Where Next for Microsoft? - As the mercy killing of Lumia and Windows Phone will happen in next year or two, what impacts to Microsoft world domination plans?

Two days ago we heard that Microsoft cut yet again more of its ex-Nokia employees. And tons of well-minded analysts are now giving their prognoses of what this all means and can Lumia still survive etc. And some of it is pretty entertaining reading if you enjoy fiction. And some of it is pretty sharp and smart, usually written by non-US experts who understand mobile but there are also some US based writers who now get this industry. So yes, this is my definitive blog about the future (ie the end) of Lumia. This is a long, deep, ultra-detailed facts filled blog of 18,000 words that gives you the full scoop. And this is by 'the guy who knows'

As we contemplate the obvious slow mercy killing of what remains of the ex-Nokia Lumia business and what was known as Windows Phone and the future of any 'mobile' side to Windows 11 or whatever comes next atter 10 in the convoluted math of Microsoft, consider this. Did your pundit or expert tell you, when Elop was fired in June, on that day, that there will still be more layoffs at Microsoft's handset business? It was a big story, the ex Nokia CEO fired. Did your pundit warn you on June 17, 2015, that wait, the carnage at Microsoft is not over? (I did). And if the situation was so dire, that only a month later huge layoffs were coming, why DIDN'T your 'expert' see this coming? Is he or she a real expert or just a fiction-writer or Microsoft troll?

Does your pundit or expert understand mobile at all? When Microsoft announced its previous layoffs of 9,000 ex-Nokia handset division employees on February 27, 2015, did your pundit warn you that was not the end to the carnage, more layoffs were definitely coming? (I did). Giant news in the tech industry and less than six months later almost as big layoffs to follow? What kind of 'expert' is your guy if he/she didn't see this obvious disaster brewing (or is he/she perhaps under the spell of MIcrosoft propaganda and doesn't see the blatantly obvious)? So how about the first Microsoft layoffs of the freshly-transferred ex-Nokia handset people of 12,500 - the largest layoffs in Microsoft history - on July 18 of 2014, merely three months after these highly competent people were brought from Nokia to Microsoft by Stephen Elop in the transfer. Did your pundit or expert warn you, right immediately on that sad day, that wait, the misery isn't over, there are more layoffs coming? (I did). Or did your expert write rosy fantasies how synergies will flower and Lumia will succeed and Windows 8 and Windows 10 and ooh-la-la.

Microsoft bought a loss-making, market-share-bleeding, troubled handset business from Nokia, that had fired tens of thousands of people under the management of Stephen Elop. And that same Elop came over to Microsoft to run this crippled business further? Isn't it any sane expert or pundit's DUTY to consider, is that bleeding going to end, or will it still continue at Microsoft? I mean, this was no cheap deal, Microsoft paid 7.2 Billion dollars to acquire the handset business of Nokia. What kind of Microsoft expert or Nokia expert or tech or mobile expert was your guy/gal if Microsoft has now done THREE rounds of layoffs in less than 12 months, firing 80% of the people it bought, and yesterday writing off more than the value of the whole investment. This was not any unforseen 'lightning bolt from the sky' type of total unforseen one-off event like a Fukushima nuclear power plant disaster. This was an ongoing pattern. I was not the only one promising more layoffs, but if your guy/gal NOW in July 2015 giving 'insights' to how Microsoft goes forward with the rump Lumia unit it has left, and your guy/gal didn't see the MASSIVE TRAIN WRECK coming, then why even bother to read that?

So what about my readers here. Its not that I was somehow lucky in following a pattern of layoffs. I predicted accurately also the profit/loss situation, the market share situation, and market reaction,and the precise competitor impacts at every stage of this calamity for not just the past 15 months under Microsoft ownership, I predicted accurately EVERY stage of the collapse that this 'partnership' has gone through. Yes, I told my readers right after Microsoft took over the Nokia business in April 2014, that it will not succeed and that Elop would be fired and layoffs were coming. Before that, when Satya Nadella was announced as Steve Ballmer's replacement as Microsoft CEO and as he was getting ready to take over the Nokia business, and with his nice memo, you remember that memo, I explained why under Nadella and his new strategy, the Nokia handset business would still die and he'd fire Elop and there would be layoffs. I wrote this in February 2014. And going back, when the news broke that Microsoft was going to acquire the handset business of Nokia in September 2013, I told my readers, the Nokia business would fail also under Microsoft ownership. I not only said Elop would be fired, employees losing their jobs, I said Lumia smartphones would never reach even 4% market share. Never. And the smartphone business would never achieve profits under Microsoft. Never. I said this when the news broke that Microsoft would buy Nokia's handset business, 22 months ago. Who else told you all this?

When Windows Phone 8 was supposed to rescue Nokia from the disaster that was the re-launch of Lumia under Windows 7.5, I said it won't. And that more layoffs were coming and that the handset business would not survive. I was correct. (Not many experts in the whole MOBILE side of the industry dared say that in 2013). When Windows Phone 7.5 was supposed to rescue Nokia from the disaster that was the first launch of Lumia on Windows 7, I said it won't. And that more layoffs were coming and that the handset business would not survive. (No other expert was saying this back in 2012). And when Windows Phone 7 on the original Lumia was supposed to sell at least as well as Symbian, I said it won't. And that more layoffs were coming and that the handset business would not survive. Nobody made as dire predictions as I did in 2011 about Nokia and Microsoft and Windows Phone. And I was 100% correct.

In fact, on the day that the Nokia-MIcrosoft partnership was announced, February 11, 2011, I wrote a long blog in stunned shock but in that blog clearly explained why Nokia would collapse, its market share would be devastated, Nokia would turn from record-profits just reported a few days before, to losses. And that the smartphone business would not survive this partnership, that yes the Nokia handset business would be sold. Wrote that only minutes after the press conference. And I wrote taht the likely buyer would be Microsoft. Yes. Go re-read that blog. I said all that, on February 11, 2011. When just-reported industry data had Nokia more than TWICE the size of Apple's iPhone and four times the size of Samsung's smartphone business. When Nokia had just recorded its biggest-ever profits in its smartphone division. When 2010 had seen Nokia set the world record for annual growth in smartphones (yes, go check the numbers Nokia in 2010, using the 'obsolete' Symbian had grown MORE than Apple's alluring iPhone or anyone else. Yes, Nokia utterly dominated the smartphone industry, dominated it more than IBM ever did the PC industry or Toyota ever did the car industry). Fresh of the best year of any smartphone maker ever I predicted what turned out to be a world-record collapse. And no, I was not in the habit of foreasting every month a Nokia collapse. Only days before that fateful February 11, I had written why (under the previous strategy, obiviously) Nokia would remain the largest smartphone maker. Up to that fateful day, I had NEVER said Nokia was in any danger of collapsing, in literally hundreds of blogs about Nokia on this site. But on February 11, 2011, literally four years and six months ago, I told my readers Nokia's smartphone business would die and be sold to Microsoft. Nobody else made that prediction, nobody, anywhere else.

And how easy or difficult is this industry? In 2010 Nokia sold 103.6 million smartphones (the revised final official Nokia number). This is what we were promised by 'experts' about what the Windows partnership could do with Nokia in 2012 when the Lumia phones were going to be available. IDC promised us in 2011 that this new partnership, Nokia and Microsoft would sell 148 million smartphones in 2012. Gartner was not that optimistic, they told us it will be 67 million. Morgan Stanley promised 77 million Nokia smartphones when Windows Phone was in the mix. Trefis forecasted 107 million. Pyramid forecasted 153 million. And Asymco forecasted 68 million. Thats what all the published forecasts for Nokia smartphone sales, made after the Windows partnership was announced but before any Lumia phones had started to sell. What was the reality? 35.3 mililon. And what was my forecast made on 25 July 2011? I said Nokia in 2012 will sell 45.4 million smartphones. Yes, I was off by 29% but note, what I was forecasting for 2012 would amount to a world-record collapse in the handset market in such a short time. Yes, world record so in 2010, as Nokia had reported RECORD growth and profits, I took that and the early 2011 troubles, and forecasted a larger faster collapse than Palm, worse than Siemens, bigger fall than Motorola. And those are literally all the published forecasts in the public domain for that period. The NEXT MOST ACCURATE forecaster, Gartner had an error that was THREE TIMES BIGGER than my error. Yes, not 3% worse error. Not 30% worse error, not 130% worse error. THREE TIMES worse forecast than mine. That is what you got if you were not reading the Communities Dominate blog in 2011. And the biggest idiots, Pyramid thought Nokia would see growth with Windows by 50 million, when in reality they collapsed by 70 million. (if you want to see all that, its here)

So yes. I have to start with a bit of bragging, I am the most accurate forecaster of the mobile industry and on Nokia, ABSOLUTELY every stage of the collapse of this Microsoft partnership has been chronicled on this blog, every effect good or bad (almost all bad) has been explained - and EVERY next step explained. Every SINGLE change was foretold on this blog, and NO change that happened at Nokia or under Microsoft the Lumia handset unit, was MISSED, and no forecasts made here did NOT happen. Except for one timing issue, I thought Nokia handset business would be sold earlier than it actually happened.

There is nobody else who comes CLOSE to all this insight into this MOBILE business, that Microsoft now owns. So if you wanted to read some analysis of Microsoft's next steps, perhaps this blog is worth your while more than some who didn't see the catastrophy coming, not even after time and again of layoffs.

FIRST OFF, THE HATERED

So I was and still am a huge fan of Nokia (I am from Finland) I was a Nokia customer before they made phones - wore Nokia branded shoes and rubber boots - and owned only Nokia branded phones before I was hired by Nokia. And after my Nokia career, as a mobile industry expert I have used numerous phones by more than a dozen brands, every single day of my life at least one of my pockets has had a Nokia branded phone in it, whether that was my primary or second (or sometimes third) phone. At Nokia I was early on Nokia's first Segmentation Manager and my last job was to set up and run the Nokia Consulting department at headquarters which also included the Nokia 3G Research Centre that did global studies of consumer surveys covering over 60,000 individuals over half a dozen topics.. Oh, and I left in 2001 so a decade before this Microsoft-Windows-Elop-Lumia mess even started.

FIne, I love Nokia. Now Microsoft. There is only one company I truly hate in tech. That is Microsoft. I mean literally hate. They have destroyed almost everything I have ever loved in the PC and internet side of tech and many of my fave tech brands also in mobile. I mean really, really from the beginning. I was a registered Lotus 1-2-3 developer. I was Novell Netware trained. I was an authorised WordPerfect instructor. All these died (or for practical purposes died) not in open fair competition, but by Microsoft using its monopolistic power to crush the competition, for which it was repeatedly sued and fined and found guilty. That is where that nickname Evil Empire comes from. Not just those, perhaps you remember Netscape. Killed by Microsoft Internet Exploder. And on and on, up to mobile - do you remember Sendo, a company Microsoft raped and crushed and gave their tech to HTC. Sendo won the court case (ok settled in court but so that Sendo was paid) but by then they were already bankrupt. And latest victim was my fave phone brand Nokia. Every deal Microsoft would get into would destroy that 'partner'. The have been from the start and are still today the Evil Empire and I hate them truly-madly-deeply-do. Just so you understand, there is obvious bias in my emotions but INSPITE of this HUGE handicap of seeing red whenever their logo is in my view, I still was CONSISTENTLY the most accurate Windows Phone forecaster too, not just Nokia on Windows. Like check out this comparison of 'experts' and Windows Phone forecasts.

THEN THE HISTORY

You cannot understand context and relevance and the likelihood of fhe near future if you don't know how we got here. So we need some history but don't worry, I will stick mainly to the relevant parts. So Windows on smartphones did not start with what we now know as Windows Phone. Microsoft saw the future of the computer industry shifting to PDA-type phones which became known as smartphones.The desire to pursue a mobile strategy was formed under Bill Gates later years as CEO but mostly executed under Steve Ballmer, for more than a decade. The Microsoft smartphone OS evolved and would eventually be known as Windows Mobile and they became the second bestselling smartphone OS behind Nokia's Symbian, and Windows Mobile reached a peak market share of 12% in 2006 (obviously all numbers are global numbers). 

So you can see no doubt the timing issue here. So the iPhone launched in 2007 and you no doubt would rush to claim that the iPhone killed Windows Mobile. The iPhone did kill several rivals, Palm, Motorola, HTC but not Windows Mobile. Yes, Windows Mobile did see a decline but only about the same share as anyone else, when a new rival enters the market, not more than that. Windows Mobile market share in 2009 was still a very healthy 9% globally ie a decline only of 3 points from before the iPhone, while iPhone had jumped from 0% in 2006 to 14%. Clearly iPhone took most of its early scalps from other brands not the Windows Mobile family. But check out this collapse:

Windows Mobile 2006 market share 12%
Windows Mobile 2007 market share 12%
Windows Mobile 2008 market share 11%
Windows Mobile 2009 market share 9%
Windows all smartphones 2010 market share 5%
Windows all smartphones 2011 market share 3%
Windows Phone 2012 market share 3%
Windows Phone 2013 market share 3%
Windows Phone 2014 market share 3%

There is a catastrophic fall from 2009 to 2010. At that time iPhone only grew from 14% to 16% so again it was not the iPhone. Something else happened in 2009.  There is a clue in how I describe the item. In 2009 it was all Windows Mobile. In 2010 it was two operating systems from Microsoft, the older Windows Mobile and the newer Windows Phone. Something happened in that transition. Yes. Steve Ballmer the dick is what happened. He was being a total Steve Ballmerish asshole as only Ballmer could be.

When Bill Gates was in charge, and Microsoft went from one incompatible OS platform to the newer one (ie from DOS to Windows) Microsoft spent a lot of money and programming effort to allow compatibility so there was a 'migration path' from DOS to Windows. So when you bought a Windows PC, you could still run older DOS based software. This is how the global massive market share of DOS was transferred into the 'next paradigm' where rivals like Macinosh OS and IBM's OS/2 etc would not steal Microsoft's market dominance. Microsoft knew how to do the transition. Except Ballmer was the asshole that he always was, he annoucned in 2009 that there was a totally new OS coming for Microsoft smartphones and that new OS, Windows Phone was incompatible with existing Windows Mobile. And he said that there would be no migration path. So no apps would work in any way form the old to the new. Not worth his while to bother with this. Remember, Microsoft was the world's richest software company and at that time also the world's richest TECH company (title since gone to Apple obviously).

