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« Nokia Q2 Results: Bad bad and will be even more bad | Main | If Apple is running away from this strategy, and Samsung growing by opposite strategy, why is Elop trying 'exclusive' carrier strategy for Nokia and Microsoft. He must be mad! »

July 20, 2012

Comments

vladkr

MIguelo:
I'm sorry if I'll disappoint you, but Marko Ahtisaari didn't do anything special. N9 was already designed when he became "head of design" at Nokia, and then, all he did is accept Compal to put qualcomm hardware (for WP) in a N9 body for the Lumia 800/900. Lumia 710/610 ? Just a clone of Samsung Focus... nothing to be proud of.

Unfortunately, Marko is as useless as the rest of executives that have been hired lately.

There is still two things that shock me :

At Walmart (or any supermarket), if a cashier makes a $1 or $2 mistake, (s)he has to refund from his/her salary to compensate the mistake. If the mistake is repeated, the employee is fired.

At Nokia, a guy is paid 6M Euros a year (and I'm sure he has an army of accountants to make him sure he will pay a minimum amount of taxes) and he makes mistake after mistake. His salary is maintained, and he still is not fired. That I don't understand (why not taking example of Steve Jobs who used to be paid only through his stock options ?)

About Finland... what can government do against a private company? They already do what can be done, like a refund of subsidies Nokia got (Romania, Germany, Finland)... but that's it. Nokia isn't state owned, so state power is limited.

Vinicius

@Mark

You're right, here piracy is sometimes taken as a kick in the nuts of the USA, but this attitude and mentality is more disseminated on the lower economic population. A population that wasn't going to buy a smartphone anyway.

The richer tend to aspire to things made in the USA, Europe and Japan. Apple, for instance, is considered God made a product. Microsoft is mostly well respected.

Nokia is still considered the better built unit, that lasts longer, has better battery life and camera, but still people like more cores and more apps.

I don't think any preconceived notion about MS is affecting WP sales, no. I think that, if anything, MS reputation should help it gain traction where it needs.

Kenny

Tomi, don't forget that Nokia gave a free Lumia 900 to each AT&T employee. It was reported that Nokia spent US$25 million on this. How many phones is that? Based on $250 per phone that comes to 100,000 units. Surely that should take down AT&T sales by a couple of notches?

CN

@Kenny

You are serious, aren't you?

So, all those increased revenues (+38% Q-o-Q, +45% Y-o-Y) in North America (Devices & Services) came through what? Oh yes, IPR's of course.

Simple question to many of the guys around here. Why do you assume that whenever there are costs associated to entry efforts, Nokia is the only one carrying those?

JK

Tomi's blog on the Elop/Nokia mess is not only spot on right but the predictions have been scary right.
The biggest mistake Nokia's board did was not elevating Anssi Vanjoki to the CEO role and instead going with the incompetent Elop. Where would Nokia's sales be if Anssi had been promoted?
-Symbian sales would be migrating to Meego in mass. The ability to port all your apps through QT developement would have ensured it.
-Meego N9 would be the flagship phone for every carrier in EMEA & APAC. N.A. operators would have jumped on it by now with the promise of a 41 megapix camera coming to the lineup.
-Symbian price points could have been driven low enough (because the volume and scale would still be second to none)to compete and hold share against low price Android.
-Carrier relationships wouldn't have been toasted. Anssi was a master at carrier relationships, Elop? He is still trying to "understand" and "learn what it takes" to appease the carriers. WTF!?
-Symbian was most carrier frinedly billing OS and Meego would have been the same.

Instead Findland got sold some smoke and mirrors from the boys in Redmond. It was Redmond's last attempt to get into the Mobile revolution that was being run by Apple and Google in the West and Nokia in EMEA & APAC... Funny how bad intentions and dishonesty never pan out, even in big boy games.
Which brings up the point, what is wrong with the Finnish government?? It is blatantly obvious what took place, the biggest conflict of interest is just one point of corporate criminal activity here. The list is endless.. If the board is too shocked or scared to take action what about Findlands own government? Here in the US CEO's have done much less and are in Federal prison doing long terms.

Spawn

@Jussi

> Nokia surely got more than 45 dollars per device.

This is the profit. That is what stays after you substracted the cost of a device from what you got for that device.

> Also Microsoft and AT&T contributed to marketing efforts.

First he did not say otherwise and second that is not the point.
The point is, that for every sold device there is a lose, a gigantic lose. Who is losing that money is not relevant. Relevant is, that the Lumia burns cash rather then bringing any in. Maybe good to increase sells but long term its unhealthy and will be.changed what will have a future negative effect on the market share.
Those 3% market share are temporary bought. They need to go future down to make profit rather then lose. But then the number is already so small that its just impossible to make profit with Lumia.

