Digging Deeper into Nokia Q2 Results - and exactly how many 'awesome' sales was AT&T and China... (Updated)

Lets dig into those Nokia Q2 numbers and the statements from the Conference Call some more. Yesterday I published the top line market data. Now lets look deeper. We heard a lot of marketing spin in the past months during the massive Lumia launches. We heard that UK consumers have grown tired of iPhones, that on AT&T the phone was among its best sellers and in China the Windows Phones were outselling the iPhone. Yeah. And monkeys might fly out of my butt, as Madonna said on Wayne's World.

I was yelling here that those claims had no foundation, and none of the early numbers and research suggesting anything of the kind. Now we have numbers. So first, lets dig into the astonishing AT&T number. Some reputable people were seriously talking of expecting millions of Lumia sales at AT&T.

HOW MANY AT&T LUMIA SALES?

We now know, that the total Nokia handset sales in Q2, the only quarter when AT&T has sold Lumia, was.. 600,000. So it cannot be more than that. But we also know, that Nokia sells its phones in Canada, which is part of the North America region that Nokia reports on. Canada mobile market is roughly 10% of that of the USA, but Nokia's recent market performance has been far stronger in Canada than the USA, so the share of total Nokia unit sales in North America will definitely be better than 10% out of that 600,000. But lets be generous, lets say 'only' 10% would be in Canada (this includes Lumia sales there of course).

Then there are the dumbphones. Nokia's dumbphone sales have been falling over time in the USA but are nowhere near zero yet. My analysis of Q1 numbers found 310,000 dumbphone sales in North America last quarter. How many are still sold now in the USA? Lets say its far less than half, but it will be at least 10%. And that leaves us with smartphone sales in USA, which will be all Lumia then? Not so fast.. Nokia has been selling small amounts of Symbian in the USA especially those E-Series business phones that many European companies like to give the execs etc.. And as we saw from the Kantar numbers, Nokia's Symbian sales in the USA have been growing now, not diminishing. The Kantar June numbers suggest a level of 200,000 Symbian sales in the USA, powered in part no doubt by the launch of the 808 Pureview, but again, lets only say its 10% ie 60,000 that was Symbian sales in the USA..  Being VERY conservative and cautious, we subtract 30% from the 600,000 units to get 420,000 total USA sales of Nokia Lumia smartphones in Q2. And that is AT&T yes.. No its not. That is still split between T-Mobile and AT&T. AT&T is bigger than T-Mo, but T-Mo's Lumia 710 is cheaper than AT&T's Lumia 900. And T-Mo has the full Q2 to sell the Lumia 710, while AT&T started selling the Lumia 900 from Easter. My estimate of Lumia 710 sales at T-Mobile USA was 290,000 units in Q1. So yes, even if it fell dramatically, it will not disapper. Lets say the T-Mo sales have 'collapsed' and fallen in one quarter, to one third the level it was, for the sake of argument. Lets say T-Mo only sold 100,000 Lumia this Q2.

By those extremely 'AT&T-friendly' assumptions, out of the 600,000 total North America sales of Nokia handsets, only 320,000 would be on AT&T. This is THE BEST case possible. The reality will be less. And if you think, that 320,000 smartphone sales on AT&T is somehow 'a success' I have a bridge to sell you haha...

AT&T did exactly what all other carriers/operators did, who said they want the third ecosystem etc. They took happily the Microsoft Dollars and Nokia Euros and used the money for big extravagant marketing, and then ignored Lumia - and sold Android and iPhones !!! Exactly like European and Asian operators/carriers did before. After the free money ends, they complain that Lumia isn't really made for their markets or customers and isn't really competitive... And now we have the absolute clear numbers. AT&T could not have sold more than 320,000 units of Lumia in Q2. As we saw in recent analysis, the US campaign cost 450 dollars per Lumia sold, for a return of 45 dollars per device. That is not a viable business in anyone's book. So yes, this AT&T 'success' is anything but. Nothing like the millions the US based pundits expected. How's that for your 'third ecosystem' in the best Microsoft market and the big US carrier deal? Yeah. Those hopes of a Windows Phone empire are pretty well silly by now. And no, Windows Phone 8 will not make things better.

SO WHO HATES SYMBIAN?

Then there is the 'conventional wisdom' that Symbian is hated and Lumia is loved. Ah, is it so? One measure is sales, yes, another measure - very relevant - is average sales price. If your customers like your product a lot, they don't demand huge price cuts. If they hate your product, to move it you have to slash your prices. So, we heard that Nokia's smartphone average sales prices went up from Q1 to Q2, grew by 6% to 151 Euros. That is good, yes? Except that it was primarily due to a shift in the portfolio, from lower cost to higher cost smarpthones. We also heard in the Q2 results, that specifically Lumia ASP has fallen quite alarmingly by 15% from Q1 to Q2, and is now 186 Euros. Note, this was not due to the Lumia product line shifting from expensive to cheap, as Nokia launched both the most expensive Lumia, the 900 and the cheapest Lumia, the 610. But the prices fell by 15% in one quarter. That is very bad. Now what of those unloved Lumia and MeeGo smartphones then?

