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Bloodbath Results, Latest Apple Quarter - More evidence of Peak iPhone

So yes. Now we have Apple's latest July-Sept Quarter, ie calendar quarter Q3 (Apple has different fiscal quarters, we use standardized calendar quarters on this blog). And as this blog is only interested in mobile phones and thus, smartphones, I won't look at other aspects of Apple's great businesses than the iPhone smartphone business.

And that is once again reporting growth. Year-on-year growth level of 26% and Quarterly growth vs 3 months ago of 8%. Apple is holding steady in its market share at 13.6% (preliminary). The iPhone business is profitable, they have now split their product line into a premium product and (nominally) discount product. All is generally pretty good. Next quarter will have the full sales quarter for the new iPhones, 5S and 5C, and that will definitely help Apple to record Christmas sales in the smartphone business and new record unit sales levels. But what of market share?

Apple's iPhone market share has indeed peaked. It is now almost impossible for Apple to be able to report growing iPhone market share annually for 2013, compared to 2012. It will be the first year that iPhone did not add market share on an annual basis. I predicted this would happen, I was off by the timing (but nobody could foresee that Nokia's CEO would be given a bonus for wrecking his handset business). But we've been monitoring the developments of the iPhone market share and here is an interesting view for you to consider. Because Apple only releases a new iPhone/iPhones once per year, it has a peculiar sales pattern of strongly seasonal sales. So comparing Quarter-to-Quarter would give a see-saw effect, some months up, other months down, with difficult-to-see patterns. But we have a good statistical tool for that. Lets look at the last 4 quarters (last 12 months) moving average. Now it gets very interesting. Look at iPhone market share development as an averagef of the latest 4 quarters ending:

MOVING AVERAGE iPHONE MARKET SHARE

Latest 4 quarters ending Q4 2009 - 14.0%

Latest 4 quarters ending Q1 2010 - 15.3%
Latest 4 quarters ending Q2 2010 - 15.8%
Latest 4 quarters ending Q3 2010 - 15.9%
Latest 4 quarters ending Q4 2010 - 15.9%

Latest 4 quarters ending Q1 2011 - 16.5%
Latest 4 quarters ending Q2 2011 - 17.8%
Latest 4 quarters ending Q3 2011 - 16.9%
Latest 4 quarters ending Q4 2011 - 18.7%

Latest 4 quarters ending Q1 2012 - 20.1%
Latest 4 quarters ending Q2 2012 - 19.6%
Latest 4 quarters ending Q3 2012 - 20.0%
Latest 4 quarters ending Q4 2012 - 19.6%

Latest 4 quarters ending Q1 2013 - 18.1%
Latest 4 quarters ending Q2 2013 - 17.2%
Latest 4 quarters ending Q3 2013 - 16.6%

Source: Apple quarterly results
The above data may be freely shared

The iPhone 12 month moving average has fallen now for 5 quarters in a row. It is now indisputable that there has been a clear peak in year 2012 and the moving average is down over 3 points of market share (one seventh of its size) from the peak it held last year. It would take Apple a Herculean sales effort for Christmas - of about 91 million unit sales (and quarterly market share of 29% when Apple has never had a quarterly market share better than 24% before) to bring Apple to 'level' in market share compared to last year. I am expecting Apple Q4 Christmas Quarter to have something like 65 million iPhone sales - which would be 'normal' growth vs last year and produce record performance at Apple - and result in Apple's full year 2013 market share to be about 17% to 18%.

Now, what Apple needs to do, if it wants to reverse the decline in market share - is to lower the price of its discount product, the iPhone 5C. Of course Apple doesn't care about my views or about market share, they want profit share and pursuing that strategy no doubt is best for Apple investors - but this means that you should not expect iPhone market share to grow anymore. It has peaked and will now settle into that roughly 1 in 6 smartphones sold level (And roughly 1 in 12 total handsets sold which is well in line with historical Macintosh PC sales...)

Bloodbath Results of the Smaller Guys - LG and Nokia report Q3

Now that Nokia is just another small guy lets not give them too much attention anymore..

LG STUMBLE AND REPORT LOSS AGAIN

LG reports Q3 quarterly results. For Q2 of 2013 LG was third largest smartphone maker selling 12.1 million smartphones, profitably. Now we get their latest results and there seems to be emerging a 'Third Rank Curse' which prevents anyone from holding onto that position (in last 5 quarters we've had 4 companies holding 3rd place - Nokia, Sony, Huawei and LG. This Quarter gives us a new 3rd place ranking company again). 

So yeah, LG sold 12.0 million smartphones, which gives them a preliminary market share of 4.8%, down from 5.2% in Q3. Their Top 3 ranking is gone, they now are hoping for 4th, and might be as low as 7th, competing with Lenovo, ZTE and Sony. Very likely they outsold Coolpad/Yulong. The more alarming news for LG is that their handset unit is back to making a loss again after some profits. Life's not-so-good nowadays over at Life's Good.

