Modelling Nokia X Scenarios and the Level of Desperation it Reveals

Many have asked me to give an analysis of what potential the Nokia X smartphones on Android could have. To understand the potential we need some historical context. What has transpired, what has been tried, when were options considered and what have Nokia customers been doing. What kind of numbers are out there in terms of existing users and their loyalty, etc. This is a longer article (5,500 words - would be about half a chapter in one of my hardcover books) but it is detailed and tries to be reasonably comprehensive. For regular readers there is considerable repetition of the past but for first-time visitors, some of these issues are unknown but very significant. We want to undestand some of the thinking behind the 'why' is Nokia doing this bizarre move now and what kind of level of sales success might this mean. We'd also like to understand what parts of Nokia's portfolio might be cannibalized by Nokia X running on Android. Do lets dig in...

 

ANDROID WAS CONSIDERED BEFORE, BUT REJECTED

 

We know lots of things now about the Windows Phone project at Nokia, in the aftermath of Elop’s removal from post of Nokia CEO and the sale of Nokia’s total handset division to Microsoft. Lets now examine this desparation move by Nokia to launch the X series on Android.

 

To be clear, Elop did not kill Symbian. Nokia had already a year earlier determined that Symbian was not viable in the long run for Nokia’s future and the previous management had communicated that Symbian would be gradually wound down and a new modern smartphone operating system would replace it. Nokia’s original plan was to use a Linux-based open source operating system it had been developing called Maemo. In the spirit of openness, within the Linux environment, Nokia found Intel’s similar Linux based project Moblin and its wide array of equipment makers to have the potential of great synergies and even though it meant a delay of more than a year, the Nokia Maemo project was merged with Intel’s Moblin to form a new and even larger MeeGo project, still on Linux and of course fully open source. In addition to Nokia and Intel the MeeGo project brought handset makers like Panasonic and carriers like China Mobile and even car makers, gaming companies etc. We saw the only Nokia handset on MeeGo that was released for sale in 2011, the N9, the highest-regarded and most award-winning Nokia handset of all time. The only Nokia handset ever deemed to be a legitimate iPhone-killer.

The problem was, of course, that Elop didn’t want N9 or MeeGo to succeed because Elop had his mission to turn Nokia’s handsets into Microsoft’s division - an explicit achievement which he had negotiated to be in his CEO contract, and which ended up paying him a bonus of 25 million dollars in 2013. So Elop took every step he could as CEO to torpedo and undermine any chances for MeeGo from delaying its public visibility to cutting staff and budgets to cancelling a fully ready-to-launch handset to refusing to sell another (which was actually manufactured in small quantities, so all development had been completed) to a third which was gutted at the last moment and converted to become the first Lumia device instead, running on Windows Phone. Several Nokia senior management including most in the MeeGo project resigned in protest over Elop’s decisions. But Elop knew MeeGo in 2011 was that good, it could power Nokia into the future of smartphones and keep the handset division highly profitable, conditions which of course would prevent Nokia’s handset division from being sold to Microsoft (and deny Elop his goal of pocketing 25 million dollars in bonus).

We know that in his initial CEO employment negotiations there were no discussions of Nokia joining Microsoft’s Windows based smartphone family of handset makers (which then included Samsung, SonyEricsson, LG, HTC, Motorola, Dell, Huawei, ZTE and others). That idea was introduced by Elop later in 2010 after he was already CEO of Nokia (and had started his wrecking of Nokia’s own Symbian-replacement project, MeeGo). Elop managed to dupe Nokia’s Board rather effectively by promising to contact all available OS providers and ask for secret meetings about possibly joining one of them. We know that Nokia had discussions with Google to join Android and with Microsoft to join Windows Phone. We also know that Nokia had contacted Blackberry who had said no. We can assume Elop made the effort therefore also to contact Apple (who of course said no) and Hewlett-Packard with its new Palm WebOS purchase (who also said no). Nokia’s Board would then get to see bids from Google’s Android and Microsoft’s Windows Phone, as well as a pitch from Nokia’s own MeeGo project.

We have seen that Elop has - should I say a ‘flexible attitude to the truth’ - and he’s made numerous statements that were later found not to be completely in line with the facts (exhibit 1: Burning Platforms memo - Elop was actually reprimanded in front of Nokia’s Board for that, the most damaging management memo of all time). As we know Elop had in the weeks and months after the Memo corrected many of his mistaken claims in the memo or walked back his positions. Elop admitted to the Nokia annual shareholders’s meeting in 2012 that yes, his Memo had damaged Nokia smartphone sales. So yes. Elop was prone to ‘stretch’ the truth and facts to suit his own agenda.