Nokia didn't talk about their ASP, but its easy to calculate when we know Lumia ASP. 4 million Lumia units sold at average sales price of 186 gives us Lumia revenues of 744 million Euros. That leaves us 797 million Euros earned out of the sale of 6.2 million smartphones running Symbian or MeeGo, and that gives their ASP of 129 Euros. And guess what. That ASP is up - yes up - by 1% from Q1. Who says nobody loves Nokia's Symbian and MeeGo then? While Lumia gets Nokia's biggest marketing launch blitz ever, and added to that massive spend, carriers like AT&T have had their biggest marketing spend ever, and add to that Microsoft throwing literally hundreds of millions of dollars more at Lumia such as giving away free Xbox 360 gaming consoles to buyers of top end Lumias - what do we get? The Lumia series ASP falls 15% in 3 months. And in its shadow, the 'burning platforms' utterly Osborned and Ratnered, indeed Elop'ped and unloved Symbian and MeeGo - see their average sales prices not just hold steady, but grow a percent in the same period. What IS wrong with this picture?

WINDOWS PHONE MARKET SHARE NOW 3%

So yes. Lumia sold (or actually only shipped) 4 million. That is up from 2 million in the previous Quarter. And if you remember Windows smartphones had 2% market share in Q1, and knowing Nokia is by far the biggest seller of Windows Phone smartphones, you might think Microsoft has now doubled its market share to 4% globally. And there is at least some analysis that Windows might have 4% market share in the US market currently. But what is the reality globally?

In Q1 Nokia accounted for 87% of all Windows Phone based smartphone sales, with Samsung and HTC only selling token handsets in a few markets like the USA. We've seen the Windows smartphone alliance splitting up and most major players in it shifting completely out to other platforms, primarily Android obviously, like Sony, Motorola, LG and Dell. And even of the two other major partners, Samsung and HTC both are clearly putting their focus on other platforms, Samsung on three - Android, bada and the about-to-be-launched Tizen. So the proportion of non-Nokia partner sales in Windows Phone is not increasing, it is at best holding steady and most likely shrinking. If we are generous to the partners, and say they will again sell 13% of all Windows Phone smartphones in Q2, then multiply 4 million by 1.13 and you get.. 4.5 million total Windows Phone smartphones on all platforms. How big is that? That is less than 3% global market share for this, so-called 'third ecosystem' haha. And this is definitely Nokia's peak - with the Osborning of all current Lumia smartphones, the Q3 numbers for Lumia will not grow, they will decline from 4 million. So right now, as we live in late July, the Windows Phone market share is heading down towards 2% once again. This with 'the mighty' Nokia on a full-court-press attack to push Lumia at every customer..

Windows Phone is not viable as an OS. It is being force-fed to unsuspecting customers, who end up hating it. If you've heard Nokia spinning a story about a Nielsen survey of Lumia owners loving it, and 95% saying they would recommend Lumia to their friends, that sounds very suspicious, doesn't it? It sounds like those communist Eastern European 'elections' where the President always got 95% or more of the total vote haha.. So whats the story in Balamory? The Nielsen 'survey' is a PAID study by Nokia !!! It is utterly biased and non-credible. There is one other study, a genuinely unbiased neutral survey of the same issue, by Yankee Group - which found the total opposite - 41% of specifically American Lumia owners rated it such utter rubbish smartphone, that they gave it a rating of 1 (worst) on a scale of 5 to 1. Four out of ten Lumia owners in America right now, rate their smartphone the worst thing they've ever seen. Is the reality 95% will recommend or 41% hate it? We also hear that operators - carriers - and retail - say it is a smartphone not suited for their clients - and we hear that Nokia's Lumia has the highest return rates of any Nokia branded smartphone ever - and we hear now that the average prices have fallen massively and the USA sales are tiny. Is it possible Yankee Group (the independent survey) is right, or that the Nielsen (paid for by Nokia) survey is correct? I say I trust Yankee Group's study and don't believe the one by Nielsen.

Why so bad? I told you so. I told you, there are 13 systematic major marketing problems, from the launch project to the actual design of the handsets and their production and manufacturing problems. 13 strategic blunders by Nokia and Elop in the current Lumia series up to and including the Lumia 900. If you don't want my view, then why not read the full list of 101 faults in specifically the Nokia Lumia versions of the Windows Phone based smartphones, from the angle of experienced smartphone users (now with more Elop'pia - its been upgraded to 121 faults, get your Lumia!). Its so bad, people who are stuck with Lumias can't get any kind of prices for them as used handsets. And don't think its because of the Windows 8 Osborning. Nokia's own Conference Call now yesterday told us the reality. Timo Ihamuotila, Nokia's CFO told of the "allowance" cost of 220 million Euro (285 million US dollars) that Nokia has now written off in its smartphone unit. For what? For having purchased components that Nokia over-budgeted etc, which yes, relate to all Nokia smartphones, but to a specific question about where that went, Timo specified the biggest cause of the allowance cost, was Lumia, then followed by Symbian with MeeGo the least affected of the Nokia smartphones. So we have heard very explicitly, that Nokia's own planning for Lumia sales has made actual component purchases (and commitments etc) that were too big, and the actual Lumia sales have been so dramatically worse, that it costs more than 100 million dollars in unusable componets already purchases into Q2. (Timo also advised this problem continues into Q3)

LUMIA PEAKED

So what else do we know and see? In the Conference Call, Nokia CEO Stephen Elop explained that even prior to the Microsoft announcement that existing Windows Phone 7.x generation of smartphones will not be able to be upgraded to Windows Phone 8 - that Nokia's Lumia series sales growth was stalling. Elop's words are "Lumia activations have been flat to up in the weeks following the announcement of Windows Phone 8". Think about that just for a moment. This was just before the profit warning. So Nokia Lumia sales for several weeks has stopped growing, has been flat! Nokia total shipments doubled from Q1, but the end of Q2 the Nokia Lumia sales have been flat (no more growth). The growth period has ended. Stop. Arretez! Halt! Detener!

