Ok, a Few Words About Microsoft Under Satya Nadella

So congratulations to Satya Nadella, who gets to run one of the very few Fortune Global 500 sized multinationals which enjoys near-monopoly status in most of its core businesses - Windows and the Office Suite. Microsoft is also strong in videogaming consoles and cloud computing. Microsoft is a player in mobile on the software side and just bought the second largest handset manufacturer in the world in its acquisition of the handset division of Nokia. Microsoft is filthy rich with enormous profits only put to shame by those other PC industry pioneers with the logo stolen from the record company that the Beatles started. 

What do I think? I really liked the tone in the memo he released to all Microsoft staff at this link on the official Microsoft site. Very up-beat and optimistic visionary tone. Lets work together, cum-ba-yah. If I was an MS employee I would like this to be the first communication from the new boss, especially after the reputation Ballmer had had for his fierce temper tantrums etc.

THE MOBILE DREAM

So first my professional judgement as the most published author (12 books and counting) in my industry - mobile - and measured by Forbes in 2012 as the most influential expert of my industry. I was the most accurate forecaster for how Nokia would fare in the past few years as its new CEO Stephen Elop attempted a conversion of Nokia's massive and loyal customer base to convert to Windows Phone. The race was not even close. While no forecaster can be perfectly correct (if that happens its an accident) I was so good on both Nokia smartphone and Microsoft Windows Phone forecasts that the next most accurate forecaster was nearly twice as much off as I was. I was almost twice as accurate than the next most accurate forecaster specifically on Nokia smartphone and Windows Phone performances. Bear that in mind on my 'judgement' about Microsoft and its Nokia acquisition.

You may have read recently some optimistic reports that Windows Phone was growing in the past year. That is true. Its about as relevant as if you asked me to talk about the big oceans and I answered talking about the Great Lakes. Lets talk about the reality.

Nokia's market share in 2010 was a massive 35% in smartphones, more than twice that of its nearest rivals, Blackberry and iPhone. That was running 'obsolete' Symbian. Then came Elop who decided to wreck the market by creating his Elop Effect (he badmouthed his own products through his Burning Platforms memo - an idiotic mistake that replicated the Ratner Effect - Elop was reprimanded by Nokia's then-Chairman Jorma Ollila for this; and that Ratner Effect was combined by an Osborne Effect when the CEO announced the new Windows platform far too early, instantly collapsing all current smartphone sales on Symbian. I have coined the term Elop Effect when you do both a Ratner and an Osborne.)  Nokia's market share set a world record fall in the handset industry by falling by more than half in just 12 months to reach 16%. Yes, a world record. This was worse than Palm or Motorola or Blackberry or Siemens or any other sudden fall in the history of handsets.

Then for 2012 we saw the global launch of the promised new Lumia smartphones running the wonderful new Microsoft Windows Phone operating system that was supposedly better than Symbian. Surely the new Lumia smartphones would sell as well - indeed should sell better - than those obsolete Symbian smartphones? Nokia could not sustain a 1-to-1 conversion from Symbian to Windows Phone. Nokia's market share kept sinking reaching 5% when the final numbers were out at the end of the year. Yes you read that correctly. This was a collapse losing two thirds of what you had at the start of the year - Elop actually broke his own world record for failure in the handset industry. Oh, I forgot to tell you, all the Lumia smarpthones were now being sold at a loss. At its worst peak in Q3 of 2012 the Nokia smartphone unit reported a 49% loss per unit sold! 

Then there was the new savior, the Windows Phone version 8 that arrived to the end of the year. Lets see how that fared. Nokia's market share for year 2013 when the Lumia range was migrated to this new Windows Phone 8 system achieved a global market share of how much better than the older Windows 7.x versions? Not better. Worse. Nokia's smartphone market share fell still more in 2013 reaching 3%. It is true yes, that compared to Windows Phone sales one year ago, Nokia did grow the Windiws Phone sales. That was while the smartphone industry grew by 46% according to fresh numbers by Canalys. And what was the cost of this 'success'. Nokia CEO massacred 35% market share on Symbian to deliver 3% on Windows Phone! No wonder they didn't name Elop the new CEO. Even after the first Lumia was launched, just in the last two years, Nokia exchanged 16% of Symbian-based market share for 3% of Windows Phone based market share. All this while posting losses in every single quarter that the Lumia series was ever sold, even after Elop had departed. This is total utter complete market disaster. Not my words. Nokia's past CEO and Chairman when Elop was hired, who chaired the Board that accepted Elop's recommendation to shift to Windows. Ollila admitted to the largest newspaper of Finland, Helsingin Sanomat that yes, Nokia's Windows Phone gamble turned out to be a total flop. A 'big mistake' was how tne newspaper reporter phrased it to which Ollila agreed.

In 2012 when all smartphones sold by Nokia ran only Windows Phone, and most of those were already on Windows Phone version 8. And the ex-Microsoft dude Stephen Elop was in charge. And he had installed hs own Microsoftian buddies to run Nokia's sales etc. That Nokia achieved 3% market share in the industry Nokia invented, and utterly dominated still only three years prior. The only way Windows Phone grew from 2012 was at the expense of the massacre of Nokia's huge customer loyalty worldwide. Yes, before Elop damaged Nokia, it was the most beloved handset brand in all countries except the USA, Japan and South Korea - three markets with many domestic handset brands AND strong local carriers that protect their domestic market. In the rest of the world where 90% of us humans live, where there mostly were no domestic rivals and Nokia competed on even terms, Nokia held over 50% market share in smartphones on every continent! Dont' be misguided by US-market anomalies when you analyze the mobile industry. 