NOKIA GROW SMARTPHONE UNIT SALES BUT ALSO REPORT BIGGER LOSSES AGAIN

So Nokia. The last partial quarter with Elop in charge. The end of the Elop Era. We just got the Nokia results. The overall company made a modest profit - driven by the other (remaining, non-handset) businesses. Nokia's handset unit again reported a loss. Not because of bad dumbphones - the dumbphones ie 'featurephones' unit was slightly profitable. The problems continue at the smarpthone unit which now saw increasing losses. But yes, it now seems very clear, Nokia had hit its bottom and has now achieved a 'floor' level as the 'New Normal' which is about 3.3% in global smartphone market share, plus or minus half a percentage point. For the past 5 quarters Nokia has fit comfortably inside this narrow window - 3.7%, 3.0%, 2.9%, 3.2% and now 3.5%. If you want to be an optimist, you say we've hit the bottom and Nokia is now 'rising'. The realist points out that just 18 months ago - yes 6 quarters ago, Nokia's market share was 6.7% and just 2 years ago it was 14.0%. There will not be a heroic return to the early days of Elop in charge when Nokia controlled 34% of the smarpthone market.

So yes. Nokia reports 8.8 million smartphones sold in Q3 of 2013, that is up 19% from Q2 and gives Nokia a preliminary market share of 3.5% currently. Their risk of dropping out of the Top 10 biggest smartphone makers has subsided, as Blackberry (ex RIM) and HTC continue to struggle. Nokia is now fighting Coolpad/Yulong for which gets to claim 8th ranking. Nokia cannot finish worse this quarter than 9th.

We also see the annual numbers becoming quite clear. Nokia will end the year selling around 3% of the total global smartphones, down from 5% last year, 16% in 2011 and down from 35% in 2010, when Elop was hired. Remember Nokia smartphone sales were growing strongly (with increasing and indeed Nokia-record-setting profits) when Elop was hired and every published handset analyst was convinced Nokia would easily remain the world's largest smartphone maker for years to come (with the older strategy, until we got Elop destroying that with the Elop Effect, to pursue his personal bonus of 25 million dollars to wreck the handset division business).

We have seen a nearly perfect transition from Nokia to Samsung. In Q4 of 2010, the last quarter before the Elop Effect, Nokia smartphone market share was 29% and Samsung was 11%. Today Nokia is 3% and Samsung is 33%. Meanwhile we also saw Blackberry collapse from 14% to 2% and HTC fall from 9% to 3%. Did Apple win out of these major collapses? Barely. The iPhone had 16% market share in Q4 of 2010 and has 14% today.. No, the only one who gobbled up all the destroyed rivals was the fastest mover in the smartphone space, the Korean giant we know as Sammy...

Back to Nokia. We can see the bottom, Nokia natural share in smartphones now in the Lumia age is about 3.3%, literally just one tenth of what Nokia smartphones owned of the market before Elop wrecked the business. And its also true, that since the Elop Effect, until Elop left Nokia, not once has the smartphone unit managed to produce a profit. The smarpthone unit had never reported a loss before Elop came into town. Now for Nokia/Microsoft, the next stage is to cure this company of its losses, and try to bring the smartphone unit to a sustainable business level, ie nominal profits or at least about neutral standing. Of course if the Nokia shareholders approve the sale of the handset unit to Microsoft, then the 'Nokia' handset business will become a side business for Microsoft and it can afford to run it with losses for years, like it did when it prepared the Xbox gaming console business to eventually become viable profitable and market leading business.

 

Best Mobile Ad Campaign I've Yet Seen - comes from Guatemala - and is Location-based.......

Yeah, to show how clueless your mobile analyst is, remember me telling you year after year, how location-based advertising is a losing propotion? Well, here is the exception that proves the rule. The best mobile ad campaign I've yet seen.

 

Ashutosh Srivastava the CEO of Mindshare was speaking at the MMA Forum here in Vietnam today where I was co-chairing the event with Rohit Dadwal. Ashutosh gave example of a mobile ad campaign that a sporting shoes store chain, Meat Pack in Guatemala, had just run. It was called 'hijack'. The idea was, to hijack customers from competitor stores. Meat Pack customers had to pre-register. Then Meat Pack had gone and geo-location positioned the stores of all of their competitors. When a registered Meat Pack customer went into a competitor store, they would receive a timed discount offer. The offer starts at 100% discount, and starts to 'count down' so a moment later, the discount is only 99%, then 98%, then 97% etc - this drives customers quickly to the nearest Meat Pack store, so if you arrive and you have 18% left of the discount, that is the discount you get today on your purchase of shoes at Meat Pack.

In one week in Guatemala, Meat Pack stole 600 paying customers from competitors, using mobile. The top discount achieved was 89%. Here is the video to the campaign.  

