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. 

Comments

[bjarneh]

Jolla sports a dual-core I think

Blackberry has some issues; who tries to sell a device without any distribution at that price? For people to fork over $900 (the cost in Norway) for a phone they have to be able to hold the device and see it first hand, and even then it's perhaps too expensive.

[Vikram]

It isn't a coincidence that Nokia and Blackberry went down at almost the same time with the same patter, and that had everything to do with Android. Android hurt Nokia just as it hurt Blackberry.

Both companies had out of date OS's that did not feature full computing platforms with multi-touch standards-based browsers. That's what killed them. That is why there is no coincidence that the graph of Nokia and BB success and decline coincided. Both appeared to be very successful in 2010 and then went down together - put their performance side by side and it is eerily similar.

Of course, it was Android, but Android was a reaction to iPhone so it really is iPhone and rise of the modern smartphone that killed Nokia and BB since they were on antiquated platforms that couldn't compete. As Lazardis of RIM said when he opened up an iPhone, "if that thing catches on, we're competing against a Mac, not a Nokia..." and that's what happened.

Nokia and BB were unable to compete with a Mac that was in a Phone shape. That's what mosly killed them, not simply bad management alone.

[winter]

@Vikram
Both BB and Nokia could have released Android phones. It was a management decision to stick to an unwanted OS.

[khim]

In hindsight it's obvious. Apple could never kill neither RIM/Blackberry nor Nokia for one simple reason: it does not make cheap phones and thus could never kill a manufacturer who's willing to make them.

Android killed them. Or rather: finger-driven touch phones have killed them. Apple was not the sole inventor of such phones, BTW. There was LG Prada, HTC Touch and probably others. HTC Touch, in particular, was quite successful: it's sales were half of iPhone sales which is quite good if you'll recall that we are comparing high-profile US company with huge marketing budget and a lot of fans to a small Taiwanese manufacturer.

It's funny but I think that in alternate reality Nokia and RIM/Blackberry had another year or two but ultimately would have ended in even worse position. Why in a world without Apple Nokia and RIM/Blackberry would have had another year? Apple sharply raised the quality mark. Android was planned for Blackberry-like "Sooner" devices and while "Dream" was developed in parallel it was planned for later date. "Dream" was finger-diven from the start (it was done by the same company which started selling finger-driven touchphones in the same month as Apple, remember?), but "Soomer" was planned to go on sale first. After iPhone "Sooner" become "Never" and "Dream" became HTC G1. So yes, Apple speeded up the process by a year or two, but ultimately it have changed little in the grand scheme of things.

But iPhone *also* spurned RIM/Blackberry and Nokia efforts to produce a touch phone replacement! They ultimately failed, yes, but at least they have tried. Without such wakeup call they could have continued for a while with old paradigm till sudden collapse in about 2014-2015, but ultimately the effect would have been the same.

P.S. Actually I'm not so sure about Nokia in this alternate reality. RIM/Blackberry only started doing something after look on iPhone, but Nokia had Nokia 770 in 2005! Of course it was carefully positioned in the niche where it was basically useless (it was not even a phone!), but they kind of developed a replacement already. It's not easy to redesign an UI from stylus to finger and I'm not so sure Nokia with it's bureaucracy could have managed to do that in time, but hey in OUR reality that did it just one year too late! Perhaps without Apple they actually had a chance... but probably still not: till Apple's "wake-up call" development of Linux-based replacement happened at truly glacial speed in Nokia, I doubt they were ready to fight younger companies who operate at "Internet speed". Apple fastened up the whole story by a year or two but did nothing else.

[Minna]

@Baron95: "So I guess Nokia is no longer Finish?

Exactly. For me and probably for many other Finns Nokia phones division ceased to be Finnish the moment it was announced that it was sold to Microsoft. The only Finnish things left in Nokia phones division now are the logo colors and the people who still work in their Finland-based units (until those get surely shut down within the next 2 years). The last Nokia phones no matter what brand name is placed on the cover were produced in August 2013. There will be no more Nokia phones produced any more unless the Nokia divisions which are still independent do a re-entry into the handset business when they are contractually allowed to do that. Production of the phones was already for a large part outside Finland. R&D and headquarters were still in Finland and there was therefore plenty of Finnish know-how going into the Nokia phones. But under Microsoft all major decisions will be done in the US and the countdown to relocation of departments to the US has already started (even though they don't of course admit that publicly yet). So Tomi is right, Jolla is now the biggest Finnish mobile handset maker. Twig doesn't count, as they have only integrated a mobile phone into their personal alert devices. They are not in the phone business as such.

