Matchmaker Matchmaker Make Me a Match - What if Microsoft sold Nokia back to Nokia

The Nokia deal to sell the handset business to Microsoft in 2013 was when Ballmer was the CEO of Microsoft and Elop was CEO of Nokia (the two by the way were by then rated the two worst CEOs in corporate governance and both would be gone from their companies in less than a year). It was worth 7.2 Billion dollars. Now most of the value of that purchase has been written off by Microsoft. The new Microsoft CEO Satya Nadella is not afraid to sell businesses that are not essential to its business. Nokia new CEO Rajeev Suri isn’t afraid to buy loss-making businesses in industries Nokia knews well, he bought loss-making Alcatel-Lucent. The new Microsoft CEO says Microsoft no longer wants to compete in handset wars. The new Nokia CEO says next year Nokia will return as a smartphone brand. Is this not an obvious match made in heaven?

Why not sell the remaining handset business at Microsoft - all of which used to be owned by Nokia so they are all Nokia people who know Nokia values etc - back to Nokia. As long as the price is right, why would Nokia not be happy to buy? Its not that far-fetched an idea, especially as both culprits of the previous deal, Elop and Ballmer are gone, and as Nadella himself is known to have been against the Nokia purchase from the start. And now the just-announced write-off of most of the book value of the Nokia deal has been done. Why on earth not. So lets explore some Hollywood Ending scenarios what this deal might mean and what it might cost. And note, I have absolutely no insider knowledge that anything like this might be going on, this is just idle speculation for a weekend blog..

 

THE TWO WORST CEOS

Its rare that there is such a total break by both parties of a big corporate deal. Ballmer wanted this deal (not because it made any business sense, he wanted it to hide his mistakes). Elop needed this deal because his secret CEO bonus clause worth 25 million dollars was stipulated on that deal being very specifically to Microsoft, not any other possible buyer of the handset business. Ballmer knew perfectly well that the Nokia business he was buying was not worth anything near $7.2B and he was bullied into taking that deal by Nokia’s Chairman Siilasmaa who threatened Nokia will launch Android smartphones if Ballmer didn’t pay. That would have been the ultimate slap in the face of the still-existing Windows World Domination plan by Ballmer, if his biggest handset provider so publically abandoned that vision. That is the only reason the price was so high. Smart by Nokia.

Equally Elop, the worst CEO of all time of any industry. He deliberately actively and consistently sabotaged Nokia smartphone business for two and a half years, to push the Nokia share price to the bottom and get all credit ratings to junk, only so that he could get that Microsoft deal, which activated his secret 25 million dollar bonus payoff.  When it was finally obvious that there was no rescue of the doomed Lumia project by Windows 7.5 or by Windows 8 etc, and it was truly smashed beyond repair, by that time Nokia’s smartest play was to force a sale of the wrecked business to Microsoft. At least they got something out of the deal (and with that money Nokia could go buy Alcatel-Lucent with plenty left over). If you weren’t paying attention, the networks-business oriented Nokia is happily profitable and growing.

 

Ballmer clearly didn’t play fair and square as Microsoft CEO, the Chairman Bill Gates saw that and even reprimanded Ballmer in public. Ballmer was fired ie he voluntarily stepped aside. And Elop? He was stripped of power by spring 2012 and wasn’t even allowed to attend the negotiations of the Nokia deal, and he was immediately removed from the post of CEO when the Microsoft deal was signed. He was then humiliated in public forced to push Nokia’s non-Microsoft non-Windows new smartphones running on Android the Nokia X Series at the world’s largest telecoms trade show in Barcelona before he was sent to Microsoft. And as we noticed, he was fired there just a year after returning to his old home. So much for the two clowns who brought us this mess.

A NEW DAWN

 

The Nokia deal with Microsoft had a relatively short exclusivity period for Microsoft. Nokia was allowed to sell other gadgets under its brand, so Nokia already launched a tablet running on Android that is very popular in China for example. And Nokia is allowed to return as a phone brand, on smartphones only, not dumbphones, next year. That is still a restricted return, Nokia can’t sell or make the phones, but Nokia brand is allowed to be licenced for third party manufactuers to make and sell. And as we heard from new Nokia CEO Rajeev Suri, that is what will happen next year. So Nokia is definitely coming back, on Android, into smartphones, next year. Definitely. Microsoft cannot stop that.

And Microsoft? We just saw Elop fired, we saw new CEO Satya Nadella write off 90% of the handset business book value (and write off more than what Microsoft actually paid Nokia in cash) and in three rounds of layoffs, Nadella has already fired 80% of the staff that came over in the Nokia deal. He further told about the future of the business, that Microsoft no longer is pursuing the handset business as an end, but only as a supporting function of its core businesses in the enterprise and cloud etc. Because Nadella has already sold some businesses, why not sell this phone business too. Now that the accounting value has been reduced to a tiny fraction of what it was, that deal would become far easier.

Nokia was a phone maker. It sold the phone business away under the old CEO. It has a new CEO. The new CEO said he wants to return to the phone business. And he will do so next year. And this CEO has already paid big bucks to buy a loss-making business.

Microsoft was not a phone maker. Its bought a loss-making phone business under the old CEO. It has a new CEO. The new CEO said he doesn’t care about the phone business. And this CEO has already sold non-essential businesses. Is this NOT a match made in heaven?

SO SCENARIO ONE - JUST THE DUMBPHONES

So lets start with the ‘no brainer’ deal. Sell at least the dumbphone business back to Nokia. The dumbphone (non-smartphone basic cheap phones) is an industry that will disappear in five years (I say in four years but lets go with the consensus industry view). So by 2020 there is no more a dumbphone market. Its now obvious like say it was for black-and-white TV sets or for Video Cassette Recorders (VCRs) or for fax machines. The dumbphone business was the size of 900 milloin units sold in 2013 when the Nokia deal was announced. It was of the size of 600 million last year when Microsoft took over the Nokia handset business. It will be the size of 450 million this year and less than 300 million next year. And yes, by 2020 there are less than 20 million dumbphones sold worldwide. It is a disappearing business.

And for Microsoft there may have been some element of ‘synergy’ in that fantasy that Steve Ballmer was selling in 2013 when he justified this deal, that Microsoft could sell 300 million smartphones with 15% world market share in 2018. Then yes, maybe that part of the ultra-low Nokia branded featurephones, maybe some could be migrated to Windows ecosystem as they upgraded their phones. An iffy part of his plan in any case but like the snake-oil salesman he always was, he was selling it.

Now we know from Satya Nadella’s new reorientation of the remaining handset business, there is no mass market share that Microsoft can pursue, so the cheap phones end is utterly useless to Microsoft. There is no synergy with the remaining premium smartphone businesses nor the cloud nor with Windows nor with Office Suite nor Hololens etc. No synergy. It is a useless part of the Microsoft empire that doesn’t contribute to the common goal. And it is slightly profitable but even its profit margin is less than Microsoft average, so on a financial evaluation basis, it is reducing the value of Microsoft shareholders out of ongoing business. And that business is not going to ongo far longer. It will be ended before this decade is done. Why on earth not sell it for anything, if there is a buyer.

So why would Nokia want to buy this unit? The business is gone almost the day they would take hold of the employees and factories. This deal indeed makes no sense at all, except under one condition. If Nokia is simultaneously released from the restriction under the previous agreement, that Nokia cannot make or sell smartphones. So Nokia returns next year as an Android smartphone brand, but that is made by someone like Foxconn and sold by them. That is the current contract clause. If Microsoft included this release in the new contract. Nokia buys the dumbphone business and from January 1, 2016, Nokia is free to sell and make its own smartphones under any software. If you toss in that change to the contractual arrangement between Microsoft and Nokia, Nokia would suddenly be very interested in buying the ‘dying’ dumbphone business.