Out of customers not scared off by the Elop Effect during 2011, of the remaining 16% market share, Nokia managed to scare off 13% of that or more than four out of every five attempts to convert to Windows Phone. And remember, those were not iPhone users. They were users on Symbian, the 'obsolete' smartphone platform. Yet somehow Windows was so poisonous that four out of five loyal Nokia customers would rather switch brands than take a Nokia using Windows! That is your 'success'. Or more precisely, the Windows based smartphones had 4% market share in year 2010, just before the Nokia partnership was announced. Now after Nokia sacrificed 32% of its market to the altar of Redmond, where is Microsoft? At 3.5% market share. The Nokia partnership resulted in a net LOSS of one half of one market share point. THAT is not success in any book.

The market has spoken loud and clear. We do not need to revisit tens of thousands of words about the how and why and when (you can read all about that in my shortly to be released 13th book). The facts are obvious. And here is my point. MIcrosoft's new CEO wrote eloquently about mobile in that nice first memo. He even welcomed the Nokia employees shortly joiing Microsoft. There is great hope at Microsoft that they can use the Nokia handset division to propel Microsoft into something akin to Apple who sells its highly profitable iPhones and owns its iOS ecosystem. There is a lot of reason for the new CEO to be optimistic that Microsoft's Nokia will be a success. It will not. Trust me because I was by far the most accurate forecaster of both Nokia smartphones and Windows based smartphones of the recent past. Why will this not work?

CARRIERS, WHAT ARE CARRIERS?

The mobile industry differs from the PC industry and almost every other tech industry in one vital way. The carriers/operators are gatekeepers to their domestic markets that no handset maker can successfully circmvent. Google tried this with the original Nexus and failed. Apple tried for years until it relented to agree to terms with the biggest carrier in the world, China Mobile (about the size of seven AT&Ts). Microsoft ifself felt the wrath of the carrier community after it spent billions buying the Danger handset manufacturer and then releasing its own Kin phones. The Kin series was killed in only 6 weeks from launch (that too is a world record failure in mobile). Why killed. Because the carriers suddenly withdrew the promised support. Yes. Microsoft itself has felt the devastation of how the carriers rule.

Nokia testified to the NY Stock Exchange and the Securities Exchange Commission in filing its Form 20-F in 2011 that the carrier relations of Nokia were the world's strongest, but that if they were damaged, all other Nokia competitie advantages such as its scale, logistics and brand would be damaged too. The carrier relations underpinned Nokia's dominant position. Elop himself said that the biggest lesson he learned out of the Lumia launch failure was how strong the carrier commnity was and he hadn't correctly dealt with them. When the three ratings agencies Moody's, S&P and Fitch each downgraded Nokia numerous times from near perfect to junk status - at every downgrade they mentioned the poisoned carrrier relations or sales channel problems as a cause. Usually the first mentioned cause. Often the ONLY cause why Nokia suffered another downgrade! Nothing was more important to Nokia's dominant position than the massive lead it had built in its carrier relations. Relations that were destroyed under three years of Elop's rule. Relations that had taken decades to build. Relations that have now been snapped up mostly by Samsung by the way so they won't be coming back either.

Nokia's fall was not because handsets were not good enough. Certainly Windows Phone by version 8 was better than the outgoing Symbian. Nokia did not fall because the marketing was bad or the prices too high - come on, every single Lumia was sold at a loss. At its worst, a loss of 49% per handset! Microsoft threw a quarter of a Billion dollars into the Lumia marketng every single quarter to help boost the handset success. Yet dismal failure.

LETS PLAY BAD COP - BAD COP

And here is the kicker. Carriers had loved Nokia (except US carriers - even neighboring Canadian and Mexican carriers loved Nokia but not the US carriers). But carriers had distrusted and disliked Microsoft. That dislike turned into hatered when Microsoft bought Skype. Not because Skype appeared on Windows Phone smartphone - Skype was available on Android smartphones but not on early Windows based smartphones. No. Carriers hated it that Microsoft the rich tech giant could now bankroll the single biggest existential threat to their business. Skype threatens voice calls. Skype threatens messages. Skype threatenes videocalls. While carriers dislike all OTT providers from Whatsapp to Blackberry Messenger, only Skype attracts pure hatered. Again not my words. Stephen Elop told the Nokia annual shareholder meeting in 2012 that carriers were boycotting all brands of Windows smartphones and it was because of Skype.

The boycotts have neen independently verified in secret in-store surveys by journalists from San Francisco to New York to Boston to London to Paris to Helsinki to Beijing and Hong Kong. Its a fact that after Microsoft bought Skype the total carrier commnuity put all Windows based smartphones into boycott. LG and Sony quit the Windows ecosytem completely. HTC and Samsung reduced their involveemnt to a token handset or two. Huawei and ZTE abandoned Windows Phone launches. In all cases that there was a statement why, it was because the carriers said they don't want the Windows based smartphones. They wanted the same manufacturers to give them Android handsets instead. Ex Microsoft executive who was in charge of the Windows smartphone unit at MIcrosoft, Charlie Kindle said that Microsoft's carrier relations were bad before the Skype purchase and then Microsoft made matters even worse essentially giving the middle finger to the carrrier community.