So. Elop shrewdly pushed the honorable and mostly Finnish MeeGo project bosses to the point of resignation. Thus all who really knew what MeeGo was, were removed from Nokia. Then Elop appointed people more ‘in tune’ with his thinking to run what remained of the gutted MeeGo project of less manpower and less resources. Then Elop had his famous meeting about ‘is MeeGo ready’ and leaked to the press how clearly uncompetitive MeeGo was. It would not even be able to produce three phones by the end of 2011 ready to sell. When in reality Elop personally killed the first MeeGo phone. The second and third were manufactured in 2011 (only the second, the N9 was sold) and the fourth MeeGo device was sold at the end of 2011 - as the Lumia 800, even after it had been converted to Windows Phone. Nokia had at least 4 separate MeeGo devices fully ready to sell and one of them, the N9 won the ‘oscars’ of international design, the D&AD awards in London, beating out Apple’s new iPad 2. (who beats Apple at design?). The N950 was so highly in demand that copies were selling on the second hand market for over 1,000 dollars in 2012 !! This for a used smartphone. And expert reviews of the N9 by the press praised it as the best thing Nokia had ever done and the N9 and MeeGo were regularly considered equals of  - yes - the contemporary iPhone. Something no other Nokia device, no Blackberry, no Android device, and definitely no Windows Phone device, including none of the Lumia ever achieved.

FLAWED IF NOT CORRUPT DECISION PROCESS AGAINST ANDROID
 

We know now that Nokia Chairman Jorma Ollila had deliberately taken a ‘hands-off’ approach to the new CEO, giving him a lot of latitude. With hindsight that turned out a problem. As Elop himself was not inclined to inform the Board about what he was doing and the Board often was frustrated learning about Elop’s adventures first time when reported in the press. And judging by new Chairman Risto Siilasmaa’s lack of knowledge about Elop’s strange bonus clause, the Board seemed unaware of what was motivating Elop to actively damage Nokia’s handset business. But even without his corrupting 25 million dollar bonus, as Elop had come from Microsoft, he should have recused himself from the process of selecting Nokia’s future platform - where Microsoft was one of the bidders. The selection of Windows Phone that was announced on February 11, 2011, was a corrupt process and Google’s Android and Nokia’s own MeeGo had no chance, when the CEO was guided by his own personal agenda to damage Nokia handsets and get the handset unit sold to Microsoft.

 

We know that in late 2010 Nokia was negotiating with Google to join Android and with Microsoft to join Windows Phone. We know that in January Elop killed the first MeeGo device that was supposed to be shown at the Mobile World Congress in Barcelona a few weeks later. So by then Elop had made up his mind he was going fully with Windows Phone. As Steve Ballmer then CEO of Microsoft was on stage with Elop when he announced the Nokia-Microsoft partnership on February 11, 2011, sometime between mid January and early February the deal was sealed.

Now we know it was a total failure. The Windows Phone project was a massive failure so much so, that it sunk Nokia’s market-dominating and highly profitable handset-manufacturing juggernaut. What started as the Elop Effect, plunged Nokia’s profitable smartphone business into continuous loss-making from which Nokia never recovered and was forced to sell the total handset business to Microsoft for peanuts. And Elop collected his bonus 25 million dollars.

THE FOUNDATIONS FOR MARKET PERFORMANCE
 

Year 2011 was an annus horribilis for Nokia handsets. But at the end of the year the first Lumia smartphones running Windows Phone were released in a few select markets. By Spring of 2012 the Lumia series was available globally even in the USA. So whatever we think of Elop torpedoing Nokia’s old business in 2011, when we consider the announcement of Nokia X now, running on Android the comparison needs to be made to the Lumia era at Nokia, not the ‘golden years’ of the past. So lets go to 2012.

In 2012 Nokia saw its smartphone sales collapse at a world-record rate by 55% in just one year, down from 77.3 million the year before to 35.0 million in year 2012. This happened while the industry grew by 42% in just one year. Nokia was desperately migrating customers from the outgoing Symbian system to Windows Phone and by the end of the year most of Nokia’s smartphone sales were on Windows Phone.

To understand the dynamics, in 2010, Nokia’s loyalty was very safely above 50% the second best loyalty in the industry behind only Apple’s iPhone. No other handset maker in 2010 had a loyalty of more than half of the brand’s owners saying they want their next phone to be that same brand, except obviously Apple and Nokia. Those customers in 2010 bought 103.6 million smartphones from Nokia that ran on Symbian.

 

When those satisfied customers came to the stores in 2012, asking to replace their Nokia smartphones, they were given the choice of Lumia or a few remaining Symbian models mostly from 2011. Two out of every three loyal Nokia customers refused to buy a Nokia smartphone at all. If we say that half would not have done so anyway (loyalty, while second best in the industry, was only a bit over 50%) then it meant that of those ‘intending’ to buy Nokia, still one third said no and bought a rival smartphone - mostly Samsung on Android - instead.

(Just as a side-note about the iPhone. Apple’s iPhone grew one point of market share from 2011 to 2012, ie from 19% to 20%. But Samsung grew by half, jumping from 20% to 31% picking up eleven points of market share in just one year. Most of Nokia’s loss was Samsung’s gain, not Apple’s gain).

Lets return to the Loyal Nokia customers. If 52 million Nokia loyal - I intend my next smartphone brand to also be Nokia - came to stores but only 35 bought Nokia. That is bad news. Then of Lumia? Half of those buyers walked out of the stores with Symbian-based Nokia smartphones not Lumia’s in 2012. Only one third of those customers who intended their next smartphone still to be a Nokia, was satisfied enough in the store to buy a Lumia. Out of the total Nokia installed base who came to stores in 2012, only one in six accepted a Lumia. (Again, please note this is a simplification, we are now ignoring that the industry is in hypergrowth and part of Nokia’s sales in 2012 was to new customers and first-time smartphone buyers, as more than half of all smartphones sold in 2012 were to first-time smartphone owners, but I am trying to keep this simple).