I'm now saving for a Jolla phone, as it's a bit above my budget, but I want a real Finnish "old Nokia" quality phone. My current phone is Lumia 620, which I bought for 4 reasons: it was in the right price class with decent specs, it was made by Nokia so I trusted it not to break from the first fall, my old 2nd hand N97 (which I liked due to qwerty) was starting to break and I hoped that if the new Lumia series became a hit, Nokia could turn their downfall and ditch Microsoft. Like I said to my colleagues the day the news broke, all that is good in my Lumia is made by Nokia and all that is bad is made by Microsoft. Now that Nokia phones are sold to Microsoft, I will have no reasons whatsoever to buy Lumia branded phones anymore. My phone had actually survived falling onto the ground about once every 2 days for 6 months without any problems. I don't think that it was just a coincidence that the day after the news it fell in a way that the screen broke and had to be replaced. I feel that my Lumia 620 was attempting suicide out of shame for the betrayal of its maker.

Our former President Urho Kaleva Kekkonen was surely turning in his grave when the sale of Nokia was announced on his birthday. He was a big believer in developing know-how and technology in Finland so we would have competitive export industries and also that we wouldn't be completely dependent on the fickle business interests of other countries. And on his birthday Nokia was donated to Microsoft with that Flop lying in our faces about how "Nokia and Lumia are still Finnish". We're not fooled that easily.

[foo]

> 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.

Sometimes the divorce is performed to secure part of the money, in case of lawsuits.

Elop may be transferring a good part of his wealth to his wife, as part of the "divorce", so, when he faces a lawsuit, they don't loose all the money.

This is so common, and the timing so convenient...

[Vikram]

@winter (I had replied before but it didn't post)

I agree with you on that had BB or Nokia shifted to Android that they would have been much better off. That was clearly a decision that should have occurred years ago and that is at management's feet and their fault.

I meant to more clearly point out that given their actual strategy, neither company had a chance to succeed because iPhones and Android devices were true mobile computers and that they couldn't compete in that arena.

I disagree with Tomi a bit because he has in previous posts castigated Elop, but Tomi has never advocated that Android be he right strategy to follow. Instead, I get the impression (maybe I'm wrong) that he felt that if Nokia kept on their Symbian3 or MeeGo strategy that they would be better off somehow, when MeeGo was not ready and Symbian3 was a dead end.

My point is that had Nokia avoided Microsoft, that they would be in a worse position than they are in now. Symbian3 or MeeGo was no good option.

You can trot out a checklist of features and say that Nokia did everything before the iPhone but features isn't usability or utility. The fact is that the iPhone and Android devices were far better products than what Nokia (or BB) shipped because they were true mobile computers with multi-touch functionality and a developer ecosystem that was better to develop for than what Nokia had at the time, or were able to produce.

Nokia wasn't a computer OS or software maker in the class of Apple or Google. When phones became computers, Nokia didn't have the people and expertise to compete.

Elop went to MSFT as the only other company with the ability to develop such a platform in order to differentiate but the issue was that MSFT was too late and too slow...though interestingly the low end Nokia smartphones are getting some traction.

Elop's mistake was to go to MSFT. Nokia should have jumped onto Android and with the beautiful Nokia hardware I have no doubt that they would be the leading Android maker. Blackberry should have done the same thing and added BES on top of Android.

[foo]

@Vikram

> It isn't a coincidence that Nokia and Blackberry went down at almost the same time with the same patter,
> and that had everything to do with Android. Android hurt Nokia just as it hurt Blackberry.

First of all, the patterns were quite different: Blackberry died a slow death, whereas Nokia collapsed in almost one year, and lived in the support line, thanks to Microsoft's injection of $1B / year, for the next two years until acquisition.

Second, they took different approaches:

Blackberry bet in the next version of their tested and proven operating system to fight Android and iOS; Nokia (Elop) bet in a third-party OS.

Now,

Choosing a third-party OS wasn't a bad option per se; the problem is that Elop opted for the least popular OS available at the time.

Elop didn't talk and act as Nokia CEO, but as Windows Phone ambassador, going as far as inviting competitors to join the "ecosystem"!!! (Which wasn't owned by Nokia, but Microsoft).

If everything went according to the plan (best case scenario), Windows Phone would have by now 20% of market share, and Nokia would be disputing this market with Samsung, HTC, et al (because Microsoft and Elop wanted them).

So:

The decision to change the OS was not bad. The execution (picking WP, the burning platform memo, Elop Effect, etc) was terrible and destroyed Nokia.

[Winter]

@Vikram
I see your point. For BB, it might have been a rational bet to go for their own OS and not for Android. The odds and expected pay-off might have been good enough.

For Nokia, I cannot see how throwing away their independence for WP could have been a rational decision. Unless they got a large company bribe. With Android, they could have kept control over their models and specs. By going WP, they gave away every form of control to a company psychopath.

[Herer]

@vikram "when MeeGo was not ready"

Meego was more than ready, certainly much more ready that WP, and of course they could have sold it more actively, rather than burying it in emerging markets.

[foo]

@Winter

> For Nokia, I cannot see how throwing away their independence for WP could have been a rational decision.
> Unless they got a large company bribe. With Android, they could have kept control over their models and specs.
> By going WP, they gave away every form of control to a company psychopath.

Great point, which completes what I said before:

Choosing a third-party OS was not a bad decision per se; choosing Windows Phone was a *terrible* decision in many aspects.

