So the Nokia brand returns.. with a Vengeance

Ah, that was fabulous news to discover when returning online after two days out of coverage. All readers of this blog already knew what I just discovered.. And let me say that essentially all you ever wanted to know about how will this new Nokia deal work, and the sensible analysis about it, is already on this blog, but written by my readers in the comments section (thank you!). I don’t really need to write my own analysis, I could just quote my regular readers.

What is the deal. Microsoft quits its disastrous play into handsets via the purchase of the Nokia handset business. After firing most of the people they brought in, now part of the remains are sold, kind of, back to Nokia. The hopeless venture into ‘Lumia’ brand and Windows based smartphones will be terminated and some of the resources Microsoft had acquired will transition to the Surface tablet (and phablet) business. The end of this to Microsoft branded consumer handsets is going almost as totally a catastrophy as Microsoft’s previous attempt when they bought Danger who had been making the highly popular youth phones branded ‘Sidekick’. Yes, obviously, its also exactly as I predicted when the Nokia-Microsoft sale was announced in 2013, and what I reaffirmed when the deal was completed in 2014 and reminded that Microsoft handset venture continues to be dead, last year in 2015 when Microsoft fired Stephen Elop and gave this project one last chance.

There was that rumor a few days ago that Hon Hai aka Foxconn (makers of iPhones) was buying the remaining Nokia business from Microsoft. I wrote my initial analysis of that rumor. I also argued that it would make sense for Microsoft to sell the remaining ex-Nokia handset business back to Nokia (instead of Hon Hai/Foxconn). I pointed out that Nokia was already coming back to smartphones and Nokia could/should be able to make this loss-making unit turn back into a profitable and growing business (part of Nokia’s core competence is to turn loss-making telecoms businesses back into profits, see Siemens and Motorola networking businesses, plus now the project with Alcatel-Lucent). I speculated that if there now was a deal in the works with Hon Hai/Foxconn then there must have been at least serious talks between Microsoft and Nokia. As the new CEO of Microsoft, Satya Nadella was not involved in the Nokia purchase (that was done by ex-CEO Steve Ballmer) there was no personal reputation or political investment in that decision. Similarly, Microsoft had already written off the total purchase in its accounting books last year, so the sale of the handset business could be done without a penalty in an accounting/finance sense.

Obviously as it turns out, there had been talks with Nokia and the deal is a complicated three-way (four-way) deal where part of the ex-Nokia business is sold to a new Finnish entity, HMD, which now acquires Nokia handset branding rights from Microsoft and handset design aspects. Meanwhile Hon Hai/Foxconn has set up a company called FIH, which will acquire the ex-Nokia featurephone factories, and handset sales and marketing from Microsoft. Because Nokia already had by the original sales contract from 2013 the rights to return to sell smartphones now, this new partnership of HMD and FIH will become a Nokia brand full portfolio company, designing, manufacturing, marketing, selling and distributing smartphones, dumbphones and tablets under the Nokia brand (exclusively) and using what remains of the original Nokia design, manufacturing, marketing, sales and distribution of ‘original’ Nokia. The part left out is Windows smartphone OS and it will be replaced (we all rejoice) with Android. Nokia retains a licencing agreement with this partnership ie the Nokia brand and some share of its market success, without taking much of a risk in two very volatile businesses.

WHY THE DUMBPHONES?

The traditional handset business (dumbphones aka ‘featurephones’) was a 1 Billion handset business sold annually a few years ago but last year sold only 500 million and this year will sell 400 million and the business will be down to near zero handsets sold by year 2020. A dying business, where Nokia’s brand even under Microsoft ownership was still holding a large market share and fierce loyalty among loyal customers in mostly Emerging World countries from India to Nigeria. Nokia brand offering in ‘featurephones’ extended to near-smartphone class with the Asha series of dumbphones that had good cameras, touch-screens, 3G and WiFi connectivity and of course the full internet; they even could take apps that were written in Java such as Angry Birds, Facebook etc. Before then-CEO Stephen Elop (worst CEO in any time among any Fortune 500 sized company in any industry) decided to destroy the Nokia handset business the Nokia handset business was vibrant, highly profitable, growing faster than Apple’s famed iPhone business (yes, its true) with high customer loyalty and a powerful sales and distribution asset.

Stephen Elop (did I say, worst CEO in history, of any industry) did yes destroy the goose that layed the golden eggs. He did that to collect a bizarre bounty on his CEO contract which ended up being an incentive for demolishing the most profitable part of Nokia’s business). A key point to note, was that Nokia was the best among ‘legacy handset manufacturers’ (handset manufacturers who sold both dumbphones and smartphones, as distinct from newer handset makers who only sold smartphones like HTC, Blackberry and Apple) to MIGRATE its dumbphone customers to smartphones. While Motorola, Samsung, LG, SonyEricsson, Huawei, ZTE and others had to accomplish this tough transition, moving customers from relatively modest-cost and modest-capability phones to full smartphones, the others struggled so badly in that transition that every one of Nokia’s rivals had quarters where they produced losses in their handset unit, and their resulting market share in smartphones was WORSE than the share in smartphones. Nokia (up to when Elop - worst CEO of any industry ever - decided to destroy the business) was the only one of the legacy handset makers to report every single quarter of that transition a profit - and the only one whose resulting market share in smartphones was higher than its share in dumbphones. Yes, Motorola, SonyEricsson, LG, Samsung etc all saw a loss in market share when they tried to move their customers to smartphones but not Nokia. Nokia was able to GAIN market share while executing this tough and expensive transition. And only Nokia was doing that profitably.

