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« Just heard the news, hold on am on trip gotta board plane.. ie Nokia return via Foxconn | Main | Time for a new Acronym for Mobile, Digital, Media & Tech: Our New Tech Industry Sectors Are: SCIAM - Social Media, Cloud Computing, Internet of Things, Analytics, and Mobile »

May 20, 2016



Maybe you have missed the start of the discussion. It was Manufacturingbig's comment starting with "HAHA what BS."
I was addressing some misconceptions regarding Linux and its development model, and how the players in that ecosystem benefit from each other.

Tomi T Ahonen

Hi everybody

Wow 65 commments over the weekend, that is nice. The late discussion has regressed into somewhat typical bickering we often have on this blog but the earlier parts have lots of good comments and debates and questions. I'll do a few specific responses to some of you.

Tomi Ahonen :-)

Tomi T Ahonen

So comments from 20 May

Wayne - great sensible views on sustainability of the Nokia return. On the profit level, its true that huge scale and second-biggest profits of industry is how Nokia could afford to do all those innovations before. Now as it starts by a recovery strategy from under 0.7% market share and needs to grow; building a portfolio from scratch where even on Windows, the Lumia model range has become stagnant; and rebuilding a damaged distribution network - a lot of upset past clients need 'wooing' ie taken to restaurants for nice lunches and taken to local games as Nokia's guest etc, to rebuild those relationships - all of that is expensive. And there will not be huge income revenue streams coming in. So its also a tight balance walking forwards. AND the race is far more competitive in the mid-field where the most new Nokia Android smartphones will be sold. Its not going to be easy.

You're right to write that quality costs money. BUT against that, there is STILL a willingness to pay premium prices for Nokia brand, as long as the Nokia brand has in general a competitive product (new models, modern features) and Nokia has a little bit of something extra. That price premium may not be huge, it might be down to 'modest' but it still exists - in the 5/6th of the world where most people live. And that by itself will be what should get this project onto its feet.

Separately is the carrier relationship. The carriers wanted Microsoft out. They wanted Nokia to abandon Windows. They made it very clear in 2011 and kept repeating it in 2012, 2013 (until Microsoft sale announced) then kept repeating it to Microsoft 2014, 2015 and up to now. They got what they wanted. They meanwhile have always appreciated Nokia and its way to deal with carriers. They should - and if they're smart they will - now support Nokia, which they knew is struggling BECAUSE of the carrier boycott. So they will lift the boycott and they will give Nokia early on some extra business, as a reward for doing what they demanded. In many cases it will be that a brand new Nokia on Android will suddenly be the featured phone in their promotions helping GREATLY to boost that phone's sales in that market. But this pattern will repeat in the first 6-9 months in essentially all major markets by at least one or two carriers there. This will power a return 'bounce'. The early quarters of Nokia's comeback will repeatedly feature the complaints of management that their demand is exceeding supply...

So then to 'Nokia that you love' - yeah, good point, but Nokia also knows the value of having a flagship as the driver of their visibility and getting people excited about the brand overall. Even if its 'unprofitable' to create now a top-end flagship (in an iPhone/Galaxy/Xperia class) that is kind of a required element in the re-entry strategy. One superphone has to be there, to re-establish Nokia. In reality, because the Lumia flagships sold in such modest numbers, if Nokia does just a new Android version with modest updates to the last Lumia flagship, even that is a good phone to start with...

And as many have said, just putting the pureview camera sensor onto an Android flagship alone, is reason to go buy the next Nokia 'proper' flagship.

Tomi Ahonen :-)

Tomi T Ahonen

Now comments from 21 May

Hi RickO - good points and yeah, the low-end of the Top 10 smartphone makers are so close with very small market share numbers, that once you get into the Top 10, at a bit over 2% market share, if you can keep growing, you could climb relatively easily up to number 4 where you need to be a bit over 5%. But then the jump to number 3 around 8% is a far bigger climb.

zlutor - haha, but you know what. The Nokia team is likely to be very business-oriented and cautious - BUT - it also means, they have robust business plans built on sensible views of the real world, not something silly. And then they will execute that with relentless management scrutiny and efficiency. Which means.. Nokia 'should' be able to almost consistently EXCEED their initial business plans. Look at the top of the market, they are novices there, recent new Chinese makers who are fighting with price on the Chinese domestic market to temporarily hold a good position, then find that price wars are unsustainable, and fall back into the pack. But then look at the guys on the top - how many times as Apple refused to behave 'rationally' and taken literally YEARS to do what every sensible business analyst has suggested. Thats not a smart company fighting a competitive market, and then look at Samsung and LG, both have done a series of blunders (as has, gosh, Sony, now out of the Top 10). This is not the most competent field of very strong rivals. I don't mean to belittle the challenge, but very likely this HMD & FIH partnership has some of the very best minds in HANDSET biz to fight this war. Some customers will buy price. They won't be buying Nokia. Others will buy 'value' or quality, and those will be in the market for Nokia. And Nokia, of the Top 10 rivals, is VERY good at delivering what those customers want. Expect Nokia to have good loyalty on the new Android smartphones.

