Nokia Q2 Analysis - This is Textbook Comprehensively Failed Strategy in Numbers

So yes, lets do the full analysis of Nokia numbers and Q2 Results. As this is now the first quarter in which Nokia reports zero Symbian sales, it is also a critical milepost in the strategy that Stephen 'Call Me the General' Elop, new CEO of Nokia, announced in February 2011. His strategy promised a 1-to-1 transition of Nokia smartphones as well as a 1-to-1 transition of revenues as Nokia shifted its smartphones from Symbian, Maemo (and shortly-to-release MeeGo) to Windows Phone OS.

SETTING THE STAGE

So to be clear. Lets see what was at stake. In 2010, Nokia sold 103.6 million units of smartphones running Symbian and Maemo, up 53% from 2009. Nokia's smartphone revenues in 2010 were 14.8 Billion Euros, up 17% from 2009. Nokia profits of its smartphone unit were 1.5 Billion Euros in 2010. Nokia's market share was 33%. And it bears repeating - Nokia was more than twice as big as Apple, four times the size of Samsung in smartphones. Nokia was also more than twice as big as its nearest rival (RIM/Blackberry) at the time. It is nearly unprecedented in modern business for one company in a competitive industry to be twice as big as its nearest rivals, in the Fortune 500. Toyota and General Motors have never been twice as big as their nearest car-maker rival. Never in car-making history. HP, Dell, Lenovo etc have never been twice as big as their nearest rival in the PC industry. This is very VERY rare, and a massive competitive advantage that Nokia held in 2010.

Then the truly amazing part - Nokia in 2010 grew more unit sales in smartphones than Apple or Samsung. Yes its true. All those lies that somehow Nokia was 'losing' to Apple - while Nokia grew MORE than Apple in 2010, and Nokia did this profitably, with increasing profits towards the end of the year. In fact, Q4 of 2010 saw Nokia break its own record for most unit sales, most revenues and most profits out of its dominating smartphone unit. What madman wouldn't want that? Being more than twice as big and growing more? Not only that, but also Nokia's Ovi Store app store had become the second-bestselling app store behind only Apple.

And for the record, Nokia share price which had tumbled 55% under previous CEO Kallasvuo, had already recovered 11% during the first 5 months of Elop in charge, a very strong healthy endorsement of Elop as CEO. All three ratings agencies had Nokia listed as one notch below perfect by February 2011. This inspite of an industry in deep trouble due to the global recession. So this is what Elop wanted to set on fire with his 'Burning Platforms' memo and what he wanted to exchange for Windows Phone (which at the time was the tiniest of 8 major operating systems in smartphones).

Windows based smartphones sold 12 million units in 2010, down 20% from 2009 when they sold 15 million. The number of Windows smartphone manufacturer partners was declining, not growing! Windows had a market share of 5% for the year 2010. So the 'two turkeys' had a combined market share of 38% in 2010, before Elop decided to destroy Nokia and its dominant position. 

NOKIA Q2 RESULTS 2013

Now we have Nokia Q2 results. Nokia now sold 7.4 million smartphones, up 21% from Q1 for a preliminary market share of 3.4%. Over the past four quarters, Nokia has sold 6.3M, 6.6M, 6.1M and 7.4M smartphones for a total of 26.4M and a market share of 3.6%. So compared to the 'burning platforms' situation of Nokia just before this Windows disaster was announced, Nokia sold 103.6M per year. In the last 30 months since then, Nokia's unit sales of smartphones have fallen by 75%. As the industry has grown by 2.5x in the same period, Nokia's market share has tumbled from 33% in 2010 to 3.4% now. Nokia has lost almost exactly 9 out of every 10 customers it had in smartphones, by market share.

Maybe there is a silver lining? Maybe this change was to massively expensive and profitable new smartphones? Lets see. Just before this strategy was annouced, Nokia witnessed strongly growing revenues in its smartphone unit and generated 14.8 Billion Euros (21.1 Billion US dollars). How is it now? This Q2 the smartphone unit revenues were 1.2 Billion Euros (flat from Q1). So the past 4 quarters? Nokia revenues were 4.5 Billion Euros (6.4 Billion US dollars). Nokia has wiped out 10.3 Billion Euros (14.7 Billion US dollars) ie destroyed 70% of the revenues of the smartphone unit in the past two and a half years, as the smartphone industry revenues globally more than doubled.