Nokia's own CEO says that for several weeks already towards the end of Q2, Nokia's own Lumia sales had stopped growing. That was 'Peak Lumia'. On a Quarterly basis, the 4 million was it. There won't be more growth now. Now we are seeing the decline. Now the last lies are exposed, AT&T did not sell two million, rather closer to one tenth of that amount haha. And now that Microsoft has kindly Osborned all Lumia units, we will see a dramatic decline. Some carriers have already resorted to literally one penny deals, others have stopped total Lumia sales like T-Mobile Germany (the biggest carrier/operator in Europe's biggest country and very big Nokia client). And the smart ones, like Verizon (biggest carrier in USA) or China Mobile (biggest carrier in the biggest country on the planet and biggest smartphone market, China) laugh as they refused to take any Lumia and never got into this quagmire of upset customers.

NOKIA SMARTPHONE / DUMBPHONE SPLIT

So I occasionally publish the regional split of Nokia sales. This is calculated from Nokia Quarterly Results data, by a multidimensional optimizing equation, as we know the total sales volume for each of Nokia's 6 reporting regions, and we also know the total sales revenue for each region. Nokia also reports to us the ASP for both smartphones and dumbphones, so with a bit of patience, we can get a very close estimate of how the split of handset sales was regionally (usually it will be accurate to about 100,000 smartphone unit sales). Here is the latest data (with Q1 numbers in parenthesis)

Nokia Regional Market Split of Smartphone vs Dumbphone Sales in Q2 of 2012:

Region . . . Smartphones . . . . . Dumbphones  . . . . . . . Total Handsets 
Europe . . . 4.4 M . . (6.6 M) . . . 10.9 M . . (  9.2 M) . . . 15.3 M . . (15.8 M)
MEA  . . . . 0.1 M . . (0.1 M) . . . 19.2 M . . (21.3 M) . . . 19.4 M . . (21.4 M)
China . . . . 2.9 M . . (2.3 M) . . . . 5.0 M . . (  6.9 M) . . . . 7.9 M . . (  9.2 M)
APAC  . . . 0.2 M . . (0.3 M) . . . 28.5 M . . (25.8 M) . . . 28.6 M . . (26.1 M)
N Am . . . . 0.5 M . . (0.5 M) . . . . 0.1 M . . (  0.1 M) . . . . 0.6 M . . (  0.6 M)
LatAm  . . . 2.0 M . . (2.0 M) . . . . 9.9 M . . (  7.6 M) . . . 11.9 M . . (  9.6 M)

Source: TomiAhonen Consulting 21 July 2012 based on Nokia published data
Note: Above data is accurate to approximately 100,000 units or 0.1 Million per data item
This data may be freely quoted

What do we learn? Lets start with Europe. Look at the total number. Nokia total handset sales was essentially flat from Q1 to Q2, selling 15.8 million smarpthones last quarter and 15.3 million now. But then look at smartphones. Fell by a THIRD. This was and is Nokia's bestselling smartphone market. What does this tell us? That the customers ARE there, but the love is not there for explicitly Nokia's smartphone offering. And this is the market where Lumia has sold the longest and all four models are available.

I could discuss every data point on that table haha, but lets keep this to smartphones. What is the second biggest smartphone market for Nokia? Its China. And now look at the above table - the total Nokia handset sales continued to fall, down 14% in one quarter - but now go to the smartphone side. Nokia smartphone sales GREW 26% !!! And this is the market which has least Lumia exposure as both of the giant Chinese carriers refused Lumia and only the smallest took one handset and released it very late in the period. That growth is not Lumia (I'll show you later). That growth is Nokia smartphones yes, but powered by Symbian and MeeGo. Like China Mobile said, when they saw the Lumia 800. They said, yes, I will take that smartphone, but remove Windows from it, and put in Symbian - and then also remove all the Lumia nonsense and make it a normal Nokia device. The result is the 801T, a close cousin of the Lumia 800 but far more capable and obviously loved by the Chinese. Yes. the market which has least exposure to the cancer called Lumia, is the best Nokia smartphone sales success, and the market that knew Lumia the best, saw a catastrophic collapse of Nokia smartphone sales. The picture is not pretty...