SATISFACTION AS GOOD AS WARM SHIT
 

We also know from early international consumer surveys (Yankee Group, Bernstein) of Lumia owners and of Windows Phone owners that they found the Windows Phone smartphones undesirable and disappointing. More than half of them said they would not buy another Windows based smartphone after they got rid of the current model they had bought. So we know there was a lot of dissatisfaction among those who actually accepted a Lumia in 2012.

One in six owners of a smartphone made by Nokia, was actually persuaded to take an early Lumia running Windows Phone and more than half of those were so disgusted with that device they said never another one again. And half of those given a choice of another Nokia smartphone not running Windows, selected the other choice even though it was on the ‘obsolete’ and ‘burning platforms dead’ Symbian. This was 2012.

Now. Nokia had a chance in 2011 to select Android. Android produced highly satisfied customers and was growing massively and powered Samsung’s rise to become the biggest smartphone maker in the world. Nokia selected Windows Phone instead. By 2012 Nokia management should have seen that the Lumia and Windows Phone project was a fiasco and should have rushed its alternate to the market. These Nokia X phones in late 2012 would have been a big hit globally and would have saved Nokia. But the Board was letting the michievous CEO keep doing his damage and seemed unaware that Elop was motivated by the corrupting 25 million dollar bonus clause in his contract. Now fast forward to 2014 and we finally see those Android smartphones. Why did Nokia not give these desirable Android devices to the market in 2012? It was obvious Lumia was failing already then.

THE MICROSOFT WAY - OUR NEXT VERSION WILL FIX EVERYTHING

But Elop was not done. He then promised all will change with ‘the new Windows Phone’ called Windows Phone 8. Of course in Evil Empiresque manner, Microsoft refused to let early Lumia owners upgrade their Windows Phone handsets from Windows Phone 7 to Windows Phone 8. That pissed off many otherwise satisfied Nokia customers. And Windows Phone 8 did finally ship on Lumia for Christmas 2012. So year 2013 is the last test. For 2013 the ‘rival’ Symbian had been extinguished so this was now only going to be Lumia’s glory days. Except that it didn’t happen.

Nokia also introduced a ‘featurephone’ series called Asha, at the low end of the market, which Elop desperately tried to promote as being smartphones as well. They were touch-screen internet-enabled featurephones that ran the latest editon of Nokia’s proprietary S40 operating system. Asha was not smartphones but they looked like modern touch-screen smartphones yes. You could do Facebook on them and install Angry Birds etc. Asha was released just before Windows Phone 8 arrived. So the two have been contemporaries almost exactly as long. From Q3 to today (latest data Q4, 2013) Nokia had sold 37.3 million Lumia smartphones. In the same period Nokia sold 39.1 million Asha featurephones! (and add to that 6.1 million of the last Symbian smartphones). Even after Symbian was ended, loyal Nokia customers preferred a touch-screen device that ran on ‘obsolete’ and ‘non-smartphone’ S40 the Asha series rather than Lumia running on Windows Phone and its new version 8.

So lets do the math. In 2013 the returning base of Nokia customers who had already a Nokia branded smartphone was 77.3 million. How many accepted a Lumia smartphone out of that? 30.0 million. 61% of loyal customers - the very ultra-loyal who had in 2011 bought Nokia even after the Elop Effect - now when offered Lumia and Windows Phone said ‘no thanks’ and bought a Samsung on Android instead.

This is now the ‘best case’ scenario for Elop and Microsoft. They have culled the Nokia smartphone owner base down from the hype-ages to the ‘cold reality’ hard-core loyalists. Even of those, who really want Nokia, when offered Lumia on Windows Phone - 6 out of 10 will walk out of the store with a Samsung box rather than buy another of their beloved Nokia smartphones - but running on the hated Windows Phone system. That is the reality. More will select a featurephone running S40 and called Asha, than will take Lumia.

WHAT KIND OF POTENTIAL FOR 2014?

Now lets project for 2014. This year Nokia would not see 104 million or 77 million loyal Nokia Symbian smartphone owners returning to stores to consider another Nokia purchase. Now in 2014 we have the incoming pool down to 35 million who bought a Nokia smartphone in 2012. Half of those had a Symbian - and most of those we know won’t want a Windows Phone based smartphone but will happily take an Android based smartphone. And the other half - 18.5 million in fact - of early Lumia buyers who know Windows Phone - remember more than half of those will not under any circumstances accept another Windows Phone based smartphone. So where does this leave Windows Phone and Lumia for 2014?

If we’re generous and say half of the 18.5 million would take Lumia now. Lets say thats 9 million. And we say 40% of the other Symbian users will also take Lumia, so another 7 million. We would stand at total sales of Nokia smartphones running Windows Phone at 16 million for 2014...  This is not me just speculating this is EXACTLY the kind of data that Nokia HAS about its loyalty and customer satisfaction and intent-to-buy by existing loyal customers. Remember Lumia sales had peaked in Q3 of last year. For Christmas-season in Q4, when Nokia has its best sales and the whole industry grows the strongest, Nokia Lumia sales were down !! The fall is already under way. Those first-time Lumia buyers are now the ticking time-bomb walking into stores saying ‘yeah, anything but not another Windows Phone smartphone. What do you have?'.