Pinpointing the Elop Effect - 3 Pictures from Nokia Financial Data All Agree it was February 2011

There are some who are trying to write revisionist history about Nokia now, as they head to their shareholder meeting about the handset unit sale. I want to post these three pictures from Nokia results, to show just very clearly, yes there is obviously an Elop Effect, all Nokia data totally agree that in the smartphone unit there was clear unit sales growth before Elop Effect, which turns into decline. There was clear revenue growth before Elop Effect, which collapsed. And there were strong profits before Elop Effect which all vanished turning into perennial losses. Nokia the company did not die out of becoming a dinosaur. Nokia was killed by an assassin - a paid assassin, the CEO who got a 25 million dollar bonus for destroying the smartphone unit. That is why Elop was worst CEO of any company in Fortune 500 history. Here are the pictures

Nokia Smartphone Unit Sales Before and After Elop Effect



This picture may be freely shared

Nokia Smartphone Revenues Before and After Elop Effect



This picture may be freely shared

Nokia Profits at Smartphone Unit  Before Elop Effect and Losses After



This picture may be freely shared

There is total agreement in those pictures. Nokia smartphone unit was VERY healthy, growing unit sales, growing revenues and generating increasing (and Nokia record-setting) profits. Those all were destroyed exactly in Q1 of 2011, ie February 2011, with the Elop Effect. That is the truth, people.. Lets not rewrite history now. If you want to read the full story of what happened at Nokia and how the above performance was possible, read this: Nokia Requiem. And if you want to know how Elop could have gotten such a bizarre 'assassination bonus' into his contract, this is my speculation of how it happened. And for those who think that Nokia was in trouble before Elop, he had a hopeless mission - here is the comparison of previous CEO Kallasvuo vs Elop. Yes, Nokia had problems before Elop came in - totally fixable problems and the smartphone unit was not the sick puppy at Nokia at the time. Elop decided to destroy the smartphone unit, because it was the easy way for him to collect 25 million dollars.

PS if you are curious why is there such a strong peak in Q4 of 2011, that was driven by the launch of Nokia's only MeeGo based handset, the N9, Nokia's flagship smartphone of 2011, plus obviously Christmas seasonal sales peak (which is almost non-existent a year later when Christmas sales were driven by new Windows Phone 8 based Lumia flagship phones). It is not a peak driven by Lumia and Windows Phone (which launched in small numbers in Q4). You can see that Lumia did not help decline Nokia smartphone unit sales, or revenues, or help turn loss-making into profits, until the "Lumia bottom" was hit about Q1 of 2013. 

In Nokia Aftermath, Jorma Ollila Interview by Helsingin Sanomat

Nokia past CEO and past Chairman, Jorma Ollila had been very quiet about Nokia since he retired as Chairman. But now he's given an interview to Finland's largest newspaper, Helsingin Sanomat, which is translated into English here. The interview is partly motivated by the release of Ollila's memoir just released (in Finnish).

Ollila makes some interesting observations. First, that there were many causes for Nokia's ultimate failure, that were quite intertwined. But if he had to pick one ultimate failure, he identifies it as the lack of success in becoming a software company, even after sending 1,000 of Nokia staff to Silicon Valley to try to learn the software business.

Ollila talks of Nokia problems becoming significant at the advent of the iPhone from 2007. He points out how much operators/carriers impacted Nokia's handset business, back from the first punishment of Nokia by operators in 2004 - cutting back on purchases back then - onto how operators/carriers wanted low-end mass market phones from Nokia, plus customization. He also talks of Nokia's attempts to update Symbian, but then falling ever more behind on schedules and execution. (These are all matters we've covered here on this blog ad nauseum).

Ollila identifies the period of December 2010 to January 2011 as the time when the decision was made to abandon Nokia's own MeeGo (and Symbian) based future in favor of Microsoft's Windows Phone,. Ollila is quoted saying of that decision "Great risks were involved when we assessed the company's competitiveness on the Board with these operating systems over a period of 2 – 3 years." Without quoting Ollila explicitly, the article points out that the Windows strategy was "a big mistake" but then brings Ollila's words to echo that by writing "'This is true. We were not successful in using Microsoft's operating system to create competitive products, or an alternative to the two dominant companies in the field', Ollila says." The article then points out that "Nokia smartphones generated big losses because of the low demand." From February 2013 Nokia Board began negotiations to sell Nokia's handset unit to Microsoft.

(again, we obviously have known this here on the blog..)

And Ollila takes responsibility for being part of the decision-making that led to the problems. Helsingin Sanomat writes "Ollila admits that he had been involved in making some wrong decisions. Nevertheless, he is not clinging to the past. He is therefore accepting of mistakes made by himself as he used to be of those made by his subordinates."  Read full article here.

Some News from Bloodbath Year 4: Smartphones Galore - Blackberry results, China market data

So as the big shock and analysis related to Nokia's collapse subside, we should return to our regularly scheduled feature, the Bloodbath, now in its Year 4: Smartphones Galore. We saw another death in the smartphone bloodbath, Nokia is now gone (ok, going out) to be swallowed by the death star of mobile handset wars, Microsoft. Lets see what else is happening.

BLACKBERRY QUARTERLY RESULTS

Well its another death imminent on the battlefield. Once the world's second largest smartphone maker - yes, Blackberry was, as recently as Q2 of 2010, the world's second largest smartphone maker and in terms of measurement by market share, a year earlier Q3 of 2009, Blackberry ie RIM had 21% market share of the global smartphone industry. The iconic business and messaging phone maker was highly profitable and celebrated in the US business papers at the time as the fastest-growing company ever. That turned into a collapse. Not due to the iPhone, as legend and myth would have it - when Apple grew strongly (years 2007 to 2010) Blackberry also grew. When Blackberry fell (from 2011 to 2013) Apple's market share has been flat and even peaked and has been at a very slight decline (on an annual basis) in the past few quarters. RIM ie Blackberry did not die by the iPhone. Blackberry died to Android and Samsung and low-cost providers. RIM lost the ball by attempting to launch tablets against Apple (and failed miserably in that) and that drained its deep pockets and caused mass layoffs and delays to all its development, which all hurt its cash-cow, the Blackberry. The promise of the future, the Blackberry 10 operating system arrived far too late and now Blackberry reported its results.

