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January 26, 2012
Nokia Q4 Results: Now Official, Elop has Created World-Record Destruction of Market Share in One Year
The Nokia results are out and they are brutal. It ended up being almost exactly as I predicted back in February. Nokia smartphone market share has crashed to 12% from 29% exactly 12 months ago. As I said, Nokia's smartphone unit went from generating growing profits, to generating increasing losses. And yes, just like I predicted, all of Nokia Corporation was pushed into loss-making.
For 2010 Nokia sold twice as many smartphones as Apple, and by Q4 iPhone was outselling all Nokia smartphones almost exactly by two to one. This is a historical moment. We have witnessed the establishment of a humiliating world record. We have a new definition of colossal corporate incompetence. Mark this day. We can now evaluate the full effect of the Elop Effect.
Here are the Q4 final numbers for the Bloodbath analysis. Nokia sold 19.6 million smartphones for the Quarter and 77.3 million for the full year. A year ago Nokia grew smartphone sales by 45%. Under Elop's management, Nokia replaced the strong growth with a massive decline, dropping 25% when the industry itself had a massive year growing by over 60%.
The market share exactly a year ago at Q4 was 29% and yes, Nokia was so dominant in smartphones, it was not just the biggest smartphone maker, it was literally more than twice as big as its nearest rival and obviously also bigger than its two nearest rivals combined. Nokia was not fighting its rivals like in most businesses where the top 2 players are close in size, like Coke and Pepsi, or like Toyota and General Motors, not like Boeing and Airbus etc. Nokia was TOWERING over its rivals. Literally, more than twice as big as its nearest rival, just 12 months ago!
Since then we had the new CEO Elop on a Rampage of Ruin, starting with the Elop Effect, where he combined the biggest management mistake ever of current product endorsements of the Ratner Effect, with the biggest management mistake ever of future plans of the Osborne Effect. His Elop Effect alone has cost Nokia billions in revenues and profits. I calculated in December that the Elop Effect had already wiped out from Nokia Corporation revenues as big as those of the total revenues Oracle Corporation, and worse, the Elop Effect had destroyed profits as big as the total profits of Google! The equivalent damage was as if a whole RIM ie Blackberry sized hole was cut out of Nokia, just due to the Elop Effect.
Then he continued feuding with his distributor channel, angering Nokia partners and frustrating Nokia supplier chain. The sales not just crashed for Q1 from 29% to 24% but due to Elop's continued mismanagement, Nokia smartphone sales fell throughout the year, down further to 16% in Q2, then 14% in Q3 and now 12% in Q4.
THIS IS A WORLD RECORD OF MISMANAGEMENT
This is not like New Coke. This is not like the BP Oil Spill. This is not like Toyota's problem with brakes. There have been huge disasters in business in history, but nothing like what we witnessed in 2011. Never in the economic history of mankind has there been a global market leader brand, that collapsed so totally in one year. Nokia was growing 45% from 2009 to 2010 in smartphones. Nokia was successfully migrating its 'dumbphone' customers to smartphones, by Q4 of 2010, Nokia had migrated 25% of its handset customers to smartphones while the world had only migrated 22%. All of Nokia's rivals were far behind in that transition, Motorola so badly, they had lost 8 out of every 10 customers they tried to migrate from dumbphones to smartphones. And how did Elop snatch defeat from the jaws of victory? Today Nokia's proportion of smartphones is down to 17% - while the industry has reached the point where 29% of all phones sold globally are smartphones!
I cannot emphasize how strategically moronic this is. Previously, up to 2010, Nokia was GAINING customers, as it migrated its customer base from dumbphones to smartphones. The fact was, that Nokia was so successful in designing desirable phones - for Nokia existing customer preferences - that it actually gained customers while migrating them to more expensive smartphones. As long as Nokia was doing that profitably - and it was - that was perfection in executing a transition from a legacy business of dumbphones to smartphones. Elop has now reversed that.
Now Nokia is on a Motorola trajectory, where Nokia customers are actually lost when shifting from dumbphones to smartphones - and alarmingly that rate has been increasing and is now at the rate of two lost for every one retained! Worst of all, now obviously Nokia is doing this generating huge losses in its smartphone unit. Really, readers. It is like Nokia looked at how Motorola collapsed, and Elop came in and said, lets do a Motorola for Nokia but lets just do it much faster. This is strategic: Elop not only destroyed Nokia's today, Elop is also destroying Nokia's tomorrow. And now Nokia is going against the global trend, where the world went from 21% of all new phone sales being smartphones in 2010 to 29% now. And Nokia is going against the grain, shredding its loyal customers as it peddles undesirable smartphones. Nokia's customers are so disgusted - they are more willing to buy a cheap non-smartphone, than a smartphone!
UNPRECEDENTED MARKET CARNAGE
In the past 12 months Nokia has shredded six out of every ten customers it had! This is comprehensive global collapse in the period of one year. Nothing like this has happened anywhere, in any industry. ANd look at past handset rivals. When Motorola collapsed, it achieved something like this, yes, but that happened over a three-year period, not in 12 months. When Palm died, it did it gracefully over a five-year period. Siemens did not collapse like this, nor did Microsoft's Windows Mobile.
From utter market dominance, literally bigger than its two biggest rivals combined, Elop exchanged 29% market share for 12% today. Both Apple and Samsung have already passed Nokia as bigger smartphone makers in Q2 and Q3. By Q4 Apple sold 37 million smatphones, which is a hair less than twice the number of smartphones sold by Nokia in the same period at 19.6 million. This has never ever happened before, in any industry, not in cars, not in TV sets, not in soft drinks, not in detergent, not in running shoes, not in airlines, nowhere! The dominant market leader collapsed in one year and has gone from more than twice the size of its nearest competitor, to about half the size of its strongest competitor. This is unprecedented market disaster!
