Picture Tells it Better - first in series of Nokia Strategy Analysis diagrams, how Nokia smartphone sales collapsed

So yes. Yesterday I wrote the long blog where I only focused on Nokia's own risk assessment, in the SEC filing Form 20-F for the NY Stock Exchange from March 2011. And I found 20 major risks that had come true, and why Nokia's Windows Strategy is utterly failed and doomed. But its a very long tedious blog. Now I will embark on a series of single-topic blogs about the Nokia strategy failure, illustrating each failure by one graph and related stats and/or analysis.

Lets start with the obvious. How did Nokia's strong smartphone unit sales growth turn suddenly, instantly, into a suicidal collapse? This is how it happened:




This graph may be freely shared

Note how Nokia had steady growth from each year-half to year-half. Here is the data by year:

NOKIA ANNUAL SMARTPHONE SALES BEFORE AND AFTER ELOP EFFECT
Year 2009 . . . . 68 million smartphones
Year 2010 . . . 103 million smartphones
Year 2011 . . . . 77 million smartphones
Year 2012 . . . . 35 million smartphones
(Year 2013 . . . . 25 million smartphones, TomiAhonen Estimate)
Source: Nokia Quarterly Data up to Q3 2012, after that TomiAhonen Consulting Estimate
This table may be freely shared

Nokia smartphone sales grew 53% from 2009 to 2010, until they turned instantly into catastrophic decline. From its peak sales in Q4 of 2010 when Nokia sold 29 million smartphones, exactly 12 months later that was down to 14 million per quarter - a fall of half, and now for Q4 of 2012 we expect sales at the level of about 7 million (my forecast is 6.8 million) which is again a collapse of half in just 12 months. Never in the history of mobile phone handsets, has any leading brand fallen this fast, not Siemens, not Palm, not Motorola. This is a world record collapse of a market leader. Bear in mind, while this happened, the global smarpthone market grew by 50% in 2011 and 40% in 2012. Nokia was the only major smartphone maker to actually see decline in unit sales while the industry grew so strongly over the past two years.

The Nokia strategy in 2010 had the industry-leading growth in absolute numbers, Nokia smartphones grew in unit sales more than Apple's iPhone or Samsung's smartphones or RIM's Blackberry. Nokia was also profitable doing this, and Nokia profits were increasing.

Every published mobile industry expert organization who made a Nokia-related forecast during 2010 was convinced that Nokia would continue as the world's largest smartphone maker into year 2011 and 2012 - that ws the consensus view, not one dissent! And every one of those industry experts, when considering Nokia using Symbian and MeeGo based smartphones, projected strong GROWTH in Nokia smartphones through 2011 and 2012. Every one of those experts was convinced that still today at the end of 2012/start of 2013, Nokia would be safely the world's largest smartphone maker. (that is the blue dotted line in the diagram)

That was before the Elop Effect happened in February 2011, and CEO Stephen Elop's ill-advised Microsoft strategy that caused instant Ratner Effect and instant Osborne Effect, which collapsed Nokia smartphone sales and plunged Nokia's smarpthone unit into ever bigger loss-making from which Nokia has not recovered. In fact, by Q3 of 2012, Nokia was reporting a massive 48% loss per smartphone sold, while the smartphone sales were vanishing.

When Elop announced his new strategy, he did not promise the previous growth rate of Symbian/MeeGo. But Elop did promise his new Windows strategy would achieve a 1-to-1 transition from Symbian to Windows Phone (that is the horizontal orange line in the diagram). His strategy had a two-year time span. That is now coming to a close on 11 February, 2013. So for Elop to 'achieve' his stated strategy, he should be able to deliver about 103 million smarpthone sales per year, now in 2013, all those migrated from Symbian to Windows Phone. In 2012, Nokia only managed to sell 35 million smartphones. That is likely to still fall further in 2013, to about 25 million for the full year, and about 2.5% market share. Nokia held 29% market share when this mad Microsoftian Misadventure was announced two years ago. This is comprehensive strategy failure.

Obviously, if you as CEO introduce a strategy that results in a world-record collapse in your market, then your strategy has failed and you have presided over a world-record in management failure. That means, obviously, that you as CEO are a total failure. Arguably, a world-record fool as CEO (but we'll get to that, one picture cannot yet prove Elop is the worst CEO of all time, although this first picture gives him a strong start in that race). And yes, Nokia's Board is complicit in this too - for them to tolerate the Microsoft Muppet and the Mad Microsoft Misadventure, the Board is also incompetent (or worse, in collusion with the delusional CEO) and must be fired.

I will return with more pictures and analysis of Nokia's smarpthone strategy fiasco in the coming days and weeks. 

UPDATE - second picture in this series is about Nokia and competition, and how Apple's iPhone and Samsung branded smartphones did in the race against Nokia smartphones under Elop. See here Greatest Individual Management Mistake Ever Made - Nokia vs Competition in One Picture. 

Comments

[Tester]

I know that things looked bad at the end of 2010 for Symbian. I have been there and took part in the discussions when the option came up to support Symbian.

But that doesn't mean it had to stay that way. The interest to do Symbian apps was there, it was just the tools that created a barrier.

So, had Nokia stuck to their course, rolled out Symbian with Qt support and then MeeGo with Qt support the developers would have accepted because it was still a significant market share at that time.

Nokia could have fixed the problems with a little patience instead of tossing it all into a dumpster.

[Stefan Rosander]

Interesting article: "crosoft paid $1bn to help Nokia's risky transition to Windows Phone and continues to support it with platform payments of $250m per quarter - which Nokia admits is slightly higher than the royalties Nokia returns to Microsoft."

http://www.theregister.co.uk/2013/01/08/elop_anything_goes/

[MarcoAustria]

Asymco/Horace Dediu did also a quick retro prospect of his Nokia forecast (Feb 2011) vs actual sales:
http://www.asymco.com/2013/01/10/getting-to-know-the-meaning-of-sisu/

The graphs support Tomi and also show growth up to Q4 2010 in smartphone sales.
Starting with the Elop effect (Q1 2011) they collapse.

[John]

Microsoft is also passe, I remember being in San Francisco in a music venue, going into the men's room and watching "No Microsoft Culture" stickers all over the place.

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