What of profits? Nokia's full-year profits in 2010 were 1.5 Billion Euros. But get this, before Elop was hired, Nokia profits in the smartphone unit were declining. After he took over, the yes - Symbian and Maemo based smartphone unit - saw massive increase in profits. By Q4 of 2010, Nokia reported its best-ever quarter for the always-profitable smartphone unit. The profits by Q4 powered by the new Symbian version and its hot new flagship phone, the N8, were up to 548 million Euros. So on an annualized level, that 'so-bad-I-call-it-a-burning-platform' Symbian smartphones unit was generating profits at a level of 2.2 Billion Euros (3.1 Billion US dollars) at an annualized level. 

Immediately after he released his ridiculous memo and announced the mad Microsoft partnership, Nokia's smartphone unit went into loss-making from the first full quarter it reported since. It has never recoved. So yes, Nokia has produced a loss every single quarter since Elop announced his new strategy. We are two and a half years into his new era, and not one quarter has Elop delivered a profit out of Nokia's smartphone sales. Not with the original Lumia series. And now, 9 months into the second stage of the 'better' and 'improved' Windows Phone 8 based new Lumia. No profits ever. Not once. Nothing. Nada. Niente.

Nokia's never-ever-before-losses-reported superbly profitable future-division, the smartphone division, has again in Q2 of 2013 produced yet another loss. How big? 164 million Euros. Over the past 4 quarters, three of which were selling the new Windows Phone 8 version of the Lumia series, Nokia's losses have been 1.1 Billion Euros (1.6 Billion US dollars).

WHEN IS BURNING ACTUALLY BURNING?

Yes, the 'burning platforms' so-called-failing Symbian strategy saw massive dominating market position, that saw bigger growth than Nokia's strongest rivals, and produced Nokia record-breaking and indeed increasing profits at an annualized level of 2.2 Billion Euros/3.1 Billion dollars. Now Elop's strategy has been fully executed, no more any Symbian sales. And ever since this strategy was announced, he hasn't managed one profitable quarter in the smartphone unit. He has instead now, one year and 9 months after the Lumia series started selling, in the latest 12-month period produced a 1.1 Billion Euro/1.6 Billion US Dollar loss.

So Elop's strategy costs Nokia, and its owners every year 3.3 Billion Euros (4.9 Billion US dollars) of abandoned profits. Under no possible scenario can this be seen as a success. He promised us a 1-to-1 transition on this new strategy - that itself is a bad bargain, as Nokia had grown 53% in the year before and was growing very strongly at the time - so just going 'flat' sales into the Windows era, is a bad bargain for Nokia owners. But instead, he has slashed smartphone unit sales from 104 million per year to 26 million per year. He has burned Nokia's dominant market share position of 33% to now its pathetic 3.4%. He has devastated Nokia revenues in the smartphone unit down from 21 Billion US dollars to 6.4 Billion, down to less than a third what he inherited). And he demolished Nokia profits, going from a mountain to a massive hole. From 3.1 Billion dollars of profits per year to 1.6 Billion dollars of losses per year, wiping out 4.9 Billion of profits Nokia shareholders should have been earning easily, if he had not messed with the utterly dominating strategy. In 2010, Nokia had 70% of China's smartphone market for example - the world's largest smartphone market by the way.

When Elop announced the strategy, Nokia was more than twice as big as Apple and 4 times bigger than Samsung. Today after Elop's new Microsoft strategy has reached its end, Apple is 5 times bigger than Nokia and Samsung is 10 times bigger than Nokia in smartphones (and to add insult to injury, Samsung also jumped past Nokia in total handset sales). Before this strategy Nokia's smartphone unit has never reported a loss. Since the strategy was announced, Nokia's smartphone unit has never managed a profit.

HOW FAR IS VIABLE BREAK-EVEN BUSINESS?

We can take a peek at how far Nokia is from steady viable and break-even profitable business. At the moment, the smartphone unit gets the 250 million US dollar infusion of cash per quarter. That Microsoft infusion is quite a large amount of the revenues 'earned' by the smartphone unit - but that is not money that consumers were willing to pay. Notice that if Nokia was selling at the 2010 levels, then the Microsoft money would not be a major component to the business. But now that the smartphone sales are down to one fourth of what they were, the Microsoft money is a large proportion per handset sold. How big? 250 million dollars is about 175 million Euros, so 15% of the revenues attributed to the smartphone unit, did not come from consumers buying smartphones, it was the 'bribe' from Microsoft to get Nokia to sign originally to the contract.

