The Microsoft Handset Opportunity with Nokia - the Full Analysis of Potential (its not looking good)

Ok, last week Microsoft took over control of Nokia's handset business that it bought. And in perfect timing, we just had Nokia's last Quarterly Results yesterday that was the last performance metrics just before the handset division was shifted to MIcrosoft ownership. As Microsoft also has a new CEO, Satya Nadella, who talked warmly about the need for Microsoft to embrace mobile in his early public statements and his first message to his staff, this is a good time to do a proper analysis of what chances Microsoft has in mobile.

As everybody knows Windows Phone only has 3% market share in smartphones (with Google's Android over 80% and Apple's iOS at 15%). And Microsoft is no 'newcomer' to smartphones it has made software for smartphones far longer than Apple's iPhone or Google's Android have even existed. Yes, Microsoft has been in mobile for a dozen years already. At its peak Microsoft's Windows commanded 12% market share as the clear number 2 in the industry (behind Nokia's Symbian). From day 1, Microsoft had dreamed of having Nokia become a Windows partner, which Nokia resisted for essentially a decade until the ex-Microsoft exec Stephen Elop came to run Nokia as CEO. 

Elop then suddenly introduced his mad idea of 'lets put all our eggs in one basket.' Not just that, Elop made it even more perilous by putting all eggs in a very weak basket called Windows. He then suggested to really add to the riskiness of this lunatic experiment with this cockamamie strategy that no handset maker has ever tried, of killing the current platforms before we even know whether the new one can succeed. (almost every handset maker in smartphones has made changes to the smartphone platform they support but none have been this crazy to do this mad idea that goes against all common sense and all management theories).

As we learned later, alas, Elop was not guided by any sane management theory. He was guided by greed - he had successfully negotiated the 'mad gambler' clause into his CEO contract that paid Elop 25 million dollars in case he managed to fail in his unprecedented gamble. Yes, Nokia actually agreed to reward Elop if the gamble failed. Imagine your nephew comes to you asks to borrow so much money that it risks your house. You hope his idea succeeds. But you then sign a contract, in case it fails and you have to sell your house, you give him you nice car as a bonus! Bonus for catastrophic failure? Its a management heist on par with Bernie Madoff! As the Financial Times calculated, Elop was paid a bonus of an extra 1 million dollars for every 1.5 Billion dollars of market capital he was able to destroy in his tenure of less than 3 years as Nokia's shortest-duration CEO. (So the more Elop destroyed, the bigger his bonus would be. This was sheer madness!) Elop caused a world-record collapse in a global market leader position, and plunged the highly profitable handset business into massive losses that continued to this day.

But one thing we can take from the Elop debacle. He did not spare any expense and did not skip any trick in attempting to convert Nokia to a Windows house. He killed every Nokia alternate project from Symbian to MeeGo to Meltemi and the developer tools Qt and Nokia's Ovi branding of its app store etc. All sacrificed on the altar of the false god, Windows. No other handset maker could possibly give us a better case study of what Microsoft's chances are with the Nokia handset unit, than the past 3 years at Nokia. So this analysis has to look at the recent past. I will first look at what happened in smartphones. What happened when Nokia introduced Lumia running Windows Phone. To understand that context we also need to revisit a bit of history, how does that compare to Nokia prior to Windows, as well as how does it compare to Microsoft prior to Nokia. Don't worry, I have been drawing pictures to keep the story clear and simple. But this is by necessity a long blog. Very long. Get a cup of coffee... Because after we see what has happened, I have to dig into the reasons why (we know EXACTLY why it happened from public documents and with exact statements from various execs at Nokia and Microsoft). After we understand what happened - and why - we can then do a reasonable analysis of the path forward. What can we expect from Microsoft with the Nokia handset unit.

And one personal plug here - as you may wonder is this worth reading - I have been for more than a decade the most accurate forecaster of the mobile industry and by a wide marging, the most accurate forecaster of the Nokia saga with Windows and Microsoft. So its not just that I'm the most published author in the mobile industry and referenced in over 140 books by my peers and I was rated the most influential expert in mobile by Forbes. I also have a track record truly second to none in Nokia analysis and the smartphone industry. But as always, when I make such deep predictions as I will at this blog, I have to explain my reasoning. In enormous detail. Lets start.

THE SWEET PROMISE OF PROPAGANDA

You may have heard recently that Windows is a 'fast-growing ecosystem' maybe that it grew more than rivals like iPhone and Android (lots of articles said that earlier this year - unfortunately totally untrue based on faulty analysis but nonetheless, you could not be faulted for having read that and how could you know that the analyst who was quoted was utterly wrong). You may have heard that there is a huge upsurge of handset makers joining the Windows world and that the new Windows Phone 8.1 is going to take over the world. Yeah. We have heard that all before. Windows Phone was supposed to fix the problems that Windows Mobile had. Windows Phone 7 was supposed to fix all the problems that Windows Phone had before that. Windows Phone 8 was supposed to be the big solution to the market failure of Windows Phone 7, etc. We heard repeatedly all kinds of nonsense from offcial Microsoft and Nokia spokespersons about how 'young people are tired of the iPhone in the UK' or 'Windows is outselling the iPhone in China' and so forth and so forth. Never have the global numbers backed any of that propaganda up, never. This blog doesn't deal with myths and hype. This blog deals with the brute facts. Numbers are my buddies! So lets look.

REALITY OF MARKET DISASTER OF WINDOWS SMARTPHONES

Now, the smartphone market is in hypergrowth stage. Last year the market grew by 35%. Yes, added more than a THIRD in just one year. No other giant global industry (worth 100 Billion or more) is growing anywhere near this fast (except other sectors of the mobile industry obviously). Cars, airplanes, televisions, computers, the internet, travel, healthcare, garments, food - nothing outside of mobile is growing this fast annually and smartphones have continued hypergrowth rates for years and years. So as the whole market grows 'enormously' almost any handset maker (unless you're called Blackberry) manages some growth when comparing year to year stats. So 'growth' in absolute terms is a grossly misleading statistic - which is why Microsoft propaganda so loves that measure. The more relevant measure is 'market share' as units out of total shipments in any period (year or quarter). This blog will mostly use the market share metric to describe the relative performance of Nokia, Windows, Lumia, etc vs the industry and rivals.

This is Windows performance over 12 years in smartphones. Were you ever given this 'perception' by the propaganda machine at Microsoft (or Nokia)? No of course not. Because this picture shows a potential success thrown away and withering now near meaninglessness.

 

Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

So when someone says 'Windows Phone grew x percent in past year' or so, that is technically true, but it is after a disasterous collapse. The only thing that 'saved' Windows from disappearing was.. Nokia. Because this is the picture when Nokia is removed (I hope you are sitting down, this may cause a heart-attack for those who hope Microsoft will succeed in mobile):





Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared


So yes. The Windows smartphone 'ecosystem' and platform and unit shipments actually did die before our eyes, and the only illusion of 'success' was the wholesale slaughter of Nokia to give a modest mirage of 'growth' from a tiny base. You can see that it was Microsoft who DESPERATELY needed Nokia to join the system and 'rescue' Windows Phone. Without Nokia Microsoft would have pulled the plug already on Windows Phone. EVERY other manufacturer who has ever supplied Windows based smartphones has gone bankrupt, or quit totally the Windows market, or shifted the majority of its smartphone production - to Android. Even Nokia, right after Elop was removed from post of CEO, rushed to release Android smartphones in the last weeks of still being a handset manufacturer. Think about that. If Windows Phone was even a modest success, its biggest provider today, Nokia, would not have bothered to design a totally new line of incompatible smartphones running Android, the 'hated' rival of Microsoft's Windows. Only because Nokia knows Windows is a total failure, would they want to 'invest' in the huge expense of totally new handset designs to launch on Android in the last days of Nokia handsets. What ultimate epitaph on the total failure of Windows Phone.

To now understand what Microsoft can and cannot do in the mobile handset industry, we obviously have to study not ust what Windows did, but what happened at that Nokia experiment. So lets go first to Lumia sales per quarter. Lumia is the Nokia smartphone brand that runs only on Windows Phone (Nokia also has sold smartphones running Symbian, Maemo, MeeGo and Android, plus it tried to market its featurephone series Asha also as supposedly 'smartphones') This is Lumia sales performance over its existence. Nokia smartphones that ran Windows from their launch. The measure is again market share






Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

Ok, that picture isn't 'all that bad' on the whole. It shows yes a dog-tooth up-and-down but that was the debacle of early Lumia running Windows 7.x not being upgradable to Windows 8. And there is clear growth all the way up to the point Microsoft deal was announced that it buys Nokia handsets. Not bad news. Or is it. Did you look at the SCALE on this graph? The Nokia Lumia smartphone platform at its PEAK quarter did not breach 3.5% market share and is now again in rapid decline.