That is why Nokia needed to launch Android. Not now in February 2014. Nokia desperately needed the Android lifeboat to its burning platform LAST YEAR this time. If Nokia was run by a CEO who didn’t have a conflict-of-interest by an ill-advised bonus clause. If Nokia’s CEO was pursuing his fiduciary duty and not serving to promote the success of a rival tech company. If Nokia’s CEO had behaved like any sensible CEO, he would have launched those Android Nokia X phones last year at this time (or before). Nokia would not have been in such desperate trouble last year if there were Android smartphones to sell.

WINDOWS PHONE IS DOOMED

Nokia sells 90% of all Windows Phones. Samsung, HTC and Huawei have a token contribution but all three make tons of Android smartphones. HTC sells 8 times more Android based HTC branded smartphones than those on Windows Phone. Huawei sells 50 times more Android than Windows smartphones. Samsung? Sells THREE HUNDRED TIMES more Android than Windows Phone smartphones. It is a token gesture towards Microsoft only. These are the three largest Windows Phone partners behind Nokia! And even at Nokia, run by a total Microsoft Muppet, Nokia could not have Lumia outsell Symbian when devices were produced on both platforms. And after Symbian was extinguished, Nokia customers perferred FEATUREPHONES on Asha rather than Windows Phone. That is how poisonous Windows is in smartphones.

There is the argument that after Microsoft sued its past Windows-partner Motorola, the other Windows ‘partners’ will give lip-service to Microsoft just so they are not sued. Look what Sony just did. They announced they will produce one smartphone on Windows Phone (they sell 38 million smartphones per year all on Android). That will be branded ‘Vaio’ to be a business-oriented smartphone. Microsoft paid Sony handsomely to cover essentially all development cost just so they can claim Sony is rejoining the ecosystem. Then Sony sold the loss-making Vaio unit (including that one smartphone project) to an investor group. Take Microsoft’s money, don’t do the smartphone. Why? Because there is a carrier-boycott against all Windows Phone based smartphones as Elop told Nokia’s annual shareholder meeting in 2012. A boycott that covers all handset makers on that platform. Sony is smart. They don’t want Windows Phone to pollute their good relations with the carriers. So there will be no Xperia smartphones on Windows. They will run on Android of course. The Vaio smartphone is dead now.

So Nokia’s 90% of all Windows Phone smartphone sales? If that market was healthy and growing, Nokia would not want to cause any distractions in it, and would use the ‘strongly-growing’ Windows environment to sell tons more Nokia Lumia smartphones. You heard those stories that Windows Phone is the ‘strongest growing’ platform? Bullshit. Total utter crap. Total propaganda from Microsoft. Windows had 12% market share in smartphones in 2008. Had 8% in 2009. Had 5% in 2010. Had 3% in 2011. Had 2% in 2012. Now has 3% in 2013. The only reason Microsoft can claim growth in 2013 is because they’ve seen half a decade of collapse. Collapse! To talk about 3% as ‘success’ when a few years ago you had 12% is ridiculous. The Windows Phone environment is a mirage. And nothing proves it more than the largest Windows Phone partner, Nokia so desperate they launch on a rival platform - Android.

IF WE LET NOKIA BE NOKIA (ON ANDROID)

Ok. I’ve already said many times that I expect Microsoft to immediately end the Nokia X project on Android when Microsoft takes over control of Nokia. I should add now a clever view that came from comments on this blog - also its possible Microsoft wants to sell the dumbphones side of Nokia and wants to prepare the Asha line to Android, to make the sale of the dumbphones unit - ie the non-Lumia unit - easier. If that is the case, why on earth didn’t Nokia do this itself? And keep the smartphone business? How stupid is Nokia’s Board? But I digress. So what could this Nokia X series running on Android do? In the market?

First. The launch time and markets. Only one X series, the middle model, will be on sale now from February. It has one full month to sell (March). Not the hottest handset sales month of the year (December) and well past China’s gift-giving season (Chinese New Year in late January or early February). And the X series won’t be sold in some markets like the USA. What can it do? Its priced to go but its not exceptional in the specs or its price/features value proposition (the XL is the most appealing of the three X series). It could sell a million or two if Nokia is lucky. For a full quarter - ie Q2 of 2014 - these three X series should sell in the many millions, say 5 million as a rough number and could be as high as 8 million. But for Q1 the quarter that is now under way, Nokia smartphone sales are falling and the one X series won’t stem that tide. Worse, we know Nokia won’t be giving us the detailed breakdown of the handset sales as in the past, as starting with Q4 results of 2013, the handset business is only summarized and listed as “Discontinued Operations” where featurephone sales and smartphone sales are all lumped together and we won’t get to know the specifics of levels like how many were Lumia and how many were X Series..

Where will they hit? If the full X series were allowed to be sold through Q2 of 2014, then they would cannibalize very strongly the bottom end of Lumia, where most of Lumia sales were to begin with. Bad news. Very bad news. For Microsoft. They don’t want on equivalent platforms for Android to beat Windows Phone. They don’t want any of this information leaking into the public domain.

