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« Nokia Q2 Topline Numbers | Main | Apple Q2 Results. Signs now DO indicate that we have passed 'Peak iPhone' »

July 21, 2013

Comments

Michal Varga

The thing is, Samsung is the only one who can be happy pursuing Android - Sony / LG / HTC or even Google's Motorola are not doing great at all, they're either losing money or not making much at all. To think that Nokia would just walk into the market and could compete with the billion phones Samsung is spilling out every month is simply foolish and the evidence suggests that there is simply no space in the Android market. They might make it, but it would take few more years of losing money and I am not sure Nokia can take that.

The article is failing to acknowledge a lot in terms of the actual smartphone market. Windows Phone had larger market when Elop came to his position with Nokia, but that was due to all the old Windows mobile devices - HTC was taking on iPhone with their Win mobile devices and those were only touchscreen alternative to iPhone at the time really, so thus the marketshare. Smartphone market was MUCH smaller and it was easier to get the marketshare, while now the smartphone market is extremely HUGE in comparisson so to gain similar marketshare, one has to sell more devices.

I have Lumia 521 which I bought for my mom - that phone is crazy. I previously used a lower end Android and the experience was lackluster (especially in comparison to iPhone which was my main device), while the no contract Lumia 521 for approximately 115usd (at Microsoft store with all the possible pricematching and rebates) is ABSOLUTE bomb. Nokia knows how to make phone and they are still kicking ass at the build quality. WP8 is getting better by day and as you can see, Nokia's performance is improving. I genuinely think we will be fine within a year.

Tester

And yet again someone tries to judge with hindsight and defend the WP8 decision by using Samsung's 2012/2013 market share as an indicator.

The thing is, back when the decision was made, Samsung wasn't the dominating player it is now so any attempt to justify Nokia's decisions in 2010 with Samsung's current place in the field is faulty by default. Why doesn't this get into people's heads?

Also, why did Sony, HTC et.al. develop problems? It was mostly because of bad management, structural problems, focus on bad OS platforms (yes, Microsoft again!) etc. which had nothing to do with Android. Samsung got to where they are because most of the competitors left them a void to fill. None of them took Android seriously in 2010 and 2011 when it mattered most. That's why Samsung is where it is now.

Also, LG - unlike Nokia - has already overcome these problems and has returned to profitability. Nokia still hasn't. So who's making better business here, huh?

Paid shill, again? It sure reads like it.

Sander van der Wal

@Tester

Nokia said that they were afraid that going to Android would result in them having to compete on price only. They believed that the Android market would become like the PC market, with the money not flowing to the device makers.

And indeed, the Samsung argument doesn't work in that respect. Nokia believed that nobody would make any money. Which is clearly wrong.

But this doesn't get Tomi off the hook. His predictions about Nokia aren't too bad, but his theory doesn't work either. If it did, RIM would be fine. But RIM is not fine. RIM is in as bad a shape as Nokia.

Disruption theory did forecast correctly what would happen with both Nokia and RIM. They would both fail miserably. Because both companies would be reacting too late to the new threat. Not because their new strategy would be rubbish. Their new strategy would be too little, too late.

You can see that happening both with Nokia and with RIM. By the time Nokia started to make changes in management they had already lost Western Europe. During that time, Nokia had an internal fight between the Symbian and Maemo teams, and then they delayed their competing product by doing a complete retargeting action on Maemo.
They acted as if they had all the time in the world, and not as a company that was in serious trouble.

Same with RIM. Loosing their core-business high value business users, gaining the low-value youth who only want the platform for its free messaging service. The playbook diversion. Management reshufflement three years after the competition starts slaughtering them.

Tester

Nokia would not have been too late, had they switched to a working strategy in 2010 or 2011. At that point they still were the undisputed market leader and could have kept that position with an appealing choice of devices.

RIM, on the other hand, made entirely different mistakes: They knew their OS was obsolete but it took them forever to get the successor ready.
This took a bit longer to sink in with its customers so the decline wasn't as abrupt as with Nokia.

Of course the end result was the same. Both companies had no competetive hardware lineup for years so anyone but their most loyal supporters had defected before they could get up to strength. No sane person would want to buy obsolete hardware.