LUMIA REGIONAL SPLIT

As we have the Lumia series ASP offered by Nokia in the Q2 results, and can therefore calculate the non-Lumia smartphone ASP as well, its possible to do a split of Lumia sales per markets (and of the other smartphones as a group per market also). This is how the Lumia sales are split by region:

Nokia Lumia Regional Market Split

Region . . . Lumia Smartphones
Europe . . . 2.4 M . . (1.6 M)
MEA  . . . . 0.0 M . . (0.0 M)
China . . . . 0.1 M . . (0.0 M)
APAC  . . . 0.1 M . . (0.1 M)
N Am . . . . 0.5 M . . (0.3 M)
LatAm  . . . 0.9 M . . (0.0 M)

Source: TomiAhonen Consulting 21 July 2012 based on Nokia published data
Note: Above data is accurate to approximately 100,000 units or 0.1 Million per data item
This data may be freely quoted

Note that Latin America was added so the biggest growth in Lumia for Q2 is just the launches across Latin America. Europe has the second biggest growth in Lumia. China, APAC and Middle East and Africa see no meaningful Lumia success. Now lets see how the decline in Symbian (and MeeGo) is proceeding:

Nokia Symbian and MeeGo Smartphone Regional Market Split

Region . . . Nokia Smartphones that use Symbian or MeeGo
Europe . . . 2.0 M . . (5.0 M)
MEA  . . . . 0.2 M . . (0.1 M)
China . . . . 2.8 M . . (2.3 M)
APAC  . . . 0.1 M . . (0.2 M)
N Am . . . . 0.0 M . . (0.2 M)
LatAm  . . . 1.1 M . . (2.0 M)

Source: TomiAhonen Consulting 21 July 2012 based on Nokia published data
Note: Above data is accurate to approximately 100,000 units or 0.1 Million per data item
This data may be freely quoted

Here the same story, obviously, Europe huge fall and China clear growth. Latin America has been able to do the perfect 1-to-1 conversion from Symbian and MeeGo to Lumia (2.0 million smartphones with no Lumia in Q1, now nearly 50/50 split with Lumia and still selling 2.0 million)

But yes. China. Where only a trivial 100,000 Lumia are sold in the market (3% of all Nokia branded smartphones sold in the Greater China region) and this is the last market to get Lumia, its the only market showing strong Nokia smartphone GROWTH !!! Meanwhile the market where Lumia has been pushed the longest, Europe, sees the most catastrophic smartphone sales collapse on all platforms. And globally Symbian and MeeGo smartphone sales prices did not lose one penny in value, grew in fact by 1 percent while Lumia prices are falling through the floor. Hello? What is wrong with this picture, Mr 'Call-Me-The-General' CEO?

ELOP YELLS FULL STEAM AHEAD, AS TRAIN WRECK CONTINUES

So what did Elop tell us about this catastrophy. He said that Nokia will continue with the Lumia strategy. He said that even as Windows Phone 8 comes, Elop will be not just supporting - but selling these current Osborned-and-instantly-obsolete four Lumia smartphones! Wot? While in the SAME Conference Call Elop said that before the Microsoft news, already Lumia sales had flattened out and stopped growing. Now the prices are in free-fall, the whole smartphone unit generates a Nokia-record loss, and now the full Lumia series has become instantly obsolete. And the smart CEO would say, I'll shift my portfolio to other devices that are more desirable. Not our Elop. He says that even when new Windows Phone 8 based smartphones come to the market, Elop will have Nokia selling these utterly undesirable Lumia smartphones running the current OS and its modest updates.

After 8 months of pushing Nokia Lumia, the series achieves 4 million sales over the latest 3 month period. Then compare to rival Samsung. They just announced that their flagship phone, the Samsung Galaxy S3, which costs more than the top of the line Lumia, the Lumia 900 - the more expensive single smartphone outsold the total Nokia Lumia line. Yes, how did Galaxy S3 do in only 2 months, at launch, when it is still ramping up to the various global markets? Sold 10 million units in those first 2 months. That, Mr Elop, is how you do it. Samsung sells the Galaxy on all carriers, in all countries, on all network standards, through all retail channels, and offers the broadest range of variation in the Galaxy series, to help the series. Oh, and it runs on an open-source Linux based, widely used smartphone OS platform, called Android. You know, open source like your Symbian and your MeeGo but not that Windows. And Linux based like your MeeGo but not your Windows. Android has 300 million users, like your Symbian but Windows, on both Windows Mobile and Windows Phone, doesn't have one tenth that user base...

Let me show you the two market pictures again. This was what Elop inherited when he became Nokia CEO. The top line, yes the blue line - that is Nokia's smartphone business. Apple's iPhone is red and Samsung's smartphone business is green. This was the reality of what Elop had - an utterly dominating, nearly 'crushing' global market position over his two strongest rivals.