Windows partners from handset makers to app developers to carriers/operators screamed bloody murder but Ballmer didn't care. He was thinking like a good monopolist, he was running the Evil Empire like Ming the Merciless, and he didn't need to care. The whole history of Microsoft in mobile is like Microsoft on the PC, broken promises, lies, bugs, lawsuits but on Windows smartphone 'ecosystem' this was betrayal. It was literally the developers and partners thinking Microsoft was stabbing them in the back. So the support vanished. And we can see the result. In one year market share fell by nearly half. Bear in mind at this point Microsoft had 6 of the world's 10 largest smartphone manufacturers providing Windows based smartphones (Samsung, HTC, LG, SonyEricsson, Motorola and Palm). So its not like there was nobody to try to sell the stuff.

Ok then consider the transition. Before Ballmer announced the 'no migration' Windows Mobile had 11% market share. Then by the time the transition was over, and all Microsoft partner smartphones ran only on the new OS, Windows Phone, the market share was 3%. This is a loss of almost 3 out of every 4 customers over a two year period (when counted as market share). It is very VERY clear indication that the brand is failing in the market. This was not competition killing Microsoft even though iPhone and Android then ran away with all abandoned customers. It was Ballmer's dickishness. He just felt like bullying his partners once again, like he liked to do at every turn of every deal. Screw them! and what? Then sue them! And screw them again!

This is the Microsoft that the industry knew around 2010 when secret negotiations started with Nokia about Nokia ending its own OS projects, Symbian, MeeGo the Linux based premium smartphone OS (and its predecessor Maemo) and Meltemi the low-cost smartphone OS also on Linux). And that Nokia would shift to go to Windows Phone. Note that at the time secretly Nokia's new CEO ex-Microsoft guy Stephen Elop also negotiated with Google about an Android partnerrship and contacted at least Blackberry who said no (which means very likely he also contacted Apple and Palm who also had no doubt said no).

BALLMER'S VISION

There are persisting conspiracy theories that Elop was a 'trojan horse' sent to steal Nokia's handset business and bring it to Microsoft for a discount price. Read this part and you understand that is utter horseshit. In 2010 Nokia sold more smartphones than Blackberry and iPhone combined. Nokia's market share was a massive 35% mostly on Symbian but also on Maemo. (Note that Symbian market share was larger han 35% because there were about a dozen handset partners also making Symbian phones still in 2010 like Panasonic, Fujitsu etc). And MIcrosoft on both of its OS platforms, Windows Mobile and Windows Phone had a combined market share of 5%. It was the giant and the lilliput. To get Nokia to join the dying Windows world, in Ballmer's calculation would give an honest potential of 40% market share when Nokia was combined with existing Windows Mobile and Windows Phone market shares. Now, obviously that was not the practical immediate level, anyone can see that there would be a dip in the early months and perhaps year or two, and the combined share would be somewhat less than the two players separately, but Ballmer must have calculated that 30% would be a good job and 20% would be still a perfectly acceptable job. And taking the existing 40% on the 'obsolete' Symbian, and the obsolete Windows Mobile, when replaced by the 'cutting edge' Windows Phone - if you take that 40% and go all Windows Phone surely even a trained monkey could achieve at least half that ie 20%. (And Ballmer did think of the inept Elop as his trained monkey).

So Ballmer must have calculated in 2010 that this partnership would at the VERY LEAST do 20% market share - when Blackberry had 16% and Apple's iPhone had 16%. If they killed the top dog Symbian from the market and had 20%, even if that newcomer Android would grow fast, at least Windows would be in second place. And with a little bit of coaching - Ballmer had decided to be very hands-on boss in the monkey-and-owner relationship of Elop and Ballmer - he could help Elop fix any possible mistakes so if the early results were nearer 20%, they would soon fix those to nearer 30% market share. And that would be very pleasing to the guy whose own OS never exceeded 12% and was currently languishing at 5% and declining.

Ballmer absolutely NEVER wanted to own Nokia. He wanted Nokia to be his slave. When the handsets were tied to an exclusivity deal with Microsoft to Windows Phone, he'd have a master-slave relationship similar to what the big PC makers all complained about Microsoft all through the 1980s and 1990s and 2000s from IBM to Dell to HP to Compaq etc. Microsoft knew that the reason they had been the most profiable tech company for the whole PC era was because Microsoft owned the OS and the popular apps where all the profits were, and the box-movers made razor-thin margins on the hardware. It was very widely accepted at the time, that the smartphone industry would grow to mirror the history of the PC industry (Apple has quite drastically altered that picture since).

Ballmer knew that mobile phones were the next computer and they had messed it up in the transition from Windows Mobile to Windows Phone. He had already burned relationships with all other Top 10 brands that were willing to work with an outside OS (Apple and Blackberry obviously had their own OS) and Nokia was literally his last straw. But being the biggest, it alone would bring Microsoft back and with a bang. And Ballmer already had his bitch in Elop running Nokia. (Elop maintained a second residence in Seattle, while working in Finland, he commuted almost every weekend home 'to his family' where he could easily meet up with his master, Ballmer). All Ballmer needed for the moron Elop to perform a very simple task, bring Nokia hardware excellence to his new Windows Phone OS and they'd be golden. Not even his trained monkey could possibly mess this up. As the contract on the licence stipulated Nokia would get early marketing support from Microsoft (ie bribes to join) but after a threshold level, from that point into perpetuity, Nokia would pay a handsome licence fee for every smartphone running Windows Phone - and as smartphones were already selling more in units than PCs.. this was the perfect scam. Microsoft was guaranteed licencing revenues and Nokia would go into the inevitable shrinking margins game but Microsoft didn't care, they would be paid. Would have been a sweetheart deal indeed. Absolutely under no circusdancers (or circumstances if you prefer) would Ballmer want to spend 10 Billion dollars to first prop up, and then buy the handset business if Elop cocked it up.

ELOP EFFECT

There is a business theory taught in MBA schools and lesson in the style of don't ever do this as CEO called the Ratner Effect It says that if the CEO says bad things about his company or product, he will be believed and sales will collapse. Yeah almost bankrupted the Ratner jewelry company when that was tried by its moron CEO. And there is another business theory taught in MBA schools and lesson in the style of don't ever do this as CEO called the Osborne Effect. It says that if a company announces a new product of a next generation and superior performance too far before it can be sold, the current sales will collapse. This did bankrupt the Osborne computer company when its idiot CEO did that. No Fortune 500 sized company had ever attempted instant corporate suicide of a Ratner Effect, or of instant corporate suicide of an Osborne Effect. Well, not until Stephen Elop the most incompetent CEO of all time. He not only did a Ratner, he compounded it with an Osborne. It instantly produced a world-record collapse - faster than ANY collapse of a Fortune 500 sized market leader of ANY INDUSTRY in the ECONOMIC HISTORY OF MANKIND. The collapse of Nokia was faster than the effects to Exxon oil company of the Exxon Valdez oil tanker catastrophy in Alaska, or Coca Cola's New Coke or the Toyota car brakes disaster or the BP Deepwater Horizon oil spill.  It takes a very special kind of corporate malfeasance to deploy two suicidal management errors simultanoeusly. Thats our monkeyboy there. Stephen Elop trained at McMaster university in Canada and a man who actually considered himself a strategic genius and tried to quote Sun Tzu and asked his colleagues to call him by the nickname 'the General'. General Incompetence more like it. Thats our Stephen Elop most incompetent CEO of all time.

Here is Nokia smartphone annual sales form before Elop started to today
2009 Nokia smartphones sold 67.8 million (39% market share)
2010 Nokia smartphones sold 103.6 million (35% market share)
2011 Nokia smartphones sold 77.3 million (16% market share)
2012 Nokia smartphones sold 35.0 million (5% market share)
2013 Nokia smartphones sold 30.5 million (3% market share)
2014 Nokia/Microsoft smartphones sold 34.6 million (3% market share)

Oops indeed. Elop fucked it up, royally. And then Ballmer stepped in during 2011 and tried to rescue things, attending top level CEO meetings with major carriers/operators together with Elop, to try to rescue carrier support but to no avail. By 2012 the friendship had turned sour, Ballmer was promising to sell tablets and hinted at Microsoft own smartphones, while Elop launched tablets in response and threatened going Android. By Spring of 2013 Elop had been replaced effectively from command and Nokia's Chairman Siilasmaa was now negotiating with Ballmer to unload the whole loss-making Nokia business onto Microsoft and to take Elop with the whole mess.

Some very important points from this stage. One, Ballmer and Bill Gates believed in smartphones as the next PCs, had fought for that market early but Ballmer pissed away their early gains. Then in his desperation move he enticed (read bribed) Nokia to join Windows partnership and with Elop in charge, felt it was a bet he could never lose, but Elop achieved that destruction anyway. By the time Lumia launched, Q4 of 2011, Nokia's mighty market share had fallen to 12% (Quarterly share if you were wondering why the lower number than in the table above) and the handset unit was reporting huge losses and Nokia's credit ratings were being downgraded almost daily. Ok a slight exaggeration but there were several stages when a credit rating agency actually dropped Nokia TWO notches on one day. Nokia was one notch below perfect on February 1, 2011 on all three credit agencies. Nokia was rated junk by all three by the summer of 2012.

NEXT VERSION FIXES IT

Then there is the Microsoft standard bullshit. Wait for the next version. We here on this blog were never taken by this standard Microsoft tactic but many very credible tech writers fell for it, some several times. Windows Phone 7.5 will fix the problems with early Lumia that ran Windows Phone 7.0. No it didn't. Lumia on Windows Phone 7.5 did even worse than 7.0. Oh, wait, Windows Phone 8 will solve that problem, then. No it didn't. And now we hear the same promise about Windows 10. Fool me once, shame on you. Fool me twice, shame on me. Fool me three times, how absolutely clueless am I? Fool me four times? Nobody can possibly fall for this, not even Charlie Brown kicking the football.

Ok so what do we learn so far. Windows was on a growth path and then held its own pretty well when iPhone arrived. It collapsed when Ballmer made a huge management blunder. Nokia independent of Microsoft was on a growth path and safely far bigger than any rivals including the iPhone and growing more than the iPhone even from 2009 to 2010, until suddenly massive manageent error - two suicidial errors in fact, that did destroy the company. Destroyed the smartphone business in literally world record speed.

Windows based smartphones had a large army of manufacturers and sold well enough even when going against the iPhone. Nokia before Microsoft far outsold the iPhone (and Windows). Both Windows Mobile and Nokia collapsed due to clear, well known, obvious and deadly management mistakes. Management mistakes that were well known in management theory, mistakes that experts in the industry immediately identified contemporaneously when they were made (not just me) as utterly moronic and damaging. And their results speak their sorry tale. There is no way Ballmer would have thanked Elop when it was time to start to sell Lumia smartphones in Q4 of 2011, when the promised 34% market share had been wrecked to 12%. This was by any reasonable accounting worse than any sensible manager could achieve, as it indeed was a world record in failure, across ANY industry. 

The Elop Effect happened BEFORE any Lumia smartphones had even been shown to the press far less sold to any customers. if Nokia had arrived at October 2011 with a strong 30% or better market share and highly profitable Symbian based smartphone business, with highly satisfied loyal return customers, Ballmer (and Elop) would have had very little reason to think the DESIGN of the phones was the problem. But being engineers, when they noticed Nokia sales collapsing in 2011, the gut feeling of any engineer is to first examine whats wrong with my product. Not to examine such complex and imprecise aspects as marketing, distribution, sales support etc. And that brings us to a Microsoft blind spot.

APPLE ENVY

Many major Microsoft decisions can be explained by envy, and many of those are Apple Envy. It all started with the Macintosh. Microsoft's MS DOS was the dominant PC operating system but along came the Mac in 1984 and suddenly the future had arrived. And then for years Microsoft labored with its Mac Envy product, obviously Windows. Win 1.0 was a dog. Win 2.0 was a dog. But Win 3.0 was good enough and by Win 3.1 Microsoft had overtaken Apple in the modern PC market and after that we had the next two decades of total Microsoft ownership of the PC market profits.

Until along came the iPod. So where is the Apple Envy? Zune. Then came the iPhone. Apple Envy? Kin phone. Then came the iPad. What is Microsoft's Apple Envy? Surface. But Ballmer was no Gates, so Zune was a failure. Kin was a failure and early Surface too was a failure but arguably it is now a modest contribution to Microsoft's business but nobody at Apple is losing sleep over the random Surface that is sold somewhere. Losing sleep over Android tablets, yes. Surface haha, no way.

So Stephen Elop is a product of this Microbrain mindset. Apple envy. So is obviously the grand master Apple Envier, Steve Ballmer. So when Nokia sales were falling in 2011, rather than accept that Elop caused a total catastrophy, it was far easier to say, look at the obsolete technology and how amazing the new iPhone 4 is, and clearly Nokia is now failing because Apple Apple Apple Apple.

And fine if it would have stayed there but then the next massive blunder. Elop shifted either at his own initiative, or by Ballmer's urging, the design of Nokia's most important phones ever, the first Lumia phones, from the undefeated world champions of 14 years in a row (The Finnish Nokia smarphone design team) to the junior varsity farm team, the designers near Microsoft in California. Understand, the designs of Nokia smartphones had won EVERY contest against EVERY rival EVER, up to the Elop Effect. Even the phones that suffered market sales collapse of 2011 - were winning phone-of-year awards, cameraphone-of-year awards, smartphone of year awards and huge accolades such as the global R&D grand prize, the 'Oscars' or the 'Nobel Prize' of tech design (the D&AD Award). But rather than have these veteran designers who knew INTIMATELY what Nokia buyers love and want, Elop went to California. He had his team design an Apple Envy product line for Lumia. An inherently flawed set of designs so bad, new Lumia phones were inferior to LAST YEAR's phones... by Nokia!

