So who's your daddy in mobile numbers? Lets look at the forecasts made about Windows Phone, after the Nokia-Microsoft partnership was announced. If you remember, I recently examined the accuracy of the Nokia forecasts made (and found that I had once again been the most accurate forecaster in mobile. But will that reputation hold through this, very challenging Windows Phone forecasting conundrum?)
When the world's largest computer software company has said
that the future of computers is mobile, and then sees its position in software
for mobile phones (ie smartphones) fall from 12% and second biggest to 2% and
6th in the market - and at that point, promises to grow back to a 'third
ecosystem' - it is either being brave with a cunning plan, or being foolish
with forlorn hope and hype.
SELLING THE DAYDREAM
But it is the corporate CEO's job to sell new strategies to
investors and partners. It is the analyst's job to evaluate that prospect - and
to give guidance on how it might pan out. Nobody can ever guess perfectly what
happens in the future, but a good analyst makes forecasts that are close to the
truth - and less wrong than forecasts by others. That Steve Ballmer of
Microsoft and Nokia's new CEO Stephen Elop were peddling silly stories of
Windows becoming a 'third ecosystem' - they should not be faulted for that (but
they should be held accountable for what they achieved). A CEO should project
optimism about his company and its products and its future (compare to say,
Burning Platforms memo by Elop). The test of the analyst is to see who drank
the cool-aid on silliness and who saw through the bullshit and told the truth.
So lets examine forecasts made about Windows Phone for 2012. First, the
reality. This is what Microsoft's Windows smartphone sales looked like in the
recent past when the forecasts were made, so you have some context:
Windows smartphone sales 2008: 21 million (12% market share)
Windows smartphone sales 2009: 17 million (9% market share)
Windows smartphone sales 2010: 15 million (5% market share)*
* includes both Windows Mobile and Windows Phone operating systems, combined
This was at a time when the global smartphone market more than doubled in size. Microsoft achieved that underwhelming performance, even as its Windows based operating system was supported by six of the ten largest smartphone makers at that time - Samsung, HTC, LG, SonyEricsson, Motorola and Palm.
But Nokia - Microsoft's new partner (and not just 7th of the
10 largest smartphone makers, at that time the largest manufacturer), sold
103.6 million smartphones during 2010, using its own operating systems, Symbian
and Maemo. The new CEO, Stephen Elop, promised to migrate the user base
(intending to achieve the transition at the rate of 1-to-1 in fact) to Windows.
If this golden fairy-tale could come true, theoretically, the Nokia+Microsoft
marriage could perhaps produce sales of 119 million smartphones per year which
should all be Windows based by the end of 2012/early 2013, when this transition
was to be completed. 119 million smartphones sold in 2012 would give you 17%
market share. That was the 'promise' of this partnership.
However, both Nokia and Microsoft messed up (one might use a word more
appropriate, that rhymes with plucked up) this opportunity royally, from the
very start when Elop released his destructive Burning Platforms memo, to when
Microsoft purchases Skype and angered the carrier community, to the faulty and
poorly-designed Lumia series of smarpthones that were then launched to try to
dupe customers into accepting Windows with Nokia, to the denial of a migration
path for current Lumia owners into the new Windows Phone 8 environment by
Microsoft. The whole strategy, flawed as it was, has been then executed
miserably, to pitiful results. We all know the results. IDC just reported for full
year 2012, Microsoft managed to sell 17.9 million smartphones (and by their
calculation, Microsoft landed with 2.4% market share for the year). Gartner
counted a bit less, found Microsoft with 16.9 million smartphones sold in 2012,
but as their total for the year was also less, Microsoft's market share was a
sliver better, at 2.5% for the year.
So this is no surprise now. The facts are in. Even Microsoft Chairman Bill
Gates said two days ago that the Windows Phone based Microsoft smartphone
strategy had failed and was beyond recovery, in his words the current Microsoft
smartphone strategy is 'clearly a mistake'.