As for >> Nokia believed that nobody would make any money. Which is clearly wrong.

Nokia obviously wasn't the only one thinking that. But they were the only ones not to pursue Android anyway, just in case. I don't think Samsung ever thought there was money in Windows Phone, yet they still released phones with that OS - just to be prepared for the case that it might nevertheless be a success. So they probably invested a little R&D, got some devices out and watched how it all played out. Nokia could have done the same with Android. But as things happened they were still completely unprepared when things got serious and nothing ever changed.

foo

@Michal Varga

You start your post saying: "The thing is, Samsung is the only one who can be happy pursuing Android - Sony / LG / HTC or even Google's Motorola are not doing great at all..."

And then finishes with: "I have Lumia 521 which I bought for my mom - that phone is crazy... is ABSOLUTE bomb. Nokia knows how to make phone and they are still kicking ass at the build quality."

That's the reason why Nokia could be successful with Android: their hardware is GREAT. What is lacking in their products is a good operating system.

As you say: "WP8 is getting better by day and as you can see, Nokia's performance is improving. I genuinely think we will be fine within a year."

Windows Phone will always be better... next year. But guess what? Competitors don't stand still. All the Android smartphones will be better next year.

But Nokia has ~ $2 billion in the bank now, and is loosing more than $250 million per quarter if you don't consider Microsoft's temporary cash donation (bribe).

If Elop was not crazy to put all eggs in Microsoft's basket and had developed Android as a Plan B, things could be much better now.

Of course Microsoft wouldn't like that. But what Microsoft could do? Nokia was much more powerful than Microsoft in the mobile space; Microsoft needed Nokia, Nokia didn't need Microsoft.

foo

@Sander van de Wal "But this doesn't get Tomi off the hook. His predictions about Nokia aren't too bad, but his theory doesn't work either. If it did, RIM would be fine. But RIM is not fine. RIM is in as bad a shape as Nokia."


The difference between Nokia and RIM is that RIM bet on Blackberry OS, which had 14% of market share, while Nokia (Elop) bet on Windows Phone which had only 2% of market share.

The result was that Nokia dropped from the 1st place with 33% market share, while RIM dropped from 16% (in a tie with Apple which also had 16%).

Now Nokia and RIM are disputing the 10th place. (Which Nokia won. Yay!)

Spawn

@foo

> Nokia no longer makes long-term strategic planning.

There are a few indicators for that ever since the bad trip started. "There is no plan B" and "plan B is that plan A must succeed" are probably the most notable statements raised if you understand them not as focus on strategy but as all-in. Nokia knew such a dramatic strategy-shift will need time, money and hurt. Elop named 2 years as "transition-timespan". During that Nokia went to the bottom. There is just not much room left for an alternate strategy.

What's even more worse is the long-term damage done. Nokia not just applied anotger strategy but they effetiely burned all other possible strategies. Its all about options and Nokia closed quit a few doors they need fo open again with any alternate strategy. Thunk of developer-relations. Who's going to trust Nokia? That Android/Linux segment that got so horrible burned by Nokia just some months ago? Dream on.

What about partners? Nokia had a rather large partner-network far bejond Intel, China Mobile, etc. which all got surprised when they found there investment burning in february 2011. They moved on and left what became the titanic.

Carriers? What has Nokia to offer NOW? There are 10 other players doing all better and not throwing there partnerships worth gold from one moment to the other into fire. Who would trust Nokia now? Who would believe in Nokia being of relevance any longer now tbat they got themself into such a downward-spiral, who would invest into a sinking ship if ghere are PLENTY other ships around all doing better, who?

Nokia isn,t any longer the gentleman, the dinosaurier, the tech-inventor, the finn pride, the mobile success story. They are a niche-player, a nn-profitable niche-player that is in cash-flow danger. Even Microsoft looked at them and sayed NO, there is no future in this company. That's what Nokia is now when going into negotiations with potential partners, carriers, customers.