Understand the market now. Nokia were the 'good cop' of the pairing with Microsof the 'bad cop'. That can only work if there is one bad and one good. It cannot work with only the bad cop. Now that Nokia is removed from the equation - with all this history - can Microsoft ever succeed in mobile handsets? No. Literally never. They may stumble on for many years throwing good money after bad attempting to generate modest sales out of the 'Nokia' unit in the low single digits of market share. But the carrier community has spoken, loud and clear, that even with Nokia as the partner they will punish Microsoft. Now with Nokia no longer in the mix, the performance of the handset unit under MIcrosoft's sole management will be worse. Don't believe me? The Christmas quarter from October to December is traditionally Nokia's best quarter of the year in smartphone sales. Nokia traditionally grows 25% from just the quarter before. Most analysts were expecting Nokia to report well beyond 10 million sales in that ballpark. Nokia actual sales fell from 8.8 million to 8.2 million. This while the industry grew 15% from Q3 according to Canalys. And why the sudden totally unanticipated crash now? Bad Nokia phones? No, the brand new Lumia 1020 was shipping with the monster 41 megapixel camera and the new phablets too with screens of gargantuan size. Sprint was added to Nokia's USA sales etc. But sales? Fell. What else happened? Nokia announced the sale of the handset unit to Microsoft. Who is punishing Nokia/Microsoft now? Its the carreirs, stupid!

So mark my words. Nokia smartphones under Microsoft ownership will never pass single digits. I mean never ever ever in this lifetime or the ones to follow. Never ever cross-my-heart-and-hope-to-die never. Initially this year Microsoft can report total handset market shares in the low teens as Nokia's dumbphones help it to 15% of hte total handset market. But Nokia's smartphone market share had fallen to 3% last year. That was achieved when Nokia was balancing the evil out of the Evil Empire. When Ballmer played bad cop and Elop played good cop when visiting carrier CEOs together attempting to sell the new Lumia solutions.

The only thing that could reverse the hatered carriers have towards Microsoft is, if Microsoft would soon sell off the Skype asset. I am sure Microsoft investors would revolt on that decision as its about the only strong play Microsoft has going into the internet wars now as Internet Explorer, Hotmail etc are losing market share. So that would be a bombshell of news but I would suggest that is a day they would be making snowballs in hell if that happened in the next year or so.

AND NOKIA'S HANDSET UNIT FATE AT MICROSOFT THEREFORE IS

Ok. I am on record with my dire prediction. Luckily Nadella has no idea who I am and has very little knowlege even of the mobile industry so he can't judge how valid my points are. The issue will further be obfuscated by the disgruntled Elop who hates it that he didn't get the CEO job and certainly won't want to take any credit for the downfall of Nokia's handset empire. He will not tell the truth to the new CEO and those old Nokians who would have been brave enough to tell the truth to power have long since been fired by Elop or resigned in protest or left for personal reasons etc.

The new CEO will probably give Elop a chance at the helm of the Nokia he brings to Microsoft. It will continue to be a disaster and the new CEO very likely sees the history and will fire Elop - no do the Microsoftian amputation by giving Elop a non-job with no staff like say SVP of Mobile Strategy - and then post Elop into some far-away office like Ouagadougou or Antananarivo. But the CEO will give the Nokia unit another boss no doubt a very capable one who will spend another year or two in hell trying to turn the doomed operation around. How much beyond 2016 can Microsoft linger in useless state as a nobody of mobile will primarily depend on how long the profits from desktop Windows and Office Suite sustain the luxuries of loss-making divisions. I think Microsoft will play it like Xbox for many many years but by the end of the decade the writing will be on the wall. All the smart Nokia transfers will quietly migrate to 'any department other than handsets' at Microsoft...

Thats my prognosis on the happy memo talking so nicely about the importance of mobile to Microsoft. I do want to say that I expect Microsoft to continue making obscene profits in its other businesses so please don't read into the above that Microsoft is in trouble in the short run. Only its mobile dream is a nightmare that will never pan out.

CHANGE OR NOT TO CHANGE

(I honestly didn't want to write that part today, this second part is what promted me to end my night at my PC to author this blog)

Here is the real test of Satya Nadella. Microsoft is a bully. It has earned its nickname of being the Evil Empire. It has crushed rivals with illegal means and then armed itself with armies of attorneys so in the end it only paid some penalties that were pocket change out of its deep pockets. Microsoft has definitely been the nastiest player all over the years in tech. This was not just Ballmer, it was the total corporate culture and history. It was against its VARs, it was with its partners (Sendo, anyone?) and now the Nokia crash is also attributed to Microsoftian 'Trojan Horse' behavior by Elop especially after word leaked of his 25 million dollar bonus for wrecking the handset business. The Financial Times calculated that for every 1 Billion dollars that Elop wiped out of Nokia's shareholder value, his bonus clause paid him another 1.5 million dollars. A nice job if you can get it. The FT compared the audacity of Elop's heist to Bernie Madoff. (Incidentially I have explained why Elop could not have been inserted as a Trojan Horse but he may still have been acting in Microsoft's best interest out of misguided loyalties - and should be investigated by the securities industry watchdogs)

Ok so yes, MIcrosoft has earned its reputation as the biggest bully in the tech industry. You know what? That tactic only works if you are a monopoly (or a dictator). In any fair market conditions (or real democracies) the bully is soon ousted and never gets to that kind of behavior at the Fortune 500 sized giant corporation level. Only in monopolistic situations. Microsoft is quite different in the videogaming consoles market and in cloud computing where it doesn't hold monopolistic market power.