So on the dumbphone business, its not a totally dead duck that this new Nokia-HMD-FIH partnership is reacquiring. It is an interesting asset which is actually profitable and still sells in the range of 80 million dumbphones per year, and which is the type of business, that Nokia once was the best in the business, at transitioning to smartphones. Its not inconceivable that Nokia is able to transition all of this last 80 million dumbphone customer base to smartphones in the next 36-48 months. These would be extremely low-cost smartphones of course, but still they would be smartphones. 80 million handsets is a 4% market share of total handset market. 80 million smartphones would have been a 5% market share last year in smartphones, and would put this unit in contention for roughly a 4th place finish in the Top 10. That is IGNORING the top-end and current Lumia etc smartphone potential. This is why this new partnership actually WANTS the old dumbphone unit ‘back’ from Microsoft. They are genuine Nokia mobile phones with excellent market share, a strong global sales and distribution organization and a high volume of handset production in very modern factories, with very competent component sourcing, etc. It is a good foundation to start from.

Note that this ‘dying’ part of ex-Nokia dumbphone business holds about a 15% market share in dumbphones currently and its main rival globally is.. Samsung. But the BUSINESS performance of this unit had suffered from 2011 onwards (Stephen Elop worst CEO ever) and still suffered from bad carrier relationships by Microsoft up to today. This unit could see a modest ‘revival’ in its last years. The Nokia basic phones are very well made, fit their intended customers very well, with aspects such as basic cameras, in-built FM radios, great battery life, etc. Once the ‘anti Microsoft’ attitude by the carrier community and distribution is removed, this unit should achieve its full potential while the HMD-FIH partnership prepared for the final migration of remaining Nokia brand customers to low-end Android smartphones.

ANDROID NOKIA SMARTPHONES

The eagerly-awaited part of this partnership is the ‘proper’ transition of Nokia from dead OS platform Windows to Android. When I speculated on what a pure Foxconn/Hon Hai purchase of the ex-Nokia business from Microsoft might become, I said I expected Foxconn/Hon Hai to focus on low-end and at best mid-price smartphones on Android to gain sales volume, and mostly ignoring the top end ‘flagship’ class contest. I also thought that Hon Hai/Foxconn would not want the actual factories nor the sales and distribution staff from Microsoft which once belonged to Nokia. Now in this new HMD-FIH partnership, essentially ‘the full Nokia’ handset business, of what is left, is transferred in parts to these two partners. Rather than just pursue a large volume low-end business, this partnership will be well prepared to actually ‘compete’ fully for a total smartphone portfolio play. Expect Nokia brand to rapidly return to flagship class smartphones and then several models all the way far far below where day Apple’s new iPhone 5 SE is priced. Because HMD has acquired Nokia design and intellectual property aspects, this new partnership can pursue ‘typical’ award-winning top-end smartphones. But differing from the past 5 years the new HMD-FIH partnership will not be stuck trying to push a dead Windows OS, but rather can thrive using the Android OS (which powers about 80% of all smartphones in use and sold in 83% of new smartphones last year).

I mentioned that Nokia designed a series of 3 ‘X Series’ Nokia Android smartphones in early 2014 just before the handset business was handed over to Microsoft. Microsoft then immediately ended those phones. They were low end smartphones but they did achieve a nice start in sales. They were ‘typical’ low-end smartphones of modest specs. But they also were priced to sell. When we consider the upcoming portfolio, expect several models as updates to those models (and possibly even launching a few of them still now, at lower prices). The more interesting part was Nokia’s R&D project for handsets (and tablets) for Android. That - which is kind of the father of FIH - has already DESIGNED Android based ‘new’ Nokia smartphones, which this unit (while still at Nokia) was hoping to then find a partner like Hon Hai/Foxconn to start to manufacture and sell. In that way, the transition from dead Windows to Android is not starting ‘from scratch’ like it did when LG went through this same process - they tried to go purely Windows first, before admitting its not viable and ended Windows and went fully to Android where most of LG’s rivals had already gone. So we could see (hopefully will see) the first new Nokia Android smartphones relatively soon. I think a Christmas launch of new Nokia Android smartphones is optimistic (but might happen in small volume) but a Spring 2017 roll-out should be very feasible as this deal is now announced in May of 2016.