The data and this chart may be freely quoted and reused


So first, yes, Nokia was nothing like 'in trouble' or 'on a burning platform' !!! Offer that picture to Toyota or Airbus or Pepsi or Sony, they will LOVE to be as big as their two nearest rivals, combined! While being profitable (while profits actually grew, not declined, in the latest period, and the first period you, the new CEO were in charge)

Yes, and from the picture you can clearly see, both over the whole period, and in the latest period in this graph - the 'current' situation as of Christmas 2010 - Nokia was growing more than Apple's iPhone! Growing faster (not faster 'growth rate' which always favors the smaller rival, but absolute growth in total numbers, which line shows stronger growth)

And what happened since? The Elop Effect happened. Elop decided to both Ratner and Osborne his products. He totally destroyed Nokia's smartphone position. And this happened:



The data and this chart may be freely quoted and reused


Note the irony, Nokia's own replacement solution, open source Linux based MeeGo, which is supported by Nokia's Qt developer tools, did help generate a recovery from the far-fallen Elop'pian catastrophy, to help at the end of last year. And then what happened right after the N9 and MeeGo were launched? The CEO refuses to support the N9 and the MeeGo platform, won't even sell the next MeeGo device the N950, and instead pushes Lumia on Windows Phone. Look at the continued catastrophy that came since then. Every market rejects this Nokia Microsoft partnership and Windows Phone based Lumia smartphones. The conversion from existing loyal Symbian users to Lumia users results in most churning to rival platforms.

And we hear Elop bitching about retail again. Elop was asked what he had learned from the failures of the first Lumia launches. He said of his lessons "the first is absolutely on the retail experience." Duh! He needed to 'learn' this? He's been bitching about Retail at EVERY quarterly result and profit warning since his self-inflicted fatal wound of the Elop Effect now one year and a half ago. Elop 'now' learns that retail is his most important factor to Nokia smartphone success. Duh !! I have written here, till my eyes are red and my fingers bleed, that if your retail channel refuses to sell your product - you die. Its that simple, this is not rocket science, Mr Elop, its that simple. And even a simple man would have learned this around, say.. MARCH of 2011 not July of 2012 !!! What is wrong with your brain Mr Elop !!!

Elop further explained in the Conference Call about retail problems: "That's an area where we have learned a lot about what works and doesn't work, about the amount of resource required to make it work and so forth." Ah-ha. So he has now learned what works and what doesn't. That's 'promising' isn't it. And yes, Mr Elop, what do you call a success? Lets see, he explains immediately next what he sees as his 'success' and tells us "AT&T is one where with heavy degree of focus saying, 'Here is the device. Here is the operator. Here are the stores. This is what we're going after.'"

So AT&T getting Nokia's biggest spend, throw in AT&T's own biggest spend, and they get Microsoft's megabucks, and end up selling at best 320,000 Lumias in one quarter? This is Elop's idea of success. While in China they say no to Lumia and manage to grow Nokia smartphone sales in one quarter by 600,000 !!! If you loved the hype and disappointment cycle of Elop'pian management, expect a lot more of the lies-and-more-lies campaigning from the Evil Twins Elop and Ballmer. If AT&T now is the standard of Nokia smartphone sales 'success' please please PLEASE Nokia Board - fire the Microsoft Muppet NOW !! Nokia was selling nearly a million smartphones per quarter in the USA before Elop decided to destroy Nokia's smartphone market with the Elop Effect. Why was that not 'success' if 320,000 suddenly now is the standard for Nokia to pursue? How badly did Elop fail his mathematics in school? Does he not understand 'larger than' and 'smaller than'?

SMARTPHONE MIGRATION RATE

And lastly, lets take the smartphone migration rate. I have been screaming about this, the ultimate proof of ineptitude by Elop. Nokia is not a newcomer to smartphones. Nokia is not the 'challenger'. Nokia is the incumbent. Nokia literally invented the smartphone. And Nokia was a dumbphone maker before that. So Nokia will not be measured by history, on how big profits it made or how big was its empire at its peak. The one measure that history will judge Nokia with, is when Nokia faced its paradigm shift, the shift from dumbphones to smartphones, did Nokia capitalize on that change or fall in the pursuit. Motorola was the world's biggest handset maker in the analog era. Then came digital mobile phones and Nokia the challenger took Motorola's crown. We can look at any number of global market leaders who fell to a paradigm shift. And this is how Nokia will be measured, not whether it matches Apple in profits haha..

And how was Nokia doing? It was executing this, the most strategic transition, most successfully of any legacy handset maker (ie far better than Samsung or Motorola or LG or SonyEricsson etc). Every single quarter of all time, in the history of smartphones, Nokia's migration rate from dumbphones to smartphones, had been ahead of the industry level. Nokia was literally ahead of the curve, and Nokia's handset unit accomplished this without one blemish, not once was Nokia's handset unit reporting a loss in this time while every other one of its rivals stumbled and reported losses attempting this transition. Nokia had victory in its sights.

Note - I am NOT claiming Symbian was better than iPhone or Nokia was more profitable than Apple etc. That is not the point. The point is, that as long as Nokia did it profitably, if Nokia could transfer its HUGELY dominating global dumbphone leadership position - 32% market share when Elop took charge, to smartphones during this decade, and did that profitably, Nokia would of course continue to tower over Apple and Samsung and other handset rivals. And if Nokia generated what kind of superphones and profits, but lost the transition, then Nokia would die in the process. That transition rate is what all legacy handset makers will be judged on, nothing else. We've already seen Motorola (and Siemens) die in that process, and Ericsson pull out of the Sony partnership too as the third former giant handset maker giant death.