I can't even think of where to start on this. Nokia's own consumer research said that the number 1 feature loyal existing Nokia smartphone owners wanted in their next smartphone was a great camera. The Nokia N8 of 2010 had the industry's first 12mp camera with Xenon flash and real mechanical shutter etc. The 'replacement' flagship a year later on Windows Phone, the Lumia 800, had an 8mp camera, inferior LED flash and no mechanical shutter. The older phone had a selfie cam, the newer one no longer had one. Its as if the Lumia was designed TO DISAPPOINT EXISTING Nokia owners. It was so bad, there was a whole website of 101 faults to annoy loyal existing Nokia owners in the first new Lumia smartphones. Like what? That the alarm wouldn't work like always before on Nokias. That kind of idiotic things. That will truly mess up your day and make you curse the Lumia. 101 issues like this. Designed to annoy.

Why? Apple envy. The iPhone didn't have Xenon flash. The iPhone did not have premium camera. The iPhone (early models until more recently) did't have selfie cam. The iPhone didn't have removable battery. The iPhone iPhone iPhone iPhone Apple Envy Apple Envy Apple Envy. The whole Lumia line is an uglier version of iPhones. It wasn't until Elop had been removed from running Nokia that Lumia got larger screens than iPhones or better cameras. But SYMBIAN based Nokia smartphones had bigger screens and better cameras than iPhnoes - already in 2010 !!!!! NFC? You like your NFC on the iPhone 6 in 2015? Have a guess when Nokia gave us NFC on a smartphone? In 2010. But not on the Lumia flagship in 2011? Duh. Idiots designing Apple clones.

And a VERY important distinction here. The US market. The US market is a LAGGARD in mobile. Has always been and still is today. On essentially every metric. You think your smartphone penetration rate today is amazing? Try Singapore or Hong Kong or UAE. Yes, United Arab Emirates. Has already over 90% smartphone migration. South Korea is at far above 80% installed base, not new sales, installed base. Today. What did ComScore just tell us a few days ago? That the US migration rate is at 77%. So yeah. European AVERAGE smartphone migration is ahead of that and Sweden, Spain, Switzerland etc are far ahead of the US.

But yeah. Lets say the iPhone is the perfect phone for the US market. Fair enough, it sells well there. Its a bit like Hummer cars, were huge sellers in the USA but failed in almost all the other countries. Now hold that thought. Nokia smartphones were nowhere in the US market. But in Asia? Nokia had more than HALF of the market (largest smartphone market by continent). In Europe Nokia was biggest (second largest market by continent for smartphones). In Latin America (third largest smartphone market by continent) again, not iPhone, Nokia. Yes, North America was for iPhone but Nokia was bestselling smartphone also in Africa and in Oceania. On FIVE of the six inhabited continents Nokia was the bestselling smartphone in 2010. And the US accounted for only 8% of the mobile phone subscriptions on the planet at the time (today is under 5%). As you probably know, China is nearly three times larger as a smartphone market than the USA. How was Nokia in China? Had over 70% market share in 2010.

These numbers are CRUSHING and OBVIOUS. Show these to ANY 'shareholder' or any other interested party and they say, yeah, Nokia keep doing what you were doing, don't worry about the USA. If you can design phones that outsell Samsung in Asia and outsell SonyEricsson in Europe and obviously outsell iPhone in every continent except its home market, and Nokia does this with industry's second best profits, then yeah, go right ahead. Only a total fool would exchange all that for an iPhone-clone to try to win in Apple's home market as an outsider... To try to beat Apple  - Apple - with a Finnish brand in the USA. What were Ballmer and Elop smoking?

Those successful Nokia smartphones were carefully designed to meet LOCAL needs like removable batteries where electrical supply is not reliable (much of the Emerging World) or dual SIM slots and they supported local LANGUAGES and alphabets and had carrier billing deals for the Symbian and Maemo (and soon also MeeGo) apps where carriers were involved in the revenue generation of the app sales and thus carriers loved Nokia didn't hate it like they hated it that Apple didn't share revenues of iOS app sales. Etc etc etc. 

When the carriers saw the first Lumia phones they actually begged Nokia to give them Symbian phones instead. And while Elop the compulsive liar was promising a 'one to one' transition from Symbain to Windows Phone, even if we take the last sales of Q3 of 2011 just before Lumia launched, to when Windows transition was completed, the actual migration rate was not 1 to 1. Nokia went from 16.8 million to 6.1 million. Nokia lost about two customers for every one that agreed to try a Lumia. But that is not the fair comparison. The real comparison is from when Elop made that promise of course, so last sales Q4 of 2010 were 28.6 million so the migration lost almost five customers for every one that was convinced to try a Lumia. Its not because suddenly Nokia had lost the ablity to design phones. It was because Elop (and.or Ballmer) desided that as PC software guys from the West Coast, they are more competent to make handset design decisions than the team that designed phones that had consistently outsold iPhone, Blackberry, Samsung, HTC, Palm and all the others, EVERY SINGLE QUARTER FOREVER. 

And did the Lumia 800 win over the iPhone in the home market? OF course not. No carrier in the USA even launched on that phone, the first Lumia launch in the USA was on one carrier (the smallest, T-Mobile) nd only the cheaper Lumia 710 phone, that had no chance to outclass the current iPhones. And its sales in the US market were pathetic. The Nokia designers understood the global phone market BETTER than Apple designers did (note the heresy here, this is when Steve Jobs was still alive). Yes. Nokia designers in 2010 had phones that were YEARS ahead of what Apple would do and clearly, as Apple WOULD do those changes, the Nokia designers understood what the market wanted. Except that outside of laggard USA, in advanced markets like say Singapore or Sweden the customers APPRECIATED these features already in 2010. Like bigger screens. Like better cameras. Like NFC. Huge things that Apple celebrated when years later the iPhone joined the club offering those pretty normal flagship features by then. But Elop overruled his designers who wanted these types of features. In 2011 when the Lumia series was designed, in California, they looked at the exiting iPhone 4 and tried to match those specs. Downgrading almost everything on the Nokia flagship specs. Idiots. They lost their global market and failed even to compensate a little bit by taking Apple's US market. Failure and failure. Total.

This was the most important launch in Nokia's history, because it had seen the collapse of sales due to the Osborne Effect, those customers now would try this new promised better device. And because of the Ratner effect, these Lumia were supposed to be the ones that no longer were defective or undesirable phones. Nokia only had one chance to make this high-risk gamble 'strategy' work. And only because of Elop personal interference on the design (team) and possibly influenced by Ballmer, they made crappy iPhone clones. The only thing the Lumia 800 was celebrated for was its cool funky neon colored carbonite body style. You think that is Lumia design from California. Think again, that is Finnish design for the previosly-released Nokia flagship N9 on MeeGo OS, the best phone Nokia ever made, and one that the CEO refused to let be sold in any major markets. Yes. Imagine the lunacy of that. If BMW wins car of year awards and everybody raves about this new 3 Series and suddenly they say, oh, we're not gonna sell it in major markets, only in Kazakhstan or New Zealand or Norway. True. Thats where the N9 was allowed to sell. Not in the UK, USA, Germany, etc. That is the CEO going crazy. And no, the Lumia 800 did not bring us that good design, that was done by Nokia's Finnish designers, and the Lumia 800 was repurposed from the intended MeeGo series phones as a MID RANGE phone, as there was a far better flagship on MeeGo (the N9).

The most important launch in Nokia history was sabotaged by the CEO. Due to Apple Envy. And it was done so badly that even Apple owners didn't want those lame copies. But Nokia loyal buyers hated them. And that killed the chance for Lumia of any generation to forever not recapture anything nearing Symbian level sales, ever. The loyal Nokia customers were now burned. And you know what. Microsoft revealed last year, that one third of all Lumia smartphones shipped out of Nokia/Microsoft factories to retail from the beginning of time, have never been activated. Some came back as returns. Some were just tossed as obsolete in the retail channel; some are still waiting in discount bins waiting for someone to buy; and some were bought as essentially paperweights, maybe just as a stand-alone camera; or as a toy for kids, never activated etc because sold at such steep discounts that makes sense. As to any 'ecosystem' this is catastrophic. One third that went out from the factory were never activated. Its literally the least beloved smartphone line of all time.

Again I must bring in the math. From the start of the iPhone Nokia grew MORE than the iPhone up to 2010. Apple went from zero in 2006 to 47.5 million. So Apple grew obvously 47.5 million over four years. Nokia starred in 2006 with 39 milion smartphones sold which grew to 103.6 million in 2010. So Nokia grew its smartphone business 64.6 million units in the same period. It is simply a mathematical undeniable FACT that Apple was not closing in on Nokia. From 2006 to 2010, Nokia was PULLING AWAY from Apple's iPhone. The gap between Apple and Nokia was growing obviously in Nokia's favor. That is the math. It is the fact. There is absolutely no real world normal math reality where Apple was 'beating' Nokia in smartphones. Simply utterly untrue and part of the Steve Jobs magic and Apple Distortion Field.

So you say but how about the period at the end. Fine. Year 2009 Apple sold 25.1 million iPhones. In 2010 it was 47.5 million. So Apple grew iPhone sales 24.4 million units that year. And Nokia? Started year 2009 sales were 67.8 million and ended at 2010 sales 103.6 million. Do the math yourself. It is growth of 35.8 million Nokia smartphones!!! NOKIA SMARTPHONES GREW FROM 2009 to 2010 A MASSIVE 60% MORE THAN APPLE iPHONE GREW THAT SAME YEAR.  Nokia geenerated a profit every quarter of its smartphone business for which Nokia reported that detail (early in history it didn't separate smartphones out form all phones but then all phones were also profitable). The last quarter of 2010, that total domination of Apple, the last quarter of 2010, the Nokia smartphone unit reported a Nokia record profit. Nokia was the second most profitable smartphone maker on the planet (behind Apple, while Apple only sold premium phones but Nokia sold at all price points to all customers rich and poor). Nokia just beat Apple like a rented mule and the unit sales gap was vastly expanding in Nokia's favor and that Symbian smartphone business just reported a Nokia record profit. This is pure excellence in competition. Only a madman would dare to overrule those true geniuses who were capable to beat Apple so comprehensively.

But Apple Envy. Rather than sell phones that Nokia customers wanted - one third of Nokia smartphones sold in 2010 had a physical keyboard such as for example on a Blackberry or a slider/folder keyboard under a full-size touch-screen keyboard like the E7 and the N950. Enterprise customers in 2011 were demanding physical keyboards. When Nokia designers begged to have a version of Lumia that has a keyboard - after all Microsoft Office Suite was a compelling offering in enterprise phones - the CEO overruled them. Again Elop had Apple Envy. Does the iPhone have a physical keyboard or slider? No. So no. Apple Envy. Over 40 Lumia models have been released to this date and not one has a physical keyboard. Not one in Blackberry style. Not one in slider/folder style underneath a proper touch screen. Not one. One THIRD of Nokia existing customers had one on a Symbian or Maemo or Meego device. There were public pleas for such phones. In many markets in 2012 the physical QWERTY keyboard smartphones accounted for HALF of all smartphones sold like in Nigeria, Venezuela and the Philippines. But Lumia could not have one. Note that Surface offers a physical keyboard but still, Elop refused this Nokia INVENTION and Nokia competitive advantage. Apple envy.

If Dr Martin Cooper (yes the Motorola dude) was running Nokia and he overruled his engineers, ok, I'd accept that. The guy essentially invented the handheld cellular phone. If Steve Jobs was running Nokia and overruled the engineers then yeah, Steve Jobs was a god. But Stephen Elop whose previous best achievements were wrecking his past businesses and selling them to Microsoft, no, this is no handset design genius. And what arrogance that he'd think he can overrule his never-finished-second-place design team right in his FIRST YEAR as CEO. Idiot. But Elop was, right from 2011 till he was fired from the post of CEO at Nokia, regularly listed among the worst CEOs and many called him the worst CEO of all time.

Do not write to me that iPhone was leading Nokia. It is LITERALLY the opposite. After the original iPhone of 2007 (which wasn't a smarthphone, it was a featurephone) with its truly revolutionary multitouch screen, EVERY advance that Apple CELEBRATED in its press release of its newest iPhone - OR the iOS software next generation - was already done on Nokia before. And that comes all the way to 2014 when iPhone 6 and 6+ were about the phablet screen sizes and NFC mobile wallet. As I joke, to see what will come in the next iPhone, look at a 4 year old Nokia flagship.

You cannot claim Nokia was somehow 'losing' to Apple if all four years up to 2010, Nokia grew more than Apple's iPhone and in the last year that growth rate had only increased and Nokia's growth was 60% more than Apple's. And Nokia did this with Nokia-record profits and world's second biggest profits by Q4, but on a portfolio serving all customers. globally, on all price points. You can freely argue that Apple made even bigger profits, but that is NO REASON to change a winning strategy or winning phone designs. That is a reason to change your PRICING strategy.

MARKETING BLUNDERS

But Elop was not done. Then we had a whole slew of marketing blunders from 2011 to 2013 (and more at Microsoft since). I'm not going to chronicle them all again here, they were documented as they happened. Let me just give you a flavor. Nokia had a crisis in sales volume collapsing. It had the world's largest capacity in smartphone manufacturing, and the factories were suddenly idling. It had massive volume discounts and preferred component deals based on massive sales volume, but as the sales collapsed, suddenly suppliers didn't extend the volume discounts and Nokia started to experience component shortages (as Samsung and Apple had already grown bigger and were now the top component customers) Etc Etc Etc. So one thing Nokia desperately needed was to restore volume sales ie increase market share. Makes perfect sense.