So we know it failed. But what about those forecasters two years ago? Lets
examine how well the analysts saw through the Microsoft smoke-and-mirrors and
Nokia's new miracle-cure salesman CEO. To get the number we will use as the
benchmark, lets take the average of the two published numbers Gartner and IDC, to
find the very close to truth number, which is 17.4 million Windows based
smartphones sold in year 2012.
FORECASTS BEFORE ANY DATA WAS AVAILABLE
Then lets turn to the analysts. From February 11, 2011, when Nokia and
Microsoft announced their partnership, to November 2011 when Nokia released its
first Lumia series smartphones running on Windows, there were six major mobile
industry analyst houses that released a forecast for Windows Phone sales into
2012. They were IDC in March, Gartner in April, Pyramid in May, MIC in June, my
consultancy, TomiAhonen Consulting in July, and Strategy Analytics in October.
This is what the forecasts looked like:
Source: TomiAhonen Consulting summary from public source
analyst press coverage and industry data
This table may be freely shared
Note the forecasts without asterisk gave a distinct number of smartphones sold
in 2012, the ones with asterisk gave a market share number, which I have
converted now to a number, as we know the final sales of smartphones in 2012
globally was 695 million units. My rival 'experts' are in red. The real
Microsoft performance is in blue. My forecast is in yellow.
So? I was off by 111%. That might seem awefully bad forecasting, until you see
that the next most accurate forecaster, IDC, was off by 283% and Gartner, next,
was off by 292%. Even as I was off by one whole measure, my accuracy was still
more than twice as good as the next best analyst who was off nearly 3 times
from the reality. Then look at the others. Strategy Analytics was off nearly
4x, at 397% error. MIC was off by 571%. And Pyramid - the most ludicrous forecast
perhaps of all time in mobile - was off by over 1,000 percent !!! (I did warn
readers when the ridiculous Pyramid forecast was published, that it was based
on so many faulty data points, it could not possibly bear any resemblance with
reality. Like I said back then, it is a disgrace and Pyramid should apologize
for that ridiculous forecast and fire the 'expert' who produced that outrageous
projection).
REVISIONS WHEN DATA CAME IN
So then, we have data that came in as the first Lumia smartphones were launched.
Remember the flawed first flagship, the Lumia 800, that was plagued with
hardware and software bugs. The alarm clock that didn't wake up, the time zones
that didn't recognize Nokia's home country of Finland, etc. And the immediate
price cuts. The smartphone with the infamous 101 faults list of problems that
traditional Nokia smartphone owners would grow to hate. The smarpthone that
achieved a Nokia record for returns and an instant resale value collapse
approaching zero. This where carriers and customers craved for the hugely loved
award-winning Nokia N9 instead, running MeeGo. Many European carriers said the
Lumia with Windows Phone was not suited for the mature experienced tastes of
the European customers who were not new to smartphones (like American consumers
were). European carriers begged for Symbian based smartphones instead from
Nokia.
Then we had the first revised Lumias, led by the new flagship Lumia 900. Now
Nokia was supposed to win over America. The flagship plagued with software
bugs, and a badly timed launch. The notorious 101 faults list was expanded to
121 faults. Then the consumer survey of US buyers of the Lumia by Yankee Group
found that four out of ten buyers rated it the worst phone they had ever seen. Meanwhile
store sales surveys found that sales reps who had the Lumia in stock would
refuse to show it to customers asking for Lumia by name it was that much hated
by sales reps for the high return rates. Nokia sales plummetted, the prices
were slashed, and Lumia reputation was in tatters. Many carriers refused to
carry the Lumia 900 altogether, but the parallel 808 Pureview running Symbian
could not keep up with demand and propelled Nokia's 'obsolete' Symbian platform
to outperform Windows Phone once again. And suddenly Microsoft Osborned all
existing Lumias by forbidding any upgrades from Windows Phone 7.5 to Windows
Phone 8.