So what happens next. The big war for the IT industry was already lost two years ago when more computing devices were sold running Android than Windows. The installed base tips over this year when more total computing devices in use (mainframes, servers, PCs, netbooks, tablets, PDAs and smartphones) on Android will be bigger than those on Windows. So Microsoft has already lost the war while it still keeps on trucking in the lucrative desktop Windows and Office software world that will continue to be big for many years still to come. The future via smartphones is lost (see above) and last year was the first year that traditional PC sales - desktops and laptops - fell.

The gaming consoles have reached their peak as well. So where is Microsoft's futurei if not smartphones? The cloud maybe but in that world the giant is Amazon and there are several strong players. Microsoft's whole history was built on a monopoly or monopolistic market even from the very start when IBM gave MS the DOS license for the operating system on the first IBM PC. MIcrosoft has learned every nasty trick of intimdiation and nasty contract clauses and hostile attorneys to breaking contracts to breaking laws - and it gets away with it - in those markets where it is monopolistic. It isn't behaving like that on the cloud services I am told (I am not an expert on that side of Microsoft).

So my advice and 'test' of Satya Nadella is the Evil test. If he wants to transform Microsoft and bring it as a healthy vibrant major tech company in the 2020s decade 6 years from now, the only way that is possible is if Microsoft is transformed totally into the gentle giant and friend to all. Not the closed garden - my way or the highway - thinking that is Windows and its 'ecosystem'. It is the open source type of thinking best epitomied by Linux (yeah Finnish dude Linus Torvalds can be thanked for that haha) that was also very close to the core of Nokia's culture up to when Elop the cancer arrived in 2010. Android is Linux based by the way (as was Nokia's replacement platform to supercede Symbian, the highly praised but short-lived MeeGo - its succesor, Sailfish by Jolla can run Android apps natively! Imagine that, Nokia could have the full benefit of the 700,000 apps of Android while keeping its own - Linux based open souce operating system today if Elop hadnt' murdered MeeGo in pursuit of his 25 million dollar bonus)

The rot inside Microsoft is deep. I don't mean every person at Microsoft is evil. But the corporate culture is one that takes the nasty option almost whenever it presents itself. I always say 'lawyer up' when you have any dealings with Microsoft as it so often ends in tears (did I mention Sendo, MIcrosofts very first step into mobile destroyed that smartphone pioneer in a prolonged lawsuit that in the end had Microsoft paying Sendo but by then Sendo was destroyed).

HOW SOFT? MICROSOFT AS A LOVELY PUSSYCAT

The memo is a nice first step. Nadella is a young CEO closer in tune to the modern IT tech thinking of sharing - haha Communities Dominate eh, like this blog and the book we wrote with Alan Moore a decade ago. But yes. The young CEO perhaps can guide MIcrosoft into a new era, for the tiger to shed its stripes and the Evil Empire to transform into a lovely pussycat. I am not holding my breath. I think that is far too much to ask of the new CEO while Microsoft still seems so healthy today... It will take a near-death experience perhaps to motivate the then-new CEO to that desperation move. One that starts incidentially by a massive mea culpa by the CEO apologizing for all past mistakes like all lawsuits settled out of court or fines paid to the EU and US regulators 'with Microsoft admitting no fault' haha... that to me is the only way, and yes, It will obviously not happen. So expect Nadella to supervise a continuous slow death spiral from now to maybe 2025 or 2030 but I know a dead parrot when I see one, and I'm looking at one right now. Its stone dead. The parrot is definitely deceased. He's passed on. This parrot is no more. He has ceased to be. He's expired and gone to meet its maker. He's a stiff. Bereft of life he rests in peace. This is an ex-Parrot!
 
but good luck Satya I hope you prove me wrong. The industries (digital and mobile, increasingly converging) really could use a strong Microsoft for another 20 years and if you can somehow revive the Nokia handset business back to growth, I'm sending you a bottle of James Bond's favorite whisky, a nice 25 year old single malt of Macallan. Good luck! 

Comments

[Tomi T Ahonen]

No LeeBase

I was not comparing Lumia to 'pre iPhone Nokia'. I very explicitly talked about year 2010 Nokia performance just before the Elop Effect and the iPhone was launched in 2007. This is well post-iPhone Nokia we are looking at. And you KNOW the FACTS on the year. In 2010 Apple grew by adding 19 million new iPhone users that year. Nokia crushed Apple in 2010 growing by 36 million new smartphone users. Apple was nowhere near closing the gap - Nokia was pulling away picking up nearly twice the number of new customers than what Apple was able to do.