This data and graph may be freely used and shared


From Q2 of last year, immediately after the Elop Effect, Nokia's migration rate from dumbphones to smartphones reversed, to falling behind the industry average. Now as we hear Sony saying they will shortly complete their transition to a pure smartphone maker, how is Nokia's transition? The industry average is about 34% in Q2. And Nokia's migration level fell from the 14% it had become, to 12% now !!! Yes, adding all Lumia and Symbian and MeeGo smartphones together, Nokia's proportion of total smartphones out of total handset sales fell even more, to 12%. While more than one in three phones globally sold is a smartphone, over under Elop management, Nokia reduces its rate and now only one in 8 Nokia phones sold is a smartphone. Elop sees victory, and prefers to push Nokia to defeat instead. But yes, I have written that Elop is the worst CEO ever seen in corporate governance, in any industry.

Thats what I got out of the Q2 numbers and the related Conference Call. So if you thought it was really really bad, and it can't really get worse - I am warning you no. It will get worse, and then worse yet again. Nokia is headed to 2% market share by year-end - it was 29% only 18 short months ago, the first full quarter when Elop took charge (with Nokia smarpthone sales growing and highly profitable and desirable)

Thats what I have for you today. If you want more info about the handset market, see my TomiAhonen Phone Book. And if you need to see where the overall mobile industry market is headed, including the handset part and smartphones of course, see the TomiAhonen Mobile Forecast 2012-2015.

UPDATE July 23 - A few very interesting Nokia-related stories broke over the weekend or early Monday morning. First of all, we hear that Nokia's feud with its history is now so bad, its spilled into punishing Nokia's loyal Symbian developers! Jan Ole Suhr (who goes by @janole on Twitter) who developed the most popular Twitter client app for Symbian, called Gravity, said he isn't currently interested in developing a Windows version. The story broke on My Nokia Blog. 

(And why would he? Why would most intelligent smartphone app developers, except those that have a strong Desktop PC Windows background, bother to go from a platform that reaches 300 million smartphones currently in use worldwide, ie Symbian, to one that reaches less than 10 million in use - Windows Phone (and while Symbian still outsells Windows Phone to boot!). And now, that Windows Phone itself has been Osborned so developing for current Nokia Windows Phone devices (ie Lumia) means developing to an a still-born platform - these are all my words, by the way, I don't want anyone thinking Ole started this feud with Nokia). 

Then there is news about Nokia's vanishing carrier relationships. Now we hear the Nokia PR spin of how Nokia intends to fight back, in a story written by the Financial Times. What is the 'brilliant' plan that Elop has cooked up for us (with the help of Ballmer no doubt)? To cut down Nokia carrier partners (I am not making this up) and set up exclusive partnership with select carriers (like Apple started but moved away from this model as it is too restrictive to growth!). So its not just that Elop wants to copy everything Apple does, he even wants to do those things Apple itself has shown were not optimal.. Yes. So the plan is to not sell Nokia Lumia on all carriers - only way to approach anything like the scale Nokia once had, but now to abandon most of those, and pick select few carriers, on an exclusive basis, and 'allow' those to sell Lumia and Windows Phone !!! How utterly nuts is this?

But yes, this is Elop's plan. He previously told us he wanted to cut Nokia's global footprint, to focus on select markets (one of which is the North American market where Nokia is weakest) and then to also limit Nokia's broad distributor and retail power (which we have already seen in action with several retail channels ended) and now - if this utter destruction of Nokia's market power is not enough, Elop wants to abandon most Nokia carrier deals too, for a few 'exclusive' deals. And then to throw good Nokia and Microsoft money into this pit, to try to make the carriers take the bait. There are talks apparently with Orange of France, according to the FT, which would also mean in the specific case of the UK, also T-Mobile (of Germany) because in the UK, the two carriers are in partnerhip. Now how would this 'exclusive' deal with other countries, haha, like say Germany where T-Mobile was so disgusted with Lumia and Windows 8 fiasco, they did the rare public announcement that they won't be selling the Lumia 900, even after it was already announced and promoted in Germany.

And lastly, some salt into the wounds of MeeGo fans. Did you ever wonder 'what if' ? What if Nokia had selected Android instead of Windows Phone? I said at the time that while I didn't agree on ending the MeeGo path to go Windows Phone, even Android would have made more sense, because at least Android is Linux based and thus a cousin of MeeGo, so for developers etc, would have been far easier, and both MeeGo and Android are compatible with Nokia's Qt developer tools that can be used to make apps for Symbian etc (but cannot be used to make apps for Windows Phone). So yes, what if Nokia had gone Android. The biggest handset maker would have adopted what is now the biggest OS platform. Rather than Nokia and Microsoft as Slave and Master relationship, we'd have Google and Nokia as equal partners in an open-source and 'do no evil' type of friendly eco-system partnership.

So what would an Android based Nokia superphone look like? Did you want to try one? Would you know, there already exists a port of the brand new Android 4.1 Jellybean OS, not for the Lumia series, no. Not for the 808 Pureview, no. But for what Nokia superphone? The best one of them, of course, the N9 !!!!  Yes, today you can have the best Nokia phone ever made, with Google's newest Android 4.1 Jellybean OS, as reported this morning on the Eastern Morning Herald. Why on earth is Elop ending the sale of this highly profitable highly desired and still well-selling phone, while forcing the Osborned Lumia series down our throats? (And if some independent programmers were able to do an Android port for the N9 this fast, why could Nokia not move to Android, rather than stay with Windows, and release the N900, the N9 and the N950 on Android, like next month! Like yes, in August! Come on, three Android Nokia smartphones could be sold next month, rather than live in the hope of some la-la-land Windows 'third' ecosystem.