Then Asha. The Android option at the low ‘mass market’ end of the smartphone market would be the migration option for current Asha users and target Asha customers. Much of X series sales would come as cannibalization of Asha sales. This may be part of what Elop pitched at Microsoft when selling the idea. It is truly embarrassing if Windows Phone is so radioactive that people prefer featurephones rather than take Lumia. So Nokia under Microsoft ownership would push strongly Lumia top-end phablets, great cameras, tablets and premium devices and kind of ignore the Android based X series success at the bottom of the price pyramid. Remember the hardware sales of Nokia handsets to Microsoft’s overall business is such a small part, that Microsoft has no obligations to disclose particular details of it. They can just lump them all as ‘smartphone’ sales and try to ignore the guesstimates of how many are on Windows and how many are on Android. At least the analysts will be more willing to accept Android based X series as being ‘proper’ smartphones for Microsoft than Asha featurephones which are dumbphones by every major analysts’s view. So Microsoft fudges the issue and just says ‘we sold x million smartphones’ and probably adds ‘vast majority were on Windows Phone’.. Or if thing going really badly, they just say ‘we saw growing Windows Phone sales compared to one year ago’ ignoring the decline sequentially and ignoring how much Android is cannibalizing Windows Phone sales now.

AS IF PLAYSTATION LAUNCHED ON Wii

So yes. Nokia needed this. Desperately. Windows Phone is a total comprehensive train-wreck that cannot be fixed. If there was any hope in Windows Phone Elop would have shown us three new Lumia smartphones in Barcelona. No. Nokia desperately needs Android now. Exactly the same scenario as LG faced in the past. And Motorola. And SonyEricsson. And HTC. And Samsung. And all the others. There is not one single success of Windows based smartphones, by any brand, ever. But every handset brand that went astray and opted for Windows has come to regret it so much they have rushed to Android (or in the case of Palm, went bankrupt or the case of Dell, quit the smartphones business totally). Not one success. Latest evidence: Nokia. To attempt to rescue some sales of smartphones after a world record collapse using Windows Phone, Nokia now resorts to Android. To try to return the loss-making that is symptomatic of every Windows partner of all time - to profits that was what some loss-making Windows smarpthone makers were able to do, like LG and SonyEricsson.

How outrageous is Nokia X? Nokia considered the two side-by-side, Windows Phone and Android and the CEO was very vocal in public in 2011 talking about that choice and how Nokia saw Windows Phone as better suited for it. Windows would allos Nokia to 'differentiate' even though the Lumia line has REDUCED the differentiation offered at Nokia even compared to past smartphones on Symbian, Maemo and MeeGo.

How mad was that strategy? So much so, that Nokia made that ‘every mother knows you don’t put all eggs in one basket’ type of mistake of going only to Windows with no alternatives. No other handset maker has ever made this mistake. Every single other handset maker when they made changes to their smartphone OS platforms, introduced a new platform ALONGSIDE their existing platform or platforms and waited to see if it can succeed. Only if the new system was clearly succeeding, did they announce the end of a previous platform. That is how Samsung went from Symbian to Android. That is how HTC went from Windows to Android. That is how LG went from Symbian to Windows. That is how Palm went from Palm to Windows. That is how SonyEricsson went from Windows to Android. That is how every single handset maker has ever done it (except Elop at Nokia, but Elop did have his 25 million dollar bonus guiding his decision-making).

 

So Nokia CEO says in public he considered Android and Windows Phone but Windows Phone is what Nokia will do, not Android. And three years after that statement when he has been removed from CEO job, Nokia announces 3 Android handsets. What does this tell everybody? That Windows Phone was the colossal failure at Nokia obviously. So big that it not just cost Elop his job, but forced Nokia to sell its handsets unit to Microsoft. And that the only rescue Nokia from the pain known as Windows Phone is ... Android.

If you’re a developer you learn that Windows is pure poison and cannot last. Its not an ‘ecosystem’ it is a ‘toxic system’ where everything goes to die. It is like an oasis that has been destroyed by an oil spill. Only death survives here. The only app developers still developing for Windows Phone are paid to do so. The only handset partners that promise new handsets are paid to do so (and unlikely to deliver on those promises remember Sony Vaio). The real future of smartphones is Android - Samsung the king makes Windows Phone smartphones yes but it sells 300 Android smarpthones for every one Windows Phone smartphone. And now Nokia, the Windows partner who makes 90% of Windows smartphones, is forced to admit that the failure is so complete on Windows, they need Android to prop up its sinking smartphone business.

Microsoft cannot allow Nokia X series to exist. One thing they may do is to immediately cancel all unlaunched X phones and quietly end the one(s) that had launched. The other thing is to hide X series performance. And the third thing is to sell off the dumbphones unit with its X series phones as soon as possible.