Remember this is no little start-up like HTC was with Windows Phone in 2002 or Xiaomi is now in Android. This is Nokia the juggernaut of smartphones which TOWERED over the rivals in 2010 just before this strategy was announced. Nokia was then what Samsung is now - Nokia was literally more than twice as big as Apple's iPhone in 2010 and get this - Nokia GREW MORE new smartphone sales in 2010 than Apple did!! Yes, the gap between iPhone and Nokia smartphones was not closing (iPhone was not gaining on Nokia in 2010). From 2009 to 2010, Nokia - running the ancient and obsolescent Symbian OS was pulling away from the iPhone! The gap between Nokia and Apple was GROWING in 2010. Nokia did that with the second largest profits of the smartphone industry (behind only Apple, just like Samsung today, massively bigger in total market share but serving all market segments and thus having lesser profits than Apple who only serve the top-price tier). Nokia's market share was 34% in 2010 !!! It only achieved one TENTH of that performance for one QUARTER with Lumia running Windows Phone!  So Nokia has scared away literally more than nine out of every ten loyal smartphone customers it used to have (and those were on Symbian, for god's sake! Symbian! And Windows phone is 10 times worse than Symbian? How can it be? But we will get to that, hold on).

WHEN ELOP RAN NOKIA OVER THE CLIFF

I introduced 'The Cliff' theory of how handset makers die a few years ago. At that time it was not yet obvious whether Nokia would follow other famous cliff-divers like Palm, Motorola and Siemens, over hte cliff. But now the pattern is crystal-clear, yes Elop drove Nokia over the cliff with his Elop Effect in February 2011. This is Nokia smartphone market share over time:





Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

Yes, the Nokia market share had been gradually declining before Elop came along. That is natural as Nokia invented the smartphone and started with 100% market share. By 2010 the number of global smartphone rivals had grown from 7 Fortune Global 500 sized rivals (typical of most major industries of heavy competition) to 24 (unprecedentedly heavy competition in any globally contested industry, ever). Yes 24 Global Fortune 500 (ie US Fortune 300) sized giants were chasing Nokia for that lucrative smartphone pie in 2010 - and yet Nokia was so huge it was bigger than rivals number 2 and 3 (Blackberry and iPhone) - COMBINED. And Nokia grew more than either of those rivals in 2010 so while yes, the market share was eroding gradually - that was due to vastly increased number of rivals in the industry. Nokia was doing fine, reporting industry's second biggest profits. Then in February 11, 2011, came the Elop Effect and as we can see from the graph, Nokia 'fell off the cliff' in mobile. Total collapse. In fact, the collapse at Nokia was literally a world record. Not a world record in smartphones or handsets, not as bad as Siemens or Motorola or Palm or Blackberry - no, a world record of ANY industry EVER, for a global brand leader to collapse that fast. As Nokia's then Chairman, Jorma Ollila, who approved Elop's mad Microsoftian misadventure, admitted in 2013 when the facts were finally out and the story was obviously over - yes the Windows startegy was a total failure.

So Windows was supposed to be better than Symbian but its done far far worse than Nokia had ever managed before. Lets look at that misery a bit more closely. For the total duration of Lumia series, there has been some other rival platforms on which Nokia sold real smartphones (Symbian, MeeGo and Android) and also marketed a pretend-smartphone (a normal consumer would not know the difference, an Asha featurephone had a touch screen, it could do Facebook and Angry Birds, why isn't it a smartphone..). This is how well the 'superior' Windows platform performed against the other offerings from Nokia. Please bear in mind that Elop threw all the marketing billions on promoting Lumia and Windows. And that Microsoft threw literally billions more into it - in many markets like the UK, Microsoft would hand a free Xbox 360 videogaming console for those who bought a top-line Lumia. And the carriers would throw the biggest marketing pushes of their history to promote Lumia such as AT&T did in the USA. This is how well Lumia did against the INTERNAL rivals from Nokia (ie Symbian, MeeGo, Asha and Android):





Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

Again. Windows Phone is so poorly received that even when supported by literally the largest marketing push of any smartphone series in history, the Lumia series was outsold most quarters by Nokia's own smartphone alternatives - and again increasingly now today, as Nokia offers Android based alternatives. This while the supposedly world-altering Windows 8 is the primary version of OS for Lumia. And Nokia has introduced massive screens, super cameras and even tablets into its portfolio. Yet customers are saying No to Windows Phone in droves.

(note to the number-crunchers. I used just the 1 million pre-order level for Nokia X-series as the only number sold, in reality its very likely Android based X-series is far stronger than that, and thus the last quarter in this picture, the orange part should be even smaller and light-blue part even larger, but we have no official data on X-series actual sales from Nokia or any other sources - yet. And I used the same data for Asha sales as per my previous blog where I did the 'best fit' analysis of handset sales mix for Q1 yesterday)

TWO TURKEYS DO NOT AN EAGLE MAKE

So yeah. What about the two big players the world's largest handset maker (and largest smartphone maker) of 2010 joining forces with the world's largest software maker? When we add the total sales of all Nokia smartphones on any platforms and all Windows based smartphones of any manufacturer, we get this pattern:




Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

Yes as Google's Vic Gundotra said at the time, two turkeys do not an eagle make. That was a controversial statement by a rival, but look at that graph and weep. The two 'partners' truly collapsed together. Their loss together was worse than separately. This is a case of the weird instance in math when 1+1 is less than 1 haha... Nokia was supposed to save Microsoft. Instead Microsoft brought about Nokia's downfall while not being able to even save Windows smartphones in the process.

And please remember. All Nokia smartphones for every SINGLE quarter of its existence were sold at profit up to the Elop Effect. Nokia made the industry's second largest profit behind only Apple's iPhone in 2010. But after Elop announced his mad strategy, every Nokia smartphone - not just the doomed Lumia series - was sold at a loss. Not one quarter of profit, ever. The Lumia series was so poisonous at its worst moment the unit generated a 49% loss for every Lumia sold. And that was after we included the 250 million dollar 'marketing support' from Microsoft so the real loss was even larger in reality. Yes 49% loss per Lumia smartphone sold was the 'positive spin' version of how bad it was at Nokia. Ten quarters in a row of never achieving a profit selling Lumia. Ten quarters in a row! What is wrong with this picture! No wonder immediately after Elop was fired (ok, removed from job of CEO) Nokia rushed to release Android smartphones. This is a disaster!

MIGRATION FAILURE

So Nokia was not 'confused' about the Windows opportunity or that somehow Elop didn't understand its full potential. Nokia definitely didn't split its focus on other platforms and thus under-utilize its chance. Elop went full speed Windows Phone from the start, even as his Symbian and MeeGo based handsets such as the 808 Pureview and N9 won all sorts of awards, Elop just pushed the Lumia series and ignored the others (even forbidding their sales in many markets, who mad is that? Award-winners!!)

So the ultimate picture of how Windows Phone fared in the market is the migration from the 'obsolete' Symbian to the 'superior' Windows Phone, isn't it. Certainly if Windows Phone is better than Symbian when you also throw more marketing money - Elop more than doubled the total marketing spending for Lumia than Nokia had ever spent before - and Nokia was then the world's largest spender on marketing phones (today that is Samsung obviously). Microsoft threw billions more on that and many carriers made the Lumia launch their biggest handset marketing effort ever. Nicki Minaj sang live on Times Square in the USA. Nokia signed up T-Mobile, AT&T and eventually even Sprint and Verizon to sell Lumias in the US market. And we heard from the propaganda machine that yeah, British teens are fed up with the iPhone and Lumia is outselling iPhone in China and the US launch of Lumia had sold out the whole inventory.. So what happened. This is the truth of the migration:

Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

So the blue graph on the left was what market share Nokia had when Elop announced the Microsoft partnership (ie the quarter that had just ended). The little green part in the right hand graph is total Nokia Lumia sales now, using that Windows now, exactly three years after that strategy was implemented. Note the thin blue line in that right-hand graph. That is my conservative estimate of Nokia X-series smartphone sales on Android (only using the 1 million pre-order number, in reality that blue slice is bigger, coming at the cost of the green slice, but we do not know how big).