So. Nokia in 2010 ran like the giant it was. Volume game, and segmentation, targeting and offering something for anyone and everybody. Like General Motors in cars or like Ikea in furniture. Nokia introduced new phone models every week (counting smart and dumb phones). Apple Envy? Apple back in 2010 only introduced one model per year. So if you want to win and grow market share, you do what? You want MORE models and be the dominant brand in the stores, where all shelves stock your products. This is STANDARD business theory. Absolutely no dissent on it. Apple itself has gone from one new model per year to two already and is now rumored to introduce three models this year for the first time. That is the big guy's play. So what did Elop do? When he saw his sales falling, he had some Apple Envy and announced he wants to CUT the product lines. To SHRINK the product lines. And yes, that resulted repeatedy in ever shrinking market share. Exactly as management theory tells us.

So maybe its an isolated case? Or maybe not. Retail channel. Nokia had the best retail reach and best carrier relationships in 2010, which Nokia explained in great detail to the SEC in its Form 20-F filing about the new Microsoft strategy in 2011, that a unique competitive advantage that itself expanded into OTHER competitive advantages was the world's best carrier relationships and retail channel in the industry. World's best. And that if those relationships were damaged the whole Windows strategy might fail. And that OTHER Nokia competitive advantages were directly derivative of that one advantage. This is as official as it gets. Nokia essentially 'testifying' under oath to its investors.

So, if you have relationships with all 5 big carriers of the UK or the big 3 in Finland or the 3 in Singapore etc, you Nokia want the one handset in EACH carrier store. To build volume. The CARRIER wants exclusive deals so it can differentiate from the rival networks. No handset maker wants exclusive deals, they want volume. A carrier can use this to its advantage with small handset makers to force it to give the phone on an exclusive deal or else not carry it. Small guys have to accept but obviously they then are abandoning much of that market. This is how start-ups enter. It is what Apple did not want to do, but reluctantly did, and moved away from that as fast as its contracts allowed. So Elop who already has essentially all carriers, the maddest move is to abandon those and go for exclusive deals. The maddest thing. All others strive to achieve something like Nokia had. Nokia testified it is a unique competitive advantage. Apple itself was pursuing a Nokia-like carrier relationship empire and quitting all exclusive deals as soon as possible. So Elop? Apple Envy. He saw that Apple had some exclusive deals still, what did our pinhead do? He went for exclusive deals! And yes, obviously market share fell again. and again. Exactly as the theory says will happen.

Lets do one just one more. The naming/numbering fiasco. Nokia had headhunted Keith Pardy from Coca Cola in the year before Elop arrived. Yes from Coca Cola to run Nokia's marketing. Is that not perfection? And what was one of the first things Keith did at Nokia. He announced Nokia was ending the pure numbering and lettering naming (Nokia 2110, Nokia N95, Nokia E63). And we had clever names like 5800 XpressMusic and 6700 Slide etc. So here is a guy who REALLY knows marketing. So then in comes Elop Mr genius and he annoucnes that Nokia will end the naming and even lettering and go to pure numbers only. So any possible emotional and descriptive connection is lost and even more bizarrely yes, something like a Nokia 700 or Nokia 650. And by the way, almost no logic to those numbers too, where often a bigger number might not be the better phone, etc. This was so widely ridiculed by the marketing professionals that Elop changed his mind in only a couple of months and we got to phone names again, exactly as Keith said Nokia should, and we had Lumia and Asha and Pureview etc. Of couse Keith was long gone by then, all the best minds left Nokia when they saw 'Call me the General' genius taking over at HQ.

When your company is going through a platform shift, and so many things are now in the air, what is Symbian and what is Windows and what happened to MeeGo etc, that is the WORST time to tinker with marketing to bring exfra chaos. And if mistakes by the incompetent and definitely not-marketing-god Elop were not bad enough, doing flip-flop-flip with the naming/numbering fiasco is just abusive to your own marketing team and incredibly demoralizing (not to mention alienating to any partners and customers). That is how Elop added to the carnage already happening with Lumia. I have dozens more examples. He deliberately damaged Nokia at ever stage he possibly could,

CHANGE OF OWNERSHIP

So we saw how Nokia's huge dominant and profitable growing healthy business was destroyed by the lunatic CEO. It was not that Nokia was somehow losing to the iPhone or didn't have enough apps (Nokia app store was second biggest in world by January 2010 and catching up to Apple's App Store but Nokia was bestseeling app store (Ovi store) or the related Symbian apps on all languages that were not English. Apple's home market USA fine, English language yeah i'll give it to the iPhone. And lots of affluent customers in the USA, Canada, Australia, UK, Ireland, Singapore, etc. But bestselling apps in Chinese? Ovi store on Symbian. Russian. Ovi store on Symbian. Portuguese ie also Brazil - Ovi Store on Symbian. Hindi? Ovi store on Symbian. And on and on and on. If you wanted an 'ecosystem' by far the bigger global footprint across the planet was Nokia's Ovi and Symbian, but Apple had Steve Jobs and that most tech and biz news is in English..

So yeah. it was not a case of 'not understanding customers' or 'missing trends' or 'not having enough apps' or bad retail or anything silly. It was a destructive CEO. All of the above are TEXTBOOK marketing or management blunders. No disagreement whatsoever. The theory is iron-clad. Those were all blunders. And numerous experts pointed those out contemporaneously when Elop was making those errors. And at some point Ballmer caught on. Elop is a really good bullshitter so he was able to carry on an alternate reality illusion for a while, but we know the relationship soured totally and permanently by late 2012 when Ballmer was threatening to make Microsoft branded smartphones and Elop countered that Nokia could do Android smartphones. By Q4 of 2012 the total Nokia smartphone market share on Windows, Symbian and what little remained of MeeGo had reached the bottom at 3%. That is where its been stuck ever since, plus minus a few decimals of the level. In Q1 of 2015 Microsoft's Lumia sales gave it 2.5% market share. 

Whatever we heard officially from either professional con-man, Ballmer or Elop in late 2012 or during 2013, that was total propaganda, they both knew Lumia was now dead, unrecoverable. They knew Nokia had burned all possibilities. Ballmer didn't want Nokia and in his first meetings with Nokia Chairman Siilasmaa about Microsoft buying the Nokia handset business, Ballmer made a token ridiculosly lowball offer that the Finns walked out of the meeting (Elop did not attend, he was out by now, kept on as figurehead CEO for some more months of no more power). And then Siilasmaa made a brilliant ploy - the Nokia X series smartphones running Android. The first rumors appeared in the summer and Ballmer could not accept the situation where Nokia abandoned Windows when Nokia Lumia accounted for more than 90% of all Windows Phone sales. It would have been a humiliation to Ballmer and Windows overall plus obviously Windows Phone and Microsoft's mobile aspirations. So now Ballmer was willing to fork out 7.2 Billion dollars. Not because he felt Microsoft can make the dead dog walk again. But because Ballmer could not take the embarrassment of Nokia quitting Windows Phone. That would be a colossal slap in the face of Ballmer personally, that his pet project run by his own trained monkey had failed. It was easier to use the vast cash reserves of Microsoft to buy the mess, and hide it at Microsoft. Ballmer knew Lumia was dead when he bought it.

But Bill Gates didn't become the richest man on the planet and held that title for two decades by being an ignoramus. Gates knew Ballmer as the asshole and chronical liar and Gates saw right through the clown Elop. So in a rare spontaneous and public humiliation, Bill Gates was critical of Steve Ballmer on TV with an interview with Charlie Rose, Gates said Ballmer had made a big mistake with Windows Phone. Not long that came the news that Ballmer would need to step down (but was given time to help with finding his replacement). And shortly after that the news broke that Microsoft would buy Nokia's handset business. Obviously Elop was forced to step aside from running Nokia and had to join the people shipped from Nokia to Microsoft in the new year.

When the Nokia sale to Microsoft deal was announced, Nokia's smartphone market share had been around or a bit above 3% for the previous year already (ie all the negotiations for the deal, there was no illusion of any better sales). The market shares per quarter from Q3 of 2012 were: 3.6%, 3.0%, 2.9%, 3.2% up to when the announcement was made. Then the remaining Nokia ownership of the handset business before the deal was finalized, the market share continued thus: 3.5%, 2.9%, 2.5%. And then Microsoft took over the business and the market share continued this way: 2.6%, 2.9%, 2.8%, 2.5%.

Can you see a pattern? The market share is 'flatlining' like the heartbeat monitor at a hospital when the patient has died. A steady tone. 3% market share plus/minus one half of one percent. Not once even hitting 4%. Not once. In nearly 3 years. Not once even 4%. This patient has died. The illusion of sales is random noise of some customers accidentially picking up a Lumia thinking its a real Nokia. And yes, of those numbers, Microsoft told us, one third were NEVER ACTIVATED. So the real 'ecosystem' measure is a steady 2% for 33 months in a row. This is as dead as one can be - remember not for one quarter ever in Lumia history of four years of sales by now, has the phone been sold at a profit. Every single quarter the Nokia/Microsoft Lumia smartphone unit has reported a loss. Four years straight. And what did Microsoft just tell us yesterday? That their previous expectation of this unit finally becoming profitable (initially promised for next year) is no longer viable. This unit is never going to become profitable. Microsoft knows that and is now willing to tell its investors that too as you could read yesterday.

NO SILVER BULLET

I read a lot of really entertaining fiction about how Microsoft could still turn this unit around. As I asked you in the beginning of this blog, if you read ANYONE on Lumia smartphone business at Microsoft, check out first is that author even borderline competent. This is the pattern of Nokia/Microsoft layoffs since the Elop Effect (note I am only mentioning the big layoff rounds not ones of a few hundred at a time of which there were many more and not of other Nokia businesses outside handsets):

May 2011 - 7,000 fired or sold to Accenture
Sept 2011 - 3,500 fired
Feb 2012 - 4,000 fired
June 2012 - 10,000 fired
(Sept 2013 Nokia handset business and announced 32,000 employees sold to Microsoft)
June 2014 - 12,500 fired (among 18,000 total at Microsoft that day)
Sept 2014 - 2,500 fired
Feb 2015 - 9,000 fired
Jul 2015 - 7,800 fired

If every single quarter the smartphone unit reported declining market share until it hit that 3% rock bottom and every single quarter the smartphone unit reported a loss, and you had 4 rounds of layoffs in 2 years before the deal, and the disasterous failures continue after Microsoft took over the business, what kind of blind are you as an 'expert' if that pattern isn't obvious? Yes, there will be more layoffs. This is a dead business. And yes, it was certainly PLAUSIBLE that some remedy could be had, but the proof is in the pudding. Steady erosion of jobs.

But the REAL value, the VALUE of the expert is if he or she can look into those numbers and tell you WHY it was so bad. What is wrong? This is where we separate the real competent people from the pretenders. Why is the disaster continuing unabated, one quarter after the other every single time. So. Lets do the some of the sillyness. The silver bullets for now, if you like a good fairy tale.

Design a better phone. Haha idiot comment. Nokia had regularly the best phone on the planet in that set, on Symbian, on MeeGo and on Lumia. Phone of the year at the big trade shows. And highly liked by the reviewers often, especially after the disasterous first attempt at Lumia (Microsoft always takes 3 tries to find something useful, that was Windows, that was Xbox, that was now with Lumia too, only the third edition on Windows 8 started to work well enough, but by then there were no customers left to push these phones at).

So the Nokia phones WERE better phones BEFORE the moronic Lumia decisions. So Nokia KNOWS how to make great phones. But because the loyalty is destroyed - a third of the phones are not even ever activated meaning most were never even taken home from a store - there is no love here left to exploit. Any redesigned 'better' Lumia today is as welcome in a Nokia household as a flea the size of a rat, sucking on a rat the size of a cat, to borrow from David Bowie lyrics...

Enterprise will solve it. No it won't. Nokia had full Office Suite integration with Lumia already. Nothing new here. No, wait, Nokia had full Office Suite integration BEFORE the Lumia project was even created. Before Elop was hired as Nokia's new CEO. It was indeed Elop who ran the 'Nokia' project from Microsoft earlier, that did precisely that, it brought Office Suite to Nokia E-Series business phones. Those E-Series phones roughly matched Blackberry in 2010 for global enterprise market, split three ways - one third BB, one third E-Series and one third the rest including Windows, Palm, Android, Linux and even a few iPhones. And how much did that awesome Office Suite integration help the E Series in the wars against Blackberry and the others. Zero. Zip. Zilch. Nada. Niente. Nothing.

Cheap phones will revive it. Hahahahahahahahahaaaaaa... What a moron comment. Windows Phone is like all Microsoft softare, it is bloatware. It is a resource hog. It is slow as molasses. Now with Windows 10 absolute batshit crazy 'we will work on all form factors' meaning the ultimate compromise to be master of nothing, it only gets worse. There have never been cheap Lumias. Never. Microsoft and Nokia both said Windows Phone will never be a low-cost OS platform. The image of the 'cheap' Lumia is a total mirage. Cheap smartphones are Androids, or Firefoxes, or Tizens. Not Lumias. And it won't be. Yes, there are low-end Lumia phones like there are low-end Audi cars. But those are not anywhere near the cheapest on the market, nothing like a Skoda or Lada or Tata or Proton or Smart car or the cheapest smallest crappiest Chevy. A CHEAP smartphone today costs under 40 dollars and the cheapest are in the 25 dollar range - these are UNSUBSIDISED prices in other words for American readers, price without contract. Touch-screen 3G cameraphone on Android at 30 dollars without contract. Try to do that on a Lumia any day soon. Ain't happenin' dude...

Apps with Win 10 will fix it. Bwahahahahahahaaaa [stop it my sides are splitting] bwahahahahahahahahaaaa. No way, I can't believe you just said that. Are you aware that 80% of all apps on all app stores are zombies today. Apps that the developer has stopped maintaining. That includes iPhone and Android. You know, Android, with 1.6 Billion smartphones in use worldwide (contrasted with 47 million Windows Phone smartphones globally). So yeah, Android has 40 times larger installed base yet the vast majority of Andorid apps are zombies. What do you think about those poor saps who bothered to develop some Windows Phone version in their recent past? Do you think there is any business in that pit of despair? None whatsoever. Many major brands have pulled out of Windows Phone altogether. Most who remained to do Windows 8 versions, did it only after Microsoft PAID THEM TO DO SO. There is no economy here, the developers can see the math. This is a desert not a garden. Try to eat sand. Ain't gonna sustain you for long... oh, then try to drink sand haha....