Then we had the third attempt by Nokia to relaunch the Lumia, led by the new
flagship Lumia 920 that was supposed to bring Nokia back in China, the world's
largest smartphone market. Still, by Christmas of 2012, the Nokia flagship had
a camera that was bested by the Symbian based N8 from three years before. The
Lumia 920 stole the name 'pureview' from the 808 without bothering to take the
technology, causing severe disappointments to buyers. The consumer survey by
Bernstein of smartphone loyalty found that two out of three Windows Phone
owners were so disgusted by their new device, they would never buy another
powered by Windows Phone. The new Windows Phone 8 based Lumia series was sold
in tiny numbers before Christmas, then missed the gift-giving season for
Chinese New Year, and saw an instant price collapse.
That is the reality of Windows Phone with Nokia and Lumia. Some of that reality
was obvious by the first phones when they were released. So what does an honest
analyst do with his or her forecast? When the facts change, you change your
forecast accordingly. That is what honest analysts do.
Who did that? MIC revised their forecast (downward by 23% in January 2012). IDC
revised their forecast (downward by 46% in June 2012). And TomiAhonen
Consulting, of course, me, I revised my forecast (downward by 40% in May of
2012).
Note first - that Gartner, Pyramid and Strategy Analytics - were content to
leave their outrageously faulty forecasts to remain as their opinions of how
Windows Phone would sell in 2012, all through 2012. I think this speaks very
poorly of their mobile competence.
Then about MIC, IDC and me. Yes, good for you, MIC and IDC that you downgraded
your Windows Phone forecasts during 2012, as the facts came in and your first
projections were clearly overly optimistic (as was mine). But did you inform
your customers that you had downgraded Windows Phone forecasts? No. You did it
without any mention. No explanation at all. Just that the new forecast issued
in 2012, was MASSIVELY smaller than the one you had released the year before. I
think this is not professional behavior. A professional forecaster explains why
his or her forecast is changed. What caused the change. As I did on this blog,
of course, in May of 2012.
SHORT-TERM FORECAST ACCURACY FROM EARLY 2012
But that is not all the forecasts we had for Windows in
2012. We've actually had three new forecasts for Windows Phone for 2012 (in
addition to those three revised ones) issued by June of 2012. (I am closing the
timing for these forecasts in June. Why? Because we are forecasting year 2012
sales, and by July there will be two full quarters of sales for the year 2012 reported.
So then its no longer a complex forecast to guess what the second half of the
year will be and what level Windows might end up with in 2012. So I am cutting
off the forecasts in June.)
So here are the forecasters with Windows Phone forecasts made in 2012 up to
June. They are Morgan Stanley, Credit Suisse and IHS in January. Plus the three
revisions, MIC in January, my TomiAhonen Consulting revision in May, and IDC's
revision in June. This is the accuracy of the Windows Phone forecasts made
during the first half of 2012, for how Microsoft Windows Phone sales will end
up for the year 2012:
Source: TomiAhonen Consulting summary from public source
analyst press coverage and industry data
This table may be freely shared
IDC's revised forecast was now far more accurate, they are off by only 108%
from reality. But note, theirs was a revision and done last in this series,
you'd expect it to be one of the more accurate ones. Morgan Stanley did a very
good job back in January with an error only of 147%, would have been second most
accurate forecast up to that point (second only to my original forecast in mid
2011). iHS was off by 259%, while Credit Suisse was off by a very sad 419%. And
what of MIC. They took their 2011 forecast which was off by 571% and managed to
'correct' that to one that was off 'only' by 419%. Pathetic in terms of a
correction and accuracy.
WHO IS MOST ACCURATE FORECASTER IN MOBILE (ONCE AGAIN)
What of the most accurate forecaster in mobile? After I saw what the first
Lumia was like, I of course downgraded my forecast and said in May of 2012,
that Windows Phone would sell 22 million total smartphones in 2012. While that
was still off by 26% - Windows Phone only managed 17.4 million - I was four
times more accurate than the second most accurate forecaster in mobile, IDC
(revised forecast from June 2012).
So who's your daddy? These forecasts were made here on this blog, out in the
open, clearly warning the industry, that the Windows Phone 'strategy' was
doomed and untenable. Now we have heard from no less than Microsoft Chairman
Bill Gates himself, admitting that the Microsoft smartphone Windows Phone
strategy has failed. He used the clarifying term 'clearly' failed. There is no
question this is total failure. And Bill Gates admits in his Charlie Rose
interview that this strategy is also fundamentally flawed in that it is
incapable - the strategy is incapable - of achieving leadership for Microsoft.