Why? Because of three critical elements that Nokia wants. First off, most difficult, the sales organization. The dumbphone business under Nokia brand both under Elop at Nokia and under Microsoft is profitable, has been most of the time (only a brief Ratner Effect caused by Elop’s idiotic Burning Platforms memo, in 2011 that was over by Christmas). The Nokia handset sales organization (dumbphones and smartphones) is the best in the business and has the deepest contacts and trust of the carrier community. They hate Windows so they won’t buy Lumia but look how well the non-Windows basic dumbphone business has done all along. Brilliantly. It is still today the bestselling dumbphone brand on the planet. The wholesale sales of a dumbphone is the same as the wholesale sales of a smartphone. Same buyers, same distribution channel, same terminology, same practices. And Nokia was and is best at this. And there is no material difference between selling the dumbphone or selling the smartphone. Yes, there are vast differences in the SPECS of the device, but it is a handset. How many handsets do you want with x size screen, y capability camera, z brand processor, etc.

Nokia CEO does not want to pay anything to buy the dying dumphone business. But if he has Microsoft release Nokia from limits of selling and making smartphones, this Nokia brand dumbphone sales organization that runs decades long true-blue Nokia-to-the-core, they are literally the best of the best, and they have the only platinum-level carrier buyer contact base, they know personally every handset buyer in almost every country on the planet. Nobody, not Samsung, not Apple, nobody has that depth of contact, as the DUMBphone side of what Microsoft now owns. Even the smartphone Lumia sales team is less trusted or capable as they are far more polluted with Microbrains who have wrecked carrier relationships.

And these die-hard Nokia salesreps, would they love to sell real Nokia Android smartphones to their clients - who have been begging for them for five years? Absolutely yes. Because a Nokia-designed, Nokia-manufactured Android smartphone would be everything we always trusted Nokia to be. They would be bulletproof, they would have batteries that are removable, and last. They would have great tech. They would have all possible connectivity from unrestricted Bluetooth to microSD cards. And the same Nokia salesdude or salesdudette who has reliably sold Nokia brand from before smartphones existed, when he says, we will cover the repairs, the returns, the marketing, etc - all that will be trusted. Because of a decades long relationship of trust. And now no possible Windows Lumia baggage.

This is what would happen. If that deal was announced, that very day the middle-aged senior Microsoft salesrep of the dumbphone Nokia brand, would go home, go to that old shoebox, dig out his 23 old Nokia business cards he just kept as mementoes, and then he’d go buy with his own money the tickets to today’s game of cricket or rugby or ice hockey or whatever is the local sport, best tickets for two, and bring his best customer top handset buyer senior exec to that game, just the two of them, and at that game, he’d hand over his old Nokia card, and say, we’re back. I’m no longer with Microsoft, Elop the cancer is gone, there won’t be any Windows or Lumia in our lineup, I will sell you the Androids you always wanted, and today lets enjoy the game...

Its the hardest thing to build in business. A customer relationship. The Lumia Windows smartphone salesreps have had many bridges burned when Elop came himself to meetings and worse, in some cases even Ballmer joined the meeting to bully and yell at the clients. Threatening them. And destroying years and decades of patient sales effort. So the smartphone sales side of ex-Nokia ie Lumia at Microsoft is not all perfect, but the dumbphone side? Those are the best phone salesreps, as a group, that money can buy today. And Nokia would take them back in an instant, if only Nokia was also allowed to use them to sell Nokia smartphones on Android.

Why would Nadella want to keep them? The dumphone business is gonna die and their organization is way too large to suppor the trivial niche market size of the re-sized Lumia business into the future. This is deadwood for Microsoft. And Nokia wants to buy them back? Why not sell them and yeah, if Nokia is coming back anyway as a brand in smartphones next year, its not much of a concession by Microsoft now, to allow Nokia to sell those smartphones too.

And its not just the sales organization. Its the factories. The dumbphones are made in highly automated super-efficient huge plants that have massive capacity. Capacity that maybe could have been used if Ballmer’s silly dreams came true, but now will never be utilized fully. So sell them, the ones making dumbphones. I have no idea of how many are left from the original deal, nor how they are split, but its probably about 6 factories. So lets say that two of the six, that do only dumbphones, the biggest ones of that, would go with the deal. And Nokia obviously would now have permission to retool those factories at its own leisure whenever it wants, to smartphones.

If these are the two biggest and purely dumphone factories they currently produce about maybe 70 million to 90 million phones per year (combined) and they have probably maximum capacity twice to three times that. And they are hypermodern factories of very high level of automation and of adusting and capability so they would (should) be relatively easy to retool to switch from say making a T9 keyboard basic phone with small screen to a touch-screen device. Etc. Yes, the smartphones need to be designed and there may be some limits at each factory on exactly what they can do but a far bigger issue would be advance ordering of components than just the retooling part.

Nokia back before the Microsoft deal had highly efficient factories and less efficient factories. By now what remains at Microsoft are only the very most capable units. Nokia would love to re-acquire a couple of them. So lets say you toss in two dumbphone factories out of six into this package. These are factories that serve no utility to Microsoft strategy today and are of no use into the future. And if the Lumia smartphone business were ever to rebound, the remaining four factories would have more than ample capability to absorb any business that could be generated. These two factories are totally unnecessary at Microsoft today.

A handset factory takes a year just to build. A factory costs about a Billion dollars. This would be a steal but nobody, other than Nokia, would ever want to pay a penny for factories that make DUMBphones only. So what is the third part, the R&D of course. Handset design staff, highly capable, even if the dumbphone designers are working with very low-cost devices of limited capability, but they do know how to design successful handsets and understand regional needs of where Nokia sells best. This is highly valued talent that would take years to build from scratch. And there is no future for them at Microsoft.

So lets make it a clean break. All dumphone related business at Microsoft, probably 4,000 employees and 2 factories, including related sales and marketing, would be sold back to Nokia. And as the enticement for Nokia to take this dying business, Nokia would be released from any limitations to sell and manufacture smartphones, say from January 1, 2016. 

What could that be worth? If the total handset business at Microsoft is worth, I don’t know what the current book value is exactly but lets say 1.5 Billion, then lets say one third of that could be the dumbphones side. 500 million. With that Nokia gets 4,000 employees and two factories and the related design, sales, marketing etc staff and offices that are selling dumbphones, and can start to retool parts of the plant and retrain part of the sales force to return to sell Nokia smartphones on Android (starting with the three X Series Android smartphones from last year that were so rapidly ended when Microsoft took over the business).

If Nokia was paid 7.2 Billion dollars to sell the handset business last year, and now buys back part of it for 500 million and can return to selling also smartphones next year, this would be greeted as a huge win by CEO Rajeev Suri. A masterstroke that all Nokia investors would applaud.

And if Satya Nadella was able to unload the no-future-whatsoever-left dumphone business that is branded Nokia, back to Nokia, while keeping the Lumia Windows smartphone side, and still got half a Billion dollars out of business that had at best 200 million dollars of income left in it, that would be seen as pure Jedi move by Nadella and Microsoft investors would applaud.

Microsoft can never make any possible contribution out of the dumbphone side of the ex-Nokia business. Nothing can be salvaged from that ever. But at Nokia, if they are also allowed to immediately put these people to sensible use, to switch from dumbphones to manufacturing and selling smartphones, this would be a far faster and more profitable way back for Nokia than licencing Nokia designs to Foxconn.