Windows 10 will be of course a normal market for the PC. But who uses PC apps on their smartphones? (see Enterprise in the above hahahahhaha). Beyond that, if Microsoft pays another round of total development costs, we'll see the Angry Bird and Facebook and Twitter etc apps, poorly and quickly done to satisfy Microsoft's minimum requirement, but most smartphone apps that have been made for Windows 7 or 8 will never be repeated on Windows 10. That ship sailed. Remember the story about how Ballmer screwed the developers with Windows Mobile not being compatible or having a migration path to Windows Phone. That is where the rot started and by now, its someone who lives in Redmond and wrote the city parking app who still bothers with Win 10 on mobile. The others are gone. Apps could have made Lumia something if Ballmer played it smartly but this is a totally lost cause. Or are you SERIOUSLY going to suggest Microsoft somehow gets 1.4 million new apps/versions coded for Windows 10 for those lousy under 50 million Lumia owners worlwide - worldwide so cover all the major languages too and their myriad of alphabets. Never gonna happen.

Fingerprint scanner. Retina display. 3D display. Hololens. This is all pointless. Those might help if there was ANY real traction on the brand. 

DOCTOR, PATIENT IS FLATLINING

I know the above section sounds harsh. Really, Tomi, nothing can be done? You mean nobody, not even you could think of anything to save Lumia. At this stage, yes, that is true. Nothing can be done. And let me prove that to you. We saw the flatlining of the Lumia business, after the Elop Effect was over. Its been a totally flat, 3%, 3%, 3%, 3%, 3%, 3%. Totally flat. And that might not be a sign of despair or proof in and of itself but now consider the hospital emergency room. If a patient suddenly is flatlining, what do they do? Emergency responses. Try to get the heartbeat to return. Do something!

So we have the analogy in smartphones. What happened when Samsung launched its Note phablet-sized screen smartphones? Huge spike in sales and market share. Then we see the identical effect now with Apple's iPhone 6 and 6+ huge spike in sales. We KNOW that first launch of phablet size screens result in huge spikes. It happened before Lumia did it (Samsung Note) and the effect has not worn off, it happened just now when iPhone did it after Lumia. Huge huge spikes. And Nokia's Lumia 1520 phablet with its 6 inch screen launched in October 2013. Nokia smartphone market share? 3%, 3%, 3%, 3%, 3%, 3%, 3%... zero effect.

Human beings are the same globally, we love phablet sizes screens. When anybody else does phablet screens it means huge spikes. When Nokia/Microsoft Lumia does it, 3%, 3%, 3%, 3%, 3%.

Wow that is weird. I wonder if thats the same in other areas? We saw that the number 1 thing Nokia buyers want in their smartphones is a good camera. So when Lumia went 41 megapixels with its 1020? 3%, 3%, 3%, 3%, 3%, 3%.. No way! No spike at all? None. What about cheaper models? Apple had a spike when it went down-stream with price (and I argued not cheap enough) with the iPhone 5C. When Lumia offered a series of low-end phones? 3%, 3%, 3%, 3%, 3%, 3%. Colors? 3%. Wireless charging? 3%. NFC? 3%. Windows Phone new better release 7.5? 3%. Windows Phone even newer better release? 3%. Windows Phone even newer NEWER better BETTER release 8? 3%. 

The definition of insanity is doing the same thing and expecting a different result. If you do EVERYTHING in the book, quite literally everything in the book, and its still 3%, 3%, 3%, 3%, 3%, this means nothing can be done. This division has never produced a profit. The phones are SEVERELY underpriced for their abilities and STILL WON'T SELL. And that 3% masks one third that are never actually used. So the reality is 2%, 2%, 2%, 2%, 2%.

Stephen Elop at Nokia had an agenda (his secret bonus clause). Steven Ballmer at Microsoft hoped against hope he can keep his Windows Phone idea alive long enough to last until he retires but he was forced out, partly because of the enormous costs and waste this project took. Elop back at Microsoft was exposed as the mental midget he is and nobody took him seriously anymore. But Satya Nadella is a clever guy and is not wedded to the disasterous Lumia mess. He can read numbers. 3%, 3%, 3%, 3%, 3%. He can see that when the whole project was under Microsoft ownership and management and he himself, Nadella spoke with some customers ie carriers/operators, he knows what the deal is. He knows that Microsoft's own first-year attempts resulted in... 3%, 3%, 3%, 3%, 3%. 

You know how the Ballmer-era promise of this acquisition was sold to Microsoft investors? In 2013 after the Nokia deal was announced, Microsoft promised that Lumia will reach 15% market share by 2018, and have a profitability between 5% and 10%. 15% market share? 300 million smartphones sold per year (more than iPhone today) and that amazing rush in these 5 years. To go in a linear growth pattern from 3% to 15% would mean 3%, 5.4%, 7.8%, 10.2%, 12.6%, 15%. Lumia would need to pick up 0.6% of market share every quarter and right now it should be at 7.2% and the brand new numbers out now from Microsoft should report 26.5 million Lumia sold. The reality instead will be about 8 million. (3%, 3%, 3%, 3%, 3%). And the original promise of reaching profitability by next year is no longer being promised to Microsoft shareholders. 3%, 3%, 3%. There was a dream, originally Ballmer hoped for 30% and would have taken 20%. By the time Elop had wrecked that plan, Ballmer hoped that once he had bought back Nokia, and 'reallocated' that clown Elop, with proper Ballmerian attention, they could still bully their way back in this business to 15%. Now we see the reality. 3%, 3%, 3%. And Satya Nadella saw right through the bullshit, he was already against this deal before it was made and as CEO he has examined this ten billion dollar boondoggle very intensely (bearing in mind Microsoft paid Nokia a Billion dollars per year in marketing support in this project, hence the roughly $10B total sunk cost so far). He'd be incompetent to throw good money after bad.

DOOM AROUND THE CORNER

But there isn't. What is around the corner is Godzilla. Optimus Prime is there. The Death Star is lurking. The end is in sight. Why? Nokia will return to smartphones next year and it will be on Android. That last 3% of sales is the last bit of truly hyperloyal Nokia fans who think Lumia is Nokia. When real Nokia returns, on real Nokia designs, running Android, and the box says 'Nokia' and Microsoft's Lumia doesn't say Nokia anywhere, those last customers vanish before you can say Otaniemi (the suburb where Nokia HQ building used to be now owned by Microsoft). 

Whatever you might invent as the magical silver bullet to solve Lumia now, for next year, comes truly too late because Nokia returns and trust me, those Lumia sales in Italy and Spain that you see on Kantar statistics, they are buying Lumia because they want Nokia. When real Nokia comes in that market share truly crashes down the clliff-face. With warp speed. And all phasers set on stun. There is no light at the end of this tunnel. What you see is the onrushing freight train. 

FOR THE RECORD

So why have I been able to know so precisely what is happening at the Nokia new strategy? Because my primary customers of my consulting are the direct customers for most of Nokia smartphone sales - carriers/operators. I deal with them in my day job. I hear their concerns and there is only one reason why Windows Phone failed in the market. That failure happened BEFORE Nokia started shipping its first Lumia phones. That failure started before Lumia was even formally shown to the world. That reason is well known inside the handset manufacturer community (also big clients of mine) and very well known within the carrier community. And it is something I am often ridiculed about when I write once again what it was that killed Windows smartphones. Do read this bearing in mind, I have not made ONE missed call on Nokia or Windows Phone in the past four and a half years. And I called EVERY development in this sorry saga. And while I made dozens of very exiplicit calls about Nokia, I gave no forecasts that didn't come true (except now the very last end of the story which obviously is still pending). So its not like I listed 1,000 outrageous things hoping five of those happened and then claim to be so smart haha. No, this is legitimate most accurate shit. Read the blog, its all there, with contemporaneous commenatary and often links by outside sources who refernce my forecasts in that context so I could not have written these with benefit of hindsight.

So Mr Most Accurate, what is it that killed Windows smartphones. It is an acquisition by Ballmer that did make sense for Microsoft overall, while it destroyed the mobile future. That was Skype in May 2011. And immediately I have to explain several misunderstandings. This is not about VOIP services. Carriers/operators do not fear VOIP. They themselves offer VOIP services. Secondly, this is not about OTT. There are plenty of OTT threats to carreir/mobile business with Whatsapp on the top today, that is wrecking the profitability of SMS texting. Yes carriers hate OTT but Skype is totally in another class altogether. This is not about HAVING skype on a phone. In 2011 Skype was not on Windows Mobile or Windows Phone smartphones, but Skype WAS on iPhones and Android smartphones like HTC and Samsung. The carriers were not punishing brands that installed Skype on a phone (although they hated that) they were punishing only Microsoft. And remember, Windows based smartphones did not even have Skype on them in 2011. The first Nokia Lumia smartphones did not support Skype but that did not stop the carriers taking it out on Microsoft.

So first why. Skype is the only existential threat to the carriers. Understand what that means. An existential threat. It means if Skype succeeds (at large enough scale), the carriers go bankrupt. Bankrupt. Carrers literally will die. That is what existential threat means. OTT services like Whatsapp only hit profits, and while that is bad, that is not an existential threat. Skype is still today the only existential threat to carrier business. Why? Most revenues and most profits for carriers are on voice calls. The most lucrative voice calls are international roaming calls. Skype does calls and its most used on international calls. The second most lucrative service is SMS text messaging. Yes Whatsapp is taking most of that traffic but Skype also has messaging. So Whatsapp is a single threat, Skype is a double-barrel threat. And third barrel. Skype does videocalls. The vast majority of videocalls worldwide are now on Skype. Carriers want us to use our 3G videocalls on our smarphones and pay for the traffic.

Skype is the only existential threat to carrier business. Understand what that means. It means Skype is a bottle of poison, and Microsoft makes that poison and asks the carriers to drink it. Whatever they do against Blackberry Messenger (BBM) or Viber or iMessage or Whatsapp or Facebook, carriers will do that but at far greater intensity against Skype. Why? Metcalfe's Law. Metcalfe's Law is a telecommunications law that states that a network of twice the number of nodes, has four times the utility. So if one network has 4 connections and the other has 8 (twice the connections) the larger network does not give twice the utility to all users, it actually offers four times the utlity. An expontential curve which means the biggest network has far far FAR more utilty to its users than just its mathematical size difference. And whose closed garden communications network is biggest? Skype. It is the biggest network and it has a triple threat within that network. It is the existential threat and you know this as well as I do. If we have a good WiFi connection, we'll go do the Skype call rather than paid voice call. Obviously. That is exactly what this is about. Not that a given phone happens to have Skype. Its who OWNS Skype. Who made the poison. 

And Skype never played fair. Almost all other VOIP providers like say Vonage were at least nominally a 'normal' telecoms service business on razor-thin margins. But Skype never was. It didn't even TRY to make a profit. The Skype propostion was to grow with free services and always find a newer sugar-daddy to buy them and pay. Microsoft was a perfect latest buyer as Ballmer didn't care at all about making profit on his latest internet play, he just needed a stronger presense in that race that Microsoft was losing to Google and Facebook and others. So Ballmer happily allowed this 'pest' service to continue in a non-economic business proposition to just try to kill off the carriers. And what did Ballmer the bully say - together with echoes from Elop - that Skype would come and be inevitable and crush the carriers. Yes. That is what Mr Diplomatic Numbnuts Ballmer (and sidekick Monkeyboy) were telling their SALES CHANNEL - the carriers - that no, you could not stop Skype. The ousted Greek Finance Minister probably went to Ballmer's school of negotiations haha. 

So understand the intense reaction to Skype's new owner. There are tons of real and imagined threats to the oligopolistic club of mobile operator business in any country and globally as an industry. You can argue the case for the virtual SIM card or WiFi or MVNOs or OTT providers etc. But only one existential threat exists and it is still growing as a threat, that is Skype. The industry was totally united against this threat long before Ballmer bought Skype and all who work closely in the industry - I mean the mobile industry - most of this industry and most of its revenues is the carrier/operator business, the handsets are the little brother in this picture - most of those who work in this industry know this very well. That is why this aspect divides my comments so totally. Some say it is total lunacy that one thing could so hurt Lumia or Windows Phone brands, those who say so are not working with carriers/operators. And those who work with carriers/operators like I have for over two decades, they know Skype is the only existential threat to the carrier business. It is like a bottle of poison and Microsoft makes the poison (owning Skype). It is irrelevant how many people have it on their phones, or whether you or I use it - of course we do - or if this doesn't seem to impact any other phones (its not about the phones, its about owning Skype). When Microsoft bought Skype in May 2011, Microsoft became public enemy number 1 to the global carrier community. Instantly Steve Ballmer became John Dillinger. EVERYBODY was now out to get him/Microsoft (killed). This all happened BEFORE Lumia had even been shown to the public.

So what happened next? An IMMEDIATE global sales boycott against ALL smartphones that ran ANY Windows OS. Instantly. Within days we had stories in the press about handset stores refusing to sell Windows Phone based smartphones by Samsung or HTC or SonyEricsson or Motorola, even if they had them in the store, the sales rep would say, thats a broken model, I can't sell it to you, but can I show you this Android or this iPhone. The stories came from Boston to San Francisco, from London to Hong Kong. A total instant global and total reaction against Windows based smartphones. At the RETAIL level, in stores controlled by the operators/carriers. And even if the customer asked for a specific model on Windows Phone that was shown in the window display, the sales rep would push an Android or iPhone instead. This was sudden and total. I have chronicled it on this blog, I have also written extensively about the murky science of retail channel management, and when such data occasionally came into the public domain, how much power the store sale rep has to change the mind of buyers. All this is long since settled reality - except to those who don't work in the mobile industry who think its hogwash.

So lets go to the source. This is how Nokia testified to the United States stock market regulator, SEC, in its Form 20-F on May 31, 2011. First off, Nokia identified its core competitive advantages thus:

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. 