ESPOO GETS LAST LAUGH
 

But much of the Nokia X damage has already been done now. Windows dominated the computer operating systems market for three decades. They saw the future of computing devices to shift to smartphones and took an aggressive push into smartphones and at one point were the second largest smartphone operating system (behind Nokia’s Symbian) and as late as 2008 they had 12% market share. As the computing environment shited from desktops to laptops, and then to tablets and smartphones, the Windows lock on the platform broke. From 2012 the title of the world’s bestselling computing platform was stolen from Microsoft’s Windows by Google’s Android, mostly on smartphones and tablets but also on some netbooks and notebooks. From 2013 the installed base of all computing devices in the world shifted away from Microsoft’s Windows to Google’s Android. Yes today more computers of all kinds (mainframes, servers, desktops, laptops, netbooks, tablets and smartphones) run on Android than on Windows. This year 2014 its likely that Windows suffers yet another blow, as its likely Apple will sell more iOS based computers than all Windows devices combined. Microsoft owned the computing world and made its biggest profits for most of the three decades of its rule. That has now ended. And in this zero-sum game, every gain by Android is a loss at Windows. Every phone sold by Nokia X is a loss to Windows Phone. Every story about Nokia X is another reminder to Microsoft how much they messed up their chance to own the next decade of computers and now that glory has shifted to Google (and on the hardware side from Nokia to Samsung).

I said before that Windows will never take double digits of market share in smartphones. Never. I said that this year Windows could expect to live around 3% market share. Nokia could report growth in unit sales of smartphones but not in market share on a full-year basis (a given quarter may have a blip of good news, who knows). Please remember I’ve been consistently the most accurate forecaster of the smartphone market overall and by a wide margin the most accurate forecaster of Nokia over the past 3 years of its deep troubles. That was all before Nokia X. Now I have to revise my projections.

If Nokia’s X series is killed when Microsoft takes over, then the overall forecast stays about the same except that I now think the Nokia X annoucnement signals so bad news about Lumia that Nokia overall sales for 2014 would be more likely to be flat, around 30 million plus/minus ten percent and thus market share would fall this year. That is the best case scenario. Please note that any propaganda maneuvering by Microsoft such as attempting to count Asha sales as smartphones is not going to be accepted by the industry, I am talking of the traditional definition of smartphones of course. And I am ignoring Surface tablet sales which no doubt Elop when running Microsoft’s hardware division will want to count into the totals of Nokia-smartphone handset sales. (Tablets are never included in smartphone sales by any of the major analyst houses either).

 

If Microsoft lets the X series live but tries to hide its impact, then the Windows Phone market share will shrink this year because most of what Microsoft can gain from purchasing Nokia’s vast handset distribution power will go to the Android X phones not the doomed Lumia series that no carriers want. Its quite possible that Nokia overall smartphone sales grow in this scenario but that would mean that something like half of all Microsoft-Nokia smartphones sold this year would run Android not Windows.

 

If the dumbphones side of the Nokia handset unit purchase is sold and the Android smartphones will be part of that sale, then it should happen rather quickly as in his Spring or the Summer. If that happens, questions will be raised in Finland that why didn’t Nokia’s Board do this instead and keep the smartphones unit ie Nokia’s crown jewels. Why was Nokia so totally outmaneouvered by Microsoft that they came and picked Nokia’s pockets? (or as one pundit on Communities Dominate Brands blog said repeatedly last year, Nokia’s Board should try to sell Nokia’s handsets unit in public and by splitting it apart, not selling it as one unit to Microsoft!). As to Windows Phone sales, the cannibalization damage will be considerable already done by Nokia X series and Windows Phone sales would definitely lose market share as well as see real decline during 2014.

 

The overall mess that this Nokia X creates to Microsoft is a nightmare that will be seen with the lens of history as a colossal mistake that Microsoft should have seen to kill immediately or actually, should have prevented from happening in the first place. The long-term damage will extend far beyond Windows Phone to the overall Windows environment. While much of the seeds of Microsoft’s Windows empire crash were sown under Ballmer before, this timing will mean that the Nokia X Android victory is the most visible disaster point and this moment will be seen as the turning point for Microsoft’s hegemony. The Nokia X project will be seen as yet another strategic blunder by Elop and his Microsoft masters will not be duped as easily as his Nokia Board was and Elop will be removed from running the hardware division at some point this year.

Comments

[Earendil Star]

"Or... Msft and Nokia both thought WP would succeed based on Msft's past performance in the mobile market."

MS past performance in the mobile market? Really? Like in phones or tablets????

And who thought this? Nokia?????

This is the greatest joke of the century! Thanks for the laugh, really :)

[Me]

"even after 3 years the OS is total junk - crap."

Still better than Windows Phone.

[Spawn]

The new Microsoft strategy is rather visible. The pick of Satya as new Microsoft CEO underlines what we knew. Satya build up Azure, services, and he did so outside of the Windows-lockin strategy. Azure includes Linux, Azure doesn't care about the Windows platform as strategy.

We all know by now that WP has no future. Neither in the market nor in Microsoft. The problem with that, the NokiaX, move is that it comes to early, is half-done. Satya and his team did prepare a transition strategy and it very likely includes Android AOSP. But its also clear that such a transition would need to be applied carefully, step by step. Now Elop & NokiaX skip and abort once more a caregully crafted transition-strategy making sure it will be irreperable, expensive, a problem. That irony. As if Microsoft didn't saw what kind of guy they take back inhouse. Didn't they watch and learn past 3 years what Elop did? How he 'executes'?

This move is indeed doing heavy damage to Microsoft. Elop, Elop, back to burning platforms, smoking strategies and this time at Microsoft, leading xbox. A sane Microsoft would indeed try to get him out of any position he can damage and burn as soon as possible.