Yes the red graph is the lost sales to competitors. Those were loyal Nokia customers who were satisfied with their past Nokia smartphones, often for many years and many smartphone models in Europe for example. Now do the math. Lumia running Windows Phone has managed to scare away 12 out of every 13 attempts at converting Nokia loyal customers to Windows. 12 out of 13 failures! Only 1 out of 13 success rate. No wonder past Nokia CEO and past Chairma Jorma Ollilas said the Windows strategy was a huge failure. This is a world record failure for any market leader in any industry ever. Nobody has ever fallen this fast. Not Toyota with the problems with its brakes, not BP with the oil spill not Coca Cola when it launched New Coke. Never in the history of the global economy has any global market leader of any global industry failed this fast. Elop set a world record at failure. That is why they have coined the term Elopocalypse. That is why Elop was regularly a fixture on the 'worst CEOs lists'.

Again just to be very very clear. This performance was achieved with Nokia abandoning other platforms, with a MIcrosoft dude in charge, and with very close cooperation with MIcrosoft, as a preferred partner with advance access to the Windows Phone evolution. The Lumia handsets were even designed not in Finland but in California (to be more like the iPhone in the same way that almost everything in Redmond is done with Apple envy in mind from Zune to Surface). Nokia could not have executed Microsoft's desires more closely if it was owned by Microsoft. Even Nokia's long-standing sales bosses were replaced by Elop with Microbrains from the beloved house of Windows. And no, this was not a surprise. Here is my analysis two days before the Windows Partnership was announced, ie on February 9, 2011, on this blog where I said it would destroy Nokia to go WIndows. And I was not alone. Look at how the Nokia share price collapsed the moment the Microsoft partnership was announced. The share price went into freefall. (Just for context, Nokia's share price fell 55% under previous CEO Kallasvuo in his 4 years as CEO. Kallasvuo was fired for doing a bad job. Nokia share price fell 81% from the day Elop was hired to when he was removed from job as CEO in less than 3 years. Since then the Nokia share price has recovered a lot since Elop the cancer was removed). Except for some very Microsoft-oriented tech sites mostly in the USA, almost all other anaylsts - the vast majority of analysis and writing - said in the weeks and months after Windows was announced that it was a mistake and if Nokia were to change, it should have gone with Android (as it eventually did now in 2014).

NOKIA LOYALTY DID NOT COLLAPSE

The Lumia push was a comprehensive failure. When you try 13 times to sell your product and 12 times the loyal customer runs away from you to your competitor, you are failing. So was Elop running a company that was already dead? That there was nothing he could do? That it needed a miracle? Lets see about that Nokia demand. This is total Nokia handset market share:






Analysis by TomiAhonen Consulting on Nokia and industry data
The above picture may be freely shared

So compare to the 'cliff' type of total collapse from 2010 to 2011 and beyond that happened at smartphones and the mild decline in this graph. The consumers had not abandoned Nokia. They kept coming back. It was only the smartphone offering from 2011 that suddenly was undesirable to Nokia customers. So it was not a collapse of Nokia 'demand' or brand loyalty. It was something very specific about Windows and Lumia.

MEANWHILE WHO LOVES LUMIA?

Now, if you are not yet in despair, let me just remind you, that more than half of early Windows Phone and Lumia owners hated their smartphones so much, that they couldn't wait to get anything else to replace them. We had independent consuemr surveys by Bernstein and Yankee Group finding something like half of early users rating it the worst smartphone they had ever tried, or refusing to buy any other smartphone that would run Windows Phone in the future. Those customers are now in 2014 coming to the stores to replace those hated early Lumias and other Windows Phone smartphones. The carnage is continuing (as the stats also show). So, roughly speaking. You approach 26 loyal Nokia smartphone users. 24 run away refusing to buy Lumia. Two take Lumia. One of those two finds it so disgusting they can't wait to get away from Windows Phone to any other type of smartphone! So now Nokia is achieving 1 out of 26 'satisfaction' in its conversion attempts. 25 out of 26 refuse or hate the Lumia choice. Good luck with that strategy...

THE OTHER HANDSET MAKERS

Yeah. You read the wonderful news propaganda how great Windows Phone is and how well it is growing? Like about those 15 handset manufacturers now committed to do some Windows Phone stuff? Sounds great. Yeah, if you don't know the history. This is the list of the 12 largest smartphone makers of 2013 and whether they have been announced as a Microsoft partner with Windows Phone some time in the past 12 years:

RANK . . MANUFACTURER . . SMARTPHONES 2013 . . . WINDOWS PARTNER OR NOT
1 . . . . .  Samsung . . . . . . . . . 311 million .  . . . . . . . . . . Windows partner now or in past
2 . . . . . . Apple . . . . . . . . . . . . 153 million . . . . . . . . . . . Not
3 . . . . . . Huawei . . . . . . . . . . . . 53 million . . . . . . . . . . . Windows partner now or in past
4 . . . . . . LG . . . . . . . . . . . . . . . 48 million . . . . . . . . . . . Windows partner now or in past
5 . . . . . . Lenovo . . . . . . . . . . . . 46 million . . . . . . . . . . . Windows partner now or in past
6 . . . . . . ZTE . . . . . . . . . . . . . . 40 million . . . . . . . . . . . Windows partner now or in past
7 . . . . . . Sony . . . . . . . . . . . . . 38 million . . . . . . . . . . . Windows partner now or in past
8 . . . . . . Coolpad . . . . . . . . . . . 35 million . . . . . . . . . . . (announced as Windows partner in past)
9 . . . . . . Nokia . . . . . . . . . . . . . 31 million . . . . . . . . . . . Windows partner now or in past
10 . . . . . HTC . . . . . . . . . . . . . . 26 million . . . . . . . . . . . Windows partner now or in past
11 . . . . . Blackberry . . . . . . . . . 23 million . . . . . . . . . . . Not
12 . . . . . Motorola . . . . . . . . . . . 20 million . . . . . . . . . . . Windows partner now or in past

Source TomiAhonen Consulting and TomiAhonen Almanac 2014
The above table may be freely shared

That is not 15 out of 2,000 handset makers (yes, globally there are over 2,000 handset maker brands). That is for practical purposes EVERYBODY. 10 out of the current Top 12. That is as close to everybody you can possibly hope for! Apple will not do anything they didn't make themselves. Apart from that the only other player in the Top 12 smartphone makers who hasn't been in bed with Microsoft doing Windows smartphones is Blackberry and they are at the point of oblivion. These 10 companies who have played with Windows currently account for 63% of all smartphones sold globally! And Microsoft has managed at some point or another convince them to go Windows for their smartphones, either partially or totally. You can't do better than that. And now its up to the boys who really do it, to tell us what they think of Windows on smartphones. What have these 10 companies said and done with that Windows partnership?

1 - Samsung - is the most promiscuous smartphone maker of all time, they did everything that ever allowed the OS to be used by others, so Sammy has done Symbian, Android, Windows, LiMo, bada, and now is about to launch on Tizen (an evolution of MeeGo). Samsung is the only other vendor in addition to Nokia to have 'preferred partner' status with Microsoft. Samsung's been on Windows for a decade already. If anyone knows whether Windows is competive in the smartphone space that is Samsung. Today Samsung manufactures 95% of its smartphones.. on Android. It only does a token smartphone offering for the US market to ensure Microsoft won't sue them (Microsoft has a history of lawsuits against just about everyone who tries to escape)

2 - Apple doesn't do Windows

3 - Huawei has sold Windows smartphones for years but has lost faith. In 2013 Huawei CEO said that Windows Phone is weak. More than 95% of Huawei production is on Android of course.

4 - LG was once a proud profitable smartphone maker and then made the fatal mistake of making Windows smartphones its priority (every handset maker that has ever made that mistake has become unprofitable as obviously so too did LG). LG abandoned Windows totally and now does Android. LG bought Palm's WebOS instead of releasing Windows Phone smartphones, that much LG knows Windows is the sure way to death.

5 - Lenovo sells a ton of Windows based.. PCs. Not smartphones. Lenovo offers Windows Phone 8 based... tablets, not smartphones. Lenovo has been promising they will release a Windows based smartphone but only if there is a demand for it. Lenovo sells all its smartphones running Android. So the world's largest laptop maker knows there is zero demand for a smartphone running the same software that Lenovo ships standard on its other computing products. Says something doesn't it?