And yes, this is what misery or 'clearly a mistake' looks like:
Windows smartphone sales 2008: 20.9 million = 12.3% market share
Windows smartphone sales 2009: 16.8 million = 9.1% market share
Windows smartphone sales 2010: 15.1 million = 5.0% market share*
Windows smartphone sales 2011: 10.2 million = 2.1% market share*
Windows smartphone sales 2012: 17.4 million = 2.5% market share*
* includes both Windows Mobile and Windows Phone operating systems, combined
Source: TomiAhonen Consulting from public analyst and
industry data
This table may be freely shared
Yeah, I told you so... You could listen to Gartner or IDC or iHS or MIC or
Strategy Analytics or Morgan Stanley (or god forbid, Pyramid) and be misguided.
Or you could follow the consistently most accurate forecaster in mobile, the
author of 12 books on mobile, the man who is less wrong than others, and more
often right than anyone else, in predicting this industry's future. Yeah, its
nice to gloat for once, after all the shit I've taken on this blog by the
Microsoft trolls who came here to ridicule me over the past two years. Well
whose laughing now? Go ask Bill Gates if Windows Phone can ever become the
'third ecosystem' in mobile.
For those who would like more guidance on what is coming in mobile in the
coming years, see my Mobile Forecast 2012-2015. And don't worry, the biggest
milestones are, of course, given free on this blog. But for
those of you who are 'strategists' who really do need to understand the near
future, perhaps the 110 data points, across four years into the future, in my Mobile Forecast 2012-2015 can help you more than those of the statistical
sheep who peddle misguided and misinformed myths and misconceptions.
Hi Tomi, you might want to prefer using the correct english form "Who's your" instead of "Whose your"
Posted by: daz | February 20, 2013 at 12:28 PM
Why do you have such a hard-on for Nokia and Microsoft? Sure it's quite evident that both have failed miserably in the mobile space, but you seem to enjoy dancing on their graves.
Posted by: Will Finley | February 20, 2013 at 01:45 PM
@Will Finley
This forecasts are about hard numbers. I would say those being closest to the actual result is those who managed to keep away from subjective preferences most and was able to read between the lines, evaluate the facts and project them into the future best.
That MicroNokiaSoft failed so miserable isn't caused by the forecasters but if you, as forecaster, managed to be such clear closer to the actual result then any competing forecaster including the big analyst-houses and that again and again then yes, its a good reason to be happy and party. But the reason is your way more accurate forecasts and not that MicroNokiaSoft failed.
In fact most of us knew if will fail long ago. The signs where written in big letters on the wall. Article by article, comment by comment, on this blog. So, are we happy it turned out like expected? No! Many of us are angry to knew this would happen, to see it happen and to have it happened now. That while the Pyramids of the world praised the success. It sucks they get off, Nokia is dead, Microsoft moves on and nobody of thise who wrote long praise-articles the past years reflects. Its like you know something haooens and you cannot prevent it. Others say you are crazy and once it happened nobody cares. Nokianis dead, and? WTF :-(
Posted by: Spawn | February 20, 2013 at 02:22 PM
@Will Finley
But it becomes better. Read the last articlea related to this specific Elop MicroNokia case. Lots ofmthe articles reflect and project. But also give concrete hints what to do, what needs to be done to get out of the cold water back onto the (non-burning) platform before the sharks are there. Productive suggestions how to save Nokia. Even why Microsoft/Nokia failed and how they need to improve.
No, thats not a rant. That's you crying "sharks, sharks! Grt out of the water!" while the Elop-Pyramid answers "That are not sharks but opportunities! We will wait till they turn into Gold. Gold I say you!!!"
Posted by: Spawn | February 20, 2013 at 02:30 PM
It's amazing that Nokia's board of directors continue to let Elop ruin Nokia for Microsoft's benefit.
Posted by: Interested to know | February 20, 2013 at 06:39 PM
Tomi,
I think a word of recognition is in order.