SCENARIO TWO - KIT AND KABOODLE

So Scenario Two is the Everything option. Just unload all of it. This is probably not how the first contact went or goes, but this is a logical next step to consider. Why, if Nokia wants to come back to smartphones, and Microsoft no longer wants to fight in smartphones, why not just sell the whole damn lot back to Nokia, all of it.

Take the book value, say 1.5 Billion. Take all staff who came from Nokia who are left. All assets, all factories, offices, everything. All the R&D, all the sales, all the marketing. All tossed in, price it at 1.5 Billion and in it obviously no more limits to what Nokia can sell and no obligations by Nokia to Windows or Lumia. Just take it all. Why not. Nadella never believed in this deal. It no longer serves any purpose at Microsoft. It is a huge drain to profits and provides a cumbersome useless detour to software development in that continuum thinking of Windows everywhere (why bother with Windows 10 Mobile when there is no future in Windows 10 Mobile, it would be FAR cheaper to only do larger screen sizes for tablets and the desktop).

Would Suri want this at this price? He wasn’t afraid to take the loss-making Alcatel-Lucent business. Nokia has a long history of turning loss-making telecoms business around (Siemens, Motorola) and half of the business (the dumbphone side) is already profitable to begin with. And Suri knows - the Nokia networking business customers are ONLY the carriers, nobody else buys network towers or base stations or telecoms switching gear haha - that the carriers are rejecting Lumia only because of Windows, if Nokia offered Android smartphones the sales boycott is instantly lifted. He even tested that theory in 2014, and saw how rapidly the Nokia X Series took off. That is why right after Nokia exited the phone business in 2014, the CEO already promised this year that Nokia will return in 2016 - on Android.

To pay 1.5 Billion dollars for a loss-making smartphone business that has 2.5% market share? Not a bad deal at all. And far better than that, there is the synergy of a global sales force on dumbphones, and Nokia has existing Android based phones already designed and initially marketed last year, that could be plugged into the factories and produced in a matter of months. Nokia X Series would be in the stores by January. And those new designs? They could be introduced at Barcelona next year and sold by say June or latest August. All running Android. The current Lumia Windows line would be ramped down and no new Lumia phones made. The designs in the pipeline that were intended for Lumia would be redesigned for Android. Give this unit one year of adjustment and Nokia’s smartphone unit, with no Lumia or Windows in the lineup anymore, would report a profit by the second quarter of 2016 and have a market share of at least 3% and growing. Nokia would return to the Top 10. By Christmas 2016 Nokia would have 5% market share and challenge for a Top 5 position.

Remember, the disaster at Nokia smartphones on Lumia and Windows Phone was not because the phones were bad (although early phones were). Its not because Windows Phone is bad (even though the early versions were). Its not because there aren’t any apps (even though most are bad versions and its nothing as good as Android). The ongoing disaster at Lumia is because the carriers put Windows smartphones on a global sales boycott in 2011 and that will never be lifted. So the moment Nokia sells smartphones on any other OS, even if they sold them on Blackberry or on old Symbian, they would sell better than Lumia does on Windows - because the CONSUMERS love Nokia and want it. (obviously in all regions except North America).

5% market share of smartphones by Q4 of 2016 would be about 26 million smartphones. And this would be back to black, a profitable business. Note how huge that is, Xiaomi the darling of the tech world today, sells less than that per quarter. 26 million per quarter today would qualify for 3rd largest smartphone maker! (But by Dec 2016 as the market has grown, it would mean fighting for 5th place). At say 150 dollar ASP it would add 4 Billion dollars to Nokia revenues. If the profit margin was say 5%, thats 200 million dollars of profit in one quarter.

Because of how thoroughly Elop wrecked the Nokia smartphone business, I can understand many would be very wary of going all in, but Rajeev Suri knows the one critical element to winning and losing in handset wars - the carriers. They have spoken to him. They have urged him to return the Nokia brand, but on Android. That is why the networking dude is returning to the volatile and risky handset business next year. He REALLY doesn’t have to. But he is DETERMINED to. Why? Because he knows. All his customers are telling him, as long as its not Windows, we WILL buy those phones. Please come back to handsets on our network, Nokia. We will buy the phones.

Microsoft cannot make this dead dog walk. But Nokia can rebuild an Android business out of it. And who is most fearful of this? Samsung. They are not afraid of Apple. The only company Samsung fears, is that Nokia would come back to smartphones and worst case, they come full speed, all-out, manufacturing and selling, all on Android. That is the nightmare scenario at Samsung.

Initially this would be seen as a shrewd play by Satya Nadella at Microsoft but next year, two years, three years later, he’d be seen as having sold the goose that layed the golden eggs. And I think he knows this too. Its unlikely he’d go for this scenario specifically because of that upside risk, Nokia, and only Nokia, might actually be able to revive the business and then, he’d look foolish. Rajeev Suri at Nokia would be the hero and streets  in Salo, Tampere, Oulu, Espoo and Helsinki would be named in his honor. He would be thought of as the second coming of Jorma Ollila.

OPTION THREE - LUMIA STAYS

So lets do the split. Why not give to Nokia what they want, and leave with Microsoft what logically they could still use. Keep Lumia with Microsoft. So in this scenario, we sell Nokia the dumbphones business, and about half of the smartphones business, and the Nokia brand rights on the smartphones and half of the smartphone factories. But keep with Microsoft the Lumia brand and two factories and some R&D and some sales and marketing. An easy split would be looking at the new segmentation just announced. So what is the synergy part of new Microsoft handset business? The enterprise business. There is a logical overlap with Surface and Office Suite and secure enterprise stuff. So take that part of the Lumia business which is targeted at enterprise ie business users, and keep that with Microsoft. And the ‘hero’ flagship Lumia, which is clearly consumer oriented, dump that heavily contested, impossible-to-be-profitable and totally dependent on carrier support (and consumer apps) business? Dump that loss-making albatross back to Nokia. And obviously let Nokia do with it as it will, ie switch immediately away from Windows to Android.

First off, Nokia doesn’t want an Windows anyway, but some at Microsoft - including to some degree Chairman Bill Gates - want Windows 10 Mobile and a mobile future. Nokia could not be trusted to give any wholehearted support to that because of the past, so keep the Lumia side, but only the enterprise focus of it, that keeps Windows and Lumia alive, as a niche play, alongside Surface. If Microsoft keeps 2,000 staff and two factories and mostly those sales reps who served other PC channels like Microsoft VARs (Value Added Resellers) but release the consumer side of Lumia to Nokia, this is not a clean break but one that is pretty sensible nonetheless.

This way Microsoft can continue with the Lumia and Windows 10 Mobile into the near future with truly a modest investment and involvement. If it fails, it can easily be absorbed into Surface with really no meaningful layoffs. But if it succeeds, there is ample capability to design, manufacture and sell Lumia in the 1% market share level and probably do it profitably too. And as a Jedi Move here, Nadella could even rebrand the Lumia to Surface smartphones, because Lumia looks and sounds a lot like Nokia, but Surface has a pretty good reputation in the tablets space and is clearly associated with Microsoft. So for example, as Surface has keyboads and Lumia never did, if they now bring in enteprise-oriented smartphones on Windows Phone 10, that look like old Nokia Communicators with QWERTY slider/folder keyboards, this could be a good point to extinguish the consumer-oriented neon-colored Lumia that seems so Eloppian and Ballmerian, and go formal, business-like, metals, dark colors, blacks and rebrand to Surface. Just a thought.