But wait, there is another item now in Q2 results. IPR revenues. Nokia says that its IPR proportion was 3 Euros across the whole handset division. That was another 6.7% of total revenues earned (in the handset unit) or 183 million Euros (262 million US dollars) this quarter.

Lets remove the 15% Microsoft 'donation' to the Lumia case, and remove the attributed IPR income of 6.7%. Notice I am being very generous to Nokia, assigning the IPR in proportion to total revenues of the handset unit (majority going to the featurephones unit). If I was not so generous, this business case would be even worse. But lets try to keep a positive outlook. So instead of the 157 Euros, the actual Nokia retail customers are paying for handsets 21.7% less than what Nokia reports as its ASP (Average Sales Price). The end-user customers find the Lumia so underwhelming, they only pay 123.17 Euros per Lumia smartphone sold, globally, on average, this quarter.

(For those who want the reminder, yes, Nokia just before this crazy strategy was announced to go Microsoft, was selling smartphones at an Average Sales Price of 156 Euros, and that was without any Microsoft money, and with very minimal IPR income at the time)

Now, where is the break-even level then? We see that Nokia's smartphone unit now generates 14.1% loss per smartphone sold. So for it to break even, if using only a higher price and all other things remaining the same, would mean raising the Nokia smartphone price from the reported ASP now of 157 Euros all the way up to 182.91 Euros. So this is the minimum price level that Nokia would need to sustain across the Lumia range, to reach profitability.

Now understand the problem of consumer rejection (and/or of retail boycott, and/or carrier refusal to sell, all amounting to the same). The actual end-user price paid (that gets to Nokia, after resale channel mark-ups) is 123.17 Euros. But Nokia needs 182.91 Euros to break even. The difference is 59.74 Euros (about 85 US dollars). So Nokia would have to boost its end-user willingness to pay, up by 49% !!  Imagine if you're Ford, selling cars, and you find that you must bump up your prices by 49%? Or if you were say LG with flat screen TVs and your CEO said that the unit needs to increase end-user prices by 49%? You'd be out of business!

That is how huge the hole is for Nokia. Its not enough for Nokia to 'recover the last 14%' - because the Microsoft well will soon run dry, and the IPR money only seems big now, when Nokia's smartphone volumes are so tiny. If Nokia were somehow to return to say, double-digit market shares - it would also require end-user customer prices to go up - on average - 49%. This, in a market where all smartphone prices are falling, as the market is shifting from the mature US and European markets to Emerging World countries like China, India, Brazil, Indonesia and Russia.

Economic theory says that if you raise prices your sales volume will decline and vice versa, if you reduce prices, you should see some level of increase in sales (ceteris paribus, ie if all other things remain the same). These are not necessarily linear, there is 'price elasticity' ie in some cases a big change in price might only result in a small change, etc. But yes, observe the dilemma. Nokia is consistently producing a loss. That loss now, with very small smartphone shipment numbers, is subject to unusually high impacts of the Microsoft 'gift' and the IPR income.

So in terms of sustainable smartphone business, out of Nokia's Lumia - the end-users would need to pay 49% more for the Lumia line, just for Nokia to break even and remain viable business, in the longer run (or go negotiate even tougher deals out of the other handset makers, in terms of dramatically higher IPR income to correspond with the far bigger unit sales of smartphones.)  The consumers are voting with their dollars, they are refusing to pay what Nokia needs just to break even. How badly are they under-paying? Yeah, Nokia would need to raise prices 49% just to break even, on the handsets sustainable business. But yeah, if they only sell a couple of million smartphones, then the 250 million dollars per quarter from Microsoft and similar funds in IPR will actually go a long way to make it seem, like the handset business is 'healthy'. Maybe these were reasons why Microsoft said no to the deal to buy Nokia. Elop has so utterly destroyed the Nokia business, that it is not fiscally viable. 

NOKIA HAS RECOVERY IN USA, OR DOES IT HAVE?