I warned this would happen and while there were many points in 2011 where Elop could have saved Nokia, he refused to budge. He admitted the sales crash was worse than he expected. His partner over at Microsoft Steve Ballmer has admitted Windows Phone has disappointed dramatically. The past GM of Windows Phone who left Microsoft has admitted that carriers hate Microsoft's mobile activities and in 2011 Microsoft has only made matters worse. Now we have seen how badly Nokia has done with its Lumia strategy.
Note, one year ago at this time, when Elop had been in charge for about five months, Nokia shareholders had appreciated Elop's leadership and the strong performance in the smartphone unit so well, that the Nokia share price had grown by 11%. Since the Elop Effect, Nokia share price had fallen by more than half. Nokia's shares were rated one notch below perfect at this time last year. Since then all three ratings agencies issued a series of downgrades and Nokia is now rated junk. Nokia's brand was consistently one of the 10 most valuable brands on the planet. Elop's actions dropped the Nokia brand out of the Top 10 for the first time ever.
I am not suggesting that somehow Nokia was perfect - the previous management under Olli-Pekka Kallasvuo had damaged Nokia well from its peak value years ago. But that damage had been reversed, Nokia was strongly in recovery mode by Q4 of 2010. I am not attempting in the least to suggest Symbian was going to somehow save Nokia, the decision was taken long before Elop came along, that Symbian woiuld be replaced - and I had written on this blog many times why that was the right thing to do. Nokia's problems were with execution, not its smartphone strategy. I wrote for example this a year ago, about Nokia problems in execution and marketing. Elop was hired to fix execution problems, not to destroy its smartphone unit, as Chairman Jorma Ollila clearly stated when Elop was announced in early Autumn 2010.
As Nokia was plunged into generating big losses last year, Elop has been since selling various Nokia assets to try to keep the company afloat. He has tried to sell the NSN unit and currently is trying to sell the Vertu luxury phone unit. He has already sold several batches of patents, and just sold Nokia's handset factories in Romania. He also has been firing staff, more than 10,000 were let go already, and we just heard another 13,000 will be fired next. This guy is destroying Nokia as we knew it.
COMPARE THEN AND NOW
One year ago, exactly this time Q4 results, this was Nokia smartphones, compared to today:
ITEM . . . . . . . . . . . . . . Q4 2010 . . . . . . . . Q4 2011
Smartphone unit sales . . 28.6 M . . . . . . . . . 19.7 M
Unit growth YoY . . . . . . 45% . . . . . . . . . . . minus 31%
Average Sales Price . . . 154 Euro . . . . . . . . 140 Euro
Smartphone Revenues . . 4.4 B Euro . . . . . . 2.7 B Euro
Smartphone profits . . . . 510 M Euro . . . . . . minus 190 M Euro
Market Share . . . . . . . . 29% . . . . . . . . . . . 12%
Smartphone migration . . 25% . . . . . . . . . . . 17%
If you thought RIM was having trouble, it is nothing compared to this. In every way Nokia has seen an epic collapse and please understand, there is no bigger story in mobile, this is a WORLD RECORD in market collapse. Please also remember the recent analysis by Horace Dediu at Asymco blog, that in mobile, once your handset maker degenerates from profit-making into loss-making, there is no recovery. The history is clear about that from Siemens to Ericsson to Palm to Motorola. Not only that, we also see that Nokia's corporate loss of 1.1B Euros (about 1.4B US dollars) was actually 250 million dollars bigger in its operations - yes, the Q4 period included a 250 million cash payment from Microsoft to try to prop up CEO Stephen Elop and his mad Microsoft strategy. Yes, Nokia's losses in reality based on its actual market performance are far worse. And that loss goes to the smartphones unit which in reality generated nearly a 400 million Euro loss if this Microsoft cash injection is removed. And then, yes, the Microsoft 'strategy' - can it save Nokia? No.
LUMIA IS A FAILURE
Nokia refuses to give actual Lumia sales numbers. So does Microsoft. We can see from that, that both companies are ashamed about the lack of traction and fear reporting the number. Note, a year ago Microsoft proudly published its 2 million figure. Since then Microsoft has admitted that Windows Phone sales have declined from quarter to quarter. Now we know that 'to date' by January 26, Nokia's Lumia has sold 'well over 1 million Lumia devices to date'. That more than 1 million was achieved in the three months from November to end-of-January. The Q4 sales will be significantly below 1 million, and analysis of the Nokia launch markets for Lumia sugggest about 600,000 total Lumia sales in Q4. That compares to an equivalent launch of Nokia's then-new operating system, the S^3 release of Symbian, which sold 4 million units in Q4. When adjusted for the market growth in 2011, that would mean 6.4 million sales now. But under Elop's management his Microsoft Madness strategy has yielded a success rate of one TENTH of what Nokia did a year ago with the 'obsolete' Symbian and the then-flagship smartphone N8.
Note Nokia refuses to give us a sales number for N9 sales using the MeeGo OS. That means MeeGo has outsold Lumia. And we have an independent analysis which says MeeGo sold 1.4 million units in Q4. This is particularly relevant, as the MeeGo countries of N9 launch were selected to be very tiny smartphone markets like New Zealand, Singapore, Norway, Nigeria and Kazakhstan. I will do my analysis of what is the equivalent performance of the MeeGo platform vs Lumia phones by Nokia, in a separate blog shortly. It is disappointing to find that Elop refuses to celebrate the huge success that the N9 has been in horrid conditions and with no top management support.