We then need to think of Nokia and its potential. Apple did not invent the smartphone (in fact the first iPhone of 2007 was not even a smartphone, it was only a high-end expensive featurephone). Nokia invented the smartphone. Some foolish pundits and mostly US based ‘experts’ have peddled the myth that Nokia was somehow behind on the trends in smartphones. Nothing could be further from the truth. Lets take Apple. All major developments on Apple’s iPhone, as announced by Apple both on the hardware to the iPhone and the iOS operating system - all of them - had already existed on Nokia flagship class smartphones - sold YEARS before that latest model iPhone was annoucned. This was true all the way to last year, 2015. Yes, when Apple introduced phablets - Nokia did them in 2013 - and when Apple introduced a mobile wallet Nokia had done Nokia money back in 2010. Nokia had NFC on its smartphones long before Apple, and better cameras, plus a long slew of features, several that Apple STILL has not implemented (such as microSD card slot). What Nokia was particularly good at, was adding features that are popular in the Emerging World from the in-built FM radio, to dual SIM, to the in-built flashlight/torch function. And on the pricing, Nokia had pursued lower-end smartphones long before Apple decided to go to lower-end smartphones. Finally the world distribution, Nokia was in India, China, Brazil, Nigeria etc for years and years before Apple started to pursue those markets. It is simply ignorance to peddle the myth that Nokia was ‘behind’ Apple. As I said, the last year before Elop (worst CEO ever) destroyed Nokia’s handset business, in year 2010, Nokia grew MORE in smartphone business than Apple did. Apple was not CATCHING up to Nokia. Nokia was more that twice as big in market share as Apple’s iPhone - and Nokia was PULLING AWAY from Apple, while Nokia reported its most profitable smartphone quarter just before Elop (worst CEO ever) suddenly caused the total collapse of the business.

 
Nokia knows what handset customers want. Nokia knows what is a smartphone, Nokia literally invented the smartphone. While the original iPhone of 2007 was a revolution (and I said so back then) after that revolution, Apple’s total iPhone strategy was to add features that Nokia had in its smartphones - but on typically a four-year lag. Who was following whom? Nokia knows how to design great phones and to add features and abilities that consumers want and fall in love with. Like now, Apple is rumored to add an optical zoom (aka ‘real zoom’) to its next iPhone, the iPhone 7. It is expected to be either a 2x or 3x optical zoom. Nokia again, has done all that, but when did Nokia do the world’s first smartphone with optical zoom? Nokia did that LITERALLY ten years ago, in 2006. It was the N93. And it was a 3x optical zoom, while Apple might do a lesser zoom now. Or take Xenon flash (aka ‘real flash’ versus the LED flash on most smartphones). Apple still doesn’t do Xenon flash on iPhones. Nokia had the first Xenon flash in 2007.

And Nokia’s massive image sensor, the Pureview with 41 megapixels. The image density was literally the best on planet earth. Literally the largest camera sensor of any camera on the planet, from any camera brand from Nikon to Canon with pro cameras costing 10,000 dollars without their lenses; or any other pro camera including the Hasselblads and the like. And why do I say ‘on planet earth’ - because the only camera sensor even more advanced than Nokia’s Pureview 41mp sensor, when it was launched in 2012, was in orbit, used on US spy satellites which had 64mp sensors. There is much more to camera quality than who has more megapixels, but in terms of image resolution - the sharpness of detail - then megapixels matter. Nokia has still today (in Microsoft’s Lumia) the largest sensor ever put into any cameraphone. Now this FIH-HMD partnership also reacquires that tech, and we can expect more super-cameras on future Nokia flagships. Oh did I mention, the camera function this year becomes the most used feature of any phone, ahead of messaging (and far ahead of voice calls or internet or apps or Facebook or anything else). Who leads whom? Nokia KNOWS how to do great smartphones. What it had, was a bad OS and the sales boycott against Microsoft by the carrier community.

RETURN OF THE REAL NOKIA

So the Windows project was a disaster yes. Nokia had never stopped making great hardware - Nokia even with Windows was winning best phone awards. But the sales and distribution channel was strangling all Windows makers - and all other giant brands left the Windows family by the end of 2011 (yes at one point, 7 of the Top 10 largest handset makers offered Windows smartphones but Windows never passed 12% total market share. Nokia had 29% market share the year before Elop - worst CEO ever - wrecked that business).

Now the remains of what once was the world’s dominating handset juggernaut, but including parts of its legendary design, its overpowering sales and marketing, and its superbly efficent factories, can be ‘released’ from the restraints and constraints of Windows. Now the question is primarily, on how quickly and with how broad a portfolio will this new FIH-HMD make its comeback. I’d love to see the first Nokia Android smartphones this year but lets say they come back in any meaningful way in terms of handsets and their sales reach only next year. Lets say by the end of 2017 Nokia should have at least 5 Android models, maybe something like 8; and including one clear flagship with Pureview camera, Xenon flash etc. That Nokia brand should be at about 3% market share for Q4 of next year. That is four times better than what the same unit, selling Lumia brand on Windows is doing now, in Q1 of 2016. It will be a massive slap in the face of Windows and Microsoft, when this happens.