@P910i

T-Online stopped to take new Lumia.
What is sold now is very likely inventory.
It would make no sense to only abort Lumia900 and keep the cheaper models in at a high-price market like germany.

@JK

> Meego N9 would be the flagship phone for every carrier

Not necessarly. There was also the n950 and rumors are, that a theird model was ready already.
It looks as part otlf the original before-Elop strategy was to deliver all kind of different models running MeeGo.
One with keyboard (n950), one compact full touchscreen (n9) and I can imagine also differenr form factors (Galaxy like) with diffwrent price tags (Lumia like).

Mark

Forgive me if this is obvious, but having had a look at the results it was striking that Nokia received EUR196M ($250M) "platform support" from Microsoft - which works out to $62 (or EUR49) per WP7 device shipped.

There is a line in the results which states that "total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitments".

So in effect Nokia are getting the OS for free - no real loss to Microsoft, as it is software sales they would not otherwise have seen. On the other hand if it were not for that agreement, Nokia would be a further EUR200M in the red.

If that agreement comes to an end Nokia will have to hand a really big chunk of the device ASP over to Microsoft (OK it mentions a minimum royalty so if the WP7 devices are successful the royalty per device will be lower.

Spawn

All of the members of the BOD of Nokia joined in or around 2007. All the old garde that made Nokia a success is gone. Also those BOD was that decided that WP is going to be Nokias future else Elop would have been ruled out beforehand. The change in strategy, the focus on the US market and the radical shift was decided by them, by all of them.
By no means will they do anything cause admitting that the decision done by all of them back then would mean that its them who are responsible for Nokias downfall. They need a way to change direcrion while keeping there face.

CN

@Mark

One note: without the agreement, Nokia would not be selling WP devices and Nokia would not pay license fees to MS. So, they wouldn't really be another 200 MEUR down.

Other that that, you have it right. Currently, Nokia benefits, MS pays them 1 BUSD annually. But as you may have seen, many are actually wishing that Nokia would become the net payer, in their relationship with MS. This happens when volumes are high and license payments exceed one time fee of MS to Nokia. But then again, I don't think Nokia minds ending up paying MS, I assume they would at this stage be profitable with each and every smart phone shipped. And that is something they are not today, but you heard them saying it's one of the high priorities to get Smart Device segment profitable the soonest.

Tankard

I am ROFL:ling as I read this, MS gives some 200 million USD and pays some 200 million USD back as royalties (the effective outcome of the agreement). So MS gets everything FREE, i.e. marketing and realization of the devices with WP - and Nokia RISKS everything AND on top of that, does not profit a s*it, but on the contrary, bleeds money for every Lumia produced.

This is really worth a roaring laughing for an outsider, but worth capital punishment for every one responsible!!

Sander van der Wal

Why the assumption that people who bought Nokia smartphones will keep buying them? The Europans have rejected the Lumia, but that is because they think iPhone and Android are better than any Nokia phone, either Lumia or Symbian. Nokia lost their customers in Europe in 2010, and that should be visible in you data.

Sander van der Wal

A very interesting article in the Wall Street Journal came to my attention: http://online.wsj.com/article_email/SB10001424052702304388004577531002591315494-lMyQjAxMTAyMDEwODExNDgyWj.html

In it, the argument is made that Nokia was shifting its strategic attention to dumbphones at the time iPhone was introduced. Hence, Nokia was caught completely off-guard by the iPhone and the apps revolution.

Interesting is the first paragraph, where it is claimed that the first iPhone lookalike was actually made by Nokia 10 years before Apple.

Mikko

> Here in the US CEO's have done much less and are in Federal prison doing long terms.

Look again. What Elop has done is peanuts compared to any number of Wall Street bankers, who've only received bonuses for their exploits.

The name of the country is spelled "Finland".

I'm not sure what you expect the Finnish government to do. The majority of Nokia is owned by American interests, and if the board appointed by them supports the CEO, that, by itself, is none of the business of the government. You'd have to prove that Elop and Nokia have violated the rules of the Helsinki stock exchange or the law concerning public corporations. The deal with Microsoft is secret, and from what I understand, no government entity is privy to all of it. If Elop has sold Nokia down the river on behalf of Microsoft, as far as anyone can tell, he's done it with the blessing of Nokia's owners (the significant ones of whom are not Finnish).

allen83

Hi tomi! I know this is not part of your topic but what do you think about the transparency program or something of nokia now with regards to their software upgrade? Do you think they should also disseminate the actual numbers of n9 sales? Sorry for changing the topic just plain curious just read an article in phonearena. Thanks!