WINDOWS PHONE WILL NOT SAVE NOKIA
First of all, I have of course given my review of the first Lumia smartphone and why it will fail as a flagship phone, whether Nokia intended it as such or not. Then I gave a detailed analysis of where and why Lumia is failing in the market once we had market data. I have given my forecasts of what the years 2012 and 2013 will look like for Nokia and Lumia. And of course, I will revisit those forecasts and give you my latest revised picture based on these latest Nokia numbers. But lets not use my numbers. We have seen now two forecasts for Nokia Lumia success potential, by Morgan Stanley and iSupply. Lets see how plausible these are and what they tell us.
The Morgan Stanley forecast is the one you may have seen promising 37 million Lumia sales this year. The iSupply forecast is the one that promised Windows Phone to pass the iPhone by 2015 and achieve 17% market share. Lets examine briefly these two forecasts.
MORGAN STANLEY SUGGESTS LUMIA ONLY 7% BY END OF 2013
The Morgan Stanley forecast from January 2012, said Nokia Lumia sales would hit 37 million this year 2012 and 64 million in 2013. They add also Symbian sales so total Nokia smartphone sales would be 77 million in 2012 and 80 million in 2013. Note - first of all, that Morgan Stanley clearly expect that somehow Nokia can stem the decline in smartphone sales last year (of 23%) this year to be flat sales this year, and a slight growth of 5% next year for all Nokia branded smartphones. Secondly, Morgan Stanley expects that Nokia can still sell 40 million Symbian smartphones this year 2012 and 16 million next year. I think these are very rosy expectations (especially, now in light of Nokia Q4 results, when Elop clearly said he no longer expects Symbian to sell those promised 150 million more units he committed to last February) but lets assume Morgan Stanley's forecast is close to accurate. What do these numbers mean?
Morgan Stanley's forecast of 37 million Lumia sales in 2012 means 5% market share this year and the 64 million Lumia sales for 2013 suggests 7% market share by next year! This is success? I fear not. What when we add in Symbian sales. Morgan Stanley's projection suggests Nokia total smartphone sales this year 2012 would see a further drop in market share to 11% this year and down to 8% in 2013. If you think Nokia who dominated smartphones last year, would have 8% next year, and thus according to this optimistic forecast, Nokia would have expelled three out of ever four customers it ever had - that is the very definition of corporate suicide. (and I think this Morgan Stanley projection is too rosy)
iSUPPLY EVEN BASE NUMBERS ARE WRONG
Lets turn to iSupply. Just now in January, IHS iSupply gives the projection for Windows Phone sales (remember, not only Nokia provides WP7 smartphones, also Samsung and HTC offer a token few smartphones in that space but both obviously give preference to Android). They project Windows Phone to have 1.9% in 2011, then 9.0% in 2012, then 15.3% in 2013, 16.1% in 2014 and 16.7% in 2015. They do not separate Symbian sales out of the numbers, but just to see how implausible these numbers are, lets look at the other 2011 numbers. iSupply has estimated the iPhone to be the 'loser' to Windows Phone. They start with iPhone to have 18.0% in 2011. The reality is, that Apple achieved 20% market share in 2011. So the difference in iSupply's forecast in 2015 is literally one tenth of one percent between iPhone and Windows Phone, but iSupply starts by punishing Apple by 2 full percentage points! Then the growth? Apple grew 2 points in 2011 and currently in Q4 with the new iPhone 4S, Apple is selling 25% of all smartphones globally! Meanwhile iSupply felt that that Apple would be flat in 2012? That is perhaps a fair projection if iSupply thought that Apple's sales were flat in 2011, but Apple grew 2 points. Why would the iPhone then fall in 2012?
But look at iSupply's number for Windows Phone in 2012, this year. Last year all Microsoft partners sold about 5-6 million smartphones in total (remember, MIcrosoft itself was so afraid to give the number they started to count both the new Windows Phone sales with the older and incompatible Windows Mobile sales last year - and still in Q4, Windows Mobile was outselling Windows Phone in Microsoft's best market, the USA, as we found from Nielsen Q4 new sales measurements). Now lets say it was 6 million in 2011. Then suddenly iSupply feels that this year 2012, that will suddenly explode to 63 million? TEN FOLD INCREASE IN ONE YEAR? On what planet? The only manufacturer who will focus on Windows Phone will be Nokia and Morgan Stanley in their optimistic view only counted about half that number for Nokia Lumia sales. Android did not explode 10-fold in the third year of its sales. Apple's iPhone did not explode 10-fold sales in its third year. There is no precedent for this outrageous forecast. And even if it were to be true, EVEN if it were to be true, then by the end of 2015, four full years from now, the total Windows Phone family of handset makers would have achieved selling one out of every six phones worldwide, and Nokia would have some slice of that pie. A year ago Nokia alone was selling one out of every three smartphones sold globally.
We have seen that Nokia's biggest smartphone launch ever, with the biggest market support, with the biggest artificial creation of demand, as Nokia's Symbian based phones were almost extinct from handset stores; with the biggest marketing expenditure Nokia had ever done for smartphones; combined with hundreds of millions of more marketing support from Microsoft's deep pockets - to the degree that in the UK for example consumers got free Xbox videogaming consoles if they bought a Nokia Lumia 800 smartphone - yet the sales in Q4 were well below one million (and likely about 600,000). Kantar measured Q4 sales for Lumia and in no major market did Lumia pass even 2% sales of smartphones - these were Nokia's best markets where Nokia's market share a year ago was between 35% and 60%. Now the Lumia sales have failed to succeed, to the point that Nokia is already slashing prices to sustain what sales remain. Do not delude yourself, Lumia cannot save Nokia.