So what of the USA then? One of the big reasons to fire Elop's predecessor, Olli-Pekka Kallasvuo, was because he had failed to recover Nokia's position in the US market. Now we have had Elop celebrating not just AT&T and T-Mobile launching Nokia Lumia smartphones, but for Q2 of 2013, we finally had Verizon also selling Lumia. How well did Lumia do in the USA? Nokia grew its North American phone sales a pathetic 100,000 more units from 400,000 in Q1 to 500,000 in Q2. Do I need to mention that Nokia's North American sales were 700,000 that last quarter before Elop announced this mad strategy. Yeah. I know. How is this possible? After all the singing and praising Elop and Ballmer have been telling us that the USA sales are so strong... 500,000 Lumias sold in Q2, up a mizerly 100,000 units after Verizon was added to Nokia's resellers.

Didn't I say the carriers will always take the Microsoft money, and then not sell the phones. They hate Microsoft. And Nokia is suffering because of Microsoft and Windows. Everybody knows this, everyone else is saying it, but only Elop refuses to see it. Because Elop is that much 'Call Me the General' smart, that he can look at 52% growth in smartphone sales, dominating over Apple and Samsung more than Toyota dominates cars or HP dominates personal computers - and with massive growing profits, he says 'we are so much in trouble, we are on a burning platform. But now? At these results, when Nokia's market share is literally one tenth it was when he took over, and the smartphone unit continues to generate huge losses, Elop says in the Q2 results that he is "proud" of this unit. He hated dominating Symbian with big profits. He is proud of diminishing Windows with perennial losses. What is wrong with this moron. He is undoubtedly the most incompetent fool to run any Fortune 500 sized company.

Oh, and Nokia share price had tumbled 70% since Elop announced his mad strategy. It only started to recover after rumors emerged (that turned out true) that Nokia was in talks of being acquired - by Microsoft (which since have broken down). And all three ratings agencies have downgraded Nokia at every stage, only further and further down, so now all three rate Nokia as junk, and keep finding Nokia further into that junk territory of despair. If your strategy takes near-perfect ratings and a growing share price, and instantly plunges it to free-fall and now your junk ratings are in the news only because your company is even more junk? That means you have a failing strategy, Mr 'Call-me-the-General' Elop.

VIEW IN THE WINDOWS

Meanwhile Microsoft? So as Nokia now produces about 80% of all Windows Phone based smartphones, the only life left in Windows on smartphones, is how long Elop remains in charge of Nokia. The moment he is fired, any sane new CEO will announce a shift to Android or some other Linux-based OS (Sailfish, MeeGo, etc). That announcement is the death to Microsoft in smartphones. Why didn't Ballmer then buy Nokia as we heard they had had serious talks between Nokia and Microsoft? Because Elop has mangled this project so badly, that Microsoft cannot stomach the pain of continuing.

If you remember, when this partnership was announced, my first tweet was - great for Microsoft, disaster for Nokia. And I honestly, honestly believed, that when Nokia walks in with 33% market share, and Microsoft with 5%, no matter how badly it goes for Nokia (obivously collapsing market share) there cannot be anything but a bounce for Microsoft. That if Nokia is halved to 16%, and if we assume half of Windows partners quit, their combined share would be 18%. Or of we assume Nokia loses 3 out of 4 points of markets share, and so too Microsoft, then still Nokia would have 8% and Microsoft's other partners another 1% and their combined share would be 9%. So even in a very VERY pessimistic scenario, while Nokia would feel all sorts of pain and layoffs and factory-closings at that kind of carnage, Microsoft would be dancing, their market share would have almost doubled. In this very very negative scenario.

I could not see a down side for Microsoft out of this partnership. You can read my early analysis, I expected Nokia to 'bottom out' at about 8% now, in year 2013 (and that was the lowest guess by any forecaster, and most thought it would be 2x to 3x to 5x better than that). So if Nokia had today something like 8% market share (and another 1% or 2% from other partners) then yes, Microsoft could see a future for Windows Phone and would also want to buy Nokia to own that future.

That Microsoft looked at Nokia's pathetic 3% and said no, I don't want that, makes perfect sense. When Bill Gates ran Microsoft, they had managed to build Windows smartphone market share globally up to 12%. After Ballmer took over, it fell and was down to that 5% before this partnership was annoucned in February 2011. Now the Windows Phone market share is 4%. So even after the total Nokia Symbian smartphone base was sacrificed, devastated, it did not produce even one market share point gain to Windows. On the contrary, the life at Windows has gotten worse in smarpthones, not better, with Nokia on board. So obviously, when Microsoft itself says, you are doing such a bad job with my product, that I don't even want to own you - it means Windows Phone is doomed. It is on life support only as long as Nokia holds onto its delusional CEO who pumps good money after bad, attempting to push Lumia phones at huge losses, via carriers and retailers who clearly don't want it.