Blackberry Q3 results. Sales 3.7 million smartphones - down 46% from one quarter before and Blackberry preliminary market share is 1.5%. Blackberry very likely remains out of the Top 10, as HTC is expected to report bad results, but this was a record-setting failing quarter in Waterloo, its highly unlikely for HTC to report as bad numbers. And yes, Blackberry reports deep losses this past quarter, so those few smartphones that did find a buyer, were bribed to take the devices sold at deep losses. In other news, Blackberry management is trying to sell the company, or do a buy-out, and a bid is out there, attempting to collect investors to buy out the company for a valuation of 4.7 Billion dollars. These results will not help in that venture, if that happens, very likely the final Blackberry purchase price will be even less.

THE OBITUARY PAGES

So, going to the time before the iPhone, the 5 largest smartphone makers of 2006 in order of their size, were Nokia, RIM/Blackberry, Motorola, Palm and SonyEricsson. So far the Bloodbath has claimed 3.5 victims out of that bunch of 5 with Nokia, Motorola, Palm and Ericsson out of SonyEricsson already out of the smartphone wars as independent brands. Blackberry is on the ropes, but Sony after ridding itself o Ericsson, has managed to turn the smartphone business into a profit and has today nearly the same market share (4%) as it had then (as SonyEricsson), seven years ago (5%). So what else is new?

CHINA MARKET DATA - AUGUST

We have some interesting market data from China, the world's largest smartphone market as well as the world's largest overall handset market. China has now passed the migration rate of the USA as well, in terms of new handset sales with 91% of new phones sold in China now being smartphones according to Counterpoint. They also give a view to the Chinese smartphone market for the month of August which they say is: 15% Samsung, 11% Lenovo, 11% Coolpad (Yulong), 7% ZTE, 6% Huawei, 3% Nokia and 1% Apple. 45% of China's market is split by the approx 1,000 local domestic brands that almost all do Android.

Note how much that differs from for example Kantar numbers that only measure 'Úrban China' and have Apple at 20.8% market share. Kantar's numbers are for the past 3 months ending August, so we know the Apple sales are falling always up to the launch of the new iPhone models, so yes, if its averaging 21% for 3 months, it will be more than that in June and less than that in August, but still, this puts the Kantar China number into significant context. What matters in China is reach and distribution for the whole massive nation of 1.3 Billion people, not just sales in the several big megacities of 30 million people each. 

A REVISED BURNING PLATFORMS MEMO

I know I said we're done with Nokia, but I have to mention this. Nick Kolakowski over at Slashdot has done a great short revisit to the infamous Elop memo of Burning Platforms, that started the collapse of Nokia's smartphone business. I warmly recommend reading the short bittersweet blog article. In the Elop saga itself, he's also stuck in a divorce, his wife wants half of the 25 million dollars Elop grabbed from Nokia after wrecking its main business. But that gets onto the side of soap opera, I won''t comment further on the divorce side. What else is happenin' in smartphones?

SAMSUNG GALAXY GEAR AND NOTE

I think I hadn't yet mentioned this on the blog, did I? Samsung announced its s-watch, the Galaxy Gear. If Apple also launch an iWatch later this year, this could be supremely opportune timing by Sammy. If its the only smart watch out there, then I think it will fizzle rather fast.

Meanwhile on the 'my screen's larger than your screen' wars, Samsung's Note series has passed cumulatively 40 million shipments since their launch. Quite impressive and clearly there is a big market demand for bigger screens. This all begs the question, why didn't Apple use this year's split in the product line, to introduce a larger screen for the new flagship model, the iPhone 5S. I think that was a mistake by Apple (but no doubt, the 5S will sell in record numbers nonetheless, however, if the market just for Sammy's Note is 40 million and counting, Apple should have not abandoned that, the top end, of the screen wars to Samsung)

PANASONIC

Return of the Panasonic? Panasonic is launching three Android based smartphones in India, its first big international expansion for many years. Panasonic could follow Sony's (and Samsung's) footsteps of expanding its consumer electronics brand into the smartphone space in various international markets, if the India venture turns into a nice success. India's domestic smartphone market is very hot now, more than doubling annually and very welcoming of major international brands amidst its various domestic handset brands like Carbonn and Micromax, especially as past giants of the India smartphone market, Nokia and Blackberry are doing their death-dances. Oh, and Nokia has a long-standing legal dispute with its tax situation in India, no doubt hurting the brand there.

LENOVO

Talking about India, Lenovo was there already selling its LePhone and now is expanding its Android based smartphone product line there adding four new models - which all are dual-SIM Android smartphones at the low end of the price scale.

HUAWEI

Is also expanding, has entered the Israeli smartphone market. Granted, thats a tiny country of only 7 million people but still, Huawei still expanding. On a more meaningful development, Huawei promises to double its sales in Nigeria, Africa's largest handset market and rapidly growing smartphone market where Blackberry used to be number 1 and Nokia number 2. I'd be very enthusiastic about this announcement, until we remember last year's bold promises by Huawei about how much they intended to sell in China, and how flat they fell. Huawei may be one player subscribing to that Microsoft 'smoke and mirrors' tactic of promising astonishing numbers at every turn. Lets wait and see.