And now Nokia gets the consumer-facing Lumia business and the dumbphones business. For those who remember old Nokia smartphone model lines, this is like splitting Nokia old smartphones into N-Series consumer smartphones and E-Series enterprise smartphones. Nokia now gets to see the return of N-Series while Microsoft gets to keep the E-Series. A logical divide, if we want to go by Nokia history and also, a logical divide by Nadella’s new segmentation split. So lets say this package shifts to Nokia four out of six factories and roughly two thirds of the remaining sales force and most of the R&D. Nokia would ramp down the the Windows Phone smartphones, rush the X Series into production and bring the new designs into the market by next year.

The logical price for this scenario would be something like 1 Billion dollars. Again, a bargain both ways. Microsoft gets to ‘keep its cake and eat it too’ ie it gets to keep Lumia and Windows smartphones, while being paid nearly its full book value by Nokia who take the dumbphones part and only a ‘small part’ of the smartphones business. As Nokia was coming on Android next year anyway, why not collect a ‘tax’ out of that. And Nokia could easily commit to say no Android phones before January 1, 2016, so Nadella gets some cover as that is the year that Nokia was coming back anyway. And Nokia can’t turn on the Android production and sales overnight anyway. Nokia market share and profit development would be identical to the above. A significant choice in employees would be that all old Nokia staff would go back to Nokia and all the recent hires into the Windows Lumia world of smartphones would stay, as a general rule. Would make a lot of sense that way. But in general, let the two compete, Microsoft continues with Lumia refocused to Enterprise on Windows Phone OS aka Windows 10 Mobile and Nokia relaunches on Android in the consumer space (initially) and eventually of course also into the enterprise side. Microsoft’s best bet would be a Blackberry-sized success out of this split but they could make a 1% or 0.5% market niche become profitable, yes, that is possible.

OPTION FOUR - THE NOKIA WAY

Nokia was always the nice guy. They really really were. Always. Not that they are somehow an altruistic company no, but they were the nicest. In a cut-throat business, Nokia tried to cooperate with competitors, and tried always to negotiate and to find win-wins. So if I was thinking what is the elegant way, the Nokia way, and one that is consistent also in a newer kinder Microsoft way, then why not find the best of all worlds.

Microsoft has invested enormously into the Windows mobile dream. There are tons of smart people who have poured their hearts into this. It is not a bad OS and the Lumia phones are good and there are now plenty of apps too. If Nokia got its business back now, at a fair and vastly discounted price, why not then do the nice thing for Microsoft.

So this is my dream scenario of the deal. Sell the whole phones biz back to Nokia, with all the rights. But in the deal, Nokia commits to launching those rumored six Lumia phones next year, branded Nokia Lumia, running Windows 10 Mobile, and for 2017, two years from now, commit to two more new handsets, one premium and one mid-price. This gives Nadella the clear commitment that Nokia is not abandoning Windows 10 Mobile and will be there for two more years. And clearly a handshake gentleman’s deal between Nadella and Suri, that if there is any demand past 2017, Nokia will continue providing Windows based smartphones and sell them fairly in those markets where such demand exists. There is no bad blood between these two new CEOs so there is no need to pay back any debts or prolong any blood feuds.

There is some lingering business for Lumia definitely. Windows 10 Mobile is a clear step forward in the evolution of Windows Phone which was deficient at its start but is now reasonably robust and competitive OS. Why not, as the investments have been made to design for this platform, keep that alive for two more years, and see how it goes.

But obviously release Nokia of any other limitations, so they can go back to Android immediately and get all their factories and all the R&D and staff and offices back. And Nokia would launch Android phones, first the three X Series in early 2016, then the newly-designed flagships on Android, but also release every two months another new Lumia during 2016, and once per six months another Lumia model in 2017. Nothing wrong with that, Nokia can handle this easily if it doesn’t force Lumia on its customers as the only choice, most will take Android but some will take a few Lumia as well. They also see Ballmer is gone. And if Satya Nadella really wanted to lift the ban on carriers supporting any Windows smartphone sales - carriers do want a third ecosystem - then if Nadella sees at some point in the coming months, that Skype is not really vital to the future of Microsoft either, if he sold Skype, that would open the door for Windows 11 Mobile and Samsung and HTC and Huawei and others to return with some interest. Just a thought...

Microsoft totally doesn’t want the handsets business. The dumphones side of Nokia is going to die in five years definitely, four years likely. No business left in it. Totally dead. Why not sell that now, and one buyer only exists who would want to buy it - that is Nokia.

If we’re talking with Nokia, new Microsoft CEO doesn’t believe in phones, new Nokia CEO wants to return to phones, why not then sell it all, or at least sell part of the smartphones business as well? Nokia wouldn’t mind at all if Microsoft kept a part of the Lumia business, especially any hires during Elop’s era because many of those are brainwashed microbrains anyway. Nokia could even say lets split the staff by hiring date. All hired from 2011 stay at Microsoft (the corrupted ones) and all hired up to 2010 return home (the true Nokians). I’m guessing that would be on the smartphone side roughly half of the staff haha. Obviously all dumbphone Nokia people would get to go back home.

Or sell it all back to Nokia, and really, I think there would be no resistance in the negotiations whatsoever for Nokia to commit to minimum levels of continuing Lumia support so that Nadella had his out on this issue, Nokia continues as a Windows partner for at least two more years. Why the hell not. Nadella doesn’t want this business. Its not going to turn to profits at Microsoft in two years ANYWAY, and Nadella already now sees the writing on the wall, this business has to be terminated anyway.

And for Suri? He gets to bring back the lost boys and girls. Can you imagine the level of loyalty and commitment and gratitude and hard work he would buy from this lot of saved Nokians” Samsung better watch out, this team would be chasing Samsung’s lead as early as 2017....

AND A FEW PRACTICAL DETAILS

 

So lets say this happened, I think Scenario 1 absolutely should happen for both sides and some kind of weird karma would need to occur for at least that to be denied. Microsoft has no need for dumbphones, Nokia wants to get back to phones, why not effectively sell the permission for Nokia to return fully to smartphones, if it takes the soon-to-end dumbphone business (and last remaining Nokia branding) off Microsoft’s hands. If Microsoft still keeps the smartphone Lumia business, and Nokia pays something for this little unnecessary bit, then why the hell not.

Then in those negotiations the other three Scenarios would also be approached. I think the most likely one is Option 3, Microsoft keeps only a part of the smartphone business, focuses remaining Lumia to the enterprise and Nokia gets back the rest. Still a bargain price for Nokia’s old business and Microsoft can attempt to make something out of the most promising part of Lumia and Windows 10. My fave is Option 4 obviously and with new CEOs in charge, both wanting to turn a new leaf, that could happen.

But regardless of which it was, lets look also at a few obvious steps it would mean. The Nokia handset sales staff is second to none, pure gold. The Nokia hardware R&D people are unmatched too, truly excellent. Other rank employees mostly good too, and as there have been so many stages of layoffs, any possible dead weight in the general staff has been cut quite a while ago. So for the staff, this is some of literally the best on the planet. But senior management of what remains of Nokia, the ones reporting directly to Elop or one level below that, these are utterly worthless. The ones with real vision and backbone stood up to Elop, were fired, or resigned in protest, years ago. The last ones who lasted are not brilliant executives of phone business, they are survivors and career politicians who are only good at kissing ass and saying yes. They are worth less than nothing.

