Business, Hardware

Nokia 2011 Analysis: The Heart has Stopped

Before continuing with reading, bear in mind that it was Stephen Elop which caused the initial shock, the heart attack. It was Stephen Elop’s February 11 announcement of the end of Symbian that effectively killed the sales of Symbian in the sales channel. What Nokia has since seen, is a sales channel revolt, in effect a boycott of all Nokia phones, not just smartphones. Check this out.

All News Is Bad News
The blood is now everywhere. This is what we read everywhere. Tero Kuittinen, a telecommunication analyst writes that Nokia smartphone sales are "eroding rapidly" and the crash is happening even as the phones are now "steeply discounted" and the sales channel is simply "phasing out" Nokia sales with "no carrier support". That is carnage. If it was just one source, maybe we could dismiss it. But read what we hear from The Street who write about Nokia smartphones now saying "carriers are yanking the support of Nokia smartphones" and the higher-priced flagship phone successor to the N8, the E7 is said that its "launch is a disaster".

Nokia N8 - Undoubtedly world's best cameraphone: 12MPixel camera, brilliant Carl Zeiss optics, excellent sales - and then February 11 cameAnd then Mobile Today reports on Carphone Warehouse (Europe?s biggest handset retailer) saying that Nokia premium phones like N8 and E7 are disappointing "despite the N8 getting off to a strong start at the end of last year" (ouch! Talk about snatching defeat from the jaws of victory!) and then from neighboring Orange store, Mobile Today quotes sales saying ?Nokias are currently the worst selling handsets in the store?.

Not the worst-selling ?smartphone? but Nokia is now the worst-selling phones of the UK. This in one of Nokia?s traditional stronghold markets, the UK, where often 5 and sometimes as many as 8 of the top 10 bestselling phones have had the Nokia brand. April was the first month ever, when the Top 10 was devoid of any Nokia handset, no smartphone, no dumbphone. That has never happened as long as records have been kept in the UK market for top-selling phone brands. CNBC reported on 1 June that several mobile operators/carriers worldwide are now refusing to sell any Nokia smartphones.

Just a small sample of why Nokia N8 started to sell in significant volumes (2M+) prior to February 11 announcement
Just a small sample of why Nokia N8 started to sell in significant volumes (2M+) prior to February 11 announcement

The retail chain has spoken. They are sending a message to Nokia HQ. No price discount, no new model, no marketing gimmick, no apology by the sales rep, the regional sales manager, the global VP of sales, not even a total retraction by the CEO is now enough. The retail channel is strangling Nokia in a death-grip choke-hold. They will not let go, until Nokia Board of Directors fires the CEO and reverses the stated strategic direction to Microsoft.

Understand what this means. Nokia cannot survive even to the end of this year, if its retail channel is in revolt. Nokia does not have any meaningful levels of its ?own? sales, it has even closed most Nokia flagship stores (which only sold a tiny fraction of Nokia products). Nokia needs its distributor network, in fact Nokia?s distributor channel is the biggest in the world, and thus Nokia is most dependent on it. They have now grabbed Nokia by the hair, and pulled Nokia?s head under the water. Nokia is drowning and alone, it cannot recover. Nokia needs its distributors to be willing to let go, let Nokia catch a breath of fresh air. To get some Symbian sales back during 2011.

QUICK SAND: Platform Death is Special Death
We have seen enough of these platform deaths in technology, to know how it goes. Anyone remember the short battle between Blu-Ray vs HD-DVD? Once a platform dies, it dies fast (I once spent $250 on Toshiba HD-DVD player and 80 movies when Best Buy was liquidating the platform, Ed.). Or we can go back into history, look at Sony’s Betamax. It was technically better than VHS in every single generation, better sound, better picture, better slow motion etc. And at one point it was the bigger platform. One could have forgiven VHS for throwing in the towel, but VHS did not need to become as good as Betamax. What VHS needed, was to become ‘good enough’ and it devastated Betamax. But when Sony finally announced it was shifting from Beta to VHS, that killed Sony Betamax VCR sales overnight.

We have seen this movie before! The difference is in the Japanese version of the story, the platform is given its chance to fight, and they do not surrender when they were the biggest. Sony abandoned Betamax when their market share ws down to about 5%. But now we see how Hollywood would remake that Movie, in Stephen Elop’s directoral debut. The blockbuster featuring sexy WP7 will kill of evil villain Symbian not when it was finally dead at 5%, no, Elop kills Symbian was when was still the biggest OS, and making profits, and growing sales (and most astonishingly, even managed to grow Nokia Average Sales Prices of smartphones – by a MASSIVE 15% in just one quarter. That is amazingly strong performance) …and then to replace it with the smallest and weakest OS out there.