Nokia had the ecosystem number 1, now they have nothing. WinPhone isn't there ecosystem, its Microsofts. Nokia has Ovi with two dozen S40 apps and that's it. Services beyond (lose-making) HERE and whats left of Ovi? Nothing. Factories, market share, just anything? No, nothing.

Take the brand Nokia and NSN and wbat you have is a money-hole. Business 101: stay away from money-holes like Microsoft did.

@Michal Varga

> Samsung is the only one who can be happy pursuing Android

Look at the top 10, 8 of them do Android. Huawei, LG, Amazon, etc are doing so profitable. HTC, after its initial Android success a mobile-decade ago, made the essential mistakes to not build up on it and even spent significant time, resources and money in the WinPhone ecosystem. As outljned by "Tester" same trap Sony fall into and Nkkia is in now. They, HTC, ditched WP and re-focused on Android just something like 1-2 years ago. That gives you an idea how long it would take for Nokia to recover. Google's Motorola is something we can talk about after there first new devices are out and available.

@Sander van der Wal

> They [Nokia] believed that the Android market would become like the PC market, with the money not flowing to the device makers.

And solution is ... to give up your software-fate and bind yourself to Microsoft like the PC market did. Hahaha, good one!

foo

@Tester "RIM, on the other hand, made entirely different mistakes: They knew their OS was obsolete but it took them forever to get the successor ready."

That's a very good point.

RIM's problem was operational, while Nokia's problem was strategic.

Choosing Windows Phone was a terrible decision, and it was clear since the OS had 2% of market share and would be ready by the end of the year... just to become obsolete a few months later.

Android, on the other hand, was ready; and if Nokia paired their great hardware with a great OS, and considering that they would start from 33% market share, they could have been in the place Samsung is today.

Too bad Elop was in the command.

Kenny

Anybody who says that Nokia couldn't succeed with Android or there is no space in Android for Nokia isn't looking at things from the 2010 point of view; they are looking at it from the present point of view.

The short story is that Samsung dominates Android now because Nokia isn't there. Simple as that.

Nokia has such a dominant brand presence in developing countries that many users there buy a Lumia due to loyalty to Nokia. They have used Nokia all their lives and they want another Nokia, even with an os that's less mainstream than Android and with far less apps. Many of them have been disappointed that WP is a downgrade from Symbian.

Would they buy a Nokia branded Android phone? You bet!

The bulk of Nokia's business was in developing countries where WP is a poor fit due to expensive hardware requirements, lack of basic offline transfer features and an os which requires an online PC and data package to get the most out of.

Nokia would have been far more successful with Android as it fits their core business. Android phones can be manufactured in any price segment.

Nokia could be bigger than Samsung now if it had gone with Android in 2010 but Elop blew it in his single minded madness for WP.

Spawn

And another gold sentence from Tester:

"
I don't think Samsung ever thought there was money in Windows Phone, yet they still released phones with that OS - just to be prepared for the case that it might nevertheless be a success.
"

That's it, keep options' be ready and NEVER EVER bind the survival of your company to only one strategy. More so if you not have all aspects of that strategy under your control. Its cheap, it's a peny-story, to keep options. That doesn't mean you need to make products, harm your main strategy in any way, it means to be ready and have options just in case.

Elop saying he didn't do Android cause Samsung was there is a lie. Samsung was and is also on WinPhone long before Nokia joined. Samsung did RT tablets, Nokia not. Samsung did Bada, Tizen, WP and Android cause this are options. Samsung was also willing to do Meego devices. There where in talks with Nokia and Intel even before Meego. Samsung had labs dedicated to Intel's Moblin like Intel has labs dedicated to Windows, Linux, OSX since many many years. Hey, Microsoft has opensource labs which also do Linux and Microsoft even pushed patches for Linux upstream. Keep options, be ready.

And Elop? He goes by and moves from the battle of devices to a war of ecosystems and moves his Nokia to one front effectivrly declaring war against anything but Microsoft. Why? What's the reason Elopvwent on war against options, closed doors, burned bridges?vWhy would you go all-in if there is NOTHING to gain but EVERYTHING to lose?

I stand by my opinion that the burning strategy was caused by Elop, "call me the General", ego taking over. Nokia BOD failed to react ever since. I think there is many evidence for Nokia BOD being a puppet-cabinet sleeping since more then two years now.