Then Nokia should be expanding, mostly further down in the price range, but also across more niche markets (I half expect and fully hope for a return of ‘The Communicator’ a full touch-screen large screen flaship class superphone with slider/folder physical QWERTY keyboard, in the style of the Nokia E7 and the N950). Nokia has its own ‘skunk works’ and owns a vast array of patents in the handset and wearable and portable gadget space, we could see many new ideas coming in near-future flagship class phones. But expect most of the new Nokia to be roughly iPhone-a-clones, slab touch-screen ‘generic’ smartphone designs like nearly all of any other Samsung Galaxy or LG or HTC or Sony or Huawei or Xiaomi smartphone that runs on Android. But a portfolio of at least 10 and could be as many as 20 smartphone models by Q4 of 2018 also means a market share well past 5% and Nokia brand fighting for the 4th ranking just outside the Top 3 of global smartphone brands by market share. The last time Nokia had a smartphone market share higher than 4% was in Q2 of 2012, when still more than half of Nokia smartphones sold, were powered by Symbian or MeeGo. The story will be the incredible come-back of Nokia and the damage is likely to be most felt by Samsung but also several of the other current Top 10 brands like LG. I strong recovery by Nokia can well have Sony quit its phone business and HTC and Blackberry to finally fold.

A recovery spirit with the rump-Nokia and its ‘last survivors’ now with FIH-HMD - will power the unit to more heroic and brave attempts and a continuing growth where for 2019 I think Nokia will be challenging Huawei for the Top 3 position. Nokia might be at around 7% to 8% market share which in 2019 will mean something around 135 to 150 million smartphones sold globally. Microsoft sold 21 million Lumia/Windows smartphones in the past 12 months. Nokia’s best year was 2010 when it sold 103.6 million smartphones. But as this recovery-Nokia returns to its ‘natural’ market position as a highly beloved, features-packed, premium phone brand but selling in all markets and at all price points, the fight will get tougher. From 2019 the ‘bounce back’ will be completed and I think its very likely that Samsung will still the biggest smartphone maker and Apple number 2, but the race will be on for number 3 and Nokia as FIH-HMD will be perceived as one of the strongest competitors in that market heading into the next decade. It is great news for all fans of mobile phones and smartphones. It is also great news for Finland and for fans of Nokia. This is pretty close to a ‘best case’ scenario of how Nokia could come back, and yes, we will finally get a full portfolio of ‘real’ Nokia smartphones running full Android. Tervetuloa takaisin Nokia!! Welcome back Nokia !!

Comments

[Winter]

@Lullz
"Most Android users seem to be taking the risk and picking a phone that might be good for them."

Summary:
- Choice is bad
- Freedom is slavery

[Winter]

@Lullz
"Linux is a component used in many operating systems."

The motor and drive train are just components of a car. The important things are the quality of the seats and the fineer of the dashboard, and, of cours, the color of the paint.

@Lullz
"The operating systems would be still called Windows and OS X and it would be for Microsoft and Apple to decide how much compatibility the operating systems would have with other operating systems utilizing the linux component."

Just like the OS that runs on most PCs is normally called "Office". The fact that many users have no clue about what drives their computer, tablet, phone, or car does not make that engine unimportant.

That very fact was driven home to MS when their nice looking dashboard could not hide the bad quality engine running it.

[William Ayrovainen]

Hello Tomi,

Glad to hear the news from Nokia. I would guess that
they've been planning and working hard on this comeback
since the Microsoft deal was made a couple of years ago,
so I'm hopeful they can hit the ground running. Do you
feel that CEO Rajeev Suri can help give Nokia a competi-
tive advantage in India?

Someday when you have some free time please tell us how
you really feel about Stephen Elop. You probably shouldn't
hold back anymore - they say it's not good for health. :)

Kiitos,
Will

[Winter]

@Lullz
"Also, OS is not usually called Office but Windows."

Sorry, but I have heard "Office 10" or eve "Word 2000" way too often as an answer to what operating system their computer runs to fall for this ploy.

@Lullz
"If the name of the OS is not known to people they usually call it just a computer and have no idea what OS means."

Except that they are keenly aware that it is not Mac nor Linux. I asked to be sure.

And they might not know what OS means, they do know the difference between iPhone and Android and between Mac, Linux, and MS' products.

I have my doubts about your insights in this matter.

[Barney]

@Daviss:

"Seriously hope Nokia to continue to churn out a flagship Windows10 mobile"

Why? The market has clearly said "no" to Windows on phones. Everybody who tried either failed or gave up that system. 6 years have proven that nobody wants it so why waste some money there?

Especially Nokia. They'd burn their brand name again and I do not expect them to be this stupid.

[Tomi T Ahonen]

Hi everybody

Just a few thoughts on Nokia brand smartphones and strategy forward. When Elop came in, he attempted to copy iPhone meticulously and pursue Apple to all its strongest markets and abandon and avoid all of Nokia's traditional strengths and not serving its best markets - nor the strongest-growing markets.

I am 100% certain, that MOST of the next tier execs at Nokia who had been at Nokia prior to Elop were VERY worried about this madness in strategy. I may have contributed to that, because I have heard from a couple of sources that this blog was read by Elop and his closest team quite religiously - they hated me and this blog obviously. But whatever I did write, did always resonate there.

Now, the team that is rebuilding Nokia smartphone biz, is attempting to get to the 'good old days' before Eloppian madness, and as Elop was essentially 'totally' wrong and did establish a world-record in business collapse, the last thing you would expect ANY of the remaining execs involved with the new Nokia smartphone biz, to try more Eloppisms.