HTC 

HTC is again expected to report declining sales. HTC doesn't report unit numbers only the revenue number in sales, but yes, the news seems to be bad also from Taiwan's biggest smartphone brand. There was some rumors that HTC might be sold again, this time Huawei said they are not interested.

ZTE

The Chinese maker which is selling its Firefox based smartphones in Europe, is promising to bring the Firefox OS also to the USA next year (once again the pattern holds, that all new developments come to the US market last in smartphones).

SONY

Sony has just issued guidance that its fiscal year 2014 sales of smartphones will grow by 55% and hit 65 million units, up from 42 million it expects to ship in fiscal 2013. Sony's fiscal year ends in calendar Q1 ie the January-March quarter, so for this year Sony's performance is about 40 million smarpthones. That is good growth, solid performance and as Sony's handset unit is profitable, this is all good news. But how good is 40 million for 2013? Not good enough, I am afraid. Momentarily Sony was the 3rd biggest smartphone maker but now if Sony ends this year selling about 40 million, that would put it behind not just the two giants, Samsung and Apple, but back in the pack of the dwarfs - behind Huawei, Lenovo, LG and ZTE - which are all currently performing to a level of between 42 million and 48 million sales for year 2013. So Sony might end the year in 7th ranking, racing against the rapidly growing Yulong/Coolpad of China, which could also hit roughly 40 million smartphone sales this year.

Incidentially, the really cool news from Sony is the Carl Zeiss branded removable and 'universal' cameraphone lens accessory they are shortly going to start to sell. I want one of those! It should work with all smartphones as a booster to your camera, with real optical zoom etc.

XIAOMI

The next Chinese brand to keep your eyes on is Xiaomi, it has passed 10 million cumulative smartphone shipments and may enter into the Top 10 brands soon as the next Chinese brand there (after Huawei, ZTE, Lenovo and Coolpad/Yulong) 

JOLLA

So the largest Finnish handset maker now is Jolla, the start-up based on the departing staff from the MeeGo and Maemo projects around Linux software at Nokia. Jolla will use the Sailfish OS, a further development of where the MeeGo OS had gotten, and Sailfish will allow Android apps to be used, giving Jolla an interesting play, being kind of compatible with Android while not being Android. The first device pre-ordering stage is past, and more complete specs have been released by Jolla - its a high-range but not flagship level device, 8mp camera, 4.5 inch screen, a Quad-core CPU, 16GB of storage and offering expansion via microSD slot. The look and feel is similar to the Nokia N9 that ran MeeGo, and thus obviously also similar in apperance to the top-end Nokia Lumia series which obviously took its familiar appearance from the N9. Jolla devices to ship in early 2014 and will have a price tag of 400 Euros without contract.

Thats about all for now, and we are entering the quarterly results period for Q3 results, so this month should see plenty of news in that space. 

Compare Elop to his Predecessor Kallasvuo. One was Bad. One was The Worst Ever

So now that the Elop Era has passed at Nokia, we can compare the two failed Nokia CEOs. The golden boy at Nokia was Jorma Ollila. His successor, Olli-Pekka Kallasvuo known as OPK became Nokia CEO in the Spring of 2006. He stayed for four years, but was ousted as Nokia reported increasingly bad results, including its first quarterly corporate loss in more than a decade, and after the Nokia share price had fallen 55% during his four-year tenure.

OPK was replaced by Stephen Elop in the Autumn of 2010. Elop only managed 3 years before he was removed from the post of CEO. As OPK came in during Q2 of 2006, and Elop took over after Q2 of 2010, and Elop was removed after Q2 of 2013, we can compare the two CEOs with reasonably fair 'Apples-to-Apples' comparison of Q2 of 2006 (Jorma Ollila's time) to Q2 of 2010 (OPK) vs Q2 now, of 2013 (Elop). We can also take the last full calendar year, 2005 for Ollila, 2009 for OPK, and 2012 for Elop. Lets compare the two Nokia 'failures' to see how they compare.

NOKIA UNDER KALLASVUO

Olli-Pekka Kallasvuo achieved the following, if comparing his last Q2 in 2010, to the last Q2 still partly under Jorma Ollila, in 2006. OPK was indeed achieving declines on several of Nokia's measured results. Comparing to four years before, remember, the total mobile and telecoms industry has been growing, OPK's last Quarter saw the declines of Nokia profits by 56% from 1.5 Billion Euros per quarter under Ollila to 660 million Euros under Kallasvuo. Nokia's handset unit saw its profits decline less, but still, a significant 34% decline from 979 million Euros per quarter to 647 million. Of Nokia's three critical regions, Europe, China and North America, North America had not grown, but had seen a very alarming 50% decline down to 2.6 million phones sold per quarter.