6 - ZTE has sold Windows based smartphones in the past. It was supposed to release new models on Windows Phone 8 but found there is no demand and abandoned the project in 2013

7 - Sony, as SonyEricsson used to sell Windows based smartphones. But Sony is so very deep in knowhow in smartphones, they were one of the original founding members of the Symbian partnership BEFORE they merged with Ericsson. Yes, they have known smartphones more than twice as long as we've known of something called the iPhone. Sony knows this market. They found that Windows Phone demand collapsed in 2011 and promptly quit the system. Sony sells now only Android based smartphones. That rumor of a Vaio based Windows smartphone from Sony died when Sony sold the loss-making Vaio unit to concentrate on (Android based) profitable smartphone business.

8 - Coolpad has been announced as a Windows smartphone partner but no smartphones have been seen from the rapidly growing Chinese brand. All of their production is on Android

9 - Nokia we saw. Nokia selected Windows in 2011, then watched in horror as the huge profits vanished and already in 2013 admitted Windows was a total failure and rushed new Android based smartphones to the market in early 2014. Nokia invented the smartphone and had developed or co-developed at least 4 smartphone operating systems (Symbian, Maemo, MeeGo, Meltemi) so Nokia knows something about what a smartphone OS needs and doesn't need. Nokia doesn't need Windows, Nokia desperately needed Android,

10 - HTC is the original launch customer of Windows smartphones, and had early on 100% of its smarpthone production on Windows. HTC found Windows not competitive in 2008 and launched on rival platform Android. HTC then announced that Windows demand had collapsed in 2011 and shifted production so that today 90% of HTC smartphones run on Android. The only major market where HTC bothers to sell Windows is in the USA.

11 - Blackberry doesn't do Windows

12 - Motorola (went bankrupt, was sold to Google and Google sold it to Lenovo who shortly takes control of it). Motorola well before Google became involved annouced Windows demand had collapsed and decided to end Windows totally to focus only on Android.

So yeah. Nobody - not one handset maker - who has ever been involved in Windows, today anymore believes in it. Even Nokia finally rushed to get into Android. Oh, need more evidence? Palm? Went Windows shortly before it died. Dell, tried Windows and by 2011 found it so loss-enducing, Dell quit smartphones completely... I could go on and on and on. Most who played with Microsoft have run away as fast as they could - almost always to Android. And most of those said that something happened in 2011 that collapsed the demand... 

Its not just that Nokia is failing with Windows. Windows is the antithesis of an ecosystem. Windows Phone is a toxic system where smartphone makers go to die (and were developers cannot survive without huge handouts from Microsoft in direct cash).

A BAD STRATEGY, EXECUTED BADLY

Ok. We have overwhelming evidence that its not just Nokia - EVERY Windows partner that ever was, agrees Windows is dead. There is no demand. There is no market. The few that bother to make a smarpthone on Windows do so only for Microsoft's home market the USA, where Microsoft strongly co-sponsors that effort. But if you do 90% or 95% of your production on the rival platform - Android - and repeatedly say there is no market for Windows, clearly Windows is dead. But why then? Lets go back to Microsoft's proud new toy, the Nokia handset unit. How did Lumia fail so badly that 12 customer out of every 13 will run to competitors rather than accept a Lumia on the Windows platform?

Was it bad devices from Nokia? No. The Lumia series had a lot of problems especially early on with the first devices, but the Lumia series has won far more than its share of industry awards for leadership. The Nokia production quality continues to be excellent and as the Lumia series stole its looks from the award-winning N9 that ran MeeGo (N9 was Nokia's most praised smartphone of all time but Elop refused to let it be sold in any major Nokia markets). There was no 'antennagate' type of scandal such as plagued one iPhone. 

If not the product, was it advertising and marketing support. Obviously when the world's largest spender in marketing of the industry, Nokia in mobile phones, more than doubles its own record for spending on marketing, and does the most amazing launch ever, and that spending was coordinated and added to by millions more from Microsoft and those expenditures then added to the in-store advertising by carriers etc, this was the biggest marketing push in handset history. No, marketing was not the fault (but that didn't prevent Elop from firing his CMO when looking for a scapegoat)

Ok, if not product or promotion, was it price? No. Nokia prices were constantly competitive for the feature set offered - and all Lumia models soon faced price cuts - steep price cuts - that then plunged Nokia into worse loss-making. But the Lumia series was never accused of being too expensive. No price was not the issue.

Marketing theory tells us if its not product, its not promotion and its not price the only possible cause for market failure then is 'place' ie distribution.

SALES BOYCOTT

If your product is suffering the accepted marketing theory says it is one of four causes - bad product, bad marketing, bad price, or bad distribution (or any combination of the above, allowing social media to be counted into the heading of marketing). Thats it. We see its not product, price or promotion. It has to be distribution. And was this important to Nokia. Lets ask Nokia. This is how Nokia wrote to the US Securities and Exchange Commission (SEC the stock market regulator) and the NY Stock Exchange about its strategy in 2011 in what is called the Form 20F:

We have a number of competitive strengths that have historically contributed significantly to our sales and profitability. These include our substantial scale, our differentiating brand, our worldclass manufacturing and logistics system, the industry’s largest distribution network and our strong relationships with our mobile operator and distributor customers. Going forward, these strengths are critical core competencies that we will bring to the proposed partnership with Microsoft and the implementation of our Windows Phone smartphone strategy. Our ability to maintain and leverage these strengths also continues to be important to our competitiveness in the mobile phones market.

(bolded emphasis added by me)

 

As discussed above, however, the proposed Microsoft partnership and the adoption of Windows Phone as our primary smartphone platform are subject to certain risks and uncertainties. Several of those risks and uncertainties relate to whether our mobile operator and distributor customers and consumers will be satisfied with our new strategy and proposed partnership with Microsoft. If those risks were to materialize and mobile operator and distributor customers and consumers as a consequence reduce their support and purchases of our mobile products, this would reduce our market share and net sales and in turn may erode our scale, brand, manufacturing and logistics, distribution and customer relations. The erosion of those strengths would impair our competitiveness in the mobile products market and our ability to execute successfully our new strategy and to realize fully the expected benefits of the proposed Microsoft partnership. 

(bolded emphasis added by me)

So before Nokia embarked on the Windows gamble, Nokia knew that it had the world's strongest carrier relations and distribution channel - a vital competitive advantage against all competitors from Samsung to Apple. And in the second paragraph, Nokia clearly explained that if the carrier relations were somehow damaged, that would hurt all the other major competitive advantages from logistics to component sourcing. Nokia knew this.

LETS PLAY BAD COP, BAD COP

Elop kept complaining about the lack of carrier support or retail support for Lumia. When asked what was his biggest lesson learned from early Lumia launch failure, he said he had been surprised how strong the carrier influence was to phone sales. Nokia knew this. Nokia WROTE this when explaining its strategy to the SEC and NY Stock Exchange. Nokia knew. Nokia's sales knew. But Nokia's new CEO didn't know. And he then went on to blame Nokia sales and fired many sales staff and forced others to leave, replacing the most competent and experienced carrier relations management experts with the bullies from Microsoft. Ex Microsoft exec Charlie Kindle explained about how much carriers loved Microsoft. Charlie said that Microsoft had already had bad relationships with carriers and then raised its middle finger at them in 2011 truly poisoning them. So if Elop was playing 'Good cop/Bad cop' with Microsoft reps joining Nokia in carrier deal negotiations (Nokia previously being the good cop), now Elop throws away the good cop and we're left with a pair of Bad cop/Bad cop.

The issue with carrier relations and retail got so bad, that EVERY TIME there was a credit ratings downgrade of Nokia it was the reason. (Nokia was near perfect rating when Elop started and crashed all the way to junk status by the time he was removed from CEO.) The three ratings agencies, Fitch, Moody's or S&P - every when they downgraded Nokia, they they mentioned bad carrier relations/retail support being the main reason - often the ONLY reason for the latest downgrade of Nokia's credit worthiness. 

So Elop clearly wasn't awake at the basics of marketing courses at McMaster University over there in Canada. And the really painful lesson is timing. Consider your alternatives. If your price is the problem, that can be changed in one minute. If the marketing is the problem, you can change your advertising in days (television ad time booking being usually the longest delay). Product changes take much longer, the lead time to create a new mobile handset from scratch is more than a year (typically 18 months). So price can be changed in minutes. Promotion in days. Product in years. But carrier relations in telecoms are built in decades. They cannot be fixed overnight - but they can be wrecked quickly. Elop demolished Nokia's carrier relations. And with it went scale, logistics, sourcing, the ability to sustain a broad portfolio - and obviously profits vanished. Overnight. Then came the endless mass layoffs, tens of thousands fired in the forlorn hope of reversing the decline.