Nokia will try to differentiate, rather than meticulously copy Apple. Nokia will try to get ahead of Apple and offer features and abilities which Apple could be expected to deploy in 3-5 years from now. Nokia will listen to its markets and offer features more fitting to them than to say the USA. So smartphones that will be seen as highly desirable in China, India, Brazil, Nigeria, Russia, Indonesia, Germany, Britain, France, Italy etc. At the moment the two strongest drivers are - large screen (60% of new phones sold in India are phablets in Q1) - and great camera. Nokia luckily has these parts VERY deeply in its DNA, it ALWAYS had a smartphone with a larger screen than that of Apple, even when the original iPhone was 'so very incredibly huge' to American buyers - at 3.5 inch screen size - Nokia's then-current E90 Communicator had just come out with a 4 inch screen. And yeah, phablets that Apple put in iPhones in 2015, Nokia gave us on Lumias in 2013.

Then the smart current management of returning Nokia does understand its core market and what kind of phones are desirable there. So expect Nokia to hold onto microSD card slots, removable/replacable batteries, NFC, Bluetooth etc connectivity, industry-standard micro-USB charging ports (something iPhone doesn't do), industry standard stereo HiFi earphone plugs (Apple rumored to end it and new model not to have it) and of course the 'normal' Nokia features overload such as FM Radio. Nokia KNOWS that for many in Africa, their family's first FM radio ever in their household is the one that came on a Nokia phone a couple of years ago and now all in the family will want FM radio also on their phones (regardless of which brand, but again, Apple blocks the FM radio out of the iPhone even though it comes standard on the chip).

In general, if you think of the portfolio, it will be FAR more similar to what the Symbian based Nokia smartphone portfolio was in 2010 than the Lumia based portfolio of 2012. I don't mean Nokia would go back to non-touch-screen smartphones haha, but I mean in terms of the design priorities. The whole Lumia series was at first as close to iPhon-a-clones as is possible without getting to be sued by Apple. Now Nokia has good reason to steer far from Lumia and 'return to its roots' on many issues.

Separately - Nokia will ALSO want to differentiate from Samsung - and that will be more difficult because Sammy offers us a broad range of devices and even some variety in form factors, offered in many price ranges. So take removable battery. iPhone doesn't have. Samsung dropped it from previous Galaxy (when it also removed microSD and waterproofing). Now Sammy returned to microSD and waterproofing - but not removable battery. I think it would be prudent for Nokia to do a couple of generations still of removable batteries, at least on all Nokia smartphones that are not waterproof (and its not impossible to make waterproof phones with removable batteries also).

There are some assembly construction penalties to build removability to the battery and the battery lid needs to be made to be quite sturdy to allow for more than 1,000 removings and reattachings without breaking. Also a removable battery would almost certainly mean a slight thickness penalty too, compared to a non-removable battery smartphone. BUT nobody is claiming modern smartphones are impractically THICK and nobody is begging for a further slimming diet for supermodel-thin flagship smartphones. Its a silly Apple obsession. Let Apple continue to pursue ridiculously thin phones taking the battery life penalty. Make Nokia a whole millimeter or even TWO millimeters thicker - but give it a massive battery life - and make the battery removable. THIS is how you differentiate.

Will silly Americans notice it and maybe not buy as many Nokias? Who cares, its such a tiny market to begin with - on a global scale - already smaller than India, far smaller than China - and Nokia never had a strong share there anyway. What you WANT is to win in China, India, Brazil, Indonesia, Russia, Nigeria etc - these are ALL markets where electricity is an issue (severe issue in say Nigeria) and that battery life will FAR trump any 'boy this is slightly thicker than an iPhone' observations.

Now if you want to make PROFITS in handsets - its ALWAYS more profitable to sell parts that are branded. And if you want CARRIERS to love you - give the customers of those carriers an excuse to come to THEIR store - to buy that battery in 18 months when they give this phone to the eldest son etc... But if you want to maximize YOUR profits at the COST to the carriers, you start to migrate those Apple iPhone CUSTOMERS from the carrier stores to APPLE stores - to come for say a battery change (which has to be done in-house at the Apple store..). That is good for Apple's business and loyalty - but not good for the CARRIERS. Nokia will again differentiate from Apple and pursue strategies that help their CARRIER relationships - especially as they have to work to fix the damage done by Elop and Microsoft.

So this is how I predict the early totally new Nokia smartphones will be received. In the USA they will be seen as a disappointment (many premium Nokia phones won't even be sold there and thus they won't even see the full portfolio). In Europe the reception will be mixed but perhaps lukewarm. In Asia, Africa, LatAm - the reception will be near ecstatic - WOW this is EXACTLY what we hoped the return of Nokia would be. They will EASILY win the various local races for 'smartphone of the year' in various Emerging World countries.

Lastly the Communicator. I think a Pureview based flagship will be out in the first year - and shown at the Mobile World Congress. It will have at least a large screen if not phablet screen (and may have a pair of sister-phones, so you can pick which screen size you want, but otherwise essentially identical specs and almost same price). It will be a flagship phone in the 700-800 dollar price range.