You are correct that the iPhone demolished Palm of the platforms and Motorola of the phone brands. HTC, RIM and Nokia were not significantly hit by Apple. HTC was a clear victim of Android - ironically by offering Android smartphones so in reality HTC was a victim of Samsung joining Android. RIM didn't die due to Android - most Android phones didn't compete in the enterprise space where Nokia's E-Series was its primary rival. Blackberry died due to a massive management mistake - you know this you've been here on this blog seeing it happen - when they took the eye off the ball, suddenly rushing to release a tablet that failed comprehensively in the market but stole the marketing afforts, drained profits and in its aftermath forced the new Blackberry OS to be severely delayed. That was not caused by the iPhone by any stretch of the imagination as their market segments were literally the furthest from each other - Apple offering no QWERTY variants and until the Z10 OS, Blackberry had no pure touch-screen versions. No, Blackberry collapsed due to a self-induced wound not because of competitors. Nokia died because of the Elop Effect, also a self-induced wound. Nokia totally dominated over Apple, Blackberry and Samsung so enormously in 2010 that Toyota and GM have never enjoyed such a massive market lead in cars; HP, IBM and Lenovo have never experienced such great market supremacy in PCs. Not for one year of any of their history as Nokia held in 2010 in smartphones.

You know this, you could probably site the facts and stats by heart. Why do you post such nonsense now?

On the boycott. Its not 100% of all countries and all operators and all models of handsets. It varies by country and the relevant impact of Nokia's brand to that market. The countries you mentioned are ones where Nokia had over 50% market shares with Symbian or even more. That they now manage 10% is pitiful. And that does not hide the fact that Nokia global market share which was 35% in 2010 is 3% now. If its 10% in Italy it then must be 1% in four other countries of roughly the same smartphone market size.. The math is irrefutable. For every 10% you can show, there will be utter total collapse such as the very same Kantar reported out of China for WP - as you know - and China alone is more than twice the USA and all of Western Europe smartphone markets - combined!

The Skype boycott is a ridiculous argument when Nokia's CEO, Stephen Elop said talking to his bosses, the Nokia shareholders in the annual shareholder meeting that the operators so disliked the fact that Microsoft owned Skype - when Skype was not even on Windows based phones at the time but WAS on rival Androids - some operators had gone so far as to refuse to sell ANY Windows Phone based smartphones by any brand. Your opinion on this point, LeeBase, is just as irrelevant as mine, when Elop has explained in great detail - with actual video and transcript - that it is the OWNERSHIP of Skype that causes some carriers to refuse Windows Phone. That is the definition of Boycott, go check your dictionary.

I do agree with you that the new CEO has tons of resources and Microsoft is one of the richest companies in the tech industry and at least at this point in time they cannot be seen to give up on mobile. They will fight definitely for years and replace the 'Nokia' division head a couple of times before they start to wonder can it ever succeed. I ask you LeeBase, out of my predictions of Nokia and Windows (and iPhone and Samsung and Motorola) do I have the credibility that my forecast has a good chance of coming true, based on my deep insights into the handset industry and in particular the role of the carriers and distribution channel? I agree Microsoft can put in the time. I still say its a futile attempt and towards the end of this decade as Windows lingers in the low single digits, and is a perennial drain to profits, the demands will come to let the Nokia/Lumia unit go the way of the Zune and Kin...

Tomi Ahonen :-)

[So Vatar]

Microsoft is not a dead parrot. WP and handset business, yes, that is dying.

As I wrote in an earlier comment to another of Tomi's blog posts there is tons of business out there for MS in the business software and services area (cloud). MS will milk Windows and Office for many years to come and will still make tons of profits there, no growth but a very nice income stream. MS will buy other technologies in the business software and services area. Heck, they might even go for SAP again (as they tried years ago).

Okay, I placed a bet that the new CEO might walk away from buying the Nokia handset business. I still think this would be a smart move for MS as there is only money to be lost in the handset business. I also think that it would bankrupt (the rest of) Nokia if MS would walk away. But I do admit that the initial remarks by Satya Nadella suggest that MS will close the deal and buy Nokia's handset business. So, I might have been wrong short term. But Tomi and I agree that there is no future for MS in the mobile segment other than connecting to devices running the successful systems (iOS, Android).

Microsoft will be less sexy and not relevant for the topics of this blog, but they are and will stay a powerhouse in IT: Business software and services.

[Mao Nixon]

@Tomi,

Microsoft is holding Balmer position way too long. Windows is almost dead, in the same position when OPK left nokia, in the same position when the co-CEO clown of RIM left RIM.

Here's an info for you..........

One in five notebooks sold is now a Chromebok, Microsoft appears desperate to beat Google back
www.dailytech.com/Chromebooks+Capture+21+Percent+of+2013+US+Notebook+Sales/article33985.htm

Seemingly out of nowhere Google Inc.'s (GOOG) Chrome OS -- a Linux-kernel based personal computer operating system -- has emerged as a dominant force in the PC market.
(read more at www.dailytech.com/Chromebooks+Capture+21+Percent+of+2013+US+Notebook+Sales/article33985.htm)

Chromebooks' success punches Microsoft in the gut
news.idg.no/cw/art.cfm?id=10AF2EBB-9146-F4D4-A10D341614A1A9B6

Chromebooks had a very good year, according to retailer Amazon.com and industry analysts. And that's bad news for Microsoft.