Knowing and following you and your blogs / books for years, nothing Microsoft or Nokia has done or doing is coming as a surprise [except the Burning Platforms memo and the continued madness].
Reading countless comments on countless blogs over the last few years I've been quietly saying to myself "watch this space so-and-so, Tomi is [probably] right"
Bill [Gates] has just ratified everything you've been saying.
Well said.
Well done.
Congratulations "Godman of all things mobile" [quote R.B.]
Silence is golden.
Posted by: Henry Sinn | February 20, 2013 at 11:02 PM
@Matthew:
If you can't read between the lines of business speak, better don't make any comments.
These people rarely talk frankly - but if they admit mistakes it's normally very, very serious.
Posted by: Tester | February 21, 2013 at 12:43 AM
I think that the reason Elop isn't fired yet is because his golden handshake would cost Nokia more then they have i.e. More then 10.9 Billion €. This proves that if you're on the board of directors at any large corp you better watch out what the contract with your CEO says!
Posted by: Firecracker | February 21, 2013 at 05:30 PM
The internal emails at Nokia keep on coming, telling us all about every tiny incremental step in the "growth" of WinPhone market share. At the same time, Nokia is slashing and burning staff big style. I'm one of the several hundred IT people being transferred to HCL. I think HCL don't have the first goddamn clue what they've taken on and so they don't realise that they can't possibly deliver what they promised, at the no doubt very agressive price they offered.
But I'm not here to rant about HCL. This outsourcing of 99.99% of Nokia's IT is the last gasp of a clearly failing and failed strategy which flies in the face of all the available evidence. Was it Einstein who said that the definition of insanity is to repeat the same thing over and over again, but to expect a different result every time? Well if you can't see the evidence in front of your face and you carry on doing the same thing, you must be mad, just like Elop is with his public insistence the WinPhone is right for Nokia. Look at your brilliant success Mr Elop! How proud you must be! Don't you have nightmares that your strategy might actually be failing? Or perhaps you've secured yourself such a generous package that Nokia's success or failure doesn't matter to you at all since you're going to come out of it much better off either way? After all, you've got a record of this sort of thing with your mercenary behavior at other companies where you've been in the leadership team.
Posted by: MadNokian | February 22, 2013 at 08:20 AM
@MadNokian :
I'm really sorry for you; I hope you'll find a new and stable job soon. I was disgusted of how people were moved from Nokia to other companies (ie Accenture) then fired after less than one year. What Nokia did in Romania wasn't better either.
About Elop, of course he's proud of himself; his priority is not Nokia, but his personal wealth. He controls stock's value, and that's the perfect way to make easy and fast money; even if it's illegal, it's very hard to prove.
That's certainly why a guy like Elop, who failed in any company he used to work at, is still a millionaire.
Posted by: vladkr | February 22, 2013 at 01:16 PM
@MadNokian - let me clue you in on why you are being outsourced.
Nokia wants to split up and sell some pieces - like the nightmare NSN. Investors will NOT touch Nokia and carry the crazy and ridiculous employment guarantees in Sweden and other European countries. They are demanding a thinning out, before the deal can be done.
Nothing more, nothing less. You can safely assume, that under HCL, about 1/3 of your colleagues will be laid off, and about 1/3 will quit, because now they will have to work hard. That will leave about 1/3 employed. The same thing will happen with the developers outsourced to Accenture, and the factory workers in Europe being sold off.
It is just smart business. That is the job Elop was hired to do. End the Nokia jobs program.
Posted by: B a r o n 9 5` | February 23, 2013 at 08:03 PM
@Baron95
European employee laws are no crazier than the ones in other parts of the world. One gets very high productivity (much higher than in the States), loyalty and very little strikes. There is always more than one way to skin a cat.
Posted by: Sander van der Wal | February 23, 2013 at 09:28 PM
Mister "Call me the General Failure" Elop was hired to improve execution, grow Nokia. He failed, of course, misserable. Not only failed but achieved the opposite. Not only a decline but he killed Nokia in just 2 years.
I tell you what's happening with the layoffs. Its the last step to make sure Nokia cannot change strategy. Its the final step to bind Nokia forever to its fate to die.
