Should Nokia’s current CEO Stephen Elop be entirely blamed for the mess his company is in? His new plan to make Windows Phone the primary OS for Nokia smartphones has only been in place publicly since February. Has Nokia’s marketshare tumbled that fast because of a newly announced game plan?
Before I dive deeper into thought let’s first take a quick look at the numbers. The report was huge but I’ll only show you the main bullet points.
- Operating loss of -€487 million
- Devices and Services division losses = -€247 million
- Total smatphones sold = 16.7 million. Compare that to iPhone’s 20+ million reported earlier this week.
Rafe Blandford from All About Symbian created an amazing analysis and breakdown of all the numbers. Take a look at this chart they posted:
Download the full report of Nokia’s 2011 earnings at this link (PDF).
You get the point. Nokia no longer sells the most smartphones worldwide. That title belongs to Apple.
Nokia’s current dilemma stems from problems that were seeded years ago when they failed to acknowledge a changing market. They took too long to act and now Elop and company have to face those demons.
There’s been much discussion of Nokia’s downfall in mobile communities today bringing mixed emotions, various opinions, and exaggerated predictions for the future of Nokia. It’s easy to point the finger at Stephen Elop and blame him for these horrendous numbers but at the same time you have to look further back. Back to the N97. Back to the 5800 XpressMusic. Back to Symbian S60v3. Version 3 is the key. Symbian S60v3 was key to the success of the Nokia N95 and Nokia’s dominance in the smartphone market. The Nokia N82 was/is my favorite phone ever. The E71 was the most reliable smartphone ever – even to this day. But things started to change about 4 years ago and Nokia didn’t take the new competition seriously. They hoped that the iPhone was just a gimmick but instead it became a monster.
The iPhone is in a league of its own right now. I’m not saying it’s the best phone you can get – I’m saying it’s the most popular in a time when everyone wants a smartphone. When Nokia was king years ago the smartphone was not a mass market device. Most people had a basic phone. Smartphones were limited to people who had money or business users. Geeks and gadget lovers. Hackers and hooligans. Now the masses can’t wait to get their hands on the latest Android device or the iPhone 5. It’s all about hype and Nokia was left out in the cold. Longtime Nokia users, E90 users, are disgusted at what they see from Nokia. Many have moved on to Android and others stuck around to chug along with the Nokia N8 – like me. There are so many positives to owning Nokia hardware that ultimately outweigh the negatives. But that is only my opinion. In Quarter 2 of this year the world’s biggest smartphone maker didn’t deliver. They didn’t deliver anything captivating that the majority of consumers wanted. Why not? What went wrong?
Some blame Nokia’s demise on Stephen Elop’s comments about a burning platform.
“We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.” - Read full memo here.
That stung as a Nokia fan. But he was ultimately right. The future should not continue on with Symbian as the only solution. Should he have said those words? Of course not – especially if he knew the next “big thing” from Nokia wouldn’t be ready until at least the fall season (WP7/Nokia devices). It’s ignorant to bash a platform that you hope to sell millions more of. Did his comments effect Q2 sales figures? I’m sure they did, but no much. Not enough for Nokia to hold on to their worldwide smartphone lead. Nowadays when you talk about smartphone sales you have to think millions per quarter – per manufacturer. Apple sold nearly 21 million iPhones in Q2. Nokia sold 16 million. Samsung and HTC posted amazing numbers this year. Do you think millions of people didn’t buy an N8 because Nokia decided to go with Windows Phone starting later this year?Do you think that many people actually heard Elop’s comments that leaked out about the burning platform known as Symbian? The reality is Elop’s comments and Windows Phone decision did not have much to do with the massive loss of sales and marketshare. The ship has been sinking for awhile and it has finally capsized this year.
The problems go back to the success of the Nokia N95. The N95 was on top of the world when it was released. It had a long list of features and specs that other devices couldn’t match. The N82 came around and became the imaging king. Nokia kept pushing devices powered by Symbian S60v3 because they were so widely popular at the time. The world was infatuated with the N95 and Nokia’s entire lineup. Owners of a Nseries device had so much pride in what they owned and showed it to all of their friends. I witnessed this firsthand. But there was a problem. Nokia was popular everywhere except where the future mattered most – North America. Carriers in the USA didn’t care for Nokia’s “open” devices running Symbian. And Nokia didn’t care for the US consumer market. This is when Apple came up with the iPhone and realized the potential it had. They found a hole in the market. Smartphones were not a mass market item 5-6 years ago in the States.
Eventually the iPhone become a phenomenon in North America. The touchscreen craze went rampant and Nokia decided they would simply tweak their Symbian operating system ever so slightly and S60v5 was born. The Nokia 5800XM was released and did well throughout the world. Nokia capitalized with the 5800 in places where the iPhone was either too expensive or simply not available. Another device called the N97 was unleashed and Nokia put some major marketing dollars behind it. The device sold in droves everywhere but the US. Stateside iPhone flourished and Google started pushing the Android platform. Both of which were more smooth and sleek compared to S60v5 powered Nokia devices. Symbian was now seen as clunky and slow. The N97′s processor and memory wasn’t powerful enough to keep up with Nokia’s new rivals. Longtime Nokia fanatics dealt with the pain of the N97 in hopes of “better firmware coming soon”. The video ads for the N97 showed amazing speed, transitions, and animations. None of which appeared in a firmware update.
Nokia decided to re-code much of Symbian S60 to make it more streamlined and modernized. Symbian^3 was born and the hype machine was started. The excitement of an updated OS started to build around Nokia communities but died out quickly. People were underwhelmed when they realized the Symbian^3 UI looked nearly identical to Symbian S60v5. There were hundreds of tweaks and improvements but overall it wasn’t enough to blow people away. iPhone and Android users scoffed at screenshots and visuals of Nokia’s upcoming lineup.
The high-end side of the Nokia lineup last year consisted of the N8 and E7. The Nokia N8 is an amazing device and sales have been very good since October 2010. The E7 was announced at Nokia World in September of last year but not released until this Spring. This device has its own issues that Nokia could have avoided. As Alvin pointed out today in his E7 review, these issues are too big to turn a blind eye. Other devices like the C7 and C6-01 were also released but didn’t gain much hype. This year the iPhone became widely available throughout the world and Android has done amazingly well. Solid N8 sales were not enough to hold up the giant called Nokia. The US smartphone market is now the world leader and Nokia has almost zero presence. The rest of the world now has access to the same devices as Americans and have proved their interest with their wallets.
So this is where Nokia is at. All of this build up went into effect long before Elop took over. I agree his memo about a burning platform did not help the situation but the truth is the masses don’t pay attention to CEOs and their comments – not like we do. Maybe a few million people heard Elop’s comments about Symbian and the fact that Nokia was moving on with Windows Phone. Elop had to tell the world their new plans and there was no way around it. But it’s not like the N8 was available at an AT&T store. It’s not like the E7 was on its way to Verizon. It’s not like Amazon was creating a Kindle app for Symbian then abruptly stopped. The North American market has little to no interest in buying an unlocked device for $400+. With a portfolio with carriers Nokia has no chance.
Does this spell the end of Nokia? Of course not. They are still a giant and I’m sure they’ll gain their marketshare back even if it takes a few years. I’m excited about WP7 powered Nokia hardware and even more excited about the N9. But that is the future and this article was meant to be about the past. Nothing Elop could have said (or not said) in February would have stopped the train wreck that the Q2 numbers represent. I expect the numbers for the rest of the year to be worse. Nokia’s turnaround won’t be noticeable until this time next year. It will be a long hard road but I predict next year will be a different story.