But once Nokia is back on its feet - there is enough love for the Communicator style form-factor (a big internal protest group lobbied for it all through Elop's time but he always overruled them). Again this is an 'anti iPhone' Lets forget about slimness as a 'benefit'. Lets take a reasonable thickness as the basis - start from E7 or N950 and slim that down a bit. Turn that into a phablet screen (now you have a HUGE keyboard underneath with 5 rows of large keys) and include most of the specs of the then-current flagship including a Pureview camera. Price this at 100 dollars above the current flagship - and just try to see, is there still a market for this, and launch it everywhere. And brand it the Communicator. It could go so 'classic' to return to Communicator numbering, so the last 'thousands' numbered Communicator was the 9500, so this could be the 9600 Communicator. But its MAIN raison-d'etre is to sell to Nokia Communicator fans, who crave one more QWERTY smartphone (but obviously with huge touch screen and all the modern bells and whistles including Pureview camera). Seriously speaking - as long as it also looks pretty cool and is truly a flagship-class device otherwise on Android - this will sell truly regardless of its price. Nokia could price it even at say 999 Euros and it would still sell but I hope it could be in the 800-900 dollar range, about 100 dollars above the price of the first flagship.

If that phone HAS any market, that is the way to test it, to make sure the phone line will be profitable even in a modest product run - its primary purpose is to re-establish Nokia as a tech leader with some 'I can't believe there is a phone that has this tech in it' kind of WOW factor, like every Communicator did in the past. If that first return Communicator sells in reasonable numbers, then we will see a little-brother version and a next edition. If there really is no market and the total sold is 15 devices globally, including one to some Mr Ahonen in Hong Kong - then yeah, I was wrong and that market has vanished. But I hear repeatedly and repeatedly that some who loved QWERTY keyboards would LOVE to have one on a proper smartphone flagship. I do think our returning Nokia will try it one more time - that is what the N9 and N950 were supposed to be, as a pair (on MeeGo) similar to what the N8 and E7 were on Symbian a year prior.

Notice then what this would kind of create - a whole new 'class' of phones. Phablet sized Communicators would be like 'super large' palmtop PCs. Or a super-miniaturized but super-powerful ultrabook. In some ways its what Microsoft kind of has walked towards when they put a keyboard to the Surface. There has CERTAINLY been plenty of discussion about another Communicator. I think we will be seeing it (and I think it will sell like hotcakes).

But for all the flagships the key to this new company's success is the broad portfolio that serves a wide range of customer types and needs and markets. If the first flagship (generic Android with Pureview and large, possibly phablet screen) costs say 600 dollars, expect a junior version at about 450 dollars, a clearly downgraded one at 300 dollars (possibly still including a phablet screen version) then another at the 200 dollar price point (with mid-price screen and say 5mp or 8mp camera, still branded Carl Zeiss) and then two ultra-cheap models to 150 and 100 dollar range, with far more stripped down specs. So something in 6-8 models sold, all running Android, by end of 2017, and in many markets - offering all 8 models (but obviously not in the US market).

A large product portfolio is again not the iPhone strategy and again it makes perfect sense for returning Nokia to start off with that, then see how it goes. I do expect them to get to a dozen models in the second year and over 20 models by the third year. Nokia has zero chance of reaching 7% or 8% market share unless it expands its product range and has lots of new phones at various price points every year.

There, some thoughts for you to mull over as we think this through. If you do talk about Apple, the almost certain thing is, that returning Nokia will not try to become Apple iPhone.

Tomi Ahonen :-)

[chithanh]

@Manufacturingbig
> OS X is everywhere! It powers everything from Apple Pencil to Servers.. well everything that has somekind of microprocessor in it.

I hate to break the news to you, but there exists a large market for computers where OS X (and iOS) does not even begin to compete in.

Have you ever checked which operating system runs on your printer, your TV or your washing machine? Which one runs on the dozens of computers inside a modern car? (I predict that even the Apple car if/when it comes out will run Linux on the majority of its computers.)

Servers are only covered to a very small part by OS X. In HPC, no other operating system besides Linux has any meaningful presence. In enterprise servers there is some Windows still, but declining rapidly.

> Well OS X is a POSIX certified UNIX and it is for sure shiny and definitely does not lack in any ways

I think you should read what POSIX certification actually means.
OS X has no modern filesystem. For I/O intensive workloads, it usually sucks.
If it doesn't lack in any ways, Apple surely would have used OS X or iOS on the Airport Extreme. Yet they didn't.

> "No company has the ability to make an operating system that can compete with Linux in more than very few specific areas." Well except Apple.

No. The operating system that can compete with Linux in more areas than any other is Windows.
Apple competes in smartphones, desktops, notebooks, tablets, wearables, music players, STBs (Apple TV) and small servers. That's not even a dozen. Windows already runs on many more kinds of devices, and Linux on an order of magnitude more.

[AtTheBottomOfTheHilton]

Nokia in Android space is dead. Without Symbian Nokia will end up as Sony. There is nothing wrong with Sony mobiles, they are premium but they don't generate sales that can keep Sony alive because the competition is very high in Android. With Foxcon Nokia they will basically create vanilla Android phones which mean they have very little competition advantages compared to when Nokia manufactured their own phones and HW with their own OS. I'm afraid that all the old contacts and R&D are gone for Nokia and we will never see anything like the magnificent Nokia 808 ever again, that belongs to someone else.