Should we worry about xbox? Yes, because he has weeks left!

[Spawn]

More Elop:
http://www.geek.com/games/stephen-elop-wanted-to-sell-the-xbox-division-now-hes-going-to-run-it-1585798/

Bet open how long it takes till his "significant changes in strategy" have effects on xbox, surface and the integrated Nokia Lumia team. Looks as Microsoft management put together there 3 biggest problem fields and gave them Elop. "Much more damage he cannot do and maybe giving him failed rather then profitable products has an opposite effect? Lets try!"

[Earendil Star]

** "Yes, Microsoft was desperate. [...] Desperate enough to pay $2B to Nokia to switch to WP."

It was $1B. Now it magically doubled. $2B. I love magic!

By the way, MS never paid anything to Nokia. It just channeled WP marketing money through Nokia. Which is quite a different story.

** "This notion that Meego was ready for prime time with support from several vendor is patently delusional. Where are all the devices? Nothing?"

Maemo/Meego was ready. You know it. Everyone knows it. Maemo was first demonstrated on the N900, which launched in 2009. Then released as Meego/Maemo Harmattan in 2011 with the N9 and N950. Google a bit (you only Bing? Sorry...:) and you will see (as you know only too well) that the N9 was ready and being sold well before the first unfinished and sucking Lumia prototypes, which were sold to customers for live testing with the stop-gap WP7 (P)OS. Those poor guinea-pig MS customers, who were not even given the possibility to "upgrade" (well, sort of...:) to WP8 when that came out. Remember? The Lumia 900, the "first true WP"? The one that broke all records in "flagshit" performance? Price: instead of commanding a premium price, it was gifted away at $0 (with two year contract after voucher) because it... had a (MS) software issue and could not connect to the Internet. Smart! Launch: it was launched on Easter Sunday... when shops were closed. Duration: First sold in April 2012, was Osborned in June 2012 when MS said it would launch WP8 and Lumias 900 would not be upgraded. Mmmmh, the MS experience!

Maemo, Meego, whatever, what counts here is that Nokia had its new gen platform ready for prime time. And with Nokia's muscle behind it, it would have become a success in no time. One thing is to have (2010) Nokia use its full power pushing a device, another to see if the dozen strong Jolla team is able to come up with anything. Do you remember? To avoid the Meego N9 from selling too much, THTRH Flop sold it in minuscule markets only, so that he would not be forced to say it had annihilated Lumias. He had to publicly declare on the Finnish press that no matter what, the N9 would only be a limited experiment, a one off with no future. Who was THTRH Elop working for?

We are dead tired of seeing history being rewritten. Stop it. Now!

[Earendil Star]

Tomi, you are over complicating it.

Nokia sale to MS was actually agreed back in 2010.

THTRH Elop (Top MS exec with a personal history in winding down companies, but Mr Nobody in mobile) was sent there after the sale, to pursue MS' agenda: to destroy Nokia from within and save the WP burning platform, according to Baldmer's blueprint.

Starting mid 2010, all important Nokia decisions were agreed with Ballmer, who was always there on stage with Flop whenever an important announcement was made.

All previous Nokia management was zapped. Now the place (including the part not being sold to MS) is teeming with softies. All totally aligned to the Redmond mothership... hey, if you behave well, you'll end up with a pile of money like Flop!

The initial plan, a one-to-one Symbian to WP transition, was a total trainwreck. If it had worked, the initial $1B WP marketing channelling through Nokia would be handsomely paid back several times over by Nokia's WP fees to MS. But WP turned out to be too much for customers, even when trying to force feed it.

In 2013, to rescue Nokia from collapse after having sabotaged it, MS stepped in and bought it at more than fire sale price to avert a Lumia and WP catastrophe. Nokia's price: $4.5B. Whatsapp price: $19B. WHAT THE HECK??? Plan B, but all in all, still a fantastic deal for MS.

Meanwhile, the WP (P)OS continues seeing no traction, in fact, it is starting to show fatigue strain. Fearing that the next billion customers will also go to Google's Android, in 2014 MS launches its Android AOSP smartphones, saving on costs (Meltemi project and team could be wound down), with Lumialike skin and MS services (mostly those pillaged from Nokia, such as Here Maps, Nokia Radio Mix and so on). Let's call it damage control. Hoping that Google won't offer a Google suite to be sideloaded on the devices and foil the plan...

Meanwhile, Elop is gearing up for his new top brass X position at MS, after pocketing the millions for following Redmond's orders all the time. Neat!

Occam razor proof reasoning. Just as simple as that! All the puzzle pieces nicely fit together. No need to find much more complicated explanations to otherwise inexplicable moves, choices and decisions. All plain and simple. Pure MS style.

[Earendil Star]

Astroturfing BS apart, Nokia, ehm, I mean, MS goes to the Barcelona MWC and releases... three ANDROID phones???? And NO NEW LUMIAS????

No comment. Better leave it to the Astros... Sweeet!!!

[dp]

This is how I see what MS planned and did in last few years with Nokia:

1. Destroy meego and stop Qt in becoming major development platform.
2. Make WP strong third ecosystem (failed so far)
3. Destroy Nokia.
4. Buy Nokia cheaply.
5. If WP fails, fork Android.