THIS IS UTTER COMPREHENSIVE FAILURE OF STRATEGY

Bottom line. Nokia failing. But we have probably seen the bottoming-out of the Nokia smartphone sales. It can now be expected to continue in the 3% to 4% range (was 3.7%, 3.0%, 2.9% and 3.4% the past 4 quarters). For the full year that would mean Nokia to sell between 30 million and 40 million smartphones. So Nokia is now positioned in the bottom of the Top 10, while it was far-away number 1 when the Elop strategy was announced. Never in the history of any global industry of Fortune 500 sized players, has the market leader fallen from number 1 to outside of the Top 5 in less than three years. This is by far the biggest collapse of not just any handset maker, of ANY company ever in the Fortune Gobal 500, due to management error. Yes, 'Call Me the General' Elop, the worst CEO of all time. So, we keep hearing that he is selling ever more of Nokia's assets and firing again more people (another 400 were fired when the Q2 results came out). Any competent CEO would end all that, Nokia is a sound company, with great engineering, capable of massive market innovations like the 41mp camera they introduced last year for the 808 Pureview and now incorporated into the latest Lumia flagship, the 1020. Nokia has strong customer loyalty. But the Windows strategy is a total failure. We have now seen the full migration from Symbian to Windows, and Nokia exchanged dominant growth and big profits, to miniscule sales and big losses. And most of all, Elop's 1-to-1 promise of the transition has been comprehensively missed. Any other strategy would be better now than continuing with Windows.

For the record. This is what Nokia has done the year leading up to this mad strategy, and the two-and-a-half years after it was announced. Nokia unit sales, market share, revenue and profits by quarter:

Q1 2010 . . 22.7 Million smartphones . . 42% market share . . 3.4B Euro Revenues . . +350M E profit
Q2 2010 . . 25.2 Million smartphones . . 41% market share . . 3.5B Euro Revenues . . +283M E profit
Q3 2010 . . 27.1 Million smartphones . . 34% market share . . 3.6B Euro Revenues . . +335M E profit *
Q4 2010 . . 28.6 Million smartphones . . 29% market share . . 4.4B Euro Revenues . . +548M E profit

Q1 2011 . . 24.2 Million smartphones . . 24% market share . . 3.5B Euro Revenues . . +217M E profit **
Q2 2011 . . 16.7 Million smartphones . . 17% market share . . 2.4B Euro Revenues . . -150M E loss
Q3 2011 . . 16.8 Million smartphones . . 14% market share . . 2.2B Euro Revenues . . -191M E loss
Q4 2011 . . 19.6 Million smartphones . . 12% market share . . 2.7B Euro Revenues . . -189M E loss ***

Q1 2012 . . 11.9 Million smartphones . . . 8% market share . . 1.7B Euro Revenues . . -311M E loss
Q2 2012 . . 10.2 Million smartphones . . . 7% market share . . 1.5B Euro Revenues . . -559M E loss
Q3 2012 . . . 6.3 Million smartphones . . . 4% market share . . 1.0B Euro Revenues . . -489M E loss
Q4 2012 . . . 6.6 Million smartphones . . . 3% market share . . 1.2B Euro Revenues . . -259M E loss ****

Q1 2013 . . . 6.1 Million smartphones . . . 3% market share . . 1.2B Euro Revenues . . -194M E loss
Q2 2013 . . . 7.4 Million smartphones . . . 3% market share . . 1.2B Euro Revenues . . -169M E loss

NOTE: in the same period since Nokia strategy change Q1, global smartphone market grew 251%
* Elop is hired by Nokia
** Elop announces strategy change to Windows based smartphones (at middle of the quarter)
*** Nokia Lumia smartphones on Windows Phone 7.5 launched
**** Nokia Lumia smartphones on incompatible Windows Phone 8.0 launched
Above data from Nokia quarterly results (using latest updated data by Nokia), market share calculation by TomiAhonen Consulting using average of 4 big analyst houses for total market size.
This table may be freely quoted and shared

So, Nokia Board? If you cannot see that Elop is the worst CEO ever, far far worse than Kallasvuo, who himself was failing as Nokia CEO, then you must act now. If you can't fire Elop then you, the Nokia Board, are either incompetent or in collusion with the CEO. You too must be fired.