In the document, Nokia stressed the importance of the carrier relationships and distribution channel with this striking language:

Our ability to maintain and leverage our traditional strengths in the mobile product market may be impaired if we are unable to retain the loyalty of our mobile operator and distributor customers and consumers as a result of the implementation of our new strategy or other factors. (bold in original)

And Nokia made it this plain, in Form 20-F, what would happen if those carrier relations and distribution channel support vanished:

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. 

It came true EXACTLY as Nokia warned investors in May 31, 2011. This is exactly what DID happen: 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.

It was not about PRICE (phones sold at a loss). It was not about a bad PRODUCT (3%, 3%, 3%, 3%, 3%). It was not about lack of MARKETING (Nokia Lumia launch was biggest marketing spend in mobile handset industry history). If not price, not product, not promotion, then it CAN ONLY BE ONE THING: as marketing students remember, its called the fourth P or 'place' ie distribution. If the distribution channel refuse to sell your product, you die. Its that simple. If the distribution channel refuse to sell your product, you die. This is basic 101 of business managemnet. If the distribution channel refuse to sell your product, you die. We hae seen this. 3%, 3%, 3%, 3%, 3%. Nokia had the world's strongest carrier relationships and biggest distribution reach and had 35% market share before Elop destroyed the business. But if Lumia was acceptable to the carriers, they could well have returned to 35% or at least say half of that, 17% when Elop was removed and the old phones gone. But 3%, 3%, 3%, 3%. Something happened. It happened outside of Nokia. Nokia became victim of Ballmer's last cruel trick. Because Microsoft bought Skype, all Windows smartphones became impossible to sell.

Long-time Windows smartphone partner SonyEricsson? Quit Windows in 2011 and went only Android. Long-time Windows smartphone partner LG? Quit Windows in 2011 and went only Android. So long-time Windows smartphone partner Motorola? Quit Windows in 2011 and went only Android. Recent Windows smartphone partner, Huawei quit Windows in 2011, went Android. They later returned to try Windows one more time to see if there was any chance, and quit AGAIN. And long-time Windows smartphone partner Dell? Quit Windows in 2011 and left smartphones altogether. Then long-time Windows smartphone oartner Samsung? Cut Windows in 2011 in all markets except USA, while selling smarphones on Android and launching its own bada OS platform. And the oldest Windows smartphone partner HTC? Cut Windows in 2011 in all markets except USA, while selling smartphones on Android.

These manufacturers all quit during 2011. All of them. Not after Nokia joined in February. Not when Nokia launched Lumia in November. They quit in the summer right after the Skype sales boycott started - even though NONE of their phones SUPPORTED Skype. It was an anti-MIcrosoft boycott, loud LOUD and clear. The handset makers all said that the channel had spoken, that sales had collapsed, that demand had vanished overnight, that distribution or carriers or the channel doesn't want Windows based smartphones anymore but obviously there is big demand of smartphones - on Android. Departing Microsoft Windows Phone execs said very clearly, the carrier relations got so poisoned because of Skype that there was no hope to the business.

Tomi that was 2011. Yes. and if that was no longer an issue, then why 3%, 3%, 3%, 3%, 3%.. all the way to 2015, 3%, 3%, 3%... I talk to my customers all the time and trust me, they hate Skype today as much as they did a decade ago and they now project that same hatered to Microsoft as the eabler/owner of Skype. So to put this matter to rest. We have testimony by the guy who knows it best. Stephen Elop, when CEO of Nokia, he was speaking at the annual shareholder meeting and he was asked this question: "I believe Nokia has a problem with product distribution. Operators do not want to sell Windows Phone smartphones, because Microsoft has acquired Skype, who offers free Internet calls. Skype calls are eating operator revenue. There may be ways to block Skype, but there will always be ways to get around it. What will you (Nokia) do to get over this problem."

It doesn't get any clearer and more absolute than that. He asked, is there a sales boycott. Is it targeted at all Windows based smartphones. And is it because Microsoft bought Skype recently. This is Nokia CEO talking to Nokia shareholders under oath and under strict stock market rules as the responsible executive and he is clearly asked a question that undermines the very value of Nokia and its new strategy based on Windows smarphones and partnership with Microsoft. So this is probably the most important question of that meeting. And we have the transcript of what Elop said. He anwered thus: "The feedback from operators is they don’t like Skype, of course." It is so clearly known inside the mobile industry, Elop added the phrase 'of course'. He said the reason carriers hate (or Elop-speak "don't like", if you want) Skype is because it steals the revenues of their voice business. This is not some survey or expert opinion or theory. It is 'feedback from operators' to the CEO of the world's largest handset maker. We don't want Windows because Microsoft bought Skype. Its that simple. From this point on, the Nokia market share has stubbornly stayed at 3%, 3%, 3%, 3%, 3%, even when Nokia CEO was removed from his position, 3%, 3%, 3%, 3%, even when Nokia handset business sold to Microsoft, 3%, 3%, 3%, 3%.

I could go through the profit warnings and disappointing quarterly results and all the press from Nokia and show the patterns of Elop consistently blaming the channel or carriers or retail or distribution, consistently and every time. Not a peep about apps or large screens or iPhones or Androids or prices or cameras or keyboards or Chinese phones or dual SIMs or NFC or fingerprint sensors or whatnot. The continuous rephrain from Elop when the numbers came out, why Nokia disappointed again? Carriers, retail, channel, distribution. And by the way, Nokia downgrades by the three ratings agencies, Moody's, Standard & Poor, and Fitch. If you go reading their releases WHY they downgraded Nokia dozens of times from near perfect to junk - every single time they listed reasons, they included one of the following terms 'retail, carrier, channel, distribution' which often was the ONLY reason for another downgrade, or sometimes in conjunction with other aspects. Always included. Often the only reason why.

If you can show me some public source where either Nokia or Microsoft or a major carrier group like Vodafone or Telefonica or America Movil or AT&T or China Mobile or Verizon or whoever says that 'Skype used to be an issue but now it no longer is and we are happy to expand our Windows phone smartphone portoflio - if that announcement is anywhere - by a CEO level guy - then yes, I'll accept there may be light in this tunnel. But the NOKIA CEO said Skype is killing the Windows Phone business. All Windows Phone business, not just Nokia. All other Windows partners QUIT - that summer - or serverely cut their smartphones but only on this platform - while happily selling on other platforms, EVEN NOKIA did that, the moment Elop was removed from CEO, Nokia rushed to release its X Series smartphones on Android that took off like a rocket but Microsoft immediately shut down that business of course when they took over Nokia's handset business.

You don't have to like this reason. But it is a FACT. If I can show you, that the CEO at the center of this, the guy selling the most Windows Phone based smarphones - the CEO of Nokia - says yes there is a carrier boycott against all Windows Phone smarphones and its not because Skype exists but its because Microsoft bought Skype so its aimed at Microsoft - then you HAVE to accept this was true. And the only question is, does it still hold. Have the carriers stopped hating Skype? Or is perhaps the evidence out there? 3%, 3%, 3%, 3%, 3%.

Elop knew this. Elop had ASKED the carriers and they said in ONE VOICE. No. If you read Elop's full response he also says Elop was in talks together with Ballmer to try to convince at least one carrier to try a coctail of poison and NOT ONE CARRIER had taken their offer. 3%, 3%, 3%. Not one carrier had changed their minds. And so, Elop knew this. And obviously so did Ballmer. And yet, in 2013 when Ballmer approved the investor presentation about the Nokia purchase, he promised 15% market share and 5%-10% profit margin by 2018. He knew that was impossible but this was not about business logic, this was Ballmer trying to save his own ass and hide his mistake. And as we saw, Bill Gates was too sharp for that, he fired Ballmer. And we know the truth. There is no recovery to 15%. Its 3%, 3%, 3%.

NADELLA SEES THE OBVIOUS

Nadella took over as Microsoft CEO and he has now had 15 months to evaluate the acquired Lumia business. He already fired 80% of the people who were brought in, and he's now written off 90% of the investment. He has warned of hard choices and he's shifted his rhetoric about the areas of emphasis for Microsoft into the future. So he wrote this about Lumia future: "We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family. In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”

So for now, the handset business will not be killed but Microsoft no longer even attempts a viable handset business by itself. It abdicates competition in handsets. It won't try to fight for a share. It will now use handsets as supplemental elements to a software strategy (which is smart). This can easily be done with a couple of phones made and sold in trivial numbers. This means a rapid reduction of market share below 1%. This means a rapid reduction of market share to below 1%.

The near term focused portolio means CUTTING phone portfolio. That means dramatic cuts in total sales and yes, reduced market share. Retaining capacity for reinvention means keeping one factory and some of the best staff to wait, if the wearable markets take off or some random opportunity arises imagine for example a sudden successful Playstation Smartphone from Sony. Then Microsoft could react with an Xbox Smartphone... Thats what retaining capability for reinvention means.

Nadella wrote further: We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software. We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.

Business customers? Thats the enterprise segment. Think Blackberry. This is a doomed project straight out of the box. The SALES CYCLE for enterprises is measured in months and often years. It requires a dedicated separate sales force. It requires special phones - look at Blackberry, look at old Nokia E-Series. The Lumia series was ALWAYS seen as the least enterprise-friendly line of smartphones. There used to be tons of this competence at Nokia E-Series but that is a ghost of what it once was, after the years of layoffs. And worst of all, the BUYER at the enterprise doesn't want another OS platform to support into perpetuity. Worse, they don't want another OS that has trivial share. And kiss of death - no IT manager will approve the adoption of a smartphone platform for enterprise-critical systems, which is itself on its deathwatch. You don't want to buy instant obsolesence and try to maintain a dead platform. There is no hope on this leg of this stool.

Now, every business uses Windows, there WILL be some random successes reported from this even with the existing consumer-oriented Lumia handset portfolio. If Nadella is serious, they should release E-Series type enterprise oriented smartphones with obviously yes, either Communicator-style slider/folder physical QWERTY keyboards underneath touch-screens, or perhaps the dumber idea of the narrow Blackberry style phones with for-today-too-small tiny touch screen on top. Yes, Nokia made those Blackberry-clone phones too but that is a dead phone form factor for today. A revived Communicator would get some attention to Lumia but no, there is no viable business from an enterprise solution at Lumia. Anyone thinking synergy with desktop PC see Elop at Nokia and see Elop before Nokia. That is a total fantasy. And remember IT managers, they see the writing on this wall even better than we see, there is ZERO future for a Windows Phone 'enterprise secure' variant to the OS and Lumia phones into any kind of future. So no IT manager will approve the considerable cost to integrate this new silly idea to their existing IT systems. This sounds good but this won't be any profitable business ever.

But also read what he said. He didn't say enterprises get the phones. He said 'experiences'. So even just expanding any Nokia/Lumia/Microsoft mobile solutions into a 'secure enterprise' area - on Android and iPhone - and Windows 10 - is fulfilling this promise. He doesn't need smartphones for this leg. And that is what I think is the sustainable part of this area. But one last element - this sits perfectly with Surface irrespective of Lumia. So yeah, no doubt there will be nice enterprise customer gimmicks on Surface (starting with the folding keyboards) so Microsoft tablets, why not. Maybe even Microsoft Surface line notebooks/netbooks/ultrabooks. But don't expect Lumia smartphones to survive on this leg. Lumia is dead.

Then he wrote of value phones. Value phones. Not value smartphones? So this sounds like the very low cost dumbphone Nokia brand will still continue for a while. Why not, that part is (or should be) profitable but this is not in any way supportive of Microsoft's core business or strategy. But as its not loss-making, there is no inherent reason to shut it down either. Microsoft does own the rights to the Nokia brand on phones for years to come, so why not. Now, I may be reading too much into this, this could also mean the low-end of Lumia on Windows Phone either now or even in the near future. Lumia is dead, so whatever Windows Phone 'value' buyers, those are the specific drain on profits that will never get to 15% market share or 10% profitability. It it runs on Windows Phone - it will be killed by the carriers that is clear. After these announcements and as the trend for Lumia in the past few months was well under 3%, we will definitely hit a 2% market share level by the end of the year as at least a rounding-off, so in reality something at 2.4% or below. And as the discount Lumia business cannot get onto a profitable ground that is the main part that has to be shut down. I would be quite stunned if Microsoft releases more low-end Lumias, and cannot see any to come next year, even if a few already-in-pipeline models might come out later this year. This segment NEEDS growth and the 3%, 3%, 3%, 3% flatline is death for the low end for a 'third ecosystem' haha. All this before we consider Nokia returning to the market next year, but running Android, which will only highlight the poor choice for any consumer buyer to consider a Lumia instead.

Nokia brand low-cost dumbphones, yeah, that makes sense. But low-cost Lumia is madness. And as the staff and budgets and marketing etc are all now slashed, that is utterly unsustainable anymore. All ex-big brands who were squeezed to shrink, went to premium phone segments to seek a balance of selling fewer models but making more per handset. And this is what that third part he wrote about does address. Nadella wrote he wants Windows fans (haha) to have the flagships they love. So phablets like 1520, and Pureview cameras like 1020. At premium prices, phones that never sold in large volumes because these buyers appreciate more the whole ecosystem and apps mean more here etc. Yeah. This is a 'will not cost us much' strategy and the most sustainable of the three segments for the mid-term. But as Microsoft and on a dead Windows Phone 10 platform, why ever bother to hold a Blackberry-ish 'market share' with a dead OS to sustain a few flagships that may not even be profitable either? This part cannot hold a 1% market share. And the new Nokia Android smartphones will decimate these devices in all markets except the USA. And Lumia retreats to only the US market and holds say 3% there, that is 0.4% globally. You say Microsoft, I say Blackberry.

This is a logical next step for a cautious CEO. It is possible, there are plenty inside the handsets business unit at Microsoft who urge Nadella to give it one more chance now that Elop is fired. And that makes sense. But Nadella also has studied the issue, seen the numbers talked to the carriers/operators and can see the obvious writing on the wall. This is a dead dog. So lets shut it down, but give it a chance, and as long as the costs are not severe, for a 10 Billion dollar investment, there once was huge value in this, lets see if someone other than that guy who wanted to be called The General, can perhaps resurrect some of it.