(read more at news.idg.no/cw/art.cfm?id=10AF2EBB-9146-F4D4-A10D341614A1A9B6 )

[Mao Nixon]

@So Vatar.

Chromebook manage to snag 20% of US notebook market share IN JUST 1 YEAR. and Balmer launching the anti-chromebook (smear) campaign to counter chromebook success.

I think we're seeing what iOS disruption (on greater level - with google power) on mobile in Desktop/Notebook level by Google Chromebook, and I think this is the start of the end of Windows OS.

[So Vatar]

@Mao Nixon,

Maybe Chromebooks sell well here in the US. Yes, Android and iOS eat into classic Windows areas, especially in the consumer segment. In the business segment these devices need to be connected to other business class systems (and legacy systems). Microsft will play there. Maybe Windows license sales are stagnant. I agree that Windows and Office will not be growth generators for MS anymore, but there is so much left in that segment that Microsoft can milk it for many years to come. They will not be so stupid to kill the goose that delivers the eggs before it is time to say good bye, maybe in a decade or so, maybe even later.

Microsoft will not grow in the WP or handset business either, that train left the station and MS failed to jump on the train. They are left behind, with or without the purchase of Nokia's handset business.

However, MS will be able to grow in the business SW and services areas, developing their own products and purchasing technologies and markets. They are already competing there, their new CEO comes from this segment. There there are competing and cooperating with the likes of Oracle, SAP, Salesforce, and many other multi billion Dollar companies.

Of course none of the above is set in stone, as leaders are able to change trajectories and turn a loser into a winner (Steve Jobs did it with Apple in a positive way, Elop did it with Nokia just into the opposite direction).

[JMM]

First an honest question, why carriers hate Skype but allow iMessage/Facetime/FaceTime Audio? iPhone market share is huge in US/Japan (you mentioned them as countries with huge carrier's influence.

Why Apple don't suffer the same kind of ban as M$?

Second an honest comment, your ego is becoming really annoying. Slow down with the self publicity.

[Mao Nixon]

@So Vatar

That because Google only sell Chromebook in limited country as of now. Just FYI, google silently sell the Chromebook in Malaysia. Malaysia school is 100% towards chromebook. Singapore is running a test with Chromebook in several selected school since mid 2013. It would not be surprised if Singapore will fall for chromebook too.

As for bussiness market, the change from the small and medium size company to chromebook is starting to happened. If you join/follow the chromebook news/group, you'll see the the LOWER TCO & easy management that chromebook have is really helping small/medium company to convert to chromebook. As for big company, I really have not much information. With chromebook news appearing very often, and with Google brand behind it, don't be surprised if the move to chromebook happened sooner than you thought.

Yes, microsoft can still milked the Windows platform, the Office platform, but I think the game will change FAST very SOON.

[Mao Nixon]

@JMM

Because..
in Apple, carrier hate apple greediness, but still need the iphone.
in Microsoft, carrier hate the MS, and WP is a shit.

[Mao Nixon]

@So vatar

About MS competing in SW and services, I don't think MS can do that. The failure of Hotmail, MSN compared to competitor tell us that MS bussiness practice / corporate culture is not suitable in current era.

[Tomi T Ahonen]

So Vatar - haha yeah ok. The Monty Python sketch was yes premature. I plead... return from vacation so am not yet in full mode haha...

I saw your oomment - actually I think I've seen it a couple of times, haven't I? that you thought MS might decide not to go through with the Nokia purchase. We've now seen whatshisname-Nutella.. gosh gotta learn that name fast. What was it - Nadella - has spoken so strongly about mobile and Nokia in his first memo so yeah, no chance of that happening. I did think it was an extreme long-shot in any case. Microsoft has wanted Nokia in whatever form in whatever way possible for more than a decade already. They would not walk away from that purchase now especially as the Lenovo Motorola purchase illustrates how much the far more valuable Nokia property was indeed a steal by Microsoft. Only trouble is.. we know that will never work out. I am pretty sure that Bill Gates, Steve Ballmer, Stephen Elop all believed that by buying Nokia they could turn this around. Doing it 'the Microsoft way' as opposed to the wimpy Finnish Nokia way haha...

Mao Nixon - (great nickname BTW haha for us old enough to remember both leaders seen on TV back then...) hey thanks for the great links. Yeah the Chromebooks are taking rapid gains in the market. Partly its because Chrome and Google's insights into operating systems have matured much since the first launch of Android. It helps that its more difficult to design for small devices than large ones so the learning curve over at the Googleplex mastering Android has brought more competence than similar effort put say on the desktop would have been at Microsoft and attempting to convert that then onto the small devices. There is certainly a strong dislike and mistrust of Microsoft that helps Chromebooks and various Android tablets and all the surging Mac and iPad sales steal sales from Windows based PCs and tablets. I know I can't wait to get rid of the last Microsoft software I am dealing with and hoping that this current fabulous Samsung ultrabook I am using will be my last ever Windows device and I'll go back to my beloved Macs.. but I'd take Android or Chrome ahead of Windows in a second if I didn't have to go buy new liceneses of my various Windows-compatible software I've been accumulating over the years onto the PC...