Comments

[jo]

windows phone is not being sold here in latin america in thousands

no operator in here in taking it,

claro was selling pink n9 for a while. that its. but no lumia-

many of those "million" are not sold, they may even carry dust on a warehouse forever.

[Tizastatico]

I am in the Lat. Am. area and the Lumias where pushed very strongly. Microsoft also has a very nice strategy for app development with the push of MSDN. We actually have a way to study for a "professional mobile developers" title and they use Microsoft tools (guess which OS they target).

However the prices for Lumias devices rose 50% after the launch and the sales are now flat cause the Android devices are much better and far cheaper.

[jo]

@Tizastatico

not true in all central america, mexico and venezuela.

carrier like movistar, claro are not taking lumias.

at this rate sony , is going to be selling more smartphones than nokia in q4 2012

[Tizastatico]

@jo:

But i can see in Telcel.com Lumia 710 and Lumia 610, with Telcel holding a market share of 77% for Mexico.

In central america TIGO is the strongest one. I know they dont sell Lumia in Colombia, but they are the smallest one here (12% of the market). Claro Colombia and Movistar Colombia, both sell Lumias, but they are much expensive after the initial launch.

[Interested to know]

"What is wrong with your brain Mr Elop !!!"
LOL.

Doesn't Finland have something like the US SEC?

[Vinicius]

Nokia is spending a TON in ads in Brazil (Biggest Latin American Country).

BUT, I don't see any being sold or used.

I don't know a SINGLE person who bought a Lumia. Instead I think Apple has like 50~60% of the Smartphone market (that is at least 50% bigger than reported, due to illegal importation) and Android has about 30% with the rest to Symbian. Others not even blinking in the radar.

Those 900K MUST be stuck in warehouses. And with the price they are trying to push, they'd better buy new warehouses...

[PhoneBoy]

To be fair, I did run into a single person using a Lumia in the real world. They liked it. But in reality, all I see of most people's phones is iPhone this, Android that, or the occasional dumbphone.

So I wonder who, if anyone, is buying these Lumia devices.

[m]

> Doesn't Finland have something like the US SEC?

I wonder too: What will it take to get Elop and the board investigated? Can people do something to get this going? Petition, raise awareness etc???

[Vinicius]

One thing to note here.

If I read this correctly, the CFO said they have about 285M USD on warehouse stocked components, right?

Isn't it right to assume the distributors have a healthy amount of stock, and that's why Nokia didn't turn these components into phones?

If that's right, then the number of SHIPPED phones is even more meaningless.

I guess we will find out next quarter, because if this is true then Nokia will make/ship a very small amount of phones.

[tired]

Mr. Bean for Nokia CEO. Couldn't Hurt.

[P]

This is VERY SIMPLE. Elop doesn't work for Nokia, he is working for Microsoft and Microsoft is using Nokia to market Windows 8 while the worst competitor is destroyed.
Nokia has the dumbest board ever, or they have been manipulated in some way.

[Jussi]

You wrote: As we saw in recent analysis, the US campaign cost 450 dollars per Lumia sold, for a return of 45 dollars per device. That is not a viable business in anyone's book

You know this is untrue. Nokia surely got more than 45 dollars per device. Only manufacturing costs are more than 200 (Euros or Dollars, I do not recall). Also Microsoft and AT&T contributed to marketing efforts.

[vladkr]

I have a strange feeling about all this story. In one hand, we could see in the 60s that apes could fly spaceships, in another hand we see a guy, who has a MBA from a well reputed Canadian university ruin Finland's flagship making mistakes a kid would understand.

I wonder what could Nokia's current state would be, if it had an ape, or even a plant (a ficus) at its head instead of Elop. I guess it wouldn't be that bad.

To sum up : Nokia doesn't manufacture anything any more (devices are made by Compal and Fly mobile), it doesn't develop the OS (Microsoft does it)... it doesn't make its own components like Samsung does for instance, and it sold (gave almost for free in fact) most of its patents.

How is it supposed to earn money?

By the way, Elop fired several thousands of workers to save money, but also hired directors who earn almost as much as all the poor guys who have to find a new job and who had to change their, and theirs families' lives ? What's the point in that ?

Elop is more a hidden son of Kim Jong Il with some African dictator than an East-European Party general secretary. How can he stay in Finland ? How can he face people in Finland with no shame ?

[Jamie]

Elop has destroyed Nokia: sales, workforce, manufacturing, and now busy detroying the brand through a failed strategy and marketing hogwash. Of course he will walk away when his job is perfected. Even now, in the face of poor results his paymasters continue to hamm the line that Nokia was in decline when he took over.
What is surprising and worrying is that the Finnish Govt/parliament does not take an interest on this case. It does not hold even one enquiry to find out what went wrong in their largest and flagship company. Many Finnish people loosing their jobs not to mention pension schemes and local governments funds going to waste. There are many questions that Finnish people would like answers to for example why close manufacturing in Finland but move it to Argentina. If mistakes were made by Elops predecessors let him tell the parliamentary enquiry.