WP7 was not popular, and when 7.5 was released it still had 101 flaws that made it worse than Symbian!

But, strategically speaking, Windows Phone was bad in two aspects: independence and differentiation.

According to Michael Porter, independence and differentiation are two key competitive advantages that any company should cultivate, not throw away.

But when Elop made the partnership with Microsoft, he basically turned Nokia into Microsoft's slave; even the hardware specs were controlled by Microsoft, reducing the differentiation among players.

Could this be any different with Android? Of course. Android manufacturers can choose their specs, and, if they feel Google is not a good partner, they can fork the OS. (Amazon did that with Kindle Fire).

Please read Michael Porter's Competitive Advantage (http://en.wikipedia.org/wiki/Competitive_advantage) and Five Forces analysis (http://en.wikipedia.org/wiki/Porter_five_forces_analysis). I consider these concepts key to understand why the partnership was wrong from the start.

[RottenApple]

@Leebase:

"To this day it is the iPhone that's driving the pace. "

Really? So why did they completely miss the phablet market then and left it to Samsung without a fight?

But sure, it's not Apple, doesn't fit into your view of things and needs to be ignored.

Apple claims to innovate - but the true innovation these days is coming from elsewhere. Like everything since the iPhone 4 the 5S is just lame. There's nothing ground breaking here for the user. Even 64 bit is merely a useless bullet point on the spec sheet. By itself it doesn't offer anything of value as even on PCs most software is still 32 bit.

Apple is just lucky to be able to sell incremental upgrades as innovations because its customers are too brainwashed. Let's be honest about the iPhone 5S. In what way is it better than its predecessor? It all boils down to one single point: 'It's faster!' That's not innovation in my book.

[Bruno]

Vikram,

Maybe meego wasn't enough to save Nokia, but now we see, that wp wasn't either. And this is one bad decision that a multibillion company CEO couldn't afford. Flop did it and boy he was wrong. Plan B? We'll sell Nokia(!?). Come on, who runs this big company like this? This is not a game of monopoly, if you go bankrupt, flip the board and go watch tv.
Nokia had it's options, meego, android, even wp, why not and after year or two see where it goes.
Partnership between Nokia and Microsoft was a big lose-lose for Nokia and a big win-win for MS. Why? If wp ecosystem succeeds MS will get money from ecosystem, from licenses on each sold phone. If not? Nokia stocks will fall and they'll buy them cheap. On the nokia side, if wp really do succeeded, they still have licenses to pay and more competitors in ecosystem and no alternative. Sad so, sad...

[foo]

@Tomi

> Sailfish will allow Android apps to be used, giving Jolla an interesting play, being kind of compatible with Android while not being Android.

Now,

What's the competitive advantage of Sailfish over Android?

It definitely had some advantages over Symbian, and even Windows Phone, and could have been successful if Nokia had put its weight behind it.

But what is its purpose now?

[RottenApple]

@foo:

The sad fact of the matter is that Sailfish's only reason for existence is to gobble up all those disgruntled ex-Nokia users who wouldn't dare switching to an Asian manufacturer. In the whole picture it will be an irrelevant non-factor. To become a surprise success it would have to outclass both iOS and Android by a wide margin - and have some powerful company backing it.

[foo]

@RottenApple

To quote again Michael Porter, there are two major ways to stay relevant: differentiation (outclassing the competitors) OR becoming a cost leader. The third alternative is to become a niche player -- if you have something unique to offer to a small part of the market -- or disappear.

Apple is in the differentiation camp; Android started in the cost leadership camp, but is quickly moving to cover all the bases. Windows Phone seems to be trapped between the two strategies -- which usually is an uncomfortable position to be.

And Sailfish? Unless they provide a huge cost advantage, they are condemned to disappear. Unfortunately.

[Karl]

How many handsets has Jolla produced? 25? Has Nokia's devices already been sold?

[Karl]

@foo
WP was a bad choice, as Android is the king. Who has made money on Android except Samsung, who controls the components of all devices?

[RottenApple]

@Baron:

No, you are not correct. Apple missed the Phablet market like everybody else.

When Samsung released the first Note phone, the general attitude of the entire industry - including Apple! - was dismissive. The general consensus was 'nobody would buy such a huge brick.' and they happily went on their previous business.

And let's be clear about one other thing: Being profitable does not mean your business is healthy. Just look at Nokia in Q4/2010 for the opposite. The numbers tell that it was Nokia's most profitable quarter and look where they were just 3 months later. Any good business is not betting on a single product. Right now it works for Apple but there is no guarantee it will continue endlessly.

You can deny all you want, but Apple made a big mistake when they missed the large screen business. It wasn't a mistake that seriously harmed the company but it was a mistake nevertheless and even the post-release upgrade craze that currently runs rampant can't mask that. For that the numbers of recent quarters were too obvious with Apple having lost approx. 3% market share across the whole year.

[winter]

@Boron95
The time they are a changing, but your script is not it seems.

Anyhow, Apple has become like LVMH, hugely profitable but irrelevant to all but a minority of humans.