MikaA

The question remains, has the destruction and dismantling of Nokia solely been done in the US software industry interests? Nokia had the only operating system (and an ecosystem) that doesn't have roots in the US. The recent incidents with Nokia start to draw parallels to Rauma-Repola Oceanics, a former Finnish company that shut down by US intelligence agencies.

It is hard for me to believe all what happened to Nokia could only have been a series of mistakes, but then again, why aren't the shareholders revolting? All hope lies in the Windows Phone 8, and it really doesn't look good.

Spawn

@Sander van der Wal

> either Lumia or Symbian.

Symbian was killed beforehand. Not by customers but by Nokia.
Lumia was rejected by the customers as you wrote yourself.

> Nokia lost their customers in Europe in 2010,

"Symbian maintained its status as Europe’s leading smartphone platform in July 2010"

Source: http://www.marketingcharts.com/direct/symbian-leading-european-smartphone-platform-14219/

Symbian may have lost market share before but you have to take into account the position they had.
See all the predictions that say Symbiab would be able to keep the lead next years. That was before Elop burned it. After that it was essential dead. When Ballmer.says tomorrow Windows is not competative, a burning platform and Microsoft will abort Windows to switch fully to Linux, Windows.would be dead too. You can kill everything that way.

Spawn

@MikaA

> doesn't have roots in the US.

or is controlled by the US. A very valid point.
Killing Symbian AND pushing WP are both in line with that. And plan B, Nokia as non-US market leader is bankrupted, would be too.

> why aren't the shareholders revolting?

What can they do beaidw filling sue and moving investment to something else? Both happened.

> it really doesn't look good

http://nokiaplanb.com
http://www.geek.com/articles/mobile/nokia-shareholders-have-a-microsoft-free-plan-b-20110215/

Seems its not executed through.

AtTheBottomOfTheHilton

There is no plan B and there will never be a plan B. The goal was to kill competing OSes and use Nokia in order to make WP popular, which of course has failed. If Nokia continues to fail, Microsoft would rather see that Nokia goes bankrupt in order to buy up valuable remains of it. Basically, as long as Nokia is valuable to Microsoft, they will keep it alive otherwise they will just kill their useful idiot.

Now, there is one particular issue here that I think is obvious. There is a saying that "capitalism doesn't know national borders", which means that there is no nationalism associated with capitalism. What I've seen here is the absolute opposite, which means that Nokia US shareholders have been investing in Nokia in order to kill jobs in Europe in order to move them the US. This is the part that the Finnish government doesn't understand and it would not be possible the other way around, plant a stooge CEO and kill a US company. They would have spotted it early and stopped it.

I think what the Finns must learn is that these types of hostile take overs happen and they must be realistic enough to legislate against it so that this cannot happen in future otherwise there will be not much left to do Finland. After Nokia is gone, I think there will be a lot of inquires what happened but it will not matter because it is already done.

So Vatar

@ Michael = Baron95 = LeeBase

Newsflash: Nokia's strategy before Elop was to phase out Symbian. Their chosen strategy was Qt on top of a decreasing Symbian, and an upcoming Maemo/Meego. Nokia management was incapable of executing this strategy. Managaement got replaced.

Of course many things changed in 2011. For whatever reason BoD and Flop thought it is a good idea to abandon their "tribe in highlands" (your words) customers and bet everything on - no, not Android, which was much closer to Nokia's technology, but on MS Windows Phone, a system that flopped from the beginning and continues to flop despite (or because?) of Flop's leadership.

So, Nokia in its wisdom exchanged a promising strategy with a flopping one, while execution is as awful as it has been for years.

Combine wrong strategy (WP only) with dysfunctional execution (burning memo, not willing to sell non WP phones in major markets, badmouthing your own products, repeatedly screwing your developer partners) and you get what we see now: A train wreck of a company that is right on Kodak's path into obsolescence.

Contrast that with what a capable management could have done with the resources Nokia had available only 2 years ago.

KM

>> Nokia's failure with Symbian was inevitable, when real competition showed up.


Not only that. I think that by the end of 2010 anybody looking further than quarterly profits and numbers of handsets sold could clearly see the picture - and it wouldn't be much different than what RIM is experiencing now - with 2 differences: Nokia had a replacement system ready (Meego) but on the other hand they have no service infrastructure backing their systems unlike Blackberry.

Anyway, Symbian was dead at that point. In the end it's irrelevant if Symbian had been replaced by Meego or by WP7 - at the point of announcing the replacement its life would have been over as a profit-bringer.

I have no idea how Meego would have been received outside geek circles where other things count, like availability of apps. Even if it had been received well there would have been a difficult path ahead until it could have moved into profitable territories.

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