I will return with more Nokia analysis but these Q4 results are devastating. We did witness a world record in corporate management. Nokia's CEO Stephen Elop took the world's strongest smartphone maker brand and ruined it in one year. He replaced strongly growing sales and 29% market share with 12% today, projected to hit 8% next year. He took strongly growing revenues and profits, and replaced them with declining revenues and big losses. Most of all, he managed to reverse the trend of migrating Nokia customers from low-cost dumbphones to smartphones - now Nokia is literally bleeding customers when they come to replace a phone, for the first time ever, Nokia's market share in smartphones is worse than in dumbhones - and worse than the global migration to smartphones. Last year one quarter of Nokia's customer base had been migrated to smartphones, where the future of the mobile phone business exists. Today Elop has scared those customers away, and only one in six customers of Nokia phones select smartphones. He will be studied in MBA courses as the case study of the greatest management failure of all time, and no doubt, many will arrive at the same nickname as I use for Stephen Elop: he is the Microsoft Muppet. The Nokia Board must fire him immediately before he ruins what is left of Nokia.
PS - I have now added the calculation of Lumia sales for Q4 (600,000 units) - compare it to N9 MeeGo sales of 1.75 Million - both launched in the same quarter and you can sense my frustration with Elop.
PS PS - I now added also the regional split calculation with some stunning customer acceptance findings. But read the Lumia sales blog first (the above link)
Posted by Tomi T Ahonen at 02:00 PM in App Stores, Bloodbath, Dumbphones, Ecosystem, Elop, Europe, Forecasts, Google, iPhone, Market Share, Microsoft, Nokia, Profits, Revenues, Samsung, Smartphone, Statistics, Strategy | Permalink
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et meme
[quote]The Truth. The Whole Truth. And Nothing But.. the Burning Platforms Memo is 1 Year Old.
We are now at the one-year anniversary of the notorious Burning Platforms memo, with which Nokia CEO Stephen Elop single-handedly destroyed Nokia's dominant market position in smartphones and caused 13.8 Billion dollars of destruction in Nokia handset annual revenues, and wiped out 4.4 Billion dollars of annual profits from Nokia corporation. The damage in Nokia's future, the smartphone division is even worse- Elop's memo wiped out 13.8 Billion dollars of annual sales and 3.9 Billion dollars of annual profits in just one year. Before the memo, Nokia just in smartphones was more than twice as big as Apple's iPhone. Today it is the opposite, the iPhone is twice the size of all Nokia smartphones. By crashing Nokia's smartphone market share, Nokia dumbphone market share, Nokia corporate revenues, Nokia average prices, Nokia corporate profits, Nokia share price, Nokia credit ratings, and the Nokia brand value, the Burning Platforms memo is the most damaging single management communication of all time. A year ago there were some (usually quite misguided tech experts who didn't understand mobile) who actually applauded Elop for this moronic memo.
(UPDATE 13 February - Please note I have added a brief comment to the end of this article, based on Elop's interview given in South Africa about specifically the Burning Platfoms memo. It gets beyond weird..)
At its anniversary, now is a good time to set the Burning Platforms memo into the proper context of reality and facts. To see just how idiotic it was. Because the memo was so error-laden, misguided and most bizarrely, even where Elop was right, his actions since have been against the 'sensible' parts of the memo, I have to do this blog properly. This is a long article, some 12,000 words. Take a cup of coffee before you start. This would be the length of a whole chapter in one of my books. But lets examine the Truth, the Whole Truth and Nothing But the Burning Platforms memo.
The Burning Platforms memo can be read at several locations including the Wall Street Journal. I have reproduced the memo here verbatim (in italics), but added my 'translation' from a Rumsfeld-Cheney'an deliberate distortion of reality by Elop, to the more commonly accepted definitions of 'facts' and 'reality' by the rest of the world that was not serving the George W Bush government.
THE TRANSLATION
Burning Platform Memo
(ie the Nokia destruction manual)
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire.
(Note the 'sudden' explosion - this was not a gradual challenge by the rivals of Nokia like Apple for the past four years or Google's Android the previous two years: no. This all happened quite unexpectedly in February 2011, when suddenly the Nokia CEO Stephen Elop had set the world's biggest smartphone platforms on fire like a true arsonist)
In mere moments, he was surrounded by flames.
(in merely one full quarter after he started the fire, he found that Nokia smartphones had already lost half of their market share)
Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
(there had been a strong other platform at Nokia called MeeGo, but Elop had set it also on fire, this is why the man could not see anything except the Atlantic)
As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice. He decided to jump.
(the decision was 'encouraged' by Elop who fired more than 10,000 Nokians that had refused to jump, and then in upcoming months, fired many thousands more. He has fired 30,000 Nokians by now)
It was unexpected.
(because it was 100% unnecessary, and a totally self-induced injury by the CEO)
In ordinary circumstances, the man would never consider plunging into icy waters.
(because under normal circumstances any sane CEO makes decisions that are good for the company, not detrimental to the company and its employees)
But these were not ordinary times
(as Nokia had clearly been taken over by someone, who based on this mad Memo was called a 'delusional psycopath' by the most influential expert of the mobile industry, the most published author of the mobile industry who lectures on mobile at Oxford University and whose words are so trusted he is referenced in 120 books by other experts. Nokia's own staff were aghast as were almost all reputable experts of the mobile industry)
– his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour. We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour. Over the past few months, I’ve shared with you what I’ve heard from our shareholders,
(who have loved the way Nokia's new CEO Elop had grown Nokia share price by 11% in the first five months he was in office, while Nokia's perilous decline in profits was reversed to strong growth, and Nokia's smartphone saless were now growing strongly. They did not need any change to Nokia's strategy. But after this memo, Nokia share price has fallen more than 55%)
operators
(who appreciated how much Nokia had invested in Symbian to modernize it, and how Nokia had gone out of its way to let the operators/carriers join in the Ovi store ecosystem with Symbian and did not want Nokia to abandon Symbian for the hated Microsoft OS; and Nokia's upcoming MeeGo ecosystem had achieved the ultimate prize - the world's biggest mobile operator/carrier China Mobile had signed up to MeeGo - China Mobile alone is more than twice the size of all USA carriers/operators added together)
developers
(who loved the fact that Nokia had invested in a migration path for the 400,000 strong Nokia developer community - by far the biggest in the industry, carefully nurtured and developed over the previous ten years - to migrate their apps from Symbian via Qt to MeeGo and S40)
suppliers
(who were having steady growth in their business supplying Nokia with components but are now reporting quarter after quarter of failing performance)
and from you
(Nokia employees who believed passionately in creating highly loved high quality handsets in every price segment, from the affluent markets of the West to the low-cost handset markets to the Emerging World)
Today, I’m going to share what I’ve learned and what I have come to believe. I have learned that we are standing on a burning platform.