 

And if Nokia took back any part of the business from Microsoft, the top management part has to be immediately let out to pasture. Offered generous retirement packages, part-time consulting gigs, some nonjobs in community outreach or PR or strategic planning, and not let anywhere near where adults make decisions about the future of the new division at Nokia. And they must be stripped of all staff. They are seen as traitors by the staff and middle management, cronies of Elop and part of the cancer. So when Nokia takes over the business, these in top management must be reassigned so that they cannot do any more damage.

First who to run this unit. Rajeev Suri is a networks equipment guy and has his hands full with the Alcatel-Lucent integration etc. He needs someone really strong to run the new Nokia handset business. Obviously the best man would be Anssi Vanjoki who also rather obviously would turn this job down because he was in the CEO negotiations before, so he wouldn’t take a job now to report to a new CEO. But Anssi knew the landscape better than anyone else and Anssi knew all the best talent back before the Eloppian cancer entered the company. So what Nokia should try to do, is to get Anssi to come advise and help set up the top management and help in the selection of the VP to run the phones business. Anssi could be offered a Board Member position in return and he might even be agreeable to act as an interim President of the Handsets Division while the new top guy is being recruited.

 

Other obvious top talent to help with that is Pekka Ala-Pietila who was Jorma Ollila’s first choice to replace himself as CEO (which later went to Olli-Pekka Kallasvuo the CEO who failed at that job before Elop). Another mind of great capacity in understanding Nokia handset business is Jean-Louis Gassee who also should be brought in to help in building the top management. None of these three are the guys to do executive management at a VP level (too expensive for one) but top managemnet is absolutely vital and we know that Elop forced all smart guys out, but also many purely opportunistic ones left too. And such people might be fastest to try to return (having now lost any credibility at their newest jobs) so particular attention would be needed not to hire the worst of the old gang back.

The ideal boss of handsets, to be number 2 guy at Nokia overall, and Executive VP or President of Nokia phones, would be a star of the previous top tier, who left, who now returns. But also, an outside pick could be someone from the carrier community. It should not be a networks guy (unless he/she was with phones up to about 2010-2011). And it cannot be anyone who is now with Microsoft. A panel of Vanjoki, Ala-Pietila and Gassee could do the advising on this, come up quietly with a short-list and then do the contacts. Obviously Suri would make the final decision. But Anssi, Pekka and Jean-Louis would know everybody and would easily see who was not of this calibre. The team coming back to Nokia, after five years of Elop, need to be seen as something like the return of Steve Jobs was at Apple, trusted by all, to come run their business, someone all old hands at Nokia instantly respect and one that they know, that was a brilliant choice. And the kind of legendary name, that when the younger people ask, who was that, the older Nokians can tell with pride and respect old war-stories about when we were fighting for the Vodafone contract and...

After the boss, then next tier of senior management Vice Presidents and Directors. Where to get these? Not from current Microsoft-Lumia middle management, I’m sorry. That includes highly competent staff who did a heroic job on behalf of their teams, and also career politicians who only survived. Too much a risk. The best talent of Nokia handset top management are those who resigned in public, in protest, in 2010 and early 2011. A good time frame is three months from the Burning Platforms Memo. Anyone who resigned from a top managemnet, Vice President or Director level position by April 2011, from the Nokia handset side, those are persons of personal courage and persons of integrity and backbone, who saw the best for Nokia and tried to save it, and took the gravest sacrifice possible. They abandoned a top management career rather than follow a lunatic CEO. They are where the best top management skill was. Many have found new lives, some are too old now, but also many truly loved Nokia and if offered a chance to return, would love to do so. It would be a smart move by Nokia to contact those who resigned by April 2011 and ask if they’d want to come back and do the old job or something similar (or even better) and at roughly the same salary and conditions. Even restore any abandoned bonus clauses, earned vacation days, stock options and the like, so treat the past time as if they took a long sabbatical.

Then after that, is the second tier of exits. The smart top and middle management who read the Burning Platforms memo understood that Elop was a madman and they left. But most did not leave in a public protest, they just ‘happened’ to receive soon thereafter a nice job offer at Finnair or Kone or Yle or whatever big Finnish corporation. Highly talented top and middle management who wanted out, but were smart about it, to do it quietly and as if it was just coincidence and they actually were thinking about changing to a totally different industry. Bullshit. They were afraid of what was coming at Nokia and saw the writing on the wall. They often took huge salary cuts and diminished jobs just to get out. Some are in very nice lives today. Others hark back to the good old days at Nokia. Here is the second tier of top managemnt candidates. Not polluted by Elop, know how to win in handsets, fierce fighters, performers, whose track record is documented in years, even decades of Nokia personnel files. Here is the rest of the early top management hires. All traditional old school Nokia execs who knew how to run a highly successful handset business profitably, in the face of competition from Apple, from Samsung, from the Chinese makers etc. Bring them back.

And the soul of the best of Nokia still lives on. Its not people who carry Microsoft business cards today. The soul of Nokia topmost handset design excellence is huddled in a sanctuary, a little-known cult, a lifeboat, a fanatical group of partisans in the woods, still fighting the good fight. Their numbers are small but the fire is fierce and the loyalty is unquestioned. They are the soul of Nokia. We know them as Jolla, the company making one smartphone model that runs on their OS called Saiflish. Sailfish is the son of MeeGo, grandson of Maemo and Moblin, its the older smarter brother of Tizen. Like Android Sailfish is Linux based. So the handset designers at Jolla know how to make Android-compatible phones. And they have kept the faith of pure Nokia brilliance. But Jolla, their little lifeboat, is slowly sinking and this crew does not have much life in them anymore. They have just announced that the company will end the handset manufacturing side to focus on just keeping the Sailfish OS going on. Well, if Rajeev Suri wanted to find the best collection of a handful of the world’s best smartphone designers, as a bunch, who all did Nokia before and all know Linux and all know how to make flagship class superphones that all loyal Nokia users will love, this is it. They are in Finland, and I am sure that Jolla would love to do some skills transfer, let its hardware guys go ‘back home’ to Nokia while the software guys continue on at Jolla doing Sailfish, and perhaps Nokia could even inject a little investment of cash into Jolla in exchange to help them stay afloat with their little OS dreams...

The core staff employee level and sales staff that used to be with Nokia and now are with Microsoft, they are the best 7,000 people in the mobile business. They are pure platinum and any one would love to return to Nokia and rebuild the business. Absolute top notch heroes who have had a rough few years. Every one immediately worth taking back. Their bosses in middle management, perhaps half career diplomats and politicians who played for personal gains and half exceptionally good managers under incredibly troubled times. They deserve to keep their jobs and prove their mettle in the transfer. The top management who survived Elop for five years and reported directly to him or one level below, those are the traitors, the spineless bums who should be fired but in the transfer, those who come back, should just politely be reassigned non-damaging job duties with nobody to manage. A non-job, until they get the message and find a way out of the company. That layer has to be eliminated totally and replaced. Not with promotions from the bottom, not now, maybe later, but now it has to be with the best talent that was, the ones who were brave enough to depart. And the top handset design office, should be bought back from Jolla and made Nokia’s top design ‘skunk works’ to create the next iPhone-killer (after all, these are the folks who designed the previous iPhone-killer from Nokia, the N9 on MeeGo, launched in 2011, the only phone ever that regularly beat its contemporary iPhone in tech reviews, by any manufacturer, but the phone that Elop refused to sell in any major markets).

My thoughts on an idle summer Saturday and slow news day.  

Comments

[Tk]

@WayneBorean : whats the catch for nokia to sell jolla (labeled) phones?
Definitely if Nokia wants to re enter as a winner, it needs to differentiate. It has deep pockets (thanks to - and God forgive me - Elop), so they would have a chance.