What is left now in Nokia are different levels of failed management. Those are the first to leave once there is not enough cash any longer. No production, no R&D, nothing that actually executes. This is Elop's optimization of Nokia's execution.
What stays for all those that made Nokia a success in the past and are moved out latest now is to move on to other companies and help make them successful. Nokia, through its management, does everything to notcome back, to not gain success.
Here you see what happens if you lose control of an unique company to US investors and put US ppl in charge (rant directed to Baron95).
Posted by: Spawn | February 24, 2013 at 03:44 AM
@Baron95
"Investors will NOT touch Nokia and carry the crazy and ridiculous employment guarantees in Sweden"
What is the relevance of Swedish laws to Nokia?
Or should Finland look at USA laws to see how not to build a phone industry?
Posted by: Winter | February 24, 2013 at 08:33 AM
@Winter - Sorry - I mistyped. I was thinking about Ericsson (which is in the same boat, being pressed by investor to thin out its ranks and get rid of its own boat anchors like ST-Ericsson), and typed Sweden instead of Finland.
Same thing though. I'm not making any judgements on their labor laws and practices. That is up to their electors and politicians.
I'm simply telling you that investor are balking at taking European companies with bloated employment. Nokia, Ericsson, Peugeot are all in the same boat. Untouchable till they thin out the employment count.
Europe is at an inflection point, and it is very likely that many countries will enter a high-unemployment spiral very soon.
Watch out.
Posted by: B a r o n 99 | February 25, 2013 at 05:54 AM
Great Nokia leader, Mr Elop is mixing model numbers :-) But this is only small mistake if you compare it to his previous mistakes.
http://kuvat.kaleva.fi/default/28c8f9ae-7f26-11e2-bd48-12313b053908/large-elop.jpg
Posted by: JJ | February 25, 2013 at 09:14 AM
@Baron95 :
"Investors will NOT touch Nokia and carry the crazy and ridiculous employment guarantees in Sweden and other European countries"
The countries you mention ( I suppose you mention Scandinavia + Finland, I would add Switzerland, Netherlands, Luxembourg, Austria etc.) are actually doing well economically, and that's because there social packages are well managed.
Be honest, look at the ruin the US became, despite the absence of any descent social care or any public service. From Honolulu to Bangor, poverty is alarmly increasing, and you suggest that's the example to follow ?
Posted by: vladkr | February 25, 2013 at 04:57 PM
@B a r o n 99 or any other number:
if Nokia, Ericsson, Peugeot are all in the same boat, on what boat are Veolia, St-Gobain, Vivendi, ABB, Michelin, Airbus, Eurocopter, Volkswagen ?
Posted by: vladkr | February 25, 2013 at 05:07 PM
Nokia Asha...
Smartphone or FeaturePhone?
http://www.globalmobileawards.com/winners-2013#cat_id23
Posted by: cycnus | February 26, 2013 at 07:46 PM
@Vladkr - No. The countries you mentioned, are doing relatively (as in relative to Spain, Greece, Portugal, etc) well, because they have homogeneous populations with no minorities.
What do you think would happen to Finland if they had the equivalent of millions of Mexicans crossing into their borders illegally? Or had another set of millions of disadvantaged ex-slave blacks living there?
You can compare Finland, Austria, Netherlands to any homogeneous primarily white place in America, and you will see a hugely higher standard of living in those US postal codes.
So be careful with you chest pumping.
Some social "democracies" in Europe simply haven't run out of other people's money to spend *yet*. But they are all getting closer.
Greece, Spain and Portugal are there.
Italy, France are close - less than a decade away.
Germany was spared by integrating East Germany cheap labor and lower expectations, and, of course, they are hard working and innovative.
As messy as the US economy is, and with the huge poverty in the minority population problems, the US can still print money with impunity for another 20 years or so to take care of the baby boomers and achieve energy independence.
Then it is likely smooth sailing :)
You would not want to live in France 20 years from now - trust me.
Posted by: B a r o n 9 5 | February 27, 2013 at 05:39 AM