Would the real Nokia BOD please stand up?

Janne

@Sam

How about comparing the reach of the current market rather than comparing the sales figures, as the market has grown considerably since?

For instance it took iOS six quarters to reach 10% global market share, whereas Windows Phone is holding about at steady few percent after ten quarters (Gartner numbers charted: https://en.wikipedia.org/wiki/File:World_Wide_Smartphone_Sales_Share.png).

Android dominance is overwhelming, and actually the feared fragmentation keeps the number high, because so many are contributing. Monolithic operating systems can't compete.

Simon

@Sander van der Wal
" Nokia said that they were afraid that going to Android would result in them having to compete on price only. They believed that the Android market would become like the PC market, "

How does WP solve this dilemma? There is even less opportunity to customise WP than Android, thus leaving Nokia at the mercy of Microsoft.

The argument for WP boils down to "We saw what happened with PC manufacturers because of the influence of Windows, so we decided to adopt Windows so that the same thing won't happen to us". It's obvious nonsense. It should be obvious to a 5 year old.

Spawn

@LeeBase

> they new that the battle was among ecosystems.

Please think at least a minute and combine your previous "Android is Samsung" post with your "ecosystem war" post. If its all about the ecosystem when its Android vs WP how isn't it about the ecosystem if its about Samsung vs Android? Got it? If yes, then go future and re-think who had mobile ecosystem number 1, who was kind of thr hill when Elop took over? Spoiler: it wasn't Samsung and it wasn't Apple. Hint: Try to think beyond a US highschool town.

winter

Basic economic theory seems to be shunned at school nowadays. A competitive market always goes to the lowest price. And that is called progress.

Simon

@leebase

I don't disagree with your premise that Nokia had no chance to compete, but, once you come to that conclusion, what choice does a company have?

The only route one can take in that situation (competition is not possible) is to milk one's existing products for as long as possible, while minimizing investment in new products.

Elop, on the other hand, killed the cash cow.

Did Elop think that the Microsoft money and marketing would be enough to succeed? If, so I think that he failed at grade school-level math. Did Elop not look at the history of companies who chose to partner with Microsoft?

Tester

Some basic math:

52% -> 33% means loss of 36% of existing market share.

33% -> 3% means loss of 90% of existing market share.

Not even remotely comparable developments.
One is normal if new competitors enter a market, the other is a clear indicator of something going wrong.

Spawn

And is there anybody left, beside mind-resistent Elop, that doubts that Samsung would have gone full speed on WinPhone too if WinPho e turned out to sell? Serious, Android or WP, no difference for Samsung. The only way Nokia could have avoided direct competition with Samsung in the same ecosystem is there own ecosystem but all those Nokia had Elop killed - from the number 1 ecosystem Symbian, to the ecosystem that was ready and shipped half a year before WP, Meego, to the S40 successor Nokia needs right now and that was weeks before launch, Meltimi. And now Elop argues he didn't try Android cause of Samsung? Come on!

Tomi T Ahonen

Hi Everybody

Great comments, keep them coming (And don't worry about the trolls, I am removing them as I have time)

For new readers and those who are occasional visitors who may wonder why their comment was deleted. I remove pointless comments that do not serve the discussion or which poison the discussion. So, if anyone writes a comment that clearly indicates, they did not read the actual blog posting - those will be deleted immediately. So if, for example, you claim that Nokia was losing to Apple - and my blog already established with Nokia and Apple stats, that Nokia grew more smartphone unit sales from 2009 to 2010, then you didn't read the blog and no matter what other good points you might have made, I of course remove such comments as pointless and waste of everybody's time.

I usually forbid discussions about the stock market, unless my blog opens that discussion (as I did here) so in this case I'll tolerate some stock market discussion. However, I will not tolerate abusive visitors, don't make personal attacks on others who comment here.