If we compare last calendar year, so comparing OPK's 2009 full year, to Jorma Ollila's last full year, 2005, we see that under Kallasvuo, Nokia profits fell 74% from 4.6 Billion Euros per year down to 1.2 Billion. Nokia's handset unit profits were down a bit, 8%, down from 3.6 Billion Euros to 3.3 Billion Euros over the four-year period. Regionally almost identical results, North America was the region that fell, and 47% when we use the last calendar year as the metric, down to 13.5 million handsets sold in North America in 2009 vs 25.3 Nokia branded handsets sold in North America four years earlier under Jorma OIllila.

Certainly when we combine the above performance with the share price fall of 55% in value over four years, OPK had been a poor CEO and it was a fair decision to replace him. He was not steering Nokia well enough. But lets be fair. Olli-Pekka Kallasvuo's period was indeed a 'mixed bag' - there was also plenty of good news with the bad. Consider:

If we use the Q2 to Q2 comparison of the four years, then while yes, Nokia corporation profits fell, the overall revenues were about flat (2% growth) from 9.8 Billion to 10.0 Billion Euros per quarter. The critical part was the handset unit, where revenues grew strongly by 16% from 5.9 Billion Euros quarterly to 6.8 Billion Euros. The handset unit volumes were up very strongly by 42% from 78.4 million to 111.1 million handset units sold per quarter, and where Nokia's future was - the smarpthones unit - had the best growth of them all, more than doubling in four years, up 167% from 9.0 million units to 24.0 million units per quarter. And regionally, yes North America was down, but North America is not the future of the handset market. How was Nokia doing in China? Under OPK that North American decline of 50% was more than made up by the 65% growth in China which already by then was bigger than the US market in overall handsets sold (all handsets, not just smartphones. Today China is 50% bigger than the US even in smartphones alone).

And to compare last calendar year, 2009 under OPK to 2005 under Ollila, again, its a mixed bag. Yes, Nokia profits are down but Nokia overall revenues grew 20% in the four years under OPK from 34.2 Billion Euros to 41.0 Billion. Yes, the handset unit profits were down but overall handset unit revenues were up by a very healthy 34% from 20.8 Billion Euros per year to 27.9 Billion Euros. The overall handset division reported unit sales up 24% to 431.8 million sold per year, and the smartphone unit sales - where the future of Nokia was - this unit reported sales up by 74% from 39.0 million to 67.8 million smarpthone units sold per year. European sales were slightly up, 7% but China was up 42% to 72.6 million units per year, while North America was down 47% to 13.5 million units per year.

Yes, Olli-Pekka Kallasvuo was not a good enough CEO for Nokia. He achieved growth in revenues, but declining profits (but was still profitable). He achieved growth in handset units and revenues, but the handset profits declined (but were still profitable). He did yes see North America sales decline but China grew much more than what was lost in North America and that was the right choice, considering how much bigger, and how much faster China was growing than North America. Finally, the future of Nokia, its smarpthone unit - was reporting the best growth and strong revenues during Kallasvuo. Nokia did not break out the profitability of the smartphone unit until later, but we did find out that during the end of the period, the smartphone unit was delivering strong double-digit profits even in the final months of OPK's tenure. The most critical number, Nokia's smartphone migration rate - migrating customers from dumbphones to smartphones - led the industry and was ahead of the global average. So Nokia was actually picking up market share, when it shifted from dumbphones to smartphones under Kallasvuo. Yes, there were bad results, especially the share price down by 55% but yes, Kallasvuo produced profits and growth in revenues. It was not all bad news.

WHAT ABOUT ELOP?

So lets compare to Elop. Take all those measures. Every one of them. And the results are worse under Elop than under Kallasvuo. Yes, every single measure is worse. Lets again take first the Q2 to Q2 comparison, latest quarter, in 'Apples-to-Apples' comparison of performance.

Under Kallasvuo Nokia reported growth in revenues. Under Elop the quarterly revenues fell 43% from 10.0 Billion Euros in Q2 of 2010 to 5.7 Billion Euros now. Under OPK there was a decline in profits but Nokia corporation was still profitable. After three years of Elop, Nokia was now unprofitable. This is total disaster as CEO, if you abandon profits and start to produce losses. 

Under Kallasvuo the overall revenues of the handset unit grew 16%, under Elop, comparing Q2 of 2013 to Q2 of 2010, the handset revenues fell 60% from 6.8 Billion Euros to 2.7 Billion Euros. Under OPK the handset unit profits declined but there were still strong profits. Under Elop those profits were turned into losses. He replaced 647 million Euros of quarterly profits with a quarterly loss of 33 million Euros. OPK saw a 42% increase in quarterly unit sales of handsets. Elop switched that to a decline of 45% in quarterly unit sales of handsets. The smartphone unit under Kallasvuo saw more than doubling of sales to 24.0 million per quarter, under Elop that fell by more than half, down by 69% to 7.4 million units of smartphones sold per quarter. Regionally, the European market saw a fall of 57%, the Chinese market collapsed by 79% and the North American market - where Elop was supposed to save this, and the Microsoft alliance was supposed to help, Nokia fell only 50% under OPK but crash-dived down 81% in less time, under Elop. North American handset sales down from 2.6 million per quarter to 500,000 units per quarter by the time Elop was done.