Elop started his destruction of Nokia carrier support with his moronic Burning Platforms memo, the costliest memo in corporate history. Elop himself later admitted to the Nokia shareholder meeting that yes, the memo did damage Nokia smartphone sales. Elop was reprimanded in front of the Nokia Board for that act of immense stupidity. I calculated its costs here if you are interested.

IF I LABLE THIS BOTTLE OF POISON 'TASTES GREAT' WILL YOU DRINK IT, PLEASE?

But that was only the start. Then came Skype. When Elop did his memo and other dumb stuff I did not say Nokia was yet dead. Nokia's handset business died not by the hand of Elop. It died because Elop's best buddy Steve Ballmer did something that threw Nokia under the bus. Microsoft bought Skype. And I was the first person to explain why the Skype purchase by Microsoft had killed Nokia's Lumia dream - even before the first Lumia handset was sold. The Skype purhase angered the already-suspicious carrier community. Skype in 2011 was an existential threat to the telecoms carrier community. Not a profitability threat like Whatsapp is today. Skype is still and was already in 2011 an existential threat. Its not that some smartphone 'has' Skype on it - Windows smartphones in 2011 did not support Skype and rival smartphones on Android did. No. Not that a phone model had Skype. That would only jeopardize the phone call traffic revenues, messaging revenues and videocalling revenues of those customers who happend to have that phone in your network. Skype was an existential threat because Microsoft now owned it. The OWNERSHIP of Skype was the issue. With Microsoft's deep pockets, Skype was now viable as a loss-making entity (or trivially low profits) while being bankrolled by filthy-rich Microsoft. And Skype was destroying profits out of everwhere the carriers - fixed and mobile - tended to find them, especially international calls.

The Skype issue is not a figment of my fantasy. An immediate anti-Microsoft boycott was reported on from Boston to San Francisco in 2011, right after the Skype purchase, by numerous US media. Shortly thereafter similar sales boycotts found globally from the UK to France to China to Australia. Remember, this is before Nokia's Lumia has even started to sell. It was against the OTHER smartphone makers at the time that were on Windows platform. Sony quit. Dell quit. Motorola quit. LG quit. Samsung, HTC, Huawei and ZTE all downgraded their involvement - and all said that carrier/retail support (or 'demand') had collapsed for Windows. In the summer of 2011. 

The ultimate proof is what Elop told Nokia shareholders in the shareholder meeting of 2012. This is Elop verbatim in answer to the question, is there a Skype based boycott damaging Nokia and other Windows smartphone sales. Elop replied:

So, thank you for your question about Skype. Indeed, Microsoft did buy the Skype company as part of the ecosystem that comes with Windows Phone and Windows and so forth, so that’s quite correct. The feedback from operators is they don’t like Skype, of course, because for those operators who have a traditional wire-line business, traditional telephone business, it could take away from revenues.

And, so what MSFT has done – and we’ve been part of these conversations as well with operators – is as you correctly say, if operator doesn’t want Skype installed on a Windows Phone from Nokia or any other company, then the operator can make that decision.

Now, you’re right: it can be circumvented. But of course it’s on all Android devices, it’s on iPhone devices, it’s on iPad, it’s on all of those devices. So in fact what we’re doing with the operators is turning it around into an advantage. Instead of them just complaining about Skype on Android or Skype on iPhone, with Microsoft and Nokia, we can have a conversation that says “ok there, is this Skype thing, is there a different type of partnership we can do that recognizes that voice over IP like Skype is coming no matter what, but maybe we can do something creative that generates incremental revenue for you.” Some operators are looking at bundling Lumia, Skype and their own services with higher-bandwidth allotments to actually charge the consumer more and generate more revenue for them. So by actually controlling the Skype asset, we can begin a conversation about how we can have a better Skype-based relationship, which was impossible for operators to do before. So it’s actually quite a bit more advanced than whether operators like or don’t like Skype; they actually want to engage in a conversation about what does this mean and how could we do something that we couldn’t do before. Thank you.

(Source is direct transcription by Jay Montano from the video released by Nokia of Elop giving that response) (bolding is my emphasis)

That was Elop answering a shareholder question. It is beyond argument, that carriers hate Skype. It is so well known in the industry that Elop used the phrase 'of course' about their dislike. But look at the second part in bold. Elop then told Nokia shareholders that Microsoft and Nokia are now bullying the carrier community that Skype is coming no matter what (again Elop's exact words). Words that would be far worse to carriers than you or I waving a red flag at a raging bull. This is sheer stupidity! He KNEW that carriers/operators hate Skype - and many are refusing to sell Windows smartphones as punishment (even as they didn't have Skype preinstalled) - but Elop goes on to insist 'Skype is coming no matter what.' No matterr what! And then Elop told carriers the only way forward is to accept the pretty bottle labeled 'this tastes great' even though it contains deadly poison.

And Elop told Nokia shareholders that he - Elop - was personally in those negotiations with carriers to try to get them to take the Nokia poison with Windows. That was in 2012. This was Nokia's market share in April 2012 in smartphones: 8.1% (based on Q1 results just released then). Did the carriers accept Elop's proposition? Today Nokia's market share on Lumia is at best 2.1% (allowing only 1 million X-series Android smartphones which in reality is probably far higher). For that proposition 3 out of 4 carrier discussions failed to get ANY further Lumia sales. Carriers have been saying repeatedly - we don't want Windows, give us anything else. Give us Symbian, give us MeeGo, give us Android (or even Asha). And we see the results.

Nokia had the world's best carrier relations and retail channel support in the beginning of 2011. Elop demolished that. That didn't kill Nokia, it just wiped out all its profits. What killed Nokia - and pushed nearly every other Windows 'partner' away from making those phones - was Skype. Not my words. Elop tells us carriers 'of course' do not like Skype. And independent surveys of stores around the world verified global sales boycotts against all Windows based smartphones - even before Nokia's Lumia series was launched. Lumia was dead on arrival.

I told you first. Remember, I DIDN'T say the Windows partnership could not succeed in February 2011 when it was announced and I said it was a stupid decision by Nokia. I said then it might succeed. I told you when it actually happened, when Nokia's smartphone strategy on Windows died. I told you first in the summer of 2011, when Microsoft bought Skype. I know this industry and most of my clients are the carriers. I know how they think. I was the first to see what actually killed Nokia's smartpone business and reported it here. Nokia of course also knew. Elop knew. The only reason we didn't see Android smartphones from Nokia back then, was that corrupt contract that Elop had as CEO which would reward him if he managed to wreck the handset division. The moment Elop was gone, Nokia was rushing new Android smartphones to the market. Too little, too late, but one more bit of evidence.

Now we know why. Its not a bad phone even as Lumia did have its notorious 101 faults etc. It was not marketing even though the CEO made one marketing blunder after another (the naming fiasco). It was not the ecosystem - Nokia's Ovi Store, Qt tools and related ecosystem was tons ahead of where Windows Phone is today (Ovi was the world's second most used app store in Spring of 2011, closing the gap to Apple. Today Windows is a distant distant DISTANT third behind Android and Apple). It has been Microsoft again benefitting from Nokia far more than the other way (maps, carrier billing, language support etc).

Nokia the handset division comes with poisoned carrier relationships. The poison was labeled Microsoft. Now that the Nokia brand is removed, the carrier relations will only get worse, not better, as the unit is managed under Microsoft. If the Good Cop/Bad Cop routine turned their separate 40% market share from 2010 into 3% for 2013, now the solely-Microsoft owned Bad Cop/Bad Cop game will certainly do no better. It will do worse. How much worse, we cannot really know because its pretty near rock bottom already. The division is making massive losses and Microsoft has to throw tons of money at it just to keep it afloat.

No, Windows 8.1 will not help revive this dead horse. No, '15 vendors' are not rushing smartphones to the market. Microsoft's market share has AGAIN shrunk now in Q1 from Q4 and is near 2.5%. The 'third ecosystem' is an lllusion, only kept alive by artificial injections of cash, much like Las Vegas's artificial rivers and lakes and other illusions.

SO ELOP IN CHARGE?