So small in fact, that Microsoft WP7 is currently not just selling less than similarly new bada from Samsung (bada sells more than twice as well, even though bada only has one handset maker and Microsoft WP7 has a family of them, including Samsung by the way). Microsoft’s WP7 is so weak, that even though Microsoft has tried to kill off the older sibling, Windows Mobile for almost a year, WinMo still outsells WP7. That is how bad it is. How does WP7 compare to that dinosaur they call Symbian? Well, Symbian even after Stephen Elop took a lesson from Dick Cheney and shot Symbian in the face, Nokia alone on Symbian still outsells all handset makers who make Microsoft WP7 phones in Q1, by what.. 15 to 1 that is what!

And most insultingly, even in this, the worst quarter of Symbian ever, those non-Nokia ‘other’ Symbian makers, mostly Japanese handset makers, who mostly do not even fit into the bottom of the Top 10 biggest phone makers, they manage to sell more Symbian based smartphones – yes – than all Microsoft WP7 based smartphones in the past quarter, combined. The Microsoft WP7 family includes Samsung and LG, both Top 3 sized giant handset makers. What is wrong with this picture?

How Elop is Spitting in the Face of the Distributors
And then we get to the painful part. Why is the situation getting worse for Nokia, not better? What is the clever CEO now doing? He saw that his house was on fire, he went and bought gasoline. He saw his patient was choking, so he fed the patient poison. When he saw his friend was starting to drown while swimming, rather than go save him Stephen Elop released the sharks! Look what the sharp Nokia CEO is now doing, to win over the hearts and minds of the carrier community, his primary sales channel.

Stephen Elop announced that Nokia will release dual SIM phones. Nice, you say. I?d like one of those please. Yes. This is perfectly in line with his ?West Coast? philosophy, by which the consumer preference will win. So guess what. Nokia announced dual SIM phones back in 2009. Why haven?t we seen them? Because the carriers/mobile operators said they don?t want them (carriers/operators fear dual SIM phones will promote promiscuous behavior by customers to switch between networks).

So, Nokia has had this ability for two years, and has not released those phones. Now, after Nokia?s phone sales have stalled, the CEO waves that red flag in front of the carriers/operators – that next Nokia will bring those very same upsetting dual SIM phones to the market (Nokia has already launched the first such phones in India).

And look what is happening with another West Coast thinking-company, Apple. Apple wanted to bring the "virtual SIM" card to the iPhone 5. The carriers said, "no way." Problem: Apple had already designed the iPhone 5 to run with no SIM card, and now is delayed in launching the iPhone 5, to rapidly redesign the iPhone. You can expect the launch in September 2011, and this redesign caused three month delay i.e. why WWDC keynote did not had "One more thing" moment in a form of new hardware for purchase.

It is the carrier who decides. The carrier/operator (and independent phone retailers) are the channel that Nokia needs. If the channel rejects Nokia?s phone(s), the phones die.

Nokia knows this, because that was what killed the Nokia N-Gage. Microsoft learned that lesson because it was not good or bad software that killed the Microsoft?s Kin. It was killed by the carriers. The same is true of Google?s ?iPhone killer? the Nexus One, the phone so great Google called it the world?s first superphone. Killed by the carriers. And now, even Apple is not strong enough to push a virtual SIM. That is how severely carriers/operators take the SIM card issue.

And Nokia?s new smart boy CEO announces proudly that Nokia is bringing dual SIM phones to the market. Smart move, Sherlock! Would you like to promise us next, that we will be greeted as liberators, too?

"WINNING" West Coast Designs
Then the bizarre news we had last week, that Stephen Elop has assigned Nokia?s first Microsoft phone project to the West Coast California designers. Note, Nokia?s ?own? designers from mostly Finland, have managed to produce world-beater phones, that are the most desirable phones on 5 of the 6 inhabited continents, and driven by which Nokia has always sold more smartphones than anyone else. Always! That is an unbeaten winning streak of the Superbowl champions.

Read my lips. Smartphones designed by the incompetent Finnish designers of Nokia have an unbeaten winning streak, every single quarter ever ? including this latest Q1 of 2011, Nokia?s ?Finnish-design? smartphones have outsold all others on the planet. And if you take Elop?s favored ?West Coast? Design, in fact, you can take all brands of smartphones of the United States, all Apple iPhones, all Motorolas, all HP/Palms, and all Dells and add them together – Nokia outsells them all ? combined! Yes, even in this latest quarter after the CEO tried to kill off Symbian, these ?poorly designed? Finnish Nokia designs still managed to outsell all US based smartphones added together. That?s how well Nokia designers know and understand their market, their end-users, and the needs of the carriers/operators. An unbeaten streak of 14 years, 56 quarters in a row. Who knows how to design smartphones?

Stephen Elop took the Superbowl MVP quarterback and team off the field, and brings in a third string quarterback who has never won anything – and gives that team the project to design Nokia?s most important phone ever – the first Microsoft Windows Phone 7 based smartphone. Now, in the past week or so, that team is even given more pressure, where Stephen Elop has cut their development and testing time where originally they were told to ship the phone in first quarter of 2012, now Mr "I know Nokia faults are in execution? not" Elop is causing a certain flood of design flaws into that very same first, most important handset.