For my regular readers, if you try to bring back issues that I have deleted your comments before, of course I will keep removing them. Stick to this blog and its discussion thread. If I already ruled on your previous gripe, and you bring it up, I can delete you on one click. And some of you - are on very short notice - I take great delight in removing your comments if you step across that line. Don't bother mentioning that I police this blog and remove comments - I admit to it myself, therefore your crybaby behavior will only result in your whole elegant well-developed, insightful posting will be gone. Stick to the point, and your comments will stay, even if you totally disagree with me.

I'll do a few responses here now to interesting stuff in the thread

Tomi Ahonen :-)

Tomi T Ahonen

On the iPhone vs Lumia chart

Wow, what a ridiculous comparison. Apple entered the mobile industry in 2007. That line of iPhone sales is from zero. Nokia didn't enter the smartphone industry in 2011, Nokia invented the smartphone in 1998. Its like comparing all of General Motors to only Toyota's Lexus division. Ridiculous comparison. In the first 7 months of the iPhone, Apple sold 17.2 million iPhones. In the last 7 months when Lumia was included, Nokia sold 68.1 million smartphones. Apple's growth rate on a Quarter-on-Quarter rate was 56% Quarterly growth from first reported quarter to its 7th consecutive quarter. Nokia's equivalent development was a negative 15% per quarter for the past 7 months.

Secondly Apple's iPhone numbers start from 2007 and end in 2008, when the smartphone market sold 25 million smartphones per quarter. So Apple grew to 17% market share at that quarter. The Nokia Lumia launch was 4 years later, and today the smartphone market is 9 times bigger. So if Lumia did same numbers in unit sales, it is doing 9 times worse than Apple did when market growth is factored in. That is shown by the market share, as Nokia now has 3% market share.

Lastly, you cannot compare the iPhone to the Lumia, because the iPhone encompasses the full scope of the iOS ecosystem, whereas the Lumia is only one of handset brands selling Windows Phone smartphones. So you should compare Windows smartphones (including Windows Mobile) and its launch from far before Apple, ten years ago. But if you somehow see that Windows Phone is Microsoft's first entry to smartphones (haha) even then, you need to see not Lumia launch, but Windows Phone compared to iPhone. Windows Phone launched Q4 of 2010. In the first 7 months of iPhone, Apple achieved 17% market share for iOS. In the first 7 months of Windows Phone, Microsoft achieved.. 2% market share for its new smartphone OS. Those are reasonable 'apples-to-apples' comparisons.

Tomi Ahonen :-)

Tomi T Ahonen

On the 'Samsung rules Android' debate

Very good points on both sides. A few facts to help clarify the issue and some of my thoughts.

First, if Elop today claims Samsung was 'the reason' he selected Android, that is sheer bullshit. In the Burning Platforms memo where Elop discovered Nokia in terminal catastrophy, he mentions many competitors - but not once Samsung. Even in February 2012, at the one-year-anniversary of the Memo, Elop was asked directly about Samsung, he said he doesn't lose sleep over Samsung. At that point Samsung was twice as big as Nokia in smartphones and that quarter - Q1 of 2011 - Samsung actually passed Nokia to become the world's largest handset maker. And Elop lost no sleep over this rival, while obsessing about Apple and the Chinese handset makers. No, Elop very clearly in his own words, showed he didn't see Samsung as a credible worthy rival. Samsung never factored in his decision to go Windows vs Android.

Secondly, in Q4 of 2010, when latest market data was available, the king of Android was not Samsung, it was HTC, by a considerable margin.

Thirdly, to suggest Nokia can somehow avoid direct contest with Samsung by going Windows Phone is ridiculous, as Samsung had been a Windows Mobile partner and has RELEASED smartphones on Windows Phone.

Elop is trying to rewrite history to make his moronic decision seem sensible as the market has shifted. I would agree to that view in some way, if he mentioned Sammy in his Burning Platforms memo. Samsung was the only major brand that threatened both of Nokia's handset units. It was the 'gorilla in the room' the obvious biggest rival. But Elop came from Microsoft and saw Apple and Google as Microsoft's rivals, not any real handset makers like Samsung as Nokia - the handset maker's - biggest rival. Obviously I pointed this out in my first analysis of the Elop memo (when I thought it was a well-written hoax)

Tomi Ahonen :-)

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