Ok. Elop in charge of Nokia vs Elop as EVP at Microsoft. I betcha Elop is hurting that he didn't get the CEO job. That is not good. He already was dictator-supreme at Nokia, and fired anyone who dared to disagree with him. So he surrounds himself now with yes-men. Did Elop's judgement show any sense in his management of Nokia? No. Nokia clients - carriers - and engineers - and sales reps - told him what Nokia needed, like better cameras, like QWERTY keyboards, etc.. He resisted openly disagreeing with the experts. Elop wanted to create something beautiful like the iPhone, not something that would succeed globally. Now the Lumia brand is garbage. Even the phablet screens and the 41mp Pureview camera isn't helping save Lumia now. Sales of Lumia are down 31% from the level they had before these goodies were finally announced just six months ago. Four years ago this level of collapse would have been a world record (but Elop has achieved even greater damage at Nokia so now it rankes as 3rd worst fall in a similar period of time, of any handset maker ever)

Elop heard some dissenting voices in Espoo. He won't hear any in Seattle. Now he can rule without anyone telling him how stupid his ideas are. That means that Elop will make ever bigger blunders. Satya Nadella as Microsoft CEO won't put up with Elop for long as head of hardware if Elop can't turn the Nokia dog around. And he can't. Its not anything that can be repaired in a minute, or a day, or even a year. It would now take a decade to rebuild those poisoned carrier relations - starting with the mass firing of all the Microbrains running Nokia handset sales now at Microsoft.

So, Nadella will put up with Elop excuses for a while, then replace him. The worst fate is with whoever inherits Elop's job at Microsoft - to get to see the rot, knowing it was created by Elop, and it is irreversable. That there is no cure. What prevents any smartphone success at Microsoft's handset division is not problems of that division. It is that Microsoft owns Skype. And there is no way Microsoft abandons its investment in Skype. It is crucial to the software company's viability on the internet and the services business. So the next EVP will push Surface and Xbox etc sales hoping they will be enough. And as handset sales overall and smartphones specifically continue to produce massive losses and no gains in market share, that next EVP will also be removed, reassigned to some non-job. And by then Nadella will have to start to ponder the real issue - is it time to consider selling or shutting down the Nokia handset unit. This would be about 3-4 years from now, so lets say 2018. Could be yet one more EVP to try it and we get to about year 2020. But Microsoft will either sell or shut down the Nokia handset unit. It will never hit double digit market share, no matter how much money Microsoft throws at it. I believe Microsoft's Windows unit market share will never hit even 5% but they may obfuscate those numbers combining Asha and X-Series Android and other devices to claim higher Windows or 'Microsoft software' market performance in smartphones.

WHAT OF WINDOWS ON DESKTOP

What of other Microsoft assets? The Windows installed base on desktops is a formidable strength. The Office Suite, Xbox gaming, cloud computing. The cross-platform appeal of PCs, tablets and smartphones (even wearables). Sure, these all are valuable if the market entry is 'open' as it is in videogaming or internet services or PCs or tablets. But that is where handsets are different. Remember what Elop said, his most valuable lesson learned of the early Lumia failures was that carriers control the sales in handsets. Not in PCs not in videogames not in tablets and not in the cloud or on internet services. But yes, on handsets. You can't get around the carriers. Apple tried (the virtual SIM card) and the carriers said - no way. Google tried (remember the original Nexus) even attempting to sell it through its own stores and online. Failed (now all Nexus devices are made and sold by Google's Android partners, not Google itself). Microsoft tried (Kin - the fastest death in mobile handset history, from sales launch to cancellation in six weeks). Yes, the carriers control the market entry. If the carriers decide they won't support your phone, you are dead. And we heard Elop tell us, carreirs don't like Microsoft - because it owns Skype (even as those same carriers sold smartphones from rival makers who HAD Skype already pre-installed).

The 200,000 apps on Windows Phone app store is not going to change things (other than becoming the first app by those developers to not get updated for WinPho 8.1 or 9 or 10..) Windows Phone has about 3% sales market share today. In terms of installed base market share - gosh, this is the only metric that matters to app developers - Windows Phone has a dismal share. If you develop for Windows Phone your total addressable market is 46 million smartphones. Blackberry is 28% bigger than Windows Phone at 59 million in installed base. Symbian - yes, still today a year after last Symbian shipments ended - that dead Symbian reaches 76% larger user base than Windows with an installed base still today of 81 million. Then take all of Windows, add all of Blackberry and all of Symbian, and even those three added together is way smaller than what is the iPhone installed base ecoystem at 336 million users. This is before iPads and other iOS users. Just smartphones. 7 times larger than Windows Phone. And you can take all of the iPhones, Windows, Blackberries and Symbian smartphones - add them all together - and double that number. That is Android smartphnoes today. Installed base 1.1 Bllion users. Android reaches 24 TIMES larger audience than Windows Phone. Who in their right mind would bother to develop for what is only the fifth largest ecosystem by the only number that matters - not new sales, but installed base. Yes, Windows Phone is ranked only 5th among smartphone ecosystems by installed base (you didn't hear that in a Microsoft press release, did you)

Microsoft saw the shift from personal computers to smartphones. Windows based smartphones launched 12 years ago. Microsoft managed to grow organically to 12% market share at its peak. Then it went all wrong. Angered suppliers and developers, with no migration path from Windows Mobile to Windows Phone caused start of the collapse long before Elop went to ruin (run) Nokia. But the Nokia Microsoft partnership might have worked. It didn't. They had a bad strategy, that was executed badly. Elop already managed to get the retailers in revolt with the Elop Effect. But Lumia and Nokia's Windows Phone died with Skype (ironically, as first Lumia smartphones even a year later did not offer Skype pre-installed). That is why Windows Phone died in the market and is only showing an illusion of being alive by all the dollars pumped into the poisoned environment. The patient is dead, it cannot be revived. If Microsoft were to sell parts of the Nokia handset unit, another player - abandoning Windows - might still make a modest success out of it (Nokia dumbphones maintain about 12% of the global handset market, second only to Samsung). If Nokia itself decides to come back after 2015 with some gadgets, wearables, or even phones - as long as not running Windows - they could again succeed. Nokia's 'offspring' like Jolla running Sailfish, are a long-shot but they have a chance. Microsoft cannot succeed with phones. The carriers have decided they will not drink the poison. End of story.

Comments

[John Alatalo]

I think its to early to tell how it goes with Windows Phone and Nokia (or the new brand)
After all the Windows Phone 8,1 update will be rolling out in june probably.
Not just the new devices will get it but the older ones to.
So the issue when WP7 became WP8 will not happend this time, with rewrite all the app portfoilio etc..

Windows phone 8 now have 250.000+ app and it growing with about 500 new each day. For "non geeks" the app are that matters not what OS the handset running.

So I suppose we will se how Q3 and Q4 result will be. Windows is now also free for the OEM manufactors, and early on we already see som result in this:

"Cheap Windows Phone 8.1-based Yezz Billy 4.7 and Billy 4.0 to be released soon"

http://www.phonearena.com/news/Cheap-Windows-Phone-8.1-based-Yezz-Billy-4.7-and-Billy-4.0-to-be-released-soon_id55732

And we dont know what the big brands like Samsung, HTC or Lenovo/Motorola will do yet.
So just let us wait and see how it goes.

[foofoo]

" So just let us wait and see how it goes. "

Usual argument for Microsoft chills (not accusing you of being one)

Let's wait WP7.

Let's wait Nokia Lumia's.

Let's wait WP8.

Let's wait new Nokia Lumia's.

Let's wait new Nokia with wonderful camera (everyone will line-up for them, right, right ?)

Let's wait WP8.1

Let's wait WP9...

Let's wait...

[baron99]

@foofoo I agree with the "wait for" ...that whatever is coming next is somehow supposed to placate current unhappy customers after they bought microsoft crap. I have to wonder how much Microsoft pays the group of astroturfers using the Baron95 label? ...or if it just a group of Microsoft employees sharing the burden of posting nonsense? ..It must really upset them that it is still true that NO ONE WANTS A WINDOWS PHONE! LoL

[WonTheLottery]

@John Alatalo
"For "non geeks" the app are that matters not what OS the handset running."

Or are they? According to research just conducted by ofcom in the UK (an 'advanced market' according to Baron95) the majority of smartphone users never install an app, not a single one. Of the minority that do install apps on average they install 23, only 10 of which they actually use. I'd bet if they did a deeper analysis they'd find a lot of commonality within that 10 too, popular messaging apps that are cheaper than SMS/MMS for example.

Beyond that my guess is most app downloads will be games for kids which will more likely be for tablets than smartphones. I bought all my kids Android tablets because Android games are a fraction of the cost (often free) of the games they used to want for their Nintendo DSs

So, if more than half of UK smartphone consumers don't care about apps, it wasn't the lack of apps putting them off buying Nokia's Windows Phones, therefore it must have been something else (remember, pre-Elop the UK had been a strong market for Nokia).