[RottenApple]

@Tk:

No, sorry. Nobody will have any chance with another incompatible operating system. That's just naive dreams of clueless people. 4 years ago it would have had a chance - but now it's too late.

[Lullz]

@RottenApple

"No, sorry. Nobody will have any chance with another incompatible operating system. That's just naive dreams of clueless people. 4 years ago it would have had a chance - but now it's too late."

According to PWE new platforms do not need apps in the first 12 months of sales. If this is true, Nokia could actually use Sailfish OS.

[Tk]

@RottenApple: compatible as in android?
Iirc, jolla has support for android.

[Catriona]

@Wayne, for once I agree with RottenApple. At this stage, it doesn't matter whether an operating system is "better" than iOS or Android (whatever that means today). Those two are entrenched. Nokia could return as an Android OEM but they aren't going to be launching a different OS.

[Tomi T Ahonen]

Hi Everybody

Wow nice discussion here for a weekend blog posting... haha I thought it might provoke a bit of debate. Lets do responses

Per - haha yeah, but Yahoo could maybe want it (and have nothing to lose as it doesn't rely on carrier relationships)

Wayne - very good point that I hadn't even thought of (MS doesn't sell to competitors) but that is historical Microsoft and this is a new era. It might happen now under Nadella.

winter - good point and in the IoT race they have no need for a legacy dying loss-making smartphone (and far less dumbphone) business.

Louis - on Jolla, Nokia really wouldn't need the software compentence as Nokia wouldn't want to try now to create any OS platform so they'd really only need the HW side of Jolla. On licencing, yes, that is the least risky way but that also gives least upside potential and greatest danger that the last strengths of Nokia brand are ruined by more companies not in Nokia's control. Its not like Apple's iPhone where they do everything except the manufacturing, there Apple retains the consumer-facing brand image, but if Nokia has to go with the current deal with Microsoft ie Nokia isn't allowed to market and sell smartphones on its own brand next year, and has to licence all of that, then it does threaten the Nokia brand (in consumer space) even more, but also, there would be almost no risk to Nokia corporation to have any big losses if that venture doesn't succeed.

E - you know fully well there were no numbers released into the public domain. You also know fully well that those numbers are with Nokia HQ and if they were bad, Nokia would have let the official denial - there won't be any smartphones next year - stand. Instead, Nokia CEO rushed out immediately after Elop was fired to admit, yes Nokia is coming back next year. The only reason Nokia would pre-announce such a big move is that the CEO is confident this is going to be done and it will succeed - inspite of the disasterous history of Nokia brand in smartphones of the past 5 years. Remember Rajeev Suri is not a handset guy pining for that past, he is a networks guy and after the total break, Nokia dumping all its phone business in Microsoft's lap, this is a very deliberate and thoroughly-planned return.

As to Leo Apotheker, yes there have been many bad CEOs but this kind of situation, a major corporate deal between two companies where both side CEOs are moved from their posts almost immediately after the deal was concluded, that I think - and I have not researched it so please do correct me if I'm wrong - I think this is a first in Fortune 500 size corporate mergers and acquisitions.

Another - fair points but if Nokia was clearly done with the consumer electronics side, then why bother with an Android tablet and now add to the portfolio as fast as possible with next year's licenced smartphones? And why would the CEO rush to tell the world this early they are going to do that, a year before the smartphones are sold? It seems like a big hunger to return (to me). As to this scenario, yes, its Hollywood and its likely not going to happen but when I have had speculation about mergers and acquisitions on this blog (rarely) mostly the entities discussed have later confirmed that there had been talks. Like of the Nokia sale before the Microsoft deal, and that Motorola would not stay at Google, or the speculation around a Blackberry sale, or of Sony sale/non-sale, and of Palm's sale(s) further after HP didn't want to do anything with it. I don't have any inside knowledge from either side about THIS deal but again, my gut says, this would make sense, and because this would make sense on BOTH sides, and both CEOs seem to both want that direction I write, and both CEOs have ALREADY made deals in their brief tenure, I don't see this as implausible. Possible yes, likely? Probably not, but don't be surprised if something like this happens in the next 6-12 months.

Juan - good points and that would have been seen as heresy under Ballmer haha

Symbolset - haha very funny. But seriously, a Ballmer (or Gates) or Elop (or even OPK) in charge, I don't see it happening. With these new CEOs wanting to set a new direction, why not. They might act rationally haha...

Spawn - haha good answer and on Bush-style madness and nuke wars, there is a current article at Vice, entitled literally 'Now would be a good time to launch a nuclear attack on Russia' - I am not kidding. Its by Ezra Kaplan, a very smart military analysis of why a 'Pearl Harbor' style attack might work in the coming months because Russian early warning systems are being upgraded and their satellite-based element is down for several months relying only on ground-based radar that has far less warning time. The article is here

https://news.vice.com/article/now-would-be-a-pretty-good-time-to-launch-a-nuclear-attack-on-russia

... and while I don't read Vice regularly, I read Real Clear Defense almost daily so its one of the periodicals that RCD monitors. And if anyone at paranoid Russian military and Putin regime want to show 'proof' that the USA is the aggressor and global military threat, haha, an article saying 'now is the right time to nuke the Russkies' by a 'mainstream' publication is something they can milk for propaganda hype for months to come. (But its an interesting article nonetheless, and of course it says the US cannot and will not attack unilaterally with nukes against anyone). But haha, funny coincidence with that title - I don't remember ever reading an article with such a provocative title before and I've monitored the superpower balance of power for literally over 40 years.

Ok will post these and more replies coming

Tomi Ahonen :-)

[Tomi T Ahonen]

Continuing responses

E - very good point, I can't remember this ever being done, but there HAVE been instances where later management admitted to missing the opportunity that was in their hands. Like for example HP's purchase of Palm and then abandoning that project. Or Microsoft's purchase of Danger, launching the new phones under the Kin brand, then killing Kin and later buying Nokia instead (ie coming back to business it abandoned). Coca Cola - New Coke - Coca Cola Classic arguably was a similar reversal but far faster. So its not like that is unprecedented in general but not ever at this level, I totally agree.

But that being said. We on this blog KNOW why the Nokia smartphone business suddenly collapsed. It was not because the phones were suddenly outclassed or suddenly undesirable or suddenly exploding in pockets or radioactive or suddenly nobody used phones. All of Nokia's visions in 2010 proved 100% correct and the business late into 2010 was growing and profitable and dominated the smartphone industry more than HP or IBM or Apple had ever dominated the PC business. Its collapse was not because of normal business forces, it was madness in management. It was self-inflicted wounds.

We also know having monitored it here closely as I warned my readers including of course you E, who have been here to watch closely as that catastrophy unfolded, why all Windows Phone based smartphones failed and furthermore why Nokia's own Lumia business failed. We know why, its not because nobody wants Nokia anymore, or because Nokia didn't have phablet-sized screens, good cameras, lasting batteries etc. It was the carrier boycott. So from Nokia management point-of-view, they see this as a (possible) instant recovery. Imagine how heroic that would be seen, Nokia returns to smartphones and succeeds where Microsoft failed. A true 'Steve Jobs' moment of returning this business to healthy profits and growth and doubling the market share in 18 months. The story would be of legends.

If Nokia would say repeatedly 'we are done with consumer electronics' and they only focused on networks and instantly quashed any rumors of a smartphone return, I wouldn't entertain this Hollywood ending here, but there is clearly a desire for Nokia to show, it wasn't them. It was not Nokia who failed, it was Microsoft and Windows and Elop who failed. Nokia can win. And once they DO come back, they want to become top dog again.