The exact same pattern holds for comparing the last Calendar Years, OPK's 2009 vs Elop's 2012. If OPK was a 'failure' by any measure, Elop is far worse by every one of those measures. OPK at least saw Nokia revenue growth, annually 20% during his four years, up to 41.0 Billion Euros. Under Elop's three years, that was smashed down by 26% to 30.2 Billion Euros. Nokia's annual profits under OPK's last year were 1.2 Billion Euros. Elop swapped that for losses of 2.3 Billion Euros per year (a negative swing of 3.5 Billion Euros per year!!! This is one of the worst performances just in terms of profits, by any CEO). 

OPK saw handset unit revenues up 34%, under Elop they were slashed by 44% down from 27.8 Billion Euros per year to 15.7 Billion Euros. Kallasvuo at least generated profits in the handset unit, of 3.3 Billion Euros annually in 2009. Under Elop that was exchanged in favor of annual losses of .. 1.1 Billion Euros. The handset unit sales grew 24% under OPK, they were down 22% under Elop, from 431.8 million to 335.6 million handsets. The smartphone unit annual sales were up 74% under OPK, they were down 48% annually under Elop, from 67.8 million to 35.1 million. European sales were up by 7% under Kallasvuo, down 37% under Elop. Chinese sales up 42% under Kallasvuo, down 62% under Elop. And North American annual sales were down 47% under Kallasvuo, they collapsed 84% under Elop. 

And the share price under Elop, fell over 80% in two and a half years. Elop matched the 55% fall that Kallasvuo saw in a three-year period, Elop matched that in five months. The Nokia share price recovered a little bit only after rumors emerged that Nokia is about to being sold.

Yes, by every single measure, if you thought Kallasvuo was a failure as CEO, Elop was far worse. By not some measures, by every single measure, in less time, Elop achieved greater damage to Nokia than Kallasvuo. No wonder they now say, that compared to Elop, Kallasvuo was a saint..

Of course we now know why this happened. Kallasvuo did not have a contract with a clause that would reward him 25 million dollars for wrecking Nokia corporation totally and causing its handset unit to be sold. Elop did. And thus Elop did what we witnessed. But hey, lets take one more comparison.

ELOP FIRST 6 MONTHS

There is a very interesting comparison. Elop wasn't hired until during Q3, but if we take the last quarter he was not in charge, Q2 of 2010, and compare to the last quarter before his new strategy was announced, meaning Q4 of 2010, we get an interesting 6 month period of the trends that Elop was presiding over, when he started. What did his first half-year look like, in terms of Nokia performance. And compared to the last reported by his immediate predecessor, OPK? This gets interesting:

Comparing Q4 of 2010 to Q2 of 2010, same year, the last full quarter under OPK vs first full quarter under Elop - was Nokia indeed so deeply in trouble, it had to 'jump off a burning platform' or was Nokia actually on the mend, improving and competitive? Lets see what the facts tell us:

Nokia revenues had recovered to strong growth, up 26%, from 10.0 Billion Euros to 12.6 Billion. The declining profits under Kallasvuo had reversed to strongly growing profits - yes, under first months of Elop leadership Nokia overall corporate quarterly profits were up 65% from 660 million to 1.1 Billion Euros. Handset revenues which had grown under Kallasvuo merely 16% over a four year period, under Elop had grown 24% in just six months. Nokia handset profits which had been in decline, were now up a massive 49% from 647 million to 961 million Euros per quarter. Nokia handset sales were up 11% in just six months vs 42% of 48 months under OPK - the handset unit growth rate had doubled. Smartphone unit sales were up nearly twice that in the same period, up a massive 18% to 28.3 million per quarter. The regional sales in Europe were up 28%, in China up 13% and the North American sales collapse - had ended! Nokia sales in North America were flat for the first time, remaining the same 2.6 million under the first quarter under Elop as it was under the last full quarter of Kallasvuo's leadership.

Nokia share price had climbed 11% on all the good news. This is excellent by the new CEO. He should have continued that - except that he had not as strong an incentive to do the hard work, he got a much bigger incentive if he could wreck Nokia. Here are the metrics for comparison (I have colored them so you can easily see, which numbers went up - green, and which went down - red). Quarterly and Annual

QUARTERLY METRICS, LAST QUARTER IN CHARGE, OLLILA VS KALLASVUO VS ELOP AT NOKIA

Item . . . . . . . . . . Ollila Q2 2006 . . . Kallavuo Q2 2010 . . . Elop Q2 2013
Nokia Revenue . . . 9.8 B Euro . . . . . 10.1 B Euro . . . . . . . 5.7 B Euro
Profit/Loss . . . . . . 1.5 B Euro profit . . 0.7 B Euro profit . . . 0.1 B Euro loss

Handset Revenue . 5.9 B Euro . . . . . . 6.8 B Euro . .  . . . . 2.7 B Euro
Handset profit . . . . 1.0 N Euro profit . . 0.7 B Euro profit . . 0.03 B Euro loss

Handset units . . . . .78.4 million . . . . . 111.1 million . . . . . 61.1 million
Smartphone units . . . 9.0 million . . . . . . 24.0 million . . . . . 7.4 million

China sales . . . . . . . 12.1 million . . . . . 19.3 milllion . . . . . 4.1 milllion
North America sales . 5.2 million . . . . . . . 2.6 milllion . . . . . 0.5 milllion