(which means I am either insane, or I have a hearing disorder)
And, we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.
(because the CEO Elop has set those multiple explosions himself not only setting fire to Symbian, but also to MeeGo, to the Ovi Store, to Nokia's Qt developer tools environment, to Nokia's cloud computing solutions and Nokia's services such as Navteq and its mobile advertising)
For example, there is intense heat coming from our competitors, more rapidly than we ever expected.
(actually the competition was not providing intense heat to Nokia, it was destoying weaker rivals like Palm, Motorola and Windows Mobile. Nokia was experiencing only modest market pressure and actually was growing smartphone unit sales, revenues and profits; and its Ovi store had overtaken all other rival app stores except Apple's and was now closing the gap to that)
Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.
(which is why Nokia had long before Apple built its ecosystem on the principle of an open ecosystem with its partners, with several times more developers, an installed base 8 times larger than that of Apple, and current sales of smartphones more than twice the size of Apple)
In 2008, Apple’s market share in the $300+ price range was 25 percent;
(which is why Elop acted in 2011 so detrimentally to Nokia, that today Apple's market is not just 25% of premium smartphones, it is literally 25% of all smartphones just one year later)
by 2010 it escalated to 61 percent.
(this growth rate for Apple was fast yes, but Nokia itself had also a good growth rate of 48% year over year while some rivals like Palm and Motorola were declining - and Nokia's growth rate was speeding up at the end of the year, not slowing down, so you'd think the CEO was happy things were not just good, they were improving at Nokia)
They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010.
(Nokia's own growth rate was far better - on a completely different level in Q4, with profits in Nokia's smartphone unit jumping 65% in just 3 months from Q3 to Q4 of 2010 under Elop's leadership! If compounded for the full year to be comparable to Apple, what Elop had was an annual growth rate of his smartphone unit profits of 741% !!!! - Almost 10 times stronger growth in profits at Nokia's smartphone unit than Apple !)
Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience
(which was exactly why when Nokia designed its own touch-screen phones well, like the N8, Nokia too found that consumers buying the high-priced phone with great experience - still one year later, that N8 is still a top seller in many markets such as China)
and developers would build applications.
(just like Nokia's own developers who had developed apps for the Ovi store that was now the second best-selling app store in the world, and the Ovi Store was the bestselling app store in every country where the native language was not English, Japanese or Korean, and Ovi was now closing the gap to Apple)
They changed the game, and today, Apple owns the high-end range.
(which obviously was utter poppycock. Only after Elop destroyed Nokia premium smartphone sales in 2011, did Apple gain much of the high-end range, and even then it shares it with Samsung, HTC, SonyEricsson etc.)
And then, there is Android.
(Android the open source, Linux based smartphone platform that is supported by Nokia's Qt application developer tools - just like Nokia's MeeGo smartphone platform which also is open source, Linux based and supported by Nokia's Qt developer tools - but unlike Microsoft's Windows Phone which is a closed system and needs proprietary development tools)
In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100.
(so Android is following Nokia whose Symbian smartphones were already selling in the sub 100 Euro market and Symbian was far more capable to function on low-cost, low-specification handsets)
Google has become a gravitational force, drawing much of the industry’s innovation to its core. Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace.
(meanwhile Nokia had not only the world's largest mobile phone factory also in China, but Nokia had more highly effective mobile phone factories much closer to its customers, from India to Brazil)
By some accounts, this ecosystem now produces more than one third of the phones sold globally
(whereas the reality is that this Chinese Shenzhen based 'ecosystem' produced more than two thirds of all the phones sold globally - facts very widely available - and Nokia itself was a major part of it so this is known very well inside Nokia. Where was Elop getting his 'facts'?)
– taking share from us in emerging markets. While competitors poured flames on our market share
(The competitor who poured flames on 'our market share' was of course Nokia CEO Stephen Elop himself, who compounded this idiotic memo with the partnership announced with Microsoft when he had no phones to show and thus crashing Nokia sales, and then not supporting the MeeGo handsets N9 and N950 to start even more fires to Nokia platforms)
what happened at Nokia? We fell behind
(by "falling behind", Nokia was twice as big as its nearest rival in smartphones and far bigger than its nearest two rivals, added together. Boeing or Toyota or Sony or Coca Cola would love to "fall behind" this badly and be literally more than twice as big as the nearest rival)
we missed big trends
(by "missing trends" Nokia had a touch screen phone before the iPhone, QWERTY phones before the Blackberry, an app store before Apple's iPhone App Store, 3G before either Apple or RIM made 3G phones, and currently Nokia already sells NFC Near Field based phones to enable mobile commerce, Dual SIM phones, etc. Nokia has not missed any trends. Not big trends, not even medium trends like forward-facing cameras, multitasking, folder views, Xenon flashes etc. Nokia has yes, sometimes executed poorly its first version of a given new trend, but Nokia has not missed any 'big trend' in mobile phone handsets, ever. Not one!)
and we lost time. At that time, we thought we were making the right decisions
(which of course means here on Planet Earth where people deal with reality, that Nokia was making the right decisions - app stores, touch screens, full internet HTML browsers, multitasking, front-facing second cameras, NFC, dual SIM, etc - all were right decisions, sometimes they were executed poorly or with severe delays, but the decisions were all the right calls)
but, with the benefit of hindsight, we now find ourselves years behind.