My prognosis. The Lumia unit will be shut down within 12-24 months. Windows 11 will no longer support a smarphone form factor and will only serve tablets and PCs. One more round of layoffs will come when the last parts of Lumia unit are ended.

For Microsoft overall, the mobile dream is now clearly stated as dead. There is no Windows Phone ecosystem, there is no future for Lumia and Windows will be in the future only a platform for PCs and tablets. The smartphone leg of the all-purpose compromise of Windows is a dead end and will end. That means also, that Microsoft concedes defeat in the tech war of the century, which was won by Android surprisingly fast as I wrote about already before. Windows can hold a big share of the desktop and some borderline relevant share of tablets. That means its as relevant to consumers as Cobol and Fortran. The tech wars moved past the PC in the past 10 years and now the future is all smartphones and beyond. Microsoft won't die, its Windows desktop and Office software is profitable business that will sustain it long and the cloud strategy is smart. Xbox is good business and with Hololens Microsoft has a good chance on the next generation race. But in the smartphone wars Microsoft lost. As I said, give this Lumia unit 12-24 months. And the next version of Windows after Windows 10 will not bother with a smartphone form factor and screen size.

THE HOLLYWOOD ENDING

But if I was Nadella or if I was Suri Rajeev at Nokia I would pursue very quietly behind the scenes a possibility of selling this rump unit back to Nokia. Rather than take another several hundred million dollars of losses in the next year or two, and write off another two billion, and fire thousands more, why not take some money from Nokia instead. Nokia was paid $7.2 Billion for the unit when Microsoft bought it. Now that 80% of the staff have been fired, why not see if Nokia would pay $1.5 Billion for the remains? Nokia would get thousands of the last remaining and arguably most competent of the phone people it once had hired. It would get back factories and its brand. Nokia could promise a transition support of WIndows Phone models that are in the pipeline to be sold to all markets where demand exists. But for Nokia, to have instant rights to the Nokia brand, no Microsoft rival in stores, to get the sales organization (whats left of it) and factories (whats left of those) and several truly Nokia-designed current Lumia models for instant sales?

If Nokia took over this business and shifted to Android, they would escape the prison of 3%, 3%, 3%. If Nokia aggressively rolled out Android variants of the Lumia models those Android versions would be loved by the carriers and retail channel and we'd all love a Nokia phablet on Android or a Pureview Android cameraphone or an Android based Communicator. Those 3 first Nokia X Series Android phones from last year could be in production within a few months. Not totally cutting edge and decidedly mid-range but would mark a fast return to Android. Nokia could have a profitable Android smartphone business in 9 months from the acquisition and within 12 months the whole smartphone business would be back to profits even sustaining some Lumia units. And all those designs Nokia had been preparing for its launch next year? Honestly new Nokia designs that were desiged to be Android would be ready to run but now built in Nokia factories, not by Hon Hai. The contract with Microsoft would return all rights to Nokia so they would not need 'third party' manufacturing or sales. As Nokia does want to come back, why not this way? And as Nadella is going to shut down this loss-making mess anyway, why not sell it instead?

RARE TEST

This is also a rare opportunity for you, the reader, to run a test on your normal reading. Most tech stories are subject to a lot of chance and there is a lot of uncertainty. Take the Apple Watch. Nobody really knew. There was no data. We as experts had learned not to underestimate Apple in industries where before others had stumbled, like say touch screen smartphones or tablets or MP3 players. Apple had that magic that it could create success where others had failed. And with no data, we can't really know. Even if we know x about Samsung's Gear smart watch, is that really valid comparison to Apple Watch, etc. It is an honest best effort guess for us analysts and experts, and you can't fault anyone for getting it wrong. That was not knowable. And most tech stories are like that. Samsung's Galaxy S6. Was that going to be a huge success with the redesign or not, with the missing standard features, etc. You cannot fault an expert for picking one side and then getting it wrong, there is no certain answer before we see how it goes in the market.

So imagine the competence test of a weather forecaster. Most weather forecasting is guesswork. But if you visit Sahara desert, even if it is a rare rain, almost all days will be dry hot sunny with a chance of sandstorms. Now, go visit Seattle (Microsoft's home). It is very often rainy, foggy and cloudy. Now. A competent Seattle-based weather expert, who visits some Sahara nation say Mali or Algeria, and stays there a week, and on one day it rains but clearly the climate is hot, dry, sunny and subject to sandstroms. The SENSIBLE and indeed RATIONAL expectation is that MOST DAYS it will be sunny, hot, dry and possible sandstroms. If the Seattle-based 'expert' instead says, yeah, one day it rained and as I know weather in Seattle, here in the Sahara next week will be rainy and foggy and cloudy and wet - that is a moron. And like I said, it is rare for us to have a good test to weed out the morons of the mobile industry. However, this story is one rare such change for you..

So lets remember the definition of insanity. Doing the same thing and expecting a different result. There is very rarely as huge a tech change as we saw with the Microsoft purchase of Nokia, where the result was pre-ordained and obvious. Is it obvious what will happen when Lenovo bought Motorola? No. Was it knowable what would happen when HP bought Palm? No. But was it pre-ordained when Microsoft bought Nokia, absolutely yes.

For the past 2 and a half years, Nokia's smartphone business had been a wreck. Not one quarter of a profit. The Lumia handset a market failure and Windows Phone OS a lost cause. And this unit, was run by the incompetent Stephen Elop regularly called as the worst CEO in the world. Not just in tech, the worst CEO, period. That business never once reported a profit with Lumia and had lost market share until it flatlined at 3% and it kept having to fire more people.

That business was bought by Microsoft. Did it change the OS? No. It still ran Windows Phone. Did it change the handsets? No. Same undesirable--at-any-price Lumia handsets. Did it change MANAGMENT? No !!! The idiot Elop still in charge.

Now is your rare test of your tech writer. There are three moments in time. September 3, 2013. That is when it was announced Microsoft buys Nokia's handset business. Then February 4, 2014. That is the date that Satya Nadella was appointed Microsoft's new CEO and he wrote his famous memo and glowingly talking about mobile. And April 25, 2014. That is the date that Microsoft formally took over the Nokia handset business.

Your fave tech writer(s) wrote about at least one of those three moments. Go re-read the analysis. And look at how the Lumia smartphone business was described. What did your expert tell you contemporaneously at the time. Did your expert warn you or did your expert feed you bullshit.

Nokia smartphone business was a total wreck loss-making mess. And the exact same business continued, in exactly the same form, attempting to sell to exactly the same customers, in the same way, with the same phones, on the same Windows Phone platform - and RUN BY THE SAME IDIOT. 

If your expert warned you, in that contemporaneous article last year or two years ago, that this is a high risk, and that the business is bad, and more layoffs were coming and the market share would not grow - that expert understands mobile. If your expert instead sold you fantasies about synergies and new starts and Windows next versions and success in Italy and Spain and how much carriers love Lumia and how much this is the third ecosystem - your expert WAS LYING TO YOU.

If your expert had written on one of those three giant moments in mobile/tech about the biggest story of that moment, and did not see that Nokia is a mess, and its near future was a disaster - but instead fed you horseshit by the shovel that this was about to be great. Then please, please abandon that site and never return. Was that worth your while? There were hundreds of experts writing about that at the time who warned it was a bad situation and likely to be worse before it could get any better.

Most of the time, it is not obvious what is the future. Most of the time its a 'crap-shoot' and could go either way. This time, with the Lumia business, if it continued on the same OS, and continued under the same management, on the same phones, sold to the same countries, same customer segments, through the same channels - it is the very definition of doing the same thing. And if your expert was so clueless they didn't see this obvious truth, then please stop reading and find a better source. This is a difficult enough industry as it is, without the clowns feeding us trash and wasting our time. (here endeth the lesson, amen)

Comments

[tk]

Tomi mercyfull killing would be fast and painless ;)

[Imbro]

I`ve enjoyed and learned a lot reading your blog since the Nokia burning platform disaster in 2010. However I really miss some insight (or even speculation) on what happened behind the scenes during all this time. Elop can hardly be more than a convenient scapegoat. I mean what could possibly be the strategy of the board that hired him, put in his strange bonus, and why they didn`t stop him when it became obvious he was trashing the company.

I suspect they might be your friends, customers or even perhaps idols, so perhaps this is not the best blog to get such insights.

[Tomi T Ahonen]

Hi tk and Imbro

tk - haha yeah, true. This is actually 'cruel and unusual punishment' by dragging it out..

Imbro - great comment, thanks and yeah. No, no longer anyone I'd know at the top so its not that. I know some things from my many moles at various companies that I can't really talk about or I can only hint at, and obviously those are given in confidence so I can never publish them as sources etc. But I heard regularly from many at Nokia back in the Elop days about how he hated reading my blog but every Tomi blog was read by top management - and they did all that lunacy regardless (the sensible voices had jumped off that sinking ship the moment they understood the reality of Mr Call Me The General).

I did a few speculative pieces when it was relevant, about how that decision process may have gone that selected Elop (over Vanjoki) and about how could he get that nutty bonus clause, etc... Elop was obviously a con man. And a Finnish Board and Chairman would be exceptionally vulnerable to a really polished good bullshitter - like Elop. He also tricked many in senior and mid management with his 'honest' style until they saw that he used everything to weed out all the voices of reason and killed all sensible paths. The really sharp cookies left during 2010. The rest of the smart ones left when then read the Burning Platforms memo. They knew reading that memo, that the author would destroy the company and if Nokia was going to go down, get out as soon as possible to get as good a job anywhere else as possible, before the big layoffs would be coming when the job market would be flooded with highly competent and high-paying execs seeking a new job...

(Wait, I'll post this and respond a bit more directly on your specific questions)

Tomi Ahonen :-)

[Tomi T Ahonen]

Imbro

Ok, strategy and the Board. It is rather well documented that the hiring process of Elop did not include any discussion of abandoning Symbian (that was already decided before he came in) nor of the future of MeeGo & Meltemi. What Elop was no doubt told to do, is to examine everything and try to fix anything. If you remember when his hiring process was happening secretly, in summer 2010, the latest Nokia quarterly results were very bad - in the world economic crisis - and the Nokia share price was falling fast. So whether it was Elop's idea before he came in to try to switch to Windows or he thought of it when he saw MeeGo, one doesn't know. But Elop had to get Ballmer's permission to interview at Nokia for the job and his blessing to take the job - at some point Ballmer must have mentioned the Windows opportunity. Especially as Microsoft past buddy and recently more rival Intel was in that MeeGo partnership with Nokia. I would guess that Ballmer would have been totally happy with just getting Nokia to add Windows to its E-Series enterprise smartphones where a lot of cooperation already existed from back when Elop was still at Microsoft as their Nokia partnerhip manager.

What no doubt triggered the real motivation for Elop to go full out to end MeeGo and go full Windows-only, was his bonus clause. That bonus clause was the invitation to only gamble huge. No sensible middle-of-the-road rational and 'incrementional' behavior would be rewarded. If Elop's Windows strategy worked out well, Nokia would have big business and he'd get a nice 'normal' bonus and his share options would be worth something. Or if that gamble failed and failed badly enough, he could sell the handset biz to Microsoft - and earn even bigger bonus. So the bonus clause is obviously the cause for this madness. At no stage after the ball was set in motion, could Elop make sensible rational middle-of-the-road decisions. He had to go all-out nutty at every stage.

I did write a blog about how could that CEO compensation negotiation have gone, pure speculation, on how that could have happened. Let me go find that link, hold on...

Found it. Here it is

http://communities-dominate.blogs.com/brands/2013/09/elop-25-million-dollar-golden-handshake-for-destroying-the-company-how-could-this-happen-analysis-an.html

Its a long and purely speculative blog but even re-reading parts of it now that is pretty sound thinking of how the negotiations could have gone, where absolutely innocently without any trojan horse intentions, that three-part bonus clause got added to the contract where nobody seriously expected it ever to be needed. And then how it eroded the sense out of Elop as his high-gamble strategy started to fail.

On why not stop him.. That is really the Board's fault and there may even have been collusion in stock manipulation by that stage etc, but to assume no malice of intention and just poor oversight, Elop was a silver-tongued liar, he didn't keep the Board or the Chairman well informed of what he did (his relationship with Ollila was quite strained). So part may just be human relation matters. But part is probably a gentleman's agreement type of Finnish sense of fair play. That when the wild Windows strategy was pitched at the Board, and then approved, Elop no doubt warned them that Finns will be hostile to it, the Symbian and MeeGo people will be angry and there will be lots of attempts to sabotage the whole project. That Elop needed the Board to trust him and stand by him come hell or high water.

So they probably said, ok we'll give you two years. From February 11 2011 to February 2013 when the first negotiations started with Microsoft, thats two years. And the Board should have fired Elop latest in the summer of 2012 when it was very clear the Lumia plan was doomed and Nokia should have rushed Android phones out for early 2013 sales - which would have saved the company, but I am guessing they gave a handshake deal, you have 2 years of total non-interference from the Board, as this will be troubled times, and then Elop destroyed everything in the interim knowing he can't be fired. By February 2013 when negotiations started with Microsoft, Elop knew he would collect his 25 million dollar bonus, all the parts were fulfilled except the signing of the contract. And Ballmer being the asshole he is, of course negotiated hard-ball style and that took another half a year.

I was not the only one here calling for both Elop to be fired and the Board to be fired, and both be investigated. There were many such voices from the summer of 2012 when it was really clear that the strategy had failed and yet Elop refused to do any of the logical things to rescue the Nokia handset business.

So yeah, thanks, I wish at some point someone who was there, writes an actual tell-all book about the inside story about Elop's bizarre management and how he duped the Board (or were they perhaps in collusion with him)

Tomi Ahonen :-)

[abdul muis]

I think the income of Coffee shop around Redmond & Helsinki will go up by 30% for 2 weeks.

[E.Casais]

I have read about a contrarian explanation about the sale of Nokia mobile phones to Microsoft.

Namely, Nokia actually outwitted Microsoft by offloading, at what now appears to be an astronomically inflated price, a business segment that the Nokia board had decided was

a) either steadily fading and condemned to disappear in a matter of years (feature phones);

b) or doomed because of complete failure on the market (WP smartphones) for the reasons described in detail by Tomi (design shortcomings, immature OS, Skype, etc).