Pertti - yeah, its Android. There will be updates, most def. I hope, hope, hope, that this is not done automatically and the consumer can decide not to do the updates if they so desire, and/or do the updates only via WiFi connection if the cellular connection is an expensive roaming one etc...

ChrisB - good example of the 515 and obviously from that phone to an entry-level Android is not a big jump for the consumer/customer, and those who worked on S40 to put it onto the 515 to run those specs, those engineers should welcome the opportunity to 'finally' be allowed to work on the Android version of that type of a phone. Obviously Windows wasn't able to go down to very low spec devices and after Symbian and Meltemi projects were killed by Elop, those engineers had no path to using their skills, to build smartphones for the low end.

Manufacturingbig (yeah we know who you are, so you will need to behave) - on the Nokia portfolio being 'a horrible mess'. That tells me you know nothing about mass market product portolio management but you love the simplicity of Apple who make all the decisions for its customers, and always gives them a compromise that under-delivers on critical elements. Always the 'not best camera' and always the 'not largest screen' and always the 'not most used memory expansion' etc etc etc. Typical Apple. And no choice. That is the Porsche 911 approach to phones. We decide. We make one aspect a priority (driver ability to go fast for Porsche 911, usability for iPhone) and everything else is secondary or non-existent like no back seat, no trunk, no diesel engines, etc etc etc. But you do get a Porsche 911 and its highly desirable and beautiful and viciously expensive and consistently profitable business for Porsche. Plus the car isn't updated every year like most other cars and has far less options than most cars.

Good luck with that selling those Porsche cars to MOST who buy a car. the family man with 3 kids and a dog. The taxi driver. The minivan operator. The college kid who needs a little car to drive around the town. Etc etc etc. The LARGE portfolio strategy is what you HAVE TO HAVE to fight for the mass market. That is what Samsung has, that is what Huawei has. It is what Nokia HAD before Elop. It is the ONLY way you can grow into a major mass market player - else you are a NICHE player. SonyEricsson was a mass market player. Recently Sony has shifted to a niche offering (and dropped out of the Top 10 and found this transition is very costly to its profits, and there is no guarantee this will succeed). If Nokia intended only to fight for the high end profitable niche with Apple, it would never have bothered with the low-end featurephone business in this partnership. No, the path forward is OF COURSE a large portfolio of many somewhat-overlapping products with minor distinctions on their features. It may drive you PERSONALLY mad that there is 'too much choice' but if that is what you say, you are clearly the same moron who has been on this blog under different names in the past. What you talk about is STUPID and IGNORANT about a mass market competitive opportunity. You are an idiot. Enjoy your time here on the blog, I don't block people simply because they are idiots. As long as you now behave.

Tomi Ahonen :-)

Wayne Borean

ROFL. Agreed. Apple focuses on usability, and are damned good at it, while limiting choice.

We were working on a new catalytic converter core design ten-fifteen years ago. There were a bunch on constraints, including NOx reduction performance, body size, cost, etc. We ended up going with an Apple style piece. It was a premium part, a fairly expensive part to build, but had great performance. And yes, most of the design choices were made by yours truly.

We lost sales because of our design choices for a variety of reasons, but actually reduced overall costs even though the core was expensive because we were using one catalytic converter core design instead of four. Volume is a fantastic competitive advantage!

The decision made sense for our company, at that time. One of our competitors went with a super cheap core design, which probably looked good on paper, but we ended up taking a chunk of business off them because our design worked better, even if it was more expensive.

Another competitor went with a wide range of choices from cheap to expensive. I think we ended up gaining business from them too. The reason I used a qualifier is that while I know we knocked them out of one particular market, in other markets it was harder to tell.

So I can see why Apple is doing things the way they do. I can also see where Nokia could pull in a ton of volume.

The phone business isn't like the catalytic converter business. With catalytic converters governmental regulations drive converter core design choices. If you need to reduce HC + NOx emissions to lower than 12 grams per horsepower hour and the core has to be capable of performing at that level for 5,000 operating hours or 5 years, then the core has to have a fairly high level of performance. And catalytic converters are sold to engine manufacturers, not end users.