(by "finding ourselves years behind", of course Nokia was years ahead. So much so, that later in 2011, Apple settled its lawsuit with Nokia and had to pay Nokia royalties for stealing Nokia inventions for years past for treading on numerous Nokia patents, and pays currently for every iPhone made, while Nokia does not pay Apple a single cent. Similarly while Apple and Microsoft sue Samsung, Motorola and other Google Android partners, Nokia is not due any patent violations to Microsoft, Samsung, Motorola or anyone else)
The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience.
(in fact 'first iPhone' was so deficient, that Apple spent the next three years making 15 major revisions to it, fixing its bugs, upgrading its hardware, operating system and software - where 14 out of those 15 upgrades and changes - that were celebrated by Apple as its biggest innovations in the official Apple press releases announcing the iPhone 3G, iPhone 3GS, iPhone 4 and their related iOS software updates - were all already deployed on Nokia's top smartphones before the first iPhone shipped in 2007. Yes, when Elop sais 'we still don't have a product close to their experience - that may be how President of the Moon Colony Newt Gingrich speaks, when normal people here on Planet Earth will actually look at the data and find that up to 2011, Apple hadn't yet caught up to Nokia smartphones from four years before.)
Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.
(Unbelievable indeed, because it was not true in February 2011. Only one analyst house, Canalys claimed this bizarre 'fact' and their published numbers illustrated blatantly a huge math error obvious to the naked eye. Even the other major industry analysts mocked Canalys for the massive math error it made in its market share calculation)
We have some brilliant sources of innovation inside Nokia
(brilliant innovation which Elop has tried to stifle, like the highly praised swipe technology of the Meego operating system on the N9)
but we are not bringing it to market fast enough.
(while not fast enough, Nokia still was doing the innovation far faster - four YEARS faster - than Apple for example, see Patent court settlement in the above - Apple was stealing from Nokia not the other way around)
We thought MeeGo would be a platform for winning high-end smartphones.
(it also clearly is. The market reception for MeeGo based N9 is overwhelmingly superb. The MeeGo based N9 is rated by tech analysts not only as Nokia's best smartphone ever, but that both the hardware and the software are rated on par with the iPhone 4S in most reviews, and incredibly for Nokia, some actually rate the N9 and MeeGo better than the iPhone 4S and iOS. The N9 is rated far above all other rivals running on Android or Blackberry or Windows based operating systems, including Nokia's own Lumia series. This is the best reception of any Nokia handset, and especially any new smartphone software ever to carry the Nokia brand)
However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.
(Sure. Like Madonna said to Wayne and Garth on Saturday Night Live: "And monkeys might fly out of my butt." Anything 'might' happen but the reality is, that even after Elop personally terminated one ready-for-sale MeeGo unit in early 2011, and then torpedoed the MeeGo staff, resources and funding, Nokia still managed to create two more MeeGo handsets - the N9 and N950 - both that went to production well before the first Microsoft handset appeared. The truth is, Nokia was fully able to have three MeeGo devices on the market were it not for Elop's personal meddling)
At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America.
(by 'non competitive' in North America, that Symbian was still outselling Microsoft's own Windows Phone OS in the USA at the time, until Elop later killed all Symbian sales for the USA in the summer of 2011. But the reality is, that 'markets' is more than just one market of the USA. Symbian had over 75% market share in China, now the world's largest smartphone market, bigger than the USA. Symbian had over 60% market share in Singapore the country with the highest penetration rate of smartphones globally. Symbian had over 70% market share in India, the mobile market with the biggest growth rate. Symbian was the biggest handset platform in Japan, the country with the most advanced phones, a country where the original iPhone was literally obsolete when it launched in the USA in 2007. Symbian was the biggest smartphone platform in Europe, a market both bigger than North America and more advanced in both maturity of smartphones, generation of smartphones, new market sales size of smartphones, and penetration rate of smartphones. Symbian was also the run-away market leader in Latin America and Africa. Symbian was the bestselling smartphone on five of the six inhabited continents and Nokia's Maemo was the bestselling smartphone on the uninhabited continent of Antarctica too. The only continent where Nokia's Symbian was not the clear market leader was North America where six other smartphone operating systems were all produced by domestic rivals, manufactured by North American handset brands. SIX local rivals! iOS, Blackberry, Android, Palm, Windows Mobile and Windows Phone. And even in this market, at the time, Symbian managed bigger sales than two highly praised domestic rivals, Palm and Windows Phone at the time)
Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development
(which is why Nokia developed Qt as its application development tools and environment. Qt would support not only Symbian which powered more than half of all smartphones in use worldwide, but also supported Android and soon also Blackberry smartphones reaching more than three quarters of all new sales of smartphones; plus supporting Nokia's featurephone system S40 which more than doubles the accessable market for app developers, plus supports Nokia's Linux based future platform, MeeGo. Developers using Qt have rated it by far the fastest way to create smartphone apps compared to tools for any platform including iPhone, Android and both Microsoft platforms)
and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
(by falling further and further behind, Nokia was massively bigger than any of its rivals - in smartphones Nokia Symbian smartphones sold more than the next two biggest rivals - combined! And Nokia grew smartphone sales strongly in 2010 at 48% per year, while ending the year with renewed strong growth in profits)
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us. And the truly perplexing aspect is that we’re not even fighting with the right weapons.