So Vatar - on the business vs residential PC use remember that of the 300M or so annual sales of PCs when tablets (and smartphones) are not included, more than half are sold to residential users and less than half into business use. So even if Microsoft were to be able to somehow innoculate its business customer market from the invasions of the rival PC operating systems, they are likely going to see an erosion of more than half of their market dwindling to trivial Microsoft share... Its all bad news into the future..

Tomi Ahonen :-)

[AndThisWillBeToo]

@Mao Nixon
What "failure of Hotmail"? If having second largest free email service on the planet is a failure, let me fail as bad as Microsoft.

[Tomi T Ahonen]

JMM - ok.. that is a fair question and unfortunately the answer is long and detailed. I have written several times on this blog the full story why. Here is a recent version that addresses that very specific point why Skype is different to any other OTT service:

http://communities-dominate.blogs.com/brands/2012/05/understanding-ott-why-carriers-dislike-bbm-hate-imessage-and-fear-skype.html

I hate to do that and very VERY rarely refuse to answer by giving a lame link instead but seriously.. it is a long answer and I just can't take the time to write at least 2,000 words for you in a series of replies here this afternoon. Sorry. The answer if you want it is at that link. After you have read it completely, feel free to return here if you still have some question. Illustrate in your question that you've read the blog article but after reading it x is still on your mind. I will address that x if you have the basic understanding out of that blog. Ok?

On the self-promotion, I hear you. You are not alone and your impression is accurate that I do a lot of arrogant and smug self-promotion all the time on this blog. Here's the full picture to that. This blog is free. No subscription and no tricks. I don't give you previews of the story but forcing you to buy the rest of the story, or limit you to a few free pages then start to charge. There is no advertising on this blog - did you notice that. No banners nothing. I don't collect your contact data and don't ask you to sign up and I don't spam you on a newsletter or any such slimy stuff. (Typepad forces you to include you email in leaving a comment. i don't collect those either). This blog still is as pure 'honest' non-professional site, that is truly an amateur hobby web log, a blog as originally conceived where I come to share my thoughts about our industry when I have time. I stopped counting when my words on this blog passed 3 million. 100,000 is a good-sized hardcover book. So the content here would span a good-sized SHELF of hardcover books on a bookcase. In essence reading the full blog every article would provide you with a Master's degree level of insights into the mobile (and digital) industries. Remember I lecture on mobile at Oxford University's courses on telecoms. All of this blog is for free and all accessable to the start of the blog 9 years ago. We have a huge following and are nearing the 5 millionth individual visit to this site. There are more than 30,000 comments left on this blog and something like 10,000 replies.

I would suggest that of blogs that have lived for more than 5 years and are still in operation, but which are not surviving to make money, this Communities Dominate blog must be among the most read blogs on the planet in that 'honest amateur' category where blogs of far smaller readership would typically go commercial and do ads or go to subscriptions etc. More than the size of the readership or the amount of text or comments or duration of the blog is the content. This blog is the largest single collection of mobile industry stats anywhere. I have many exclusive stats reported from TomiAhonen Consultancy here. Free. I have many types of stats where this blog gives more detail than anyone else. For free. This blog has the widest range of stats in the mobile industry from hardware to services and from global to regional to local stats. For free. All the historical data I've ever covered is here. For free. And probably more than any other blog or website I report and link to essentially every truly relevant new statistic that is reported by my peers of the analysts of this industry. And all that is done free. As my hobby because I love this industry and my fans on this blog appreciate what I do.

The price for all that free content is that you have to put up with my personal peculiarities including my huge ego, my rants, my arrogant and at times even abrasive style. My weird sense of humor. My silly hobbies like James Bond and Formula 1. My smugness. And the constant self-promotion that I have done naturally since I was a kid. After almost five million visits and a fiercely loyal base of daily visits in the several thousands, if I were to suddenly change my style to fit YOUR wishes that would be a disservice to all my loyal past fans and readers.

If you can't appreciate all that, then I have a good suggestion to you. Go buy my books and you'll get the clean version of my text that has the egoistical self-promotion all removed by my editors. Or else enjoy what you get here and don't plucking complain about my style. There is NOWHERE you will find for free the information that I volunteer to come and share out on this blog year out and year in. Oh. And some will appreciate the time value of insight. This blog is BY A WIDE MARGIN the fastest source of breaking stats for the mobile industry often literally the worlds' first source and always among the first ever to report on every significant new stats while also keeping the nonsense non-news out. I am in fact considered the stats police of the mobile industry keeping the crazy stats in line - pointing out when truly silly stuff comes out - and why that given number is utterly out of the realm of plausibility (when that happens a couple of times per year). So consider the value of what is on this blog and if you can't take my writing style there is an easy solution - don't come back.

Tomi Ahonen :-)

[AndThisWillBeToo]

About that OTT post...
This data may be outdated as it is from last year, but Skype has 280M active monthly users (active, not amount of accounts) whereas WhatsApp has 300M active monthly users.
The biggest instant messaging service by far is Facebook that (at the time) had 1.1 BILLION active monthly users. Facebook also offers video calls.

Is there a reason you did not cover these two services that by all definition should be larger threat to traditional services than Skype?