[Holger]

Hi Tomi
This is a interisting analysis (in german) http://www.focus.de/finanzen/news/fanfocus/smartphone-marken-im-check-neukunden-zeigen-nokia-und-motorola-die-kalte-schulter_id_3811038.html

Key findings:
- Only 25% of Nokia's customers owns a smartphone.
- Nokia has the longest lasting relationship to its customers.
- Nokia has the fewest new customer.
- Nokia has the most unhappy customers.

[Tomi T Ahonen]

Thank you Winter,

but I remove all references to the trolling blog. I am sure you understand. But your comment was good, thanks. But it was not necessary as I of course remove all references to that or any other trolling blogs. Cheers!

Tomi :-)

[Tomi T Ahonen]

More comments

Rotten - ok, good points and I don't disagree with you, that part of Windows Phone failure is bad interface and that users don't like the OS. The issue has gotten rather worse with Windows 8. But that is not incompatible with the point, that carriers revolved in 2011 and the effect has been catastrophic to the whole Windows smartphone ecosystem. The only illusion of it remaining alive was as Nokia slaughtered its Symbian market share at 13 to 1 conversion rate to Windows. But your point that Windows itself is ALSO bad, is also a valid point. I just don't see it as the primary driver of the failure.

Tomi - haha well not bada. But I will definitely go check out the first Tizen flagship and may get it. At the moment I'd need to get a new 'second' phone with a good QWERTY keyboard and the Blackberry offering is lame and Samsung's Galaxy only offers cheap models with QWERTY. If someone (other than Microsoft) offered a new high-end 'business' phone with good QWERTY, I would go for that in a heartbeat. I betcha there are dozens of millions of users of Nokia E7 etc models with QWERTY keyboards who would do the same.

Baron95 - so you bring in Kantar and you deliberately ignore China. You KNOW that Windows Phone market share in China has fallen in half in the past quarter. The Oct-Dec months Kantar had about 2% market share for all Windows smartphones in China and under 1% now for Jan-Mar (the March numbers came out last week). China smartphone market is bigger than those countries you listed - COMBINED. So don't play with math. The reality is that Windows Phone global market share is DECLINING not increasing. It is likely to be well below 3% when the big analyst houses report (obviously Microsoft is too chicken to give us the number as it keeps shrinking)

WonThe - thanks. Yeah Samsung will release first 2 Tizen smartphones by June including its first flagship. Russia will be among launch countries. And it already has the smart watches and a few of the other Tizen hardware vendors have released some smaller production run units like tablets etc. Tizen isn't dead but it is nowhere near as vibrant or promising as it was this time a year ago when major carriers were supposed to launch.

E.Casais - good point. Latest numbers I reported on the blog after we had Q4 results on installed base had Windows Phone with 46M installed base (3% globally), Blackberry is 40% bigger than Windows Phone ie it has 59M installed base (4%). Symbian is almost twice the size of WP by installed base even though no Symbian smartphones have been sold for a year, at 81M units and 5%. iOS (just on smartphones, ignoring iPad etc) has 336M installed base ie nearly 10x bigger than Windows Phone (22%) and Android has 1.1 Billion installed base (20x bigger than Windows Phone) and 66% market share.

Ok now gotta run. Hope to return soon with more comments

Tomi Ahonen :-)

[Tomi T Ahonen]

Sorry, I'll add one point

As LeeBase has just returned to the marketing expenditure issue. He (and others) is confusing current Samsung with past. Elop said very clearly in 2011 as we approached Lumai's first launch, that it would be the biggest in history and Elop had allocated twice the marketing budget just from Nokia's side, to what it had ever done before. This is not my conjecture. At that time Samsung was a drop in the bucket and couldn't possibly afford the marketing spend in that scale. Now that Sammy is the world's largest handset maker and by far the largest smartphone maker - and this war is a war of marketing - of course they can AFFORD to overspend everyone. THAT IS WHAT MARKET LEADERS DO.

(and math 'discrepancy' twice the budget BY NOKIA ALONE. Triple budget TOTAL SPEND when all others incl Microsoft and carriers are added.

Tomi Ahonen :-)

[Winter]

Tomu,
I really do not mind if you remove my comments if they hamper discussion. I hate it when blog comments are overrun by trolls.

[John Alatalo]

@WonTheLottery

Apps are important but not all of course. But Windows Phone 8 did miss some features that the updated 8.1 will bring. Notification center, VPN support for companies, swipe keyboard and a lot of other stuff.

So the step for a iPhone or Android user that maybe will moving to a Windows Phone 8.1 handset will not be such a big deal as before.
Like the Engadget write:

"Windows Phone 8.1 review: "Microsoft's mobile OS finally feels whole"
http://www.engadget.com/2014/04/14/windows-phone-8-1/

The app situation are not a big issue anymore. with 250.000+ and still growing fast.
So overall I think Microsoft have much things in place for once.

I dont think they will give up the smartphone race (With Elop or without him) . But if they screw things up the Nokia X platform can be the "plan B" so to speak.
Terry Myerson hinted at a interview (ZDNET) that they will continue to support it. So its not same Microsoft now as in the Ballmer era.

[RottenApple]

@John Alatalo:

Whatever. But the damage has already been done. Just like Windows Desktop 8.1 was unable to salvage the botched Windows 8 launch, so won't Windows Phone 8.1 do a miracle for WP.

The major criticism for me is still the utterly spartan user interface, that, compared to the competition feels like a joke. On both Android and iOS I got all the important functions nicely placed on the bottom of the screen. All I get on Windows Phone is the hopelessly confusing tiles screen and on the second page an alphabetic list of apps and phone services.

It doesn't really matter how good the OS itself is, everybody looking at a WP8.1 phone vs. a WP7.0 phone won't see any distinguishing marks on the surface. It's basically exactly the same UI with at most marginal improvements, But that's where people will look first. Essentially even the most recent Lumias have the look and feel of a 3.5 year old phone. And now please don't tell me that customers won't be affected by that (and of course the whole Metro hate that runs rampant.)

Microsoft may have a chance if they jump over their own shadow and admit that their UI needs a redesign. The current one has been poisoned beyond rescue, both on desktop and on mobile. Before that - good luck trying.

[John Alatalo]

@RottenApple

The Metro style works fine in a smartphone. Windows Phone and desktop Windows are not the same. And if you look at the features that is included in 8.1 you can make some changes in the interface that make it mer personal etc..

"Windows Phone 8.1: Finally, a worthy rival to Android and iOS"

http://timesofindia.indiatimes.com/tech/computing/Windows-Phone-8-1-Finally-a-worthy-rival-to-Android-and-iOS/articleshow/33858158.cms

Most rewiers think its a massive update and not a marginal one.

Yes I agree that will not do a miracle or quick fix for the platform. But their marketshare slowly growing. And Microsoft have the money to keep going:
"Microsoft has published its Q2 2014 earnings report, and the company has made $6.56 billion in net income on $24.52 billion in revenue. Revenue has increased by 14 percent from the same period last year, and net income increased by 2.8 percent"

I see no way they giving up on this.

[Nokia Share Holder]

Finally Nokia do not have phones anymore. Elop and Ollila made a huge mistake when they sticked to Windows Phone. But luckily it is over now. Android and iOS are already too big. There is no room for third ecosystem.

I hope that new Nokia becomes succesful in all three segment it have, Networks, Here and Technologies. Now we have a very good company and it is more finnish than phones with Microsoft's operating system.

[RottenApple]

@John Alatalo:

I don't think it will matter.
Windows Phone is the classic case of a product that already has comprehensively failed in the market.

The WP 7.5 update was supposed to solve all the problems. It didn't. Sales didn't take up.
The change to WP 8 was supposed to solve all the problems. It didn't. Sales didn't take up.
What makes you think it'll work the third time when it didn't the first two times. This is all wishful thinking on behalf of Microsoft. It also doesn't matter that Metro 'works better' on a phone than on a desktop. Again, irrelevant. Those who learned to hate it on a desktop have no desire to see how it works on a phone.

As for the tech press, yeah, sure. They hailed WP 7 as the revolution. It didn't come. They prophecized that WP7.5 would change it. Of course not. They predicted that WP 8 would turn things around. Of course it didn't happen. 'This is Microsoft. They'll make it work' No, did not happen.