In that sense, Nokia astutely got the better part of the deal as soon as the Lumia fiasco was evident.

The basic idea behind this theory is that historically Nokia never hesitated to get rid of business divisions and divest whatever corporate parts whenever it had decided they no longer fitted: tyres, cables, televisions, set-top-boxes, professional networks (TETRA), pagers, accessories...

This means that the Nokia board might have been first fooled by Elop and Microsoft, but then followed a shrewd corporate logic -- a far departure from the "fair" approach traditionally ascribed to Finnish people against the "ruthless", hard-nosed North-American businessmen...

[Catriona]

@E. Casais, Occam's Razor is more consistent with your interpretation. After all, if the Board had confidence in the Meego strategy, they would have hired a new CEO from within. If they were leaning toward Android or genuinely were weighing Android vs. Windows Phone, they'd have brought in an outsider without a natural bias (Elop was obviously biased in favor of Windows Phone).

It seems to me in retrospect that they figured that they would give themselves a chance to reignite their business model by partnering with Microsoft, using a sale to Microsoft as a backup plan.

[E.Casais]

@Catriona

"they would give themselves a chance to reignite their business model by partnering with Microsoft, using a sale to Microsoft as a backup plan."

This is also consistent with a variety of background information showing that right in 2010, the Nokia board knew that serious trouble was brewing: market share was good, sales were up, but ASP was down (one of the reasons OPK was fired); the new Symbian generation was late because of the difficulty to migrate to a full capacitive touchscreen UI (Nokia released quite good Symbian products in 2010, such as the N8, but significantly later than expected); Nokia's image in smartphones had been seriously dented by the N97 fiasco; and Meego was not yet ready for production (as what seems to have been the conclusions of thorough strategy meetings between Elop and top-level Nokia people at that time regarding the Meego roadmap).

But all this is inconclusive.

In fact, there is one other major point that had bugged me as soon as I learned about it, and it is the one that gives credence to that theory: the fact that the incentive package of Elop included a juicy bonus (€ 20M or so) in case he managed to sell off NMP. It is inconceivable that the Nokia board would have accepted such a stipulation had it not viewed the divestment of NMP very favourably.

So in fact selling NMP (not necessarily to Microsoft) might even have been plan A all along: make a transition to a new OS, brush up the product lineup, become the privileged WP device vendor, and then sell NMP to an aspiring North-American or Asian mobile phone manufacturer -- before Nokia endures the fate of Windows PC vendors, i.e. becoming a razor-thin-margin OEM box pusher. Elop was so incompetent that he completely ruined the business and the value of the firm, but Nokia still managed to sell the remains of NMP on what now appears to have been very favourable conditions. Notice all this took place while Jorma Ollila was on the board -- the person who had systematically shed lots of divisions and businesses from the old Nokia in the 1990s and 2000s.

One of the assumption so far in the Nokia saga was that the Finns were naive participants, fooled by hard-nosed North-Americans deal-makers. We might have to review that part substantially.

[winter]

"And only because of Elop personal interference on the design (team) and possibly influenced by Ballmer, they made crappy iPhone clones."

Tomi, I remember that an important reason for the "last year's specs" of the initial Lumia models was the bad design of WP software that literally did not support better specs than last year's iPhone. Bad software design being the halmark of MS.

So maybe the blame for the low Lumia specs must be laid at the misserable design team of WP.

[Spawn]

Great article as usual, thanks Tomi :-)

One particular aspect not named in the article is why Windows Phone was renamed to Windows Mobile and what "Mobile" means in that context:
http://www.zdnet.com/article/microsofts-windows-10-for-iot-what-to-expect/
"Windows Mobile - A version of Windows for industry devices that need mobility"

The scope was extended from smartphones to mobile devices including IoT like environmental monitoring devices which happen to be connected and mobile but not in smart massmarket pockets. Point is the rebranding underlines the shift away from Windows Phones to a wider range where massmarket Phones are just one sub-category of Windows "Mobile".

So, in a sense the sentence

> the next version of Windows after Windows 10 will not bother with a smartphone form factor and screen size

is to a certain extend true already. The extend isn't the form factor or screen size but optimizations, focus and investments that need to happen especially for smartphones. Smartphones are just one of many categories of IoT-devices. Windows Mobile runs on and will continue to run on but thats it. No huge marketing, app and service story, sells-department to focus on smartphones. Not for the mass-market.

Thats very much inline how I interpret the "Enterprise" part: for very special use-cases like when a certain customer needs smartphones with only one inhouse-app for its stuff, not more, locked down, maybe connected with some sync-service to read email-alerts. Such enterprise-customers are able to buy software+hardware+support direct from Microsoft. Its not about the enterprise-massmarket, not Blackberry-like from some years ago. Its just like Windows 10 Compact Embedded, not for the mass-market.

[Spawn]

@winter

> I remember that an important reason for the "last year's specs" of the initial
> Lumia models was the bad design of WP software that literally did not support
> better specs than last year's iPhone

Correct. A few things to remember here:
1. WP7 was CE-based, new UI on top and .NET ported over. Rushed to market to keep replevant, since CE6 was showing age like nothing else, and buy time.
2. Behind the scenes work on NT-based WP8 to replace CE-based WP7 was ongoing all time.
3. Any (limited) resources used to improve upon the shortcomings of dead-end CE was delaying WP8 future.
4. There where many shortcomings far beyond the famous 112 ones every customer noticed first hours.
5. Nokia had at no time access to the code to invest own resources. So, any demand - like work to run WP7 on more low-end devices - had to be negotiated (Ballmer & Elop during his seattle-trips) and balanced (limited Microsoft resources and other interests like getting Windows8 and WP8 out of the door). The balancing got as bad as Microsoft leaving WP7 Lumia in dust when WP8 neared while Ballmer noticed the limited WP7 Lumia success resulting in public complains from Nokia/Elop about Microsoft/Ballmer's committment. And of course the WP7=>WP8 upgrade-disaster which of course was not up to Elop to decide on.

Thing is: As we know now, NokiaX, Android AOSP was forked by Nokia and worked on. During all the time Nokia had resources to work on Android and they had the code and freedo to do so but they had neither with WP. All Nokia every could do, at WP, was apps on top like any other end-users too. At no point in time where they able to just make things happen below that. And they payed the price.

[Spawn]

@Wayne Brady

> I no more believe Msft can build a mobile ecosystem for WP/W10 than I believe Samsung will with Tizen

To be honest: Msft had and has way more skills, resources, committments and a better strategy building up a mobile ecosystem then Samsung ever had with Tizen. And that while Msft burned there ecosystem each year down!

So, no, Tizen will never succeed in building up an ecosystem. *BUT* Samsung also never went on a war of ecosystems like Msft/Ballmer/Elop did and lost! Samsung just didn't notice, care and/or even understand that they have to up until recently.

Now, both lost. And both apply *NOW* the Meego/SailfishOS strategy to bring in external ecosystems. HTML5, of course a common fail by buzz, and Android. Yes, Tizen has an Android runtime now in its appstore just like SailfishOS and eben BB10 has and afaik WP10/WM10 gets a similar xternal-ecosystem-strategy.

[Earendil Star]

From BBC News: "Who knows what would have happened if Nokia had tried to carry on as an independent business - but it could hardly have turned out worse."

Just as I said all along, to dispell the cries of the softie propaganda agitating this blog's commenters.

Now: vindicated. WP burning platform was a scam.

The only obscure part still: what happened to the board to take this kind of decision? I.e. the decision to hire Elop, i.e. to adopt a known unfinished platform such as WP7?

[Spawn]

@Earendil Star

Elop was named Nokia CEO in September 2010.
WP7 was released in october 2010 when first devices running WP where sold.
Add a quarter, february 2011, and everybody know how it performed.Like for example that in Q4 2010 the old Windows Mobile CE6 outsold WP7.
In january 2011 an LG exec named WP7 sells disappointing, https://gigaom.com/2011/01/14/windows-phone-7s-launch-disappoints-lg-exec-says/, even the old Windows Mobile CE6 outsold WP7 in Q4 2010, etc.
One month later, in february 2011, Elop wrote his famous burning platform memo setting the stage to osborn Nokia's sales and start the irreversible collapse. In the same month Nokia announced going all-in on WP.
Of course before the before the burning memo and the official announcement following it the deal was sealed, contracts signed, etc.
It was literally days to late *if* ....

.... *if* waiting for the official numbers confirming black on white what was known long before. See for example this fro november 2010:
http://news.harcourts.net/jasonwills/windows-phone-7-disappoints/
Of course before the first release of devices running WP7 in october 2010 in particular handsetmakers had very early access to what got WP7 RTM in october 2010. And of course was Nokia on that, knew it, was well aware of the situation before february 2011.

Not assume bad will when stupidy can explain it too since stupidy is more widespread then bad will. But in this case I not see how stupidy could explain anything. Every single step starting from Elop's burning-Nokia-down memo looks like agenda rather then strategy and somehow he had support from the board during all that.

My guess? Certain investors got majority of the board to apply a certain strategy in best interest for sayed investors (if worked out, did it work out? maybe it did depending on the goals).

Hey, let me spin that a bit future: in times past Snowden there was probably enough dirty survilance data collected about every board member to put them under pressure and "guide them". If the goal was to destroy the non-US market-leader it worked out, goal reached, partly at least. Business is war and there are no ethics where there are secret wars.

[chithanh]

@Wayne
Android makers are mostly profitable. I am pretty sure that the dozens of Chinese Android makers don't operate at a loss.

And certainly no Android maker sells their handsets at negative margins (meaning selling at a loss before R&D or marketing are counted). But Lumia did.

About the morass you mention, there was a unifying technology for writing cross platform apps, and it was called Qt.

[John Fro]

There are several reasons why Win Phone market share dropped in 2009-2010. For one thing, the US economy was highly depressed and worldwide not much better, particularly in Europe. For another, the new phone OS ("new" being debatable) was getting horrible reviews, especially vis-a-vis the iPhone, and lacked features that Win Mobile had previously been able to muster--And lacked any enterprise features at all, such as connections to domains on a network, and syncing with Exchange servers. Different versions of Windows would always limp along successfully enough feature-wise, but this was the first time that an OS issued by MS had serious regressions, with no great alternative options (like sticking to XP in the face of Vista). They felt confident enough that the XBox interface teenage boys were familiar with could be migrated over to both phones and the desktop, even though XBox doesn't need a ton of PC features to be a successful product. Or, at the very least, Ballmer was able to persuade the Board that his tile-XBox strategy would work, even if he and Sinofsky weren't so sure. Sinofsky was canned immediately after the launch of Windows 8, I guess in a move by Ballmer to save his hide, but only when insiders start spilling the beans do we have chance of clarifying this.

It's nice to finally know that this blog's hatred of MS is long-standing and not merely the result of things related to Nokia. I wasn't sure. The great sin done by Bill Gates in my opinion is that he made average users "fear" using computers because they would "break something", often for seemingly no reason. Rather than make PC's a joy to use with a great deal of confidence, MS allowed computers to be so fragile that just about any attempt to use them like a normal human would result in aggravation and disappointment, eventually developing into a type of PC PTSD. Apple doesn't really write great software either, but they do hide their insanity better. MS always spent "just enough" on their products to make them work, but not a penny more than necessary, lest the shareholders freak out.

When you lump Windows Phone 7, 8, etc. together with the other start-up and bit-player phone OSes out there, you can get the sense that there really isn't room for a third ecosystem. As with desktop PC's, a duopoly has formed, with Apple again playing the No. 2 role. However, the No. 1 player oddly doesn't generate monopoly profits for anyone. It's not terribly surprising that MS hasn't made a go of it because no one else has either. The lost market share happened to Nokia, Blackberry and MS, to be honest, though for three different reasons. I would be reluctant to say MS market share dropped on the same product line. The old product line disappeared and was replaced by a new product line--one that was inferior to the old one with fewer features and more bugs. The new product line market share should properly be counted starting at zero per cent. This would at least be consistent with the analysis done on the various Nokia platforms.

[Spawn]

And here from Ballmer himself still before first Lumia came to market:
http://www.dailytech.com/Ballmer+Admits+Windows+Phone+7+Sales+Are+Disappointing/article22747.htm

In August 2011, still before first Lumia, Windows Phone market share has fallen 38% since WP7 lunch:
http://www.informationweek.com/applications/windows-phones-down-38--since-7-launch/d/d-id/1099404?
"The question is for how much longer handset makers and carriers will consider it worth supporting Windows Phone 7. Microsoft's mobile market share has been declining at a compound rate of about 5% per month for the past six months. At that pace, its overall share may be be hovering around just 4% by the end of the year."

That estimate of 4% for end of 2011 is very close to the 3% we have now. Looks as Nokia had zero impact on WP but WP had 100% impact on Nokia...

But from above link my favorite is this (first Lumia shipped with Mango):
"Microsoft is hoping to gain some ground when it introduces an updated version of Windows Phone 7, dubbed Mango, later this year."

Some ground from the 4% before Nokia jumps all-in and ends at .... 3%. How unexpected!

[Spawn]

@John Fro

> There are several reasons why Win Phone market share dropped in 2009-2010.

Ballmer in 2009 about CE6: "We Screwed Up Windows Mobile" [...] "This will not happen again"
http://m.slashdot.org/story/125193

Ballmer in jul 2011 about CE7: Windows Phone 7 has so far failed
http://www.computerworld.com/article/2470415/mobile-apps/microsoft-s-ballmer-admits-windows-phone-7-has-so-far-failed.html

Still all before the first Nokia Lumia device hit market...

> Apple doesn't really write great software either

No, but they sell products customers like and do that profitable. 3 things different to how WP did.

> The new product line market share should properly be counted starting at zero per cent.

WP literally started at 0% (well, 4%) when Nokia came into the game with Lumia and it ever stayed at 0% (well, 3%) since then.

[Wayne Borean]

The Manchurian CEO.

[mark]

The magic bullet strategy would be for Microsoft to get rid of skype?