with dumber phones.)

But somehow it seems that Nokia already many years ago forgot what once made it great, durability and innovative usability, and started chasing American gadget-reviewers instead. Apparently being hip was more important to BOD et al than making profits or a real difference in the lives of people around the world.

[Zachariah Smith]

One question mates I am a little confused here, it is said that the CEO "serves at the pleasure of the board."

But even with the board meeting that happened a while back, why did nobody fire elop? The board of directors cant be happy with this right?
Not nokia fan or anything, just wondering how he lasted so long, plus i could not google an answer..

[Brock]

Hi Tomi,

first thank you for the articles your writing about nokia...

i would like to know what you think about the future of the IP Pool of Nokia. If Nokia goes bankrupt soem time in the future, what do you think could happen with it. Would MS have soem kind of priority for buying it. or does the highest bet win?
I fear that apple could buy that pool and then apple would have the most powerfull pool of them all and could block a lot more phones from selling their products like they did the last months/years...
What do you think about this?
Thx!

[Martin]

I' have been reading Toni's blog for a while and I think he is very right about the situation of Nokia. Nokia is now an economical disaster, and that it another reason why customers wouldn't buy Nokia smartphones. People shy away from buying from companies that has economical problems.

And the end it is the board that is completely responsible for the current situation in Nokia (not Elop, he is just the piano man….) and it will be very interesting to see what they will do in the coming weeks.

The ironic, is that this time, Nokia is actually on a burning platform (WP 7.5) and they must do something urgent in Q3, else Nokia will be history at the beginning of 2013. Windows 8 will not save Nokia, it will be too late, because it will take more than a year before (or if) Windows 8 has an important position in the smartphone marked.

[Aikon]

I am not an expert in this field, but...
the most reasonable explanation for me is that board of directors somehow has more interest in Microsoft. Let say they have interest in both Microsoft and Nokia, but they believe that it will be better to try to lift Microsoft using Nokia instead of loose both of them. So, Nokia is just used to lift Microsoft up.
take a look here
http://ncomprod.nokia.com/about-nokia/corporate-governance/board-of-directors
most of the directors are from 2011 or so.

[Aikon]

or, may be, just may be, they doesn't give a s#it.
Let's take a look,... Helge Lund, President and CEO of Statoil ASA, Norwegian oil company. Does he need to worry about some No'kia?

Personally, I think that the fact that Stephen Elop didn't took his family to Finland was a bad bad sign.

[KooolAid]

If you take a look of Nokia BOD, nobody, absolutelty NOBODY of them is such a person who would call out the emperor who has no clothes.

NOT ONE of them is such a person who puts his ass in the line to defend justice or righteousness.

THERE IS NO ONE person who would know MORE THAN ZERO about technology behind telecommunications, technology behind consumer electronics, technology about software engineering.

SAD BUNCH OF PEOPLE.

[Aikon]

Can Toni or someone else explain how the Board of Directors is set together? Who are real persons who set current members of board in charge? How all these stuff works?