The problem WP has is not technologocal, but psychological. People do not like it. No amount of twiddling with the OS's features will change that and it's clear that unlike Google with Android, Microsoft is unwilling to change their UI to be more appealing. They've sat it out for 3.5 years now, tried to force their UI even on desktop users - and it all completely and utterly failed. The most sold program for Windows 8 is the 'Start8' start menu replacement - and that despite a bootload of free alternatives. If people are willing to PAY to get rid of that UI, I'd say it has problems so profound that it can't be solved easily. It's not that the OS is broken or the UI is broken but that the design philosophy behind all of it is fundamentally broken.

The only way they managed to make some sales was to pump more money into the system than they were ever getting out - and then mostly in the bargain bin segment, i.e. rather undiscriminating users who look for price first and quality a distant second. They also had to rely heavily on the Nokia brand to even move these numbers and it got destroyed in the process. How do you want to cure this?

[Tomi T Ahonen]

John Alatalo

On Windows Phone market share. You probably are looking at old data (or comparing to historical points). The last 4 Quarters in a row from Q2 of 2013 to now Q1 of 2014 the Windows Phone market share has seen consistent market share EROSION ie decline. From 3.9% in Q2 of 2013 to 3.6% in Q3 of 2013 to 2.9% in Q4 of 2013 and now around 2.5% for Q1 of 2014 (may be worse than that). There is ABSOLUTELY no truth to claim that Windows Phone is "slowly growing" as you claim. The Microsoft Windows Phone market share is RAPIDLY DECLINING and lost literally one third of the modest market share they held exactly 12 months ago now in Q2 of 2013. Also please don't bring the discussion to the corporate financial performance side that is not the topic of this blog. But I'll let that comment stand, as you probably intended it to mean, that Microsoft is so rich and profitable, it can afford to keep the unprofitable Windows Phone project alive for quite a long time into the future...

Tomi Ahonen :-)

[baron99]

Notice the continuing common and very boring theme of all the microsoft astroturfing trolls... "wait and Microsoft will succeed"

RottenApple has clearly identified this non-sense theme.

....hmmmm, John Alatalo do you post as Baron95 too?

[microshaft]

Hey guys , really windows phone 8.1 will be the biggest ecosystem, far bigger than Android which only temporarily has any market share. Windows market share will start growing from now on as the carriers have just got on boards and now know that the cost of a phone is the entire cost over its entire life not just purchasing costs. There are loads of windows phone technicians around and mostly none for Android, so the carriers looked at that and will start preferencing windows phone now.

Tomi you will not be acurate next quarter as windows phone is set to skyrocket around 90 to 99 percent of market share as from next quarter.

Most people love windows and have complained to the carriers to stop boycotting windows phone so the carriers are starting to oblige.

Most people will feel silly in 3 months when there is only windows phone around and nothing else, as is the case for PC's.

Regards
Microsoft Public Relations Department America.

[RottenApple]

Dream on!

Microsoft may still have money but their best years are behind them.
All their money hasn't helped them make WP a success - on the contrary! They now have to give it away for free so that some idiot CEOs can be persuaded to support it. They had to buy Nokia's phone business because despite all their attempts it failed to become profitable. I think the most telling sign that this was an act of desperation is that they were willing to buy the entire feature phone unit along, just to make sure that Lumias continue to run on WP.

Any yet the old 'It's Microsoft. They'll make it work' mantra lives on.
The same boring arguments that were used to hail WP 7 as a success by default get regurgitated again. They didn't work 3.5 years ago when WP7 was released. They didn't work when WP8 was released 1.5 years ago. And they still won't work. In this business micracles do not happen! If a product has failed, it's over. The only way to turn a failed product into a 'success' is to force feed it to the market - see Windows 8. Nobody likes it, but there's no other choice because all older alternatives have been retired. Then again, Windows 8 Desktop can be cured - WP cannot, not to mention that it can't be force fed to a market dominated by other companies.

Concerning Microsoft developers, yes, they exist, and yes, many were badly burned by empty promises of instant success. Most, though, wouldn't even touch a smartphone, they develop 'real' software for 'real' computers.

[WonTheLottery]

@LeeBase
"Who called Nokia being bought by Msft long before it happened? People like me."

Actually it was people like me, people who knew the Trojan Horse's decision to exclusively adopt Windows Phone could only have one disastrous outcome for Nokia.

"I've been following the "not everybody uses apps" argument and I agree that in the unprofitable segment it's true. That's why there is such a huge disparity in the amount of money to be made developing for the iPhone than Android in the face of the HUGE unit share advantage Android has. It simply makes no sense until you realize that a LARGE segment of the Android customer base use their "smart phone" no differently than they use their feature phone."

According to a report prepared by Distimo in the 11 months to Nov 2013 freemium apps with in-app purchases went from 77% of the combined market (Android + iOS) to 92%. Google Play's revenue share of the freemium apps market went from 89% to 98%. This is a model that can easily work for HTML5 apps too, no locked-down 'ecosystem' required.

The most popular apps for both platforms are overwhelmingly games, which suggests the devices downloading apps are not being used as 'smart phones' at all but as games consoles/media players. It's actually more likely the devices not downloading many apps are the ones being used as smartphones.

[RottenApple]

@Leebase:

I think WonTheLottery is quite correct when he says that most smartphones generating revenue are primarily not being used as smartphones whereas smartphones being used as smartphones do not generate a lot of revenue. It makes perfect sense from the observations I made.

People who use their smartphone as a smartphone have no need for costly apps and services. They use mostly free stuff, maybe a handful of cheap convenience apps but that's it.

I really don't know many people who actually play games on their phones. There's two reasons for that. Most people are not interested in games and even many gamers find playing games on smartphones a sub-par experience, mostly due to the limited means of control. Which by default leaves a disproportionately large chunk of revenue in the hands of a tiny, tiny slice of customers.

What does that mean?
Well, ultimately it means that there's only two groups that actually benefit from Apple's leadership in profits: That's Apple itself and major game producers.

Everybody else, namely those who provide a service that's being accessed through the app and which doesn't generate any immediate revenue with the app itself cannot afford the kind of lopsided tunnel vision you exhibit. Most people use Android, not Apple and unless you provide a service aimed at money wasters you can't leave them out. It's also clear that these profits will never show up on your radar.

So the vast majority of service providers don't care one bit about Apple's profitability. It's completely irrelevant to their business, so why does this repeatedly become exaggerated as the 'main issue' with you and Baron 95?

@Baron95:

Nice distortion of facts, again!

First, why does Apple have such a high market share in Japan? No, it's not because Apple is so great. The main reason is that their major competitor is from South Korea, which for many Japanese is still a complete no-go. So without any serious competition it's not really surprising.

About Windows Phone:

The markets where Windows Phone has a high market share all share one common thing: All these markets once were strongholds of Nokia. In other words, it's not Windows Phone that made these sales, it's solely Nokia. But if that is true, the future of Windows Phone without the Nokia brand looks bleak. The development in the last two quarters is a clear indicator. Ever since the takeover was announced, WP has been fizzling. Whether this is a result of the takeover or just diminishing demand in Nokia's bargain bin phones remains to be seen. But both cases are certain proof that WP got no traction in the market. Either people buy it because it's called Nokia or they buy it because it's cheap. And both scenarios are under threat: The Nokia brand will be gone in two years and the bargain bin will, as per your own prediction, been taken over by Chinese manufacturers who will use Android.

And the comparison with Google: Please - come on!
We don't even know the ultimate financial outcome of the Motorola deal. I have seen opinions ranging from 'complete disaster' (you) to 'moderate success'.

And does it matter in the end? Google never made this deal to gain market share.

As for Microsoft: Aren't you a bit hypocritical if you deem Google's actions a failure when they capture 80+% market share with their OS, while Microsoft hangs around in low single digits?
Nokia hasn't made one cent of profit from their Windows Phone business. And Microsoft also has made substantial losses, and now that they own the smartphone unit will have to take its losses, too. Don't expect it will miraculously become profitable now. It will remain a money grave for many years to come, until someone pulls the plug. It won't even help their services because they primarily sell in the bargain bin segment, bringing us back to 'users who use their phone as a smartphone' and the above realization that those users do not contribute in any significant fashion to the 'ecosystem'. (I wonder why this euphemism is still being used for such toxic environments anyway.)

As for ignoring China: Sure, great move! Because it conveniently eliminates Google from the equation. But that's just sidestepping the issue. While for service providers, China will forever be an anomaly that is mostly ignored, the same surely is not true for hardware manufacturers. But now Microsoft is in the second group, so it's something that cannot be ignored.