I guess I need not say that again more ratings agencies are downgrading or have already again downgraded Nokia further into junk territory. And that Nokia fell out of the Fortune Global 500 top 200 rankings (now ranked 274) but unfortunately that fall will continue into next year's issue, as the numbers only reflected December 2012 levels, from which Nokia has again fallen much further. 

Comments

[paul]

Just a quick technical question..Can any of the current Lumia range run Android with a little work by the software guys? Do you think there is some sort of black ops team within Nokia that have Android running on a 920 for example just in case? How much work would be required to port Android to Lumia devices? Any modders done it yet?

[AndThisWillBeToo]

@tomi
I love it how you say you're doing "the full analysis of Nokia numbers and Q2 Results" and spend a bit over half the words explaining Nokia past. Double by love on the fact you repeat the same stories you've been repeating over two years now.
But hey, big hand for mentioning RIM/BlackBerry as second largest rival of Nokia, probably first time since February 2011. Where were they now? 10th? 11th? Did Elop put them to disasterous WP path with his burning platform too?

[Bob,Boulder,Colorado]

some folks here are supporting NOkia's decision to support only Windows phone. That is not the point, the point is why can't they make both ? almost every OEM is making both android phone and Windows phone and the few that make only android phones is because of business reasons, not some false reasons(it almost sounds like a faith based decision) as trotted out by Elop.
In any case, if Windows phone does succeed, what is to stop Samsung from coming in and taking over Windows phone, Samsung is a manufacturing powerhouse. Nokia would have faced competition from Samsung sooner or later, whether android or windows phone. Running away from war is a stupid reason to embrace a then failing and now failed 3rd platform.
And people look at HTC as an example of what happens to android OEMs. what they forget is HTC also manufactures windows phone. And people forget how Sony and LG have somewhat improved their performance by using android.

[Mark Levine]

I've heard that getting stuck doing windows phone 8 development was seen as some sort of punishment, due to having to reinstall the whole workstation PC (forced windows 8) along with the strange visual studio 2012, and all the bizarre new Metro APIs that aren't compatible with anything else.

[c.y.c.n.u.s]

@Bob, Boulder, Colorado

GOOD COMMENT!!!!
Yes, that's right!!!
This is Elop sin. Why he has to do the burning platform and not do both.

My answer is Because ELOP IS SMART!!! Elop know that:
1. If he didn't kill symbian, there will be only a few OS guy that will move from symbian to WP. and the WP strategy will fail.
2. If he didn't kill symbian, and symbian win, His best buddy the baldy balmer won't have the glory.

So, I only find reason that Elop do this because he were a trojan horse. I hope someone that PRO WP in this blog will point out there were another logical explanation for this action

[AndThisWillBeToo]

@c.y.c.n.u.s
You got it half right there.
The board decided to go WP only. As much as we want to believe in mind control capabilities of Elop, he could not have done the choice alone. And the board has shown their support for the decision several times afterwards. That decision has been said to be stupid enough many times so let's not waste words on that part, but:
When that decision was made, Elop HAD to announce Symbian and MeeGo dead. Any developed left to develop on Symbian or MeeGo was a developer lost from WP. Any sales of Symbian or MeeGo were not WP sales.

[KPOM]

@Leebase, Samsung was still smaller than Apple in terms of market share when Nokia shifted to Windows Phone. Had Nokia switched to Android, Samsung might still be #3 or #2, depending on how much market share Nokia would have retained. They would have lost some market share, but customers might have been more forgiving knowing that they were going to a stable platform. Windows Phone was unproven in February 2011, and as it turns out, was not ready for prime time in November 2011 when the phones started coming out.

[tm]

Hi Tomi,
couple corrections to numbers:

> In 2010, Nokia sold 103.6 million units of smartphones running Symbian and Maemo, up 53% from 2009.
According to the Nokia earnings reports, in 2010 they sold 100.3M compared to 67.8M in 2009. That gives 47.9% increase.