I think its one or the other. Either they walk away completely like automobile tyres and toilet paper and TV set-top boxes and Mikro-Mikko PCs etc. Or they come back and then they want to WIN. If they have to wait, and go the slow route, licencing out the Nokia brand to third parties, I would bet those licencing deals have an end date on the exact month when Nokia is then allowed to sell and market its own smartphones. There are no guarantees in business, but a Nokia Android smartphone sold in China, India, Brazil, Russia, Italy, Spain, France, Germany, South Africa, Indonesia, Nigeria, Egypt, Pakistan, Philippines, Vietnam, Ukraine, Mexico, Argentina etc - would be one of the bestselling Android smartphones in those markets in a matter of months. The Nokia brand is intensely loyal there and the markets are mostly Android and Nokia holds a huge premium brand image. In India last year, only last year, Nokia's brand image fell from number 1 position to number 2. Not as a PHONE brand. As the TOTAL brand across any industries ahead of Mercedes Benz and Nike and IBM and Coca Cola. Its still number 1 overall brand in Nigeria. Etc etc etc. And the carriers have told Nokia, if you give us an Android smartphone, we will buy it.

The main question is, will Nokia come back the slow way through its current deal, or renegotiate that deal, perhaps in ways I discuss here, and help Microsoft exit the phone making business, and expedite Nokia's return to smartphones. Its return to smartphones is obviously already announced so that is unstoppable.

Tk - good analysis but Sailfish OS makes no sense at all for Nokia now. It cannot risk failing again. So it has to go with the safest option in OS and that is Android. And then why would Nokia need the SW competence from Jolla? Now.. a REALLY Machiavellian world-domination plan (assuming the Microsoft deal first goes through in one of the ways I outlined) would be to invest in Sailfish now to keep it alive for 3 more years, and if Nokia can get to 7% by 2017 and still grow, and start to target a 10% market share window for 2018 and beyond, THEN it starts to make sense to fork out of Android, especially if Sailfish can support native Android apps - and bring back a vision of MeeGo/Jolla/Sailfish as a premium iPhone-killer 'super Android' that also runs Linux but is a Nokia vision of the future of smartphones but through an Android fork. That to me is the only way that Sailfish would make any sense for Nokia and is subject to a whole series of things going perfectly for Nokia before that (and for Sailfish to survive - and evolved - during the same period). This is highly unlikely. But as this blog is a Hollywood ending then yes, of course we'd love for that Jolla effort to end up around year 2020 to be proven to have been worthwhile, after all the troubles and tribulations. But no, not likely at all. Hardware side of Jolla team, definitely could help Nokia.

But yes, an angle I hadn't thought of, Jolla to licence the Nokia brand and be a Nokia design manufacturer on Android? It would be VERY credible as a 'real Nokia' house and they have been doing the visits trying to sell the Jolla phone to carriers and distributors. That might be an interesting twist to how Nokia does the licencing part which could include all sorts of contract clauses allowing Nokia then to purchase the Jolla (hardware) business once the limitations from the Microsoft deal end. But Jolla of course doesn't have its own factories so its only the marketing organization, the Jolla phones are made in China anyway.

Per - totally agree, HW makes sense not SW but then, only if the Microsoft exclusivity clause is removed through a newer superceding contract between the two giants.

TK - no factories only HW design team.

Wayne - Nokia can't sell Jolla smartphones branded as Nokia. If Nokia sold Jolla as Jolla, it is only Jolla. The power is the Nokia brand. Nokia should not dilute that brand at all anymore, more than is strictly necessary (because Nokia is coming back, that is the strongest asset it definitely has, assuming it can't get back part or all of the sales organization from Microsoft). So selling Jolla as Nokia is not allowed, Nokia selling Jolla doesn't make sense. But hiring Jolla HW design team to design the 'next N-Series flagship' for a 2018 Barcelona launch - that would be a Jedi move.

zlutor - Good points and no, this would not be without costs but Nokia does have money in the bank. It does depend a lot on what Rajeev Suri heard from his clients. Obviously if the market has died and nobody other than Apple can make profits in the new era of smartphones, it would be stupid for Nokia to return and as any Nokia handset return would be massive tech news, he can't hide from it either. It will be monitored and if he goes that route, he has to be 100% certain it will succeed. So why not wait until he has the phones designed, the partners signed up, the release date is a few months out, and its a big trade show like Barcelona? Why not wait until then? If there is uncertainty and doubt, that is the smart move. On the other hand, if the carriers have been begging this and Rajeev Suri has said he'll be doing it the moment it is allowed by the contract - in that case he HAS to keep his customers satisfied that this is coming. Else they may commit to all sorts of deep long-term deals with say Samsung or LG or Huawei.. But saying in public that yes, Nokia is coming back - that is a signal most of all to the CEOs who have been burned by Nokia promises during the Elop times, and need now clear reassurances that the old Nokia is back.

It may also be related to some very quiet ongoing negotiations between Nokia and Microsoft. Remember the leaked story that Nokia is coming back with Android next year. then the USA Nokia office issued an official denial (and I mentioned it here, that isn't it odd that the official denial did not come from Finland). And then Elop is fired, then Nokia CEO says he will return to smartphones next year, and now Microsoft writes off 90% of the book value of the handset business. It COULD be necessary steps in a deal that was already agreed by handshake level around April haha... Certainly Nokia's future reputation with the carrier community needed Elop completely gone and humiliated (as well as Ballmer who also meddled in those sensitive carrier handset purchase negotiations). Nokia can now safely say, we are going back to how we were, the OS will be Android as you wanted, and no Windows and Elop the man of all the broken promises is run out of the whole industry. Lets talk how we can rebuild...

Maybe I am reading too much into it, but coincidences always smack to me of something smelling..

Rotten - nearly agree with you. I agree that Nokia cannot come with a new OS now. I agree to the degree that anyone 'too small' today cannot launch a new OS. But the one exception is Samsung who has more than a fifth of the market. They are large enough that they can try the new OS path, as they are with Tizen (and you may have not meant Samsung because Tizen is already created and launched). But other than Sammy today, I agree, nobody else has a chance with introducing a new OS today. Too little too late. Most of the last remaining OS platforms will also die, not survive, meaning Blackberry, Windows, Firefox, Ubuntu, Sailfish etc. Blackberry might survive as a niche OS only for enterprise (but unlikely). Firefox is a very dark horse because they abandoned the low end and have rally no place now to go. Windows is dead. And apart for those, Tizen is not in any way guaranteed to survive either, it takes TONS of effort from Samsung which they still haven't shown they are in any way seriously pursuing.

Lullz - the argument about apps in the first 12 months is ever less true going forward. It was 100% true in 2007 when the iPhone didn't even allow apps to be installed, but that argument is becoming ever less true as we go forward. And it depends a lot on the market segment. A premium phone (like Nokia returning to smartphones) absolutely needs apps, a low-cost entry-level sub 100 dollar smartphone brand doesn't necessarily need them, at least not a huge range of apps - but it helps. And then over time, that app portfolio has to grow if the platform is seen to have life. Hence say Firefox, Ubuntu, Sailfish - are so troubled because of the chicken-and-egg situation, nobody makes apps because there are no users, and nobody buys the phones because they noticed there are no apps.

(I'll leave Baron's standard comment to be, no need to reply to it, thats his long-held view)

ok keep the discussion going

Tomi Ahonen :-)

[Per "wertigon" Ekström]

@Tomi (about 12 months of Apps):

Yes, today it's nearly impossible for any small fry to introduce a new ecosystem. It could be done, but it would require either:

a) A top-five manufacturer putting significant support behind the platform/ecosystem (and remember Nokia is not even top 10 anymore). Today only contender is Samsung/Tizen, and Samsung is only giving it lip service which doesn't bode well.
b) A shitton of money, competent people and nothing to posison the well (e.g. Skype). And yes, Windows would've had far better chances if Microsoft didn't buy Skype.