(And what 'right weapons' would that be? Is that why Elop created the Lumia range, USA designed smartphones that were released in Europe? The same Europe where Nokia's European designs have dominated being the biggest smartphone sellers literally in every European country in 2010. While most US based smartphone designs are seen as synonymous with total failure such as Palm, Motorola, Danger, Compaq, HP, Dell, Kin, etc)
We are still too often trying to approach each price range on a device-to-device basis.
(by which strategy outside of USA, Japan and South Korea, the only three countries where there are several domestic smartphone makers - in the rest of the world where 93% of the total population of Planet Earth lives, Nokia smartphones had a market lead in literally every other country except these three. The strategy was somehow 'failing' in Elop's mind apparently)
The battle of devices has now become a war of ecosystems,
(which is exactly why Nokia was the first smartphone manufacturer to create a smartphone centered ecosystem years before there was an iPhone - and Apple itself did not even let the original iPhone owners install apps to the original iPhone 2G. Apple then copied Nokia's ecosystem thinking in developing the App Store - but Apple did it obviously better, like Apple always does - and since then, Nokia's Ovi store was taking lessons from Apple's innovative thinking and inspite of that, Ovi was still the second bestselling app store of the planet, far ahead of rivals such as Blackberry, Windows or Palm etc)
where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.
(Reality check! In 'hardware' and 'software' ie the operating system (OS) - Nokia was in installed base of smartphones 4 times bigger than its nearest rival. In new sales of hardware Nokia was more than twice as big as its nearest rival. In the OS war, Nokia's Symbian was still selling more than Android at the time. With 'developers' Nokia's developer community was more than twice as big as the nearest rival. In 'applications' Nokia's app store (Ovi) had the second most apps behind only Apple at the time. In 'eCommerce' Nokia's Ovi store sold all forms of digital content as one of the world's biggest digital content stores and by far the most global store across more than 100 languages. In 'advertising' Nokia's mobile advertising unit was one of the biggest in the world. In 'social applications' Nokia was one of the pioneers on mobile from Nokia Live Blog and Club Nokia to various social and community services since. In 'location-based services' Nokia's Navteq was the biggest and powered many rival systems not just Nokia's world-leading mobile mapping. In 'unified communications' Nokia had been extending Ovi services to messaging. There is no area in the ecosystem as defined by Elop, where Nokia was not a major player or the market leader. On most of them, Nokia's ecosystem including Symbian, Ovi and Qt was the run-away leader. Apple's iPhone and App Store, Google's Android, RIM's Blackberry, HP's Palm, and Microsoft's two platforms, Windows Mobile and Windows Phone were all dwarfed just on these metrics as mentioned by Elop, not to mention when other Nokia assets are mentioned such as carrier billing support, language support, open source, Linux support, handset partner ecosystem, etc)
This means we’re going to have to decide how we either build, catalyse or join an ecosystem.
(So when Nokia CEO finds he has the biggest, best, most dominating ecosystem ever seen in mobile, that was growing at 48% per year, he somehow wants to abandon it?)
This is one of the decisions we need to make.
(this is a decision only a moron would make. There is no decision to make! If you are winning so comprehensively that you crush the competition - more than twice as big as your nearest rival - and you do that while growing strongly, and with growing profits -that is no place for any 'decisions'. As CEO you thank your organization and step out of the way, and let the competent staff continue to wipe the floor of the global market with rivals that are puny by comparison.)
(Let me add a personal comment here. I am 100% certain, that at this point in the memo, any sane Nokia employee knew they had a lunatic as a boss, and all the best brains started to plan an exit from Nokia. The CEO lost all credibility if he utters the above statement, that there is a 'decision we need to make' when you dominate the market currently, you are growing, you have correctly anticipated the changes that are now happening in that market, and you are profitable doing it. This is the obvious trend where the industry is headed and Nokia was poised to continue to dominate it long into this decade, not joining some mythical third (in reality 8th) ecosystem but rather owning and controlling the clear first ecosystem of mobile. When Elop felt he needed a decision here, shows he was incompetent and just for saying that in his memo, proves he is not fit to lead Nokia. He will never be trusted by his staff as a sane CEO who is interested in what is best for Nokia.)
In the meantime, we’ve lost market share
(this is natural and inevitable and unavoidable if there is a genuine market opportunity. Nokia invented the smartphone and started with 100% when it had no rivals. As rivals came in, of course Nokia lost market share. Sony lost market share when other music player makers started to copy the Walkman. Daimler Benz lost market share after other car manufacturers appeared. Apple lost market share when others launched rivals to the iPad. The point is, that Nokia towered over its rivals and only a fool would abandon a lead when you have essentially lapped the whole field of rivals)
we’ve lost mind share
(yes! Nokia had lost mind share badly to Steve Jobs led Apple. It was well known that past Nokia management was not good at the mind share war. This was one of the skills the Board hoped to find in the next CEO, not to change Nokia's strategy, but rather to communicate Nokia's dominating position more succinctly to the analysts and investors, to bring Nokia's reality more in line with the distorted impressions in the war of the 'mind share')
and we’ve lost time. On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade.
(since then Elop's actions have demolished that rating with three more downgrades by all three ratings agencies, and today Nokia's rating is at junk status)
Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.
(Elop's direct actions caused a comprehensive global collapse of Nokia market share in smartphones falling from 33% in 2010 when he took over to 12% by Q4 of 2011. Now Morgan Stanley projects that the Microsoft partnership will be so damaging to Nokia smartphone sales that they sell only 37 million Lumia phones in 2012 and by 2013, the Nokia smartphone market share will be at 8%. The reality is likely to be far worse still)
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year.
(so Elop not being satisfied with Nokia preference slipping in the UK, decided to devastate it, and now Nokia has lost 80% of its market in the UK. No Nokia smartphone reached the 10 bestselling smartphones in the UK for Christmas. A year before, Nokia sold four out of every 10 smarpthones in Britain)
That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on. How did we get to this point? Why did we fall behind when the world around us evolved? This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform.