> Notice I am being very generous to Nokia, assigning the IPR in proportion to total revenues of the handset unit (majority going to the featurephones unit)
(If I've understood correctly) In the earnings report it is saying that the IPR isn't included in the ASP:
Smart Devices Results Summary table:
"Note 1: Does not include IPR income. IPR income is recognized in Devices & Services Other net sales."
Also, I couldn't find information if 250M donation was included in the ASP. Maybe it's also in the Other net sales?

[Sander van der Wal]

Nokia only grew in markets were it had no competition from iOS and Android. The moment iOS and/or Android entered one of their markets, Nokia's Symbian sales collapsed. There were no Maemo sales ro speak so that OS can be safely ignored.

Proof: look at the collapse of the revenue reported for Nokia's top ten key markets in its annual statement. Both in Western Europe and in Asia you can see Nokia's revenue collapse starting in 2008.

In this specific business case, your competition immediately eating you alive in markets they have just entered, do you continue with the strategy that causes you te be eaten alive? For how many years?

And a fun fact, the USA was Nokia's second biggest market in the early noughties. Look it up for yourself. So in case you were wondering why Nokia wants the US market, they want it back.

[Tester]

To anyone comparing Nokia with Blackberry and concluding that MeeGo would have failed:

This conclusion is utter rubbish for one single reason:

MeeGo was ready for production in mid 2011 when it was crucial. BB10 was ready early this year when the market was already taken by others.

[Sam]

Lumia vs iPhone sales, starting from the date they entered market:
http://imageshack.us/photo/my-images/27/2xp1.jpg/

[AndThisWillBeToo]

@LeeBase
As you probably know I share your view. I hope you realize people in this forum will not buy the idea that Samsung could use more marketing money than Nokia or have better economy of scale than Nokia (assuming comparison comes from time where Nokia is claimed to be four times the size of Samsung etc.). Just hope you have thick skin as typing text to here may be waste of perfectly good skin on your fingertips.

[Henrik]

@Sam
The Lumia vs iPhone sale.
Remember that the first iPhone was only sold in the US. And when the second iPhone (iPhone 3G) it took a month or two after the US release before the rest of the world got it. And then again it was not the hole world that could buy it.

So 5Q iPhone sale has about if still not fewer markets then Lumia had in it's 1Q.
So start comparing iPhone 5Q with Lumia 1Q.

Lumia is still doing okay when you look at it that way. But far from that good. And then when you think about the amount of smartphones sold is rising FAST. Then market share it's looking bad for Lumia.... But it's on it's way up for now.

[Tester]

@Leebase:

>> Clearly Meego wasn't ready or else Nokia would have shipped it

Well, to me the N9 seemed to be ready to ship - long before the first Lumia -, just Nokia chose to bury it after a token release.

And please, please stop this Samsung nonsense. In 2010 Nokia was significantly stronger than Samsung so they would have entered the market from a position of strength Samsung, to a large extent, only got to where it is now is because Nokia threw it all away and cleared the playing field.

Brand recognition for Samsung was close to zero back then - in fact they had a bad reputation for their shitty feature phones - and was nowhere near what Nokia had back then.

For now, you are correct: Nobody has the strength to compete with Samsung. But we are talkina about decisions that were made more than 2.5 years ago.

[Spawn]

@eduardo

> My guess is that Nokia has a contract with Microsoft that prevents them from doing that.

My guess is its done in a more clever, law waterprof, way like that Nokia needs to pay back platform support payments when aborting that 5-year contract.

@c.y.c.n.u.s

> Does any other company would like to have a relationship with Microsoft

Nokia is by far not the first company that got burned in a strategic Microsoft partnership. There are a few impressive multiple pagds long lists circulating. But Nokia completed the "Microsoft strategy partner? NoNoNo" saying (NoNoNo = Nortel, Novel, Nokia). There are not much No* tech-companies left now to expand on that.

@Eurofan

> Isn't Elop simply shipping more Lumia's every quarter to more markets in order to provide the appearance of growth quarter to quarter

Good point. I think so too. Also inline is the shift from high-end to mid- and lower-end not only with new markets but also at established markets. Buying more volume with lower ASP. May also be seen as contiuation of Elop's fear to compete eith Samsung.

@geektech

> I think Jolla will outsell Nokia just in the first quater they get into the market.

They don't need to and its maybe not there main target. They just need to make profits to beat Nokia.

@przemoli

> Bottom line: You do not know ... about strenghts of Nokia.