However, back at 2011, Nokia was still the largest smartphone manufacturer. For them to throw all their weight on a new, non-poisoned OS, the apps would've come to them, most definitely. There was also a window for new ecosystems, closing fast but still available, even for small fries. If Ubuntu had released the phones it now has, in 2011, it would've seen a fighting chance. Today it's too little, too late.

And yes, Nokia did throw all their weight on Windows, which was a risky but viable strategy - and then Ballmer bought Skype and poisoned the well, and the rest is history.

[Spawn]

> 'Now would be a good time to launch a nuclear attack on Russia'
> https://news.vice.com/article/now-would-be-a-pretty-good-time-to-launch-a-nuclear-attack-on-russia

In the long run we probably need something similar to the Darwin award to reward this kind of "all-in war of ecosystems" ideas.

My proposal would be an Elop, "First you must believe in yourself" (if nobody else does), call me the Sun Tzu General, award.

> Or Microsoft's purchase of Danger, launching the new phones under the Kin brand, then killing Kin and later buying Nokia in

Talking about Danger & Kin; So, Andy Rubin did two companies:
First Danger, who had a rather popular device in the market back then, bought by Microsoft, resulting in Kin. Killed two weeks after product lunch cause of total market fail. The team behind that moving on to develop that "successful" Kin-design future (now known as Metro) when working on WP7, WP8, Windows 8. As we see such a "line of success" that the dev-head responsible back then for aborting CE, years of WP7 development that gave Android the opener to take over, got *rewarded* for this by leading now, under Satya, Windows+Devices. Wuth?
Then Andy Rubin did his second company, Android. They never had a product, bought by Google, went dark for years, resulting years later in tge Android smash-hit.

Draw your conclusions :-)

[Winter]

@Spawn
"Draw your conclusions :-)"

MS have always been the anti-Midas: Whatever they touch rots to dust. Being bought by MS was an almost certain death sentence for technology.

After they established their Windows/Office monopoly, nothing else MS did delivered a positive ROI. Actually, only the Xbox was able to deliver at least a positive operational result at the cost of billions of lost investments.

All "partners" of MS were severely damaged or destroyed one way or another. Which already started with the infamous MSX home computer in 1983.

[Spawn]

@winter

> Whatever they touch rots to dust

Very true. Whats interesting about the Andy Rubin Kin/Android case is also that within Danger/Microsoft he didn't took the product lead, and that while he proved(!) that they had a successful device(!!) whats why Microsoft bought them(!!!). Then within Android/Google he was the lead and delivered. Then we have candidates like Ballmer, Elop, Myers, Belfiore, etc. that somehow made it within Microsoft to the top beside there track-record.

Some scary insider-view:
http://www.slate.com/articles/business/moneybox/2013/08/microsoft_ceo_steve_ballmer_retires_a_firsthand_account_of_the_company_s.html

[RottenApple]

@ PWS:

"And yes, Nokia did throw all their weight on Windows, which was a risky but viable strategy - and then Ballmer bought Skype and poisoned the well, and the rest is history."

It wouldn't have helped anyway. Remember: WP had already comprehensively failed to capture any market share before Nokia got in. So, Skype or not - they had to fight against a non-buying public. Skype may have contributed to WP's ultimate failure but its main undoing was a UI that people universally seem to hate.

This was a product nobody wanted to own so it was easy for the carriers to sabotage its prospects. Had WP been popular like the iPhone all their manipulation wouldn't have helped. People would have voted with their wallet and shopped elsewhere.

[zlutor]

@Tomi: "Maybe I am reading too much into it, but coincidences always smack to me of something smelling.." - I wish any of your option come true. I like Nokia as company, its values and its approach to bring global solutions for all not just for the richest 5-10%...

And I'm really getting fed up with this Silicon Valley bullshit and superiority thingies so it would be really good to have something clearly setting those things down. Due credit where credit is to be due - regardless its in the US or anywhere else...
Sorry B95! :D

What I was concerned about whether Nokia will have those cash reserves after merging with ALu? That will cost a lot I guess...

[Interesting]

Somewhere on the otherside of the Internet....

"“Apple Inc. recorded 92% of the total operating income from the world’s eight top smartphone makers in the first quarter, up from 65% a year earlier, estimates Canaccord Genuity managing director Mike Walkley,” Shira Ovide and Daisuke Wakabayashi report for The Wall Street Journal. “Samsung Electronics Co. took 15%, Canaccord says. Apple and Samsung account for more than 100% of industry profits because other makers broke even or lost money, in Canaccord’s calculations.”
“Events last week highlighted the lopsided financial picture,” Ovide and Wakabayashi report. “Apple is asking suppliers to make a record number of new iPhone models. Meanwhile, Samsung forecast disappointing profits, HTC Corp. reported a quarterly loss, and Microsoft Corp. wrote down 80% of the value of the smartphone business it acquired from Nokia Corp. last year… The results demonstrate the rapidly shifting fortunes in the smartphone business, which Apple transformed with the iPhone in 2007.”"

[Spawn]

@Interesting

> more than 100% of industry profits [...] in Canaccord’s calculations

Thats creative to base percentage on something else then 100%. Probably even more creative then them leaving somehow certain participants out like all chinese, Google, etc.

So, why didn't they just calculate that "Apple makes more then 100% of the industry profits"? It wouldn't even be wrong if industry refers to the Apple appstore industry and 100% to more then 100%!

[b6]

i.e., "Let's get the old band back together again"

[RottenApple]

@Wayne Brady:

I think your post is a textbook example for the rule not to discuss Apple's profits. Nothing good can come out of it.

Regarding Apple's market share: Assuming that all players act sanely, yes they did peak. Of course, if someone acts insanely and as a result has a bad year (Samsung, I hear you!), of course there can be some mild fluctuations.

But as things stand, the iPhone growth will end - be it this year or next year doesn't matter. And when it happens it will cause shockwaves among the gullible fools who seem to believe that Apple's growth potential will be endless. The really interesting thing is how this will affect Apple's reputation. With the hypergrowth of the last few years it's nearly inevityble that some stupid investors will take the current trajectory for granted and panic if it ends.

[Interesting]

"@Interesting - from my understanding, this blog sets the score on marketshare only, as long as there is some profit involved."

Yes. I am talking about the market share. Market share of money. ;)

[Winter]

@Interesting
Apple have been raking in obcene profits for years now. And they let the money rot somewhere. Sounds a lot like a leech on mobile. People work hard so Apple can let theor money rot.

Just an alternative view on the economy.

[dickon]

One of Microsoft's big problems -- and I believe it's probably the biggest non-carrier reason for the failure of Windows Phone -- is that they don't understand their own brand. Microsoft have desperately been trying for years to convince people that they're a consumer brand: they're not. Consumers know Windows as that annoying, badly-written, buggy, confusing thing they have to use at work, and want nothing more to do with it, thankyou very much. It's very telling that adverts for the Xbox (which was an internal code name for something Ballmer allegedly wanted to call the 'Windows Gaming System') featured a very prominent 'XBox' logo and slogan, with a much smaller 'Microsoft' logo buried in one of the corners in a light grey font.

Notice also that there are good numbers around showing what laptops people buy when they're given a choice by their employers. IIRC, about 80% of the time it's Apple kit.