Thanks.

[Tomi T Ahonen]

AndThisWillBeToo - yeah the numbers are here and there.. Skype is the biggest threat on three particular reasons. It is by far the largest VOIP provider of voice on mobile alone, excluding the desktop. Infonetics last year counted 256 million mobile users of Skype. Add to that reason number 2 - the PC installed base where total Skype subscriber count - active and inactive users is way past a Billion. That brings in metcalfe's law and reed's law (networking effect and social media effect) utterly trumping any possible rival on voice - where carriers find 60% of their revenue and 50% of their profits. Then comes messaging. Skype is one of the rare providers that is commonly used by its members both on voice and messaging. Most OTT services find their success in only one or the other. Yes FB is now bigger on the messaging side but FB is nowhere on voice calls. Messaging is where about 20% of operator revenues and 40% of the profits are. These two alone, voice and messaging, would kill a telecoms business if they are cannibalized together as Skype does. And much as Microsoft tries to hide from its massive growth,t he numbers are out there. Telegeography reported last year that since Microsoft took over as Skype's owner, Skype's total share of interniational voice minutes had grown by 44% and Skype was the world's largest international telecoms voice provider. That is where the majority of voice profits are ( with the ridiculously priced operator roaming charges etc). Lastly is part 3, the future of mobile comms ie videocalls. Skype is the only real triple threat being also the world's largest video calling provider. So thats why it still is the big gorilla in the room. Carriers are very nervous about Facebook too but FB is nowhere as filthy-rich as Microsoft so Skype can play very dirty with its plans to ruin the traditional telecoms market.

Tomi Ahonen :-)

[Dipankar]

Tomi, good analogy of the "Good cop,Bad cop" routine with the operators :-)

I dont quite agree to this, though

"Certainly Windows Phone by version 8 was better than the outgoing Symbian."

I'm using a WP8 device, and it's frustratingly bad to use. Yes, it's really good design, and gets appreciative comments when I take it out, but the WP8 OS is an absolute pain to live with. I wont go into details, but overall, I think it has pretty much as many shortcomings as Symbian did, with the added downside that the battery hardly lasts a day (how I miss the Symbian battery life)!
Which is why, even in an operator-uncontrolled country like India, Nokia's Lumia devices have only single digit shares (down from somewhere near 70% during Symbian days).

[Jouko Ahvenainen]

Many interesting points from Tomi, thanks. I also wrote some thoughts myself http://www.telecomasia.net/blog/content/wheres-microsoft-mobile-heading?Jouko%20Ahvenainen. I think, one key question is how mobile can support the main strategy of MS, and how they do with cloud and enterprise services. It is risky to count on WP only. Now the financials of mobile looks bad, Nokia hasn't been effective, if you compare to MS or other mobile companies (of course Apple and Samsung are difficult to compare, when their different activities are so linked to each other). I believe (and read from analysts too) that re-organizing and cost cutting will happen to ex Nokia, how much, it is a strategic choice. And the new CEO must think the future, not how things and organizations used to be. Investors have a lot of expectations.

[Winter]

@Tomi
"And the constant self-promotion that I have done naturally since I was a kid."

I always understood this trait is not career limiting in your line of work?

And I do not mind at all. I have always been given the advice that "If you do not promote yourself, no one else will".

[zlutor]

@Tomi: what about this project: http://en.wikipedia.org/wiki/Nokia_X

Will it see lights? To some extent - replacing S40 Asha platform - it makes sense even under Microsoft...

[Gonzo]

Tomi, i read the following today (bellow *), I constantly read about market share in your blog and adoption rate and so on, so if it applies to MS let's see how you can explain it for Android, and here is my comment

Android for all its hurrah market share is loosing quite a lot looking forward, logically all market share attributed to devices using anything bellow 4.0 is obsolete or becoming obsolete, as we move towards a pocket PC/smartphone world.

So Android is left with KitKat with just bellow 2% market share, as reported by google, and older versions of it. Not that impressive and worrisome I would say, so if we compare MS, IOS and Android in THEIR current, actual and future looking releases, android market share is a different matter, will they stay behind? after a few months no adoption of Kit Kat, a bit odd, can they build their future in old versions? Foe how long?

*Today, Google has confirmed that no less than 60.7% of the devices accessing the Play Store were running a version of Android Jelly Bean operating system. Here are the raw numbers: Android 4.1.x (35.5%), Android 4.2.x (16.3%), Android 4.3 (8.9%).

Unfortunately, the distribution of Android 4.4 KitKat platform on current devices is extremely slow as the numbers show. If things continue this way, Google might announce the next version of Android before KitKat could reach 50% of the market share.

Last month, the search giant reported that around 1.4% of the devices accessing Google Play Store were running Android 4.4 KitKat operating system.

[Winter]

@Gonzo
" logically all market share attributed to devices using anything bellow 4.0 is obsolete or becoming obsolete, as we move towards a pocket PC/smartphone world."

Logically, people would not upgrade older hardware. Those who sell "older" hardware, will also sell older releases of Android.

Obviously, only newer, state-of-the-art handsets will run the latest release. And they are, indeed, sold with newer releases. Unless there are other reasons not to use the latest version, for technical or economic reasons.

So, what is your point?