In the phone business the 'bare minimum' is an ability to make voice calls. What makes or breaks a phone is the added abilities vs cost. Phones are sold to end users, to whom style and brand can be important selling points.

Nokia is going to pick the added abilities that it thinks will drive sales, leverage contacts with the carriers, use style and brand to drive interest.

Microsoft Windows Phone was a negative to end users. Android is fairly popular, so my expectation is that Nokia can expect to sell more phones than Microsoft. Because numbers 1, 2, and 3 hold such a huge percentage of smartphone sales, even a relatively small bounce in numbers will put Nokia in the top ten.

Add in Nokia's brand, and it should push sales higher. Assuming Tomi is right about Nokia's knowledge of end users in the emerging economies, and sales will go higher yet.

Assume I am right, and that Nokia has been planning for the last two years how to gain market share, and it is quite possible Nokia could end up as high as fourth place within two years.

And that would be a hell of a lot of sales.

I'm certain that Nokia is going to shake up the market. No, I don't expect them to make it back into first place in smartphone sales, but I do expect them to sell a lot more phones than Microsoft did, and to do so profitably.

Of course this assumes that they don't hire an Elop clone...


> Nokia is renting their brand to a new Finnish company and Foxconn.

Depending on how it fits your narrative best, Nokia is renting the brand or it is designing nothing special...

> The Old Nokia did design the Foxconn manufactured N1 tablet - and it was NOTHING SPECIAL WHATSOEVER.

And yet N1 sold out in several flash sales within minutes in limited regions with minimal marketing, purely based on the Nokia brand.
Nokia still sells around 15M dumbphones per quarter, those people are going to look for smartphones one day.

> a source of income to support the R&D

How much can that cost? There are dozens of small Chinese manufacturers who produce highly competitive Android smartphones at extremely slim margins. Lots of R&D is already done by Qualcomm and Mediatek; put their designs in your case, slap battery and screen, and presto you have a smartphone. (Intel did even pay for your marketing in addition to that, but Intel exited the mobile business in this generation.)



> But this isn't "Nokia". Nokia is renting their brand
> to a new Finnish company and Foxconn. Neither of which is Nokia.
> We have no details other than the name of one person of
> how much "Nokia" is in the new Finnish company.

So the HMD-Nokia thing can be seen just as a lawyer solution of getting around some obstacles. It is easy to see that Nokia is the one which has paid (one way or another) 350 million to Microsoft such that HMD got what it bought from Microsoft. It is very easy to see that HMD is relatively new Finnish company which has never had and it does not have that kind of own funding (of 350M$) to buy the phone business from Microsoft. Just look for what HMD has been used before!

From consumers' point of view there will be one entity which will be Nokia and that is it. This is what matters. By the way, HMD even has a un-pronounceable name (on purpose?) so the people will not even remember it 5-minutes later.

> Can this new Finish company make Pureview cameras? I don't know.

Nokia has done it and it can do it today. That means that HMD will have it and do it too. Just do not let the HMD thing from Nokia-HMD-Foxconn confuse you.

> Neither Msft, nor the existing real Nokia company have given
> any R&D personnel to the new Finnish company.

Today's Nokia has R&D people in Finland! Nokia is obviously supporting 100% HMD and I do not see why HMD will not get support from Nokia in this area.

> The Old Nokia did design the Foxconn manufactured N1 tablet - and it was NOTHING SPECIAL WHATSOEVER.

It was not supposed to be SPECIAL. It was a test of Nokia brand and not of Nokia's R&D.

> But even if they do -- is it going to be better than what LG, HTC and Sony are making (and failing to sell)?

Nokia & co will do better than LG, HTC and Sony! I am pretty sure that Nokia Android smartphones will get 50% of the smartphone market in Finland in the first 12 months.

> I still think the most likely path forward are cheap,
> well made phones sold for a little more than cheap
> no-name phones. But with Nokia's brands,
> they might be able to sell quite a few of them at small margins.

I guess that Nokia's plan is more flexible than that and it will be based on country to country.


"It's basically a huge sensor and algorithms to to make a smaller but more clear picture. "

Others are moving away from high density sensors (many pixels) because of low light performance. However, the pureview sensor is bigger and collects the same amount of light as a 5MP sensor per pixel (it is more complicated, see link). The point is not the number of pixels per se, but the digital zoom.


"The digital zoom is of course nice but it's hard to understand why most of the big competitors wouldn't be able to do the same if they wanted to."

Optics? You need very good optics to fit such a big sensor in such a small space. Zeiss seems to be good at that.


"It's reasonable to assume that the others may have made progress on that area in 5 years."

Optics does not progress that fast it seems. Zeiss is still one of the leading companies, like it was at German reunification 25 years ago.