I think Nokia X is something that Elop and MS did knowingly when they saw WP is ultimately failing. It could become a small hit and then in a few years time we will talk about Android and Android X. And develop for two different platforms. With MS tools and MS services. As one of commentators said: embrace, extend, extinguish.

[RottenApple]

@Spawn:

"http://www.geek.com/games/stephen-elop-wanted-to-sell-the-xbox-division-now-hes-going-to-run-it-1585798/"

One has to wonder, why are they putting him in charge of that division?
They must know that everything Elop has ever touched went sour. Are they setting him up for failure or is it a shrewd move to close down the division due to 'management incompetence'?

@Earendil Star:

Please stop these idiotic conspiracy theories, especially if they make no sense.
Nokia X is a public relations disaster for Microsoft - nothing less. I'm with Spawn on this one. It is a move that may severely undermine any attempt at repositioning the company in the market.

[jj]

"even after 3 years the OS is total junk - crap."
Still better than Windows Phone.

Plus, it's not NSA spy-tool like all US based systems (WP, iOS, Android) are.

[foo]

@Earendil Star

Great retrospective!!!

[Sander van der Wal]

@Earendil Star

Maemo/MeeGo wasn't ready. I have talked to people who were working on bundled apps. They clearly and repeatedly said it wasn't ready. All kinds of needed low level API's were just not there.

My interpretation is that they had a very small desktop computer working. Not a smartphone, which needs all kinds of interfaces to hardware that is not necessary in a desktop computer.

Then there was a huge list of showstopper errors. Clearly visible in the public, but not well-known bugs database. A phone might have at most one showstopper. Not hunderds.

[jj]

Windows Phone 7 wasn't ready either. In fact, it was so bad Microsoft itself threw it to trashcan.

[Per "wertigon" Ekström]

Meego may not have been ready - but the N9 received rave reviews once it reached the market.

With time the bugs would've been fixed, Nokias market share might've dipped a bit but nowhere near as catastrophic as with WP. The reason is, carriers would not have given Nokia the middle finger.

But, done is done no use crying about it.

[Alex]

@at the meego bashers (meego was not ready, and so on): i own a n9 myself, I love the phone, the os is great, and this is around 2,5 years old. So imagine, what this platform could have become if getting the full support. We would have another major player by now next to IOS and Android, and all on open source basis. And I am sure the market share would not be like the one of windows now, probably 10 times more, but that of course is speculation. To choose windows 7 which was, as we know now, put in the trash later, over this os was an utterly stupid and destructive business decision.

[Wayne Borean]

I think everyone is missing the most important part:

**********
Elop does say that Android devs can bring their apps to Nokia X - only takes a few extra hours dev work - and people can sideload applications using an SD card.
**********

So they've crippled the phone. Who wants to spend time porting apps over to a phone with no market share? Oh, no doubt some will sell, but word of mouth will be terrible.

This sounds like a Microsoft plan. Open mouth, insert foot up till hip.

Wayne

[foo]

@Sander van der Wal

> Then there was a huge list of showstopper errors. Clearly visible in the public, but not well-known bugs database.
> A phone might have at most one showstopper. Not hunderds.

Funny you mention that, because the alternative -- Windows Phone 7.5 -- had a famous list of 101 problems, later expanded to 110:

http://www.phonearena.com/news/Here-are-101-reasons-not-to-buy-Windows-Phone-7.5_id30255

[Sander van der Wal]

@foo

Those are not showstoppers. A showstopper in a phone would be for instance a call that is always disconnected after one minute.

If it happened after 20 minutes it would be a serious error, and of those you can have a couple.

That list would be nuisance level.

[Giacomo Di Giacomo]

@Baron95
I usually refrain from replying to your posts since they are so full of bullshit that it shows by its own stench. But I have to reply to your comment about Jolla since many here have never seen or tested one. I do not know where you took that quote and I won't to bother to search. I have the real thing and use it everyday. It's a charm, even in beta stage. More stable than Android. The battery (although "just" 2000 mAh) lasts ages. Unbelievably faster even with the hardware of a Galaxy S2 (confirmed by AnTuTu) (still more powerful than an iPhone 5S, by the way). Runs every single Android app I am trying (some require gapps of course). The UI becomes so intuitive that now I keep swiping to close apps on Android phones and on my Nokia 808. And, for people like me who want control over their phone, it is a real SuSE Linux distribution, with all the capabilities that this implies.
So, in the unlikely event that your brain allows you, please stop talking shit about what you do not know. If Tomi's praise level for Meego/Jolla is wrong, it is so only because it is too low.

[N9]

Let me also say that I still use my N9. This platform was clearly ready and was missing only a bit of polish and large scale distribution.

Compare that to WP 7 which was superseded only a year later and the first WP 8 Lumias which were initially not even usable as a phone. For about half a year - as somebody who bought a 920 told me. Knowing Microsoft's usual strategy to ship unfinished software I fully believe this.

@Giacomo Di Giacomo: Interesting to hear about Jolla, I read mixed stories about the UI. What prevented me to order one was that they don't run X11 but Wayland - meaning it breaks API compatibility with standard Linux. Do you know whether XWayland is running on Jolla already?