What I'm interested in is if Nokia is going to license Sailfish OS by Jolla. If they do then I will personally be interested in Nokia phones but with Android I can just pick up a Galaxy S7 which are great and Nokia can't compete there.

[John Fro]

While I can see the expediency of what Nokia is doing here, Android at this point is so mainstream and boring, they will probably not be able to get much word out that they exist. They might try to push the "Nokia" brand, but it's been several years since that meant anything good in the eyes of consumers. This is like a 45 year old fighter climbing back into the ring because that's all he knows.

[Barney]

@AtTheBottomOfTheHilton:

"What I'm interested in is if Nokia is going to license Sailfish OS by Jolla."

Same answer as for Windows 10 Mobile: Aside from a handful of geeks nobody wants that. It'd be economic suicide. It doesn't matter how good the system is, it got no market share, no developer support, no anything - meaning that regular people won't buy it.

And don't underestimate the developers' inertia. They are busy with making software for iOS and Android and have no desire to support a third OS without getting any more money for the added work.

@John Fro:

You are right: It all has become very boring. Not only Android but also iOS. Both systems have been cruising along for the last 7-8 years without any disruptive new features. What has driven smartphone upgrades was the increase in screen size and processing power but that's slowly coming to an end.

If there's one aspect where Nokia really could conquer Android is to make a UI that's so good that nobody ever wants to use anything else again. So far all the Android UIs have been made by idiots that only degraded the stock UI.

[Santiago]

Hi Tomi,
Do you know if it's the R&D going to be done by HMD, Foxconn or Nokia and licensing to HMD? Would they be able to use ie. the Pureview brand even if MS is producing the Lumia 950/XL with that technology/brand?

I don't understand what exactly HMD is licensing from Nokia other than (of course) the brand. AFAIK Foxconn bought the dumbphones unit but nothing related to the smartphones division and neither HMD. So that let me to think that the design, R&D, etc would be done by Foxconn with some baselines given by HMD to keep the designs and features according to what a Nokia would be. Of course the average buyer wouldn't tell between an "original" Nokia and a Foxconn designed Nokia if it has similar design, features and overall quality. Not saying that Foxconn is incapable of designing a quality smartphone though.
So one of the questions to understand this would be: What happened with the Lumia division (design team, camera and imaging, etc)? Is still kept by MS (if there was anything left) or it's part of the deal as well?

[Wayne Borean]

I mostly agree with Tomi, but there's a lot of stuff he did not cover, which I assure you did happen.

So Nokia sold the mobile division to Microsoft. Elon had pretty well destroyed the business. Nokia got money for it, and the right to make a comeback.

Microsoft got a chance to prove that Windows Phone/Mobile was marketable. Microsoft crapped out, Windows Phone/Mobile wasn't marketable. Elop got the boot, and some poor telecom down in Australia is likely on its last legs RSN.

So where did that leave Nokia? Nokia was contemplating a comeback the second the ink was dry on the Microsoft contract, if not before. Like before negotiations even started.

So what did Nokia do? This I do not know for certain. I have no proof. I do know what I've personally seen in the past.

Nokia would have made sure the carriers knew of the terms of the deal, and about the name reversion. Any question about the brand coming back would have been answered with a shrug. At first.

But Nokia would have been gathering data. What did the carriers think? Don't forget that the carriers are all buying Nokia networking equipment, so talking to the handset people while visiting to sell networking equipment wouldn't be hard. Though they'd probably want to avoid days Microsoft reps were there...

Using the data gathered (don't forget that this is 2014), Nokia started to game out scenarios. What if Microsoft Phone crashed this year (2014). What about next year? What about 2016?

How bad would the crash be? Would it coincide with when Nokia was free to use the name again? How many factories would Microsoft have gutted? How much of the sales staff, and the design staff would still be employed? How much would Microsoft want to get rid of the division (if Microsoft was willing to sell - Ballmer likely would not have been willing). If Microsoft was not willing what options were available?

Some time in 2015, probably early spring a decision was made. It would have been based on sales data for the N1 tablet and the X series mobiles, the feedback from the carriers, and publicly available data on Microsoft's woes.

The decision was to negotiate with Microsoft to get the phone business back. Ballmer was long gone, and Nadella had a full year to see what a disaster the merger had been. At about the same time Elop was removed as head of the Devices division, which may have cleared internal Microsoft opposition to the sale.

During the entire period of negotiations Nokia would have been gaming out further scenarios. If the acquisition cost this much, would we be able to do this, or would be need to offset it by doing that. One of the outcomes of the gaming was the concept of setting up HMD as the marketing/design company while using Hon Hai as the manufacturing partner.

At the same time the company will have been doing research into what customers want. As Tomi has pointed out a lot of this research will have been in the Emerging markets, so those of us in the Industrialized nations won't have seen it.

The purpose of doing research will have been to make certain that the new Nokia phones are targeted correctly. FM Radio? Check. Removable Battery? Check. And so on.