> Do you know how many N1 tablets were sold?

First flash sale sold 20k units in four minutes, with 560k lining up.
Second flash sale sold 32k units in just under eight minutes, with 660k lining up.
Third and fourth flash sale did not give any public numbers, but it seems reasonable to assume around 100k N1 tablets were sold in total in its single region.

> Adding the Nokia specific features makes it expensive.

Nokia-specific features are needed only for the halo product.

> At the same time people seem to think that Apple wouldn't have resources for designing something like 10 phones every year even if Apple wanted to do that for some reason.

Huh? Samsung can design 10 phones per year with no problem, why would someone think that Apple couldn't? What Apple can't do (easily) is shorten the development cycle to match the Android collective's agility.


> Having the Nokia specific features only on few phones may risk the brand.

The 15M dumbphones that Nokia still sells would disagree.

> Not sure why you think that wouldn't be possible if it was something Apple really needed to do.

Tomi's standard counterexample of a product that Apple rushed out of the door is "Antennagate" iPhone 4.


This news is in Finnish but you may want to tweet it or something.

"Paikalliset odottavat lehden mukaan Nokian puhelinten tuotannon alkavan taas Microsoftin myytyä peruspuhelimien liiketoiminnan sopimusvalmistaja Foxconnille.
Nokian entinen luottamusmies Udayakumar kertoo, että ihmiset tulevat töihin vaikka alennetuilla palkoilla, koska he yksinkertaisesti rakastavat Nokiaa.
Chennailainen puhelinmyyjä Ravishankar puolestaan kertoo, että Windows-puhelimet myyvät huonosti. Parhaiten hänen mukaansa myyvät vanhat kaksois-sim-peruspuhelimet"


> I believe those phones have Nokia specific dumphone features.

None that people actually care about (or are even aware of) any longer. Dumbphones are no longer lifestyle items.

> What's the rushed out part on that? The antenna of iPhone 4 had issues

Precisely that. The accelerated schedule did not leave enough time to identify and fix the problem. You need to read Tomi's blog more. :)


R&D combined with a great knowledge about consumers needs (AKA Marketing), is, what I think, made Nokia stand out with innovations and features. We all know that the Nokia brand has value l. But that value is partly (and maybe mainly) supported by all the R&D Nokia has done through its history to make the phones it made.
If now this new venture relies on more "generic" R&D without much differentiation, the brand surely will be recognised by people who had Nokia phones, but what will happen with younger public and newer generations? (Don't know what will happen after the 10 years the contract lasts anyway).
All the news I've seen nowhere said that HDM will invest in R&D or even be in charge of design (I don't remember exactly). The old Nokia smartphone division now belongs to Microsoft.
So is possible that R&D will be some "generic" chinese to say it in some way. So will that and the Nokia brand be enough?


Quote: "It is easy to see that Nokia is the one which has paid (one way or another) 350 million to Microsoft such that HMD got what it bought from Microsoft. It is very easy to see that HMD is relatively new Finnish company which has never had and it does not have that kind of own funding (of 350M$) to buy the phone business from Microsoft. Just look for what HMD has been used before!"

But that 350M included a feature phone manufacturing facility that was acquired by Foxconn not HMD, so moat of the money may come from Foxconn not Nokia nor HMD.


> Exactly why new Nokia specific features are needed for smartphone.

No, why? Low-end smartphones aren't lifestyle items either.

> Or Apple simply didn't care about the problem. Actually Apple didn't according to the book about Steve Jobs.

Whatever the extent Apple cared, they could have caught and fixed the problem given enough time.
In addition, they underestimated the extent of the problem and the customer and media response. Initially, Apple gave instructions to support staff not to hand out free bumper cases, a decision which they reversed later. Could have prevented the class action lawsuit.


The new Nokia handsets will only succeed if they make Tomi their new CEO otherwise they will not take off at all.


Again, only halo products need something special.
Reviews of high-end devices usually get a large percentage of page hits relative to their actual sales. Everyone wants to know how the latest flagship performs.

Samsung low-end smartphones don't have anything special, if anything they are worse than Huawei devices that cost the same. Yet Samsung totally outsells Huawei everywhere except in China on their brand and on the halo of the Galaxy S series.

And simply putting a well-known brand onto a phone instantly raises its value in the eye of the customer. $7 cellphones in Shenzen's Mingtong Digital Mall come with Samsung and Nokia faceplates that the buyer can choose from:$7_cell_phone

John A

Any Idea if Nokia will make their own Android flawor for the cheapest models or join the Android One program? I guess for the flagship they will have the standard with Google Play. And maybe the Z launcer they use in the tablet.

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