Making products customers sell isn't among them any longer as was and is proven since 2 1/2 years. Unfortunately that's what counts at the end.

@Bob,Boulder,Colorado

> the point is why can't they make both ?

Exactly. Elop's argumentation was that the battle of devices became a battle of ecosystems. Then he concluded and applied that Nokia, a device maker, had to go all-in with the ecosystem who was/is last and abort, no irreperable burn, all others. "There is no plan B" ...

Best article ever dealing with that aspect of the story:
http://communities-dominate.blogs.com/brands/2012/07/the-sun-tzu-of-nokisoftian-microkia-mirror-mirror-on-the-wall-whose-the-baddest-of-them-all-waterloo.html

@AndThisWillBeToo

> When that decision was made, Elop HAD to announce Symbian and MeeGo dead.

Gratulations. You just wrote the most stupid comment ever. It's a real Elop you produced there.

@LeeBase

> Clearly Meego wasn't ready or else Nokia would have shipped it

They did. The N9 exists. Please inform yourself. Thanks.

[Kenny]

@AndThisWillBeToo
>The board decided to go WP only. As much as we want to believe in mind control capabilities of Elop, he could not have done the choice alone.

The Board takes no part in the day to day running of the company. Yes, the choice of WP only is probably Elop's alone.

@Sam
>Lumia vs iPhone sales, starting from the date they entered market:
http://imageshack.us/photo/my-images/27/2xp1.jpg/

Comparing Lumia performance with historical iphone performance is unrealistic when the market has totally changed over the past 6 years. It's like comparing wages now with wages 20 years ago without adjusting for inflation.

[crizh]

Been poring over recent Nokia financials. Interestingly Nokia didn't stop hiring until 2011 where they peaked at 134000 employees. By 2012 they had cut that by just over 16.33% which had reduced their wages bill by nearly 4.66%.

Anybody see the problem here?

Since 2009 average remuneration at Nokia has risen from about Eur. 53000 to over Eur. 63000.

Obviously Nokia has gone from strength to strength during that time so the remaining employees, who are clearly the driving force behind this improvement in fortunes, deserve their 20% pay rise.

Interestingly, unless sacked for cause, Elop will need six months notice of his Termination by the board, which is a long time for him to destroy what is left of Nokia, and he gets to walk away with 18 months salary worth about Eur. 1.5M.

He does have a 12 month non-compete but I for one would be happy to wave that. Send him to Apple or some other competitor I don't like.

Another interesting factoid is that the number of shareholders in Nokia has increased by 50% between 2009 and 2012. The number of shares hasn't risen so I can only conclude that institutional shareholders have been reducing their exposure and smaller investors have been taking their place.

Maybe that is a good thing. With a larger percentage of stock in the hands of real people maybe a shareholder revolt is a real possibility.

[chithanh]

@Kenny
> The Board takes no part in the day to day running of the company. Yes, the choice of WP only is probably Elop's alone.

The decision to go WP might have been Elop's. But the decision to not go Android was done before hiring him. This is mentioned on page 2 of this interview with Jean-Louis Gassé whom Nokia consulted in 2010:

http://www.computing.co.uk/ctg/news/2188976/nokia-elop-board-jean-louis-gassee

[foo]

@Tomi "The actual end-user price paid (that gets to Nokia, after resale channel mark-ups) is 123.17 Euros. But Nokia needs 182.91 Euros to break even."

I think you made a mistake here.

The fact that Nokia makes a loss in the sales of the smartphones doesn't mean that the ASP must change.

Example:

A company sells water bottles in the desert. Each bottle costs $1, but the company sells it for $10.

Does that mean that the company is profitable? Not necessarily.

If the fixed costs of the company (factories, employees, transport, etc) is 1M, and the company only sells 10,000 bottles, the company will have:

Costs: 1M + 10,000 * $1 = $1,01M

Profit: 10,000 * $10 = $100,000

In other words: a huge loss, even though the product is profitable!

So the company doesn't have to raise its price; it must sell more products!

[foo]

Tomi,

Two questions:

1) What is Nokia's current cash position?

2) When will Microsoft's cash donation (bribe) end?

Depending on the answers, it is possible that Nokia will run out of cash in 2 years or less.

If this is true that means that Nokia no longer makes long-term strategic planning.

All the planning now is for the short-term survival. There is no more "strategy" which implies long-term analysis and planning.

What is your take on this?