This is what is meant, when an organization does not learn from past mistakes. Anssi Vanjoki would not have committed this error.

The carriers/operators of the world know what kind of designs tend to come from the West Coast, with the California thinking. Its duds like the Palm, the Kin, the Nexus, and for example the Motorola Rokr. Meanwhile yes, the iPhone? Yes, the original iPhone 2G jesusphone was indeed a big hit – in America, where 7% of all mobile phone subscribers live. The original 2007 design of the iPhone 2G was so much a failure in the rest of the world, that it was not a hit phone on even one other continent except North America. The original "West Coast" design iPhone 2G was literally obsolete for the most advanced mobile phone markets like Japan (Where Symbian is considered fully competitive.. bizarre). This is the design ?tradition? that California-Dreaming Stephen Elop wants for Nokia and its global carriers/operators.

The operators/carriers on those other 5 continents where 93% of all mobile phone subscribers live, know very well, that Nokia?s normal designers know how to make highly desirable phones that their domestic customers want. And that American designs do not cut it. But ?I know better? Stephen Elop now flaunts new California-design smartphones for them.

SKYPE: The Ultimate Death-Nail
And if there is something carriers hate more than Apple?s iPhone App Store or virtual SIM cards or dual SIM cards, or ?American? designs for phones, the thing carriers/operators hate the most, is Skype. They hate Skype with a vengeance. Why? Because the carriers witnessed how easi
ly Skype destroyed their fixed-landline telecoms cousins, and where Skype might not take all traffic, it devastated the revenues and profits of that robust industry. All existing Nokia senior managers know, that to offer Skype for carriers is tantamount to offering them a drink labeled as poison.

And what is our clever little darling Stephen Elop now promising the world? That Microsoft?s new WP7 smartphones will include Skype. His Muppet Master, Steve Ballmer is proudly crowing about how Microsoft will use Skype to build its eco-system.

Again, please don’t misunderstand me. You and I may want to have Skype on our phones. It may come some day. But trust me, the carriers will not be letting the biggest phone maker flood their market with Skype phones replacing the carriers’ cash cow – voice calls. Won’t happen. The players who will eventually bring Skype in, will be the smallest of the disruptors, not unlike how Blackberry sneaked beneath the radar to bring Blackberry instant messenger to challenge SMS today. The carrier will not allow Nokia and Microsoft to do this. Not with the brand they hate the most, Skype.

Its like building an eco-system for plants, and bringing it out to space, and setting it out of the spaceship. Into the vacuum where there is no life. Steve Ballmer has killed Microsoft WP7?s chances as a smartphone OS, with this Skype malarkey.

If you want the ultimate proof that your phone will not ever be supported by carriers, put on unrestricted Skype on it. The Grand Genius Stephen Elop is jumping from one CEO failure to yet another, and compounding the problem every time. So first he shoots himself in the foot. Did that hurt? Yes? Sorry. Let me get a bigger gun and shoot again. Pain? Sure. Thats good. Now let me get a bazooka to really shoot myself in the foot.

Elop Poisoned his Own Well
Stephen Elop may have been the best candidate Nokia?s Board saw when they were interviewing for a new CEO in the summer of 2010. We will never know. He may have had brilliant ideas and views for Nokia. He may be a fantastic manager and brilliant motivator (although all sources seem to suggest the corporate morale at Nokia has never been as demoralized as it is now). He may have wonderful secret plans to launch Nokia into the next century. Maybe he knows how to do teleportation and time-travel with a mobile phone (using Microsoft software no doubt). He may be the sharpest knife in the drawer. But he has by his own actions killed the distributor channel support for Nokia. Stephen Elop has caused the cardiac arrest which now grips Nokia. The distributors have put Nokia smartphones on a boycott.

Stephen Elop has not learned from that. He has not reacted with haste, attempting to save Nokia. He is now thinking like a Microsoft Muppet, what is best for Microsoft. In that process, Stephen Elop has seen a patient whose heart has stopped, and rather than try to revive it, he has now started to strangle that dying patient. Stephen Elop is killing Nokia. He is angering his distributor chain with every move he makes.

He is incompetent to run a company in a period of change, if he is unable to change to changing conditions. He is unfit to run Nokia whose business depends totally on carrier support. His strategy has seen wholesale rejection by the channel, they now have Nokia in boycott. Not just Nokia smartphones, Nokia dumbphones are struggling. What little Nokia can sell, is sold with massive discounts. I know a dead parrot when I see one, and I am looking at one right now. That parrot is definitely deceased. It has passed on. This parrot is no more. He has ceased to be. Its gone to meet its maker. He’s a stiff! Bereft of life, it rests in peace. .. this is an ex-parrot. (substitute ‘career as CEO’ for Parrot if you consider Elop’s chances now).

That was a bit of an update from happy Nokia news. Next will be the episode about why the catastrophy is life threatening now, not next week, now.