Do I know for certain that Nokia did this? If Nokia didn't, they were criminally negligent with stockholders money. After the criticism that Elop subject the company too, I'm certain that they were extremely sensitive to criticism.

So it is possible Nokia might crash and burn. It is in my opinion unlikely, because unlike Microsoft the firm had experience in the market. I doubt that they will hire upper level management from outside the company any time soon though!

[Abdul Muis]

@Tomi

"Nokia will listen to its markets and offer features more fitting to them than to say the USA. So smartphones that will be seen as highly desirable in China, India, Brazil, Nigeria, Russia, Indonesia, Germany, Britain, France, Italy etc."

This is the same strategy that Xiaomi is doing right now. Xiaomi only sells their device in China, India, Brazil, Indonesia. (+ Taiwan, HK, Malaysia, Singapore, Philippine).

"At the moment the two strongest drivers are - large screen (60% of new phones sold in India are phablets in Q1)"

Wow, India really envision my thought that Phablet is the perfect screen size (and iPhone SE is too puny). BTW, I was wondering if you could state what size of the phone considered phablet in this India report.

Furthermore, Nokia might not be able to use screen size as an advantage. Every possible size that can be pocketable already used. Huawei have a 7" phone (Huawei MediaPad X2) that have a very slim bezel, so it's way smaller than 7" tablet. It's really the biggest size of phone that were pocketable. Lenovo thought that 7" is too big for some pants, so they have a 6.8" phone (Lenovo Phab), XiaoMi have 6.44" phone (Xiaomi Max). The 6" size is full of many brands (Asus, Sony, Samsung, etc). Between 5.5"-6.0" is also a crowd. Bigger than 7" would not be screen size advantage.

http://www.androidcentral.com/huawei-mediapad-x2-its-latest-7-inch-phone
https://www.youtube.com/watch?v=dZ7A4QJaa3g&t=1680 (Xiaomi Max launching video - already fast-forward/set at 28 Minute)

[Arup]

The Pureview sensor was made by Toshiba and lens by Zeiss, Nokia was way ahead in cameraphone business with the launch of the 808 and its Windows successor 1020. The Pureview concept was all NOKIA.

[Winter]

@Manufacturingbig
"Two different things. Can it do it? Yes. Will Apple let OS X run in a washing machine? Never. They use OS X internally to power all the things."

Sorry, but I think you are wrong. There is more to scaling an OS from super computer to embedded device.

Here is a range of things Linux runs on, and runs on well:
https://en.wikipedia.org/wiki/Linux_range_of_use

It is true that it is possible to take the kernel of Mac OSX and get it to run everywhere. But that would be an enormous effort. It involves everything from writing drivers for every kind of hardware to file systems for every type of application. It would mean that a lot of Mac OSX would have to be rewritten.

There are good reasons the Google's of the world run Linux in their data centers (and Docker was developed on Linux), as do the routers of the world and the super computers (90+% of top 500 super computers run on Linux, as do ~80% of mobile phones). Linux has had thousands of man years of development and testing for all these platforms.

Mac OSX/iOS can only keep up because Apple fully controls the limited range of hardware it has to run on. Even MS have big problems getting Windows to compete on anything other than Intel CPUs.

[Winter]

Official:

Android is boring
http://mashable.com/2016/05/21/android-is-boring/

So what would we like in the future?

"Maybe the secret will be in AI and machine learning. Google Now (and hopefully, Google Assistant) do a good job predicting what I want to do before I do it. Taking that to the next level and integrating it with app settings – or even apps themselves – could be cool if done the right way."

[Per "wertigon" Ekström]

@Lullz:

It has been well reported that the operating system GNU/Linux is running on everything from a beer vending machine to supercomputers.

I think GNU/Linux takes the crown rather easily when it comes to versatility, even though it has split into GNU/Linux and systemd/Linux as of late. :)

[chithanh]

@Lullz
> Scaling OS or the linux component?
> You seem to be confusing linux to an OS.

When we say Linux, we mean the ecosystem around the Linux kernel. Of course there are differences between an embedded Linux distribution and one for desktops or supercomputers. But besides the kernel, they have considerable overlap (just visit the licensing information in any Android phone to see a number of open source project mentioned). Any improvement there will often affect multiple use cases.

I vaguely remember explaining this to you some time ago already.

> an you give an example of an OS scaling from very small devices to super computers.

Of all distributions, Debian is probably the one with the biggest range.

[Barney]

Why are you people even discussing stuff with these iBots?

It should be obvious by now that Lullz, Wayne Brady and our latest sockpuppet Manufacturingbig are not interested in honest discussion, but only pushing their Apple propaganda.

[chithanh]

@Lullz
What you wrote doesn't make any sense in the current context. I'm almost inclined to believe Barney that you are simply trying to find something to belittle the role of Linux to support your foregone conclusions.

Two Linux distributions, while in a strict sense need only share the kernel, in practice share a vast amount of code between them. The amount of code common to a wifi router and a washing machine Linux distribution is much more than e.g. between a Linux wifi router and a VxWorks wifi router.

Between a washing machine and a desktop or supercomputer the code-sharing is naturally less, but still a lot. So it makes sense to speak of the whole thing as Linux.