Source Nokia quarterly results

Same information comparing full year 2005 to 2009 to 2012, the last calendar year that each of the three CEO's was in charge,

ANNUAL METRICS, LAST YEAR IN CHARGE, OLLILA VS KALLASVUO VS ELOP AT NOKIA

Item . . . . . . . . . . Ollila 2005 . . . . . . Kallavuo 2009 . . . . . Elop 2012
Nokia Revenue . . . 34.2 B Euro . . . . . 41.0 B Euro . . . . . . 30.2 B Euro
Profit/Loss . . . . . . 4.6 B Euro profit . . 1.2 B Euro profit . . . 2.3 B Euro loss

Handset Revenue . 20.8 B Euro . . . . . . 27.9 B Euro . .  . . . 15.7 B Euro
Handset profit . . . . 3.6 B Euro profit . . . 3.3 B Euro profit . . 1.1 B Euro loss

Handset units . . . . .347.0 million . . . . . 431.8 million . . . . . 335.6 million
Smartphone units . . 39.0 million . . . . . . 67.8 million . . . . . . 35.1 million

China sales . . . . . . . 51.0 million . . . . . 72.6 milllion . . . . . 47.5 milllion
North America sales . 25.3 million . . . . . 13.5 milllion . . . . . . 2.2 milllion

Source Nokia quarterly results

Yes, by every single measure, Elop in just 3 years, achieved worse results than Kallasvuo under four years. Bear in mind, OPK's period was also the economic world crisis, so all businesses reported bad results, all of Nokia's traditional full-portfolio handset maker rivals (the giants at the time, who made both dumbphones and smartphones, like Motorola, Samsung, LG and SonyEricsson) reported some quarters of losses in their handset units, except not Nokia. Nokia even under the very difficult economic times, under Kallasvuo, reported strong profits in the main business, handsets. Not until Elop did the handset unit implode and start to produce losses.

And yes, under OIlila Nokia share price grew, it fell under Kallasvuo, but it fell more, and fell faster, under Elop. Under Ollila Nokia's credit evaluation was a perfect AAA. Under Kallasvuo it dropped a little bit, to AA+. Under Elop, it was wipedout - Nokia is literally rated 'Junk' by all three ratings agences. Under Ollila Nokia grew into the Top 10 most valuable brands in the global Interbrand study with such brands as IBM, Coca Cola and McDonalds. It stayed there all through the 2000s decade and till Kallasvuo's tenure ended. Nokia was ranked 7th if I remember correctly, in 2010. After Elop came in, it dropped out of the Top 10 and today is down to 57. Interbrand says this is the fastest fall of any brand in history. Which corresponds with the world record falls Nokia faced in the market share - Nokia's fall in the past 2 and a half years has set a new world record for handset collapse, beating Palm, Motorola, Siemens, Blackberry etc, and after setting the world record for failure in 2011, Elop then went even further, by breaking his own world record in failure. The damage at Nokia is literally the worst in any global Fortune 500 market leader, worse than New Coke was to Coca Cola or the brakes failure to Toyota or the Deepwater Horizon oil spill was to BP. Elop has been not just the worst Nokia CEO, he's been the worst CEO of any Fortune 500 sized company, ever.

So, lets finally compare that Elop Effect. Was Nokia already in trouble, and Elop unable to fix the damage, or was Nokia a relatively healthy handset maker, whose profits were damaged by its under-performing networking unit, in 2010? Lets compare OPK's last quarter in charge, to Elop's first quarter in charge, and Elop's last quarter now:

QUARTERLY METRICS, ELOP START VS ELOP NEW STRATEGY (VS KALLASVUO LAST QUARTER)

Item . . . . . . . . . . Kallavuo Q2 2010 . . . Elop starts Q4 2010 . . Elop new strategy Q2 2013
Nokia Revenue . . . 10.1 B Euro . . . . . . . 12.7 B Euro . . . . . . . 5.7 B Euro
Profit/Loss . . . . . . 0.7 B Euro profit . . . . . 1.1 B Euro profit . . 0.1 B Euro loss

Handset Revenue . 6.8 B Euro . .  . . . . . 8.5 B Euro . . . . . . . . 2.7 B Euro
Handset profit . . . . 0.7 B Euro profit . . . 1.0 B Euro profit . . . . 0.03 B Euro loss

Handset units . . . . . 111.1 million . . . . . 123.7 million . . . . . . 61.1 million
Smartphone units . . . 24.0 million . . . . . . 28.3 million . . . . . . . 7.4 million

China sales . . . . . . . 19.3 milllion . . . . . 21.9 million . . . . . . . . 4.1 milllion
North America sales . 2.6 milllion . . . . . . . 2.6 million . . . . . . . . 0.5 milllion

Source Nokia quarterly results

Yes, Nokia was doing pretty well, truly improving on EVERY measure in the first six months that Elop was at Nokia. Every single rising statistic of vital Nokia performance was turned into catastrophic decline, next, by Elop. Why? Because he had 25 million dollars as a bonus to wreck Nokia rather than take a couple of million in performance incentives to continue this growth.

Please feel free to share the story. This is the biggest robbery we've seen in our lifetimes, how Elop robbed victory from Nokia shareholders and gave Nokia's handset unit as a wreck to Microsoft.