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

[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.