[Anonymous]

Apart from the opinion of this blog's author, there is OBJECTIVE evidence that the current CEO of NOKIA is acting according to some agenda which is not the best interest of NOKIA as a company, or its shareholders.
At the same time, there is a deafening silence on the part of the Board of Directors of NOKIA.
Regardless of whether Elop is just too stupid, too incompetent, a saboteur, or a common criminal, the status quo should be changed before it is too late (maybe it is already too late).

Consequently, the question is: what laws in Finland (or elsewhere, where shares of NOKIA are traded) can be used to change the situation.
Can the readers and posters on this blog can provide a realistic legal path to change the situation?

A non-Finn, non-shareholder of NOKIA, but anti-stupidity and anti-criminal anonymous poster.

[P910i...]

@Tomi - thanks for the analysis.

Minor correction: T-Mobile Germany didn't stop all Lumia offerings, though they rejected the Lumia 900. T-Mobile still seems to have a healthy supply of Lumia 710 and 800, and are now offering an Xbox 360 with a 24 month mobile contract, and include one of older Lumias for free.... ;-)

[Mark]

@vinicius

How is the attitude of people in Brazil to buying a Microsoft product? There seems to be a love/hate relationship with Microsoft (and the US in general). Owning a US product is a status symbol but people resent the political and economic power wielded by the US in Latin America.

So for example I know people who rather than using free software will use cracked MS products - because the US product is "best" and not paying for it is a poke in the eye for Uncle Sam.

If that is a common dynamic in Brazil, it could be affecting the uptake of Windows Phone either positively or negatively.

Another dynamic is Brazilians' love of novelty and of branded products, versus the very high cost of these devices in relation to earning power.

[Miguelo]

There is still one key person in Nokia: Marko Ahtisaari. His designs will catapult Nokia to success when the time is right. If there is a counterpart in Apple who is at the same level it is Jonathan Ive.

Well see Nokia rising!

[TimoT]

This Canadian Demolition Derby is truly trying to achieve the world record in Company Destruction (Did I say he is from CANADA!). Customers are screaming Linux and even Symbian based phones would sell much more than Windows crap but this Elop just keep on elopping towards the cliff at ever-increasing speed. I am thus starting a boycott against whatever hell Canadians are nowadays exporting, like...moose meat and timber? :)

Plus the forrest gumpy like board of directories who are totally clueless. One of them is from Norwegian state oil company Statoil, one from a paper mill company (Stora Enso) and one even from cosmetic industry (L'Oreal). Yeah, I can clearly see great synergy and Zen like wisdom of choosing those jokers to a MOBILE PHONE company board!

[Jamie]

The Nokia shareholders tried to oust Elop already in 1st Quater 2011 but the then EB stopped that. With Nokia key employees leaving in droves, there is little hope for the company. Nokia does not have the X years required to build a third ecosystem as fronted by Stephen Elop. In fact, Elops only strategy now is to make Nokia a high street shop for Microsoft's phone products.

Time for Finnish government or the parliament to appoint an enquiry onto Nokia's recent activities.

Some questions for refference..
First question, does Nokia's collaboration with Microsoft violate stock market regulations on Fair Trading and competition ? There are strong grounds to suggest that the co-operation violates fair trading rules, as Nokia is more than an OEM for microsoft products.
Secondly, market status of Nokia before Elop assumed office; who were the share holders and how that composition changed before OPK's removal from office ? What were the market conditions that prompted Elop's appointment ? And the decision itself, who made the decision and what legal framework was used in his appointment ? You don't just pick a CEO from the competition while he maitains shares and loyalty to former employer.
Thirdly, Elop's activites as Nokia CEO and team he has brought in to the EB of Nokia. Who are Elop's appointees, their activities in the past and role in Nokia. Has Elop always worked in the best interest of Nokia as a company, its shareholders and its customers ?
Fourthly, Elop's activities as Nokia's CEO, the leaked memo and other leaks, what was his role in these leaks ? What was done to find those that leaked the memo and subsequent leaks including the "something special to happen on September 7th"? What was Elop's role if any on the leaks from Nokia ? Are these leaks a result of new company policy under Elop ?
Fifth, current staus of Nokia finances. There is reason to believe the results shared for 2nd Quater and overestimated. What are the actual Nokia results and what is state of the Nokia Patents, assets and financial health ?
Fifth, Nokia's contract with Microsoft where quote "Nokia is also tied into Microsoft on a long-term contract, restricting Nokia's ability to ditch the Redmond-based software giant and adopt any more popular or cheaper alternatives". Which members of the EB negotiated this contract ? Was this contract agreed before or after Elop's move to Nokia ?

There is reason to believe that illegalities have taken place. In UK or US Elop would have been fired and legal proceeding initiated against him for acting against his company's best interests. He has publicly accepted that "They Nokia leadership (but I'd rather say Elop as he is captain of the ship) got their strategy wrong". But this was no honest human mistake but there has been a conscious, deliberate, and sequential policy, plan to destroy the company from within.

This is why the Finnish Givernment and Parliament need to investigate Nokia board to get to the bottom of what has happened. Finnish people deserve to know why their community has been hit thus, loss of employment, pensions and local authorities put at risk.