(by 'we' Elop is not talking of Nokia employees. He is using the Royal pronoun meaning himself. Yes, after personally setting Nokia's strong solid platforms on fire, he then proceeded to pour gasoline onto his own platforms all through the year with one catastrophy after another (Microsoft announcement, N9 and MeeGo damage, Ovi rebranding, Nokia numbering/naming, patents, factories, layoffs etc etc) resulting in Nokia's brand being kicked out of the 10 most valuable brands globally, for the first time ever)
I believe we have lacked accountability and leadership to align and direct the company through these disruptive times.
(by lack of accountability Elop means that his actions bear no correlation with his own words and by leadership he means that most senior Nokia execs who had invested decades into the company, have suddenly fled the company many resigning in protest. To address the 'lacked leadership' Elop then admitted he miscalculated how big the loss would be in Q1 of 2011, then admitted he was surprised to have to announce a profit warning for Q2, then showed Nokia leaderhip in refusing to give annual guidance. And after promising 150 million Symbian devices up to 2016, he has since reneged on that promise too, now suggesting the Symbian line will be terminated this year producing only half the promised amount. This is Elop style of 'leaderhip' and 'accountability')
We had a series of misses.
(which led Nokia to tower over all of its rivals selling more than twice as many smartphones as Apple sold iPhones in 2010, and more than four times as many smartphones as Samsung - and Nokia did this in 2010 generating healthy profits in its smartphone unit. If that is what Elop calls a 'series of misses' I would like some of that please. Series of misses makes you twice as big as your nearest competitor, while making a big profit. Yes. But how does Elop fix that? Today both Samsung and Apple alone sell more smartphones than Nokia and Nokia's smartphone unit under Elop is generating huge losses)
We haven’t been delivering innovation fast enough.
(by 'delivering innovation fast enough', we now see how Elop delivers innovation. Nokia had introduced innovations such as forward-facing cameras and multitasking years before the iPhone; and were known for such high utility features as microSD memory card expansion slots, removable batteries and full Bluetooth file transfer ability that Apple still doesn't support; and recently added such market leading features as 12 megapixel cameras, Xenon flashes and NFC (rumored to be in the next iPhone). Elop then produced Lumia smartphones which are genuinely regressive in ability removing all those 'staples' of Nokia flagship smartphones, going back in ability and past Nokia smartphones now exceed these new phones in ability. So Nokia's past flagship smartphones have had these features, but the Lumia 800 does not! That is how Elop understands 'delivering innovation fast enough'. Elop must have gone to the same school of speaking as Rumsfeld. Whatever he says, he will then literally do the exact opposite. Elop now delivers innovations - EVEN MORE SLOWLY than before. When Nokia had literally delivered innovation faster than any rival - on points Apple is so proud it mentions them in the headlines or first paragraphs of the press releases for the newest iPhones - Nokia has been as much as four years ahead of Apple. Not on trivial details, these are the top-line items Apple itself celebrates in its hardware AND its software. Now Elop shows us how he intends to run Nokia. Two first two new Lumia phones have we seen a regression in Nokia flagship smartphones never seen before.)
We’re not collaborating internally.
(so therefore Elop sells whole business units of Nokia, creates massive organizational and procedural changes, makes idiotic management decisions, half of which he then back-tracks and flip-flops to further confuse and stress his staff and confuse the market, media and analysts, while compounding the problems of collaborating internally by firing people by the thousands)
Nokia, our platform is burning.
(it wasn't before Elop came to town, but it is now)
We are working on a path forward — a path to rebuild our market leadership.
(and Elop's way of building is to exchange 33% market share in 2010 for 12% in Q4 of 2011 and as low as 8% for 2013)
When we share the new strategy on February 11, it will be a huge effort to transform our company.
(by 'our company' he must have been talking of Microsoft, which desperately needed Nokia to come and rescue the Windows Phone platform which was truly a market disaster by this time, having fallen from 12% market share to 2%. But yes, even after this memo, Microsoft's brand new Windows Phone OS market share fell by another half, to about 1%, and it is still outsold by its older Windows Mobile sibling)
But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.
Stephen.
WE WILL BE GREETED AS LIBERATORS
The Burning Platforms memo disaster was to mobile phones what the Rumsfeld-Cheney communications were about the war in Iraq. We know where the weapons of mass distruction are, said US Secretary of Defense Donald Rumsfeld on TV. We will be greeted as liberators, said Vice President Dick Cheney. Its a slam dunk case, said CIA Director George Tenet about the weapons of mass distruction. etc. The costs of the war would be paid by the oil revenues according to Paul Wolfowitz, the logic of "known unknowns and the unknown unknowns" by Rumsfeld etc. The militarist wing of the George W Bush administration ended up with a whole slew of faulty statements about what would happen. When Elop released his Burning Platforms memo, that memo had enough warning signs, that it too was like a handgrade rolling around Nokia headquarters with the pin pulled, waiting to explode. Now we know and can measure the damage. But Elop is like many North America-trained executives, a great communicator. He spun his poisonous web with the sweet smell of lies and innuendo.
So lets be clear. As I wrote a year ago, the sentiment in the memo was totally correct. Nokia was facing ever tougher competition, at the high end from the Apple iPhone and Google's Android. At the low end from Chinese handset manufacturers. And that the battle for the future for Nokia would be ever more about smartphones and their ecosystems. I totally agreed with that sentiment a year ago, and I still totally agree with it today. Nokia had been in the process of changing, but needed to change much more still. The sentiment was all correct. I fully supported the sentiment in the memo.
The so-called facts in the memo were wrong throughout, as I have indicated in the above. I wrote my first analysis of the blatant errors in the blog back on 9 February 2011. Elop himself has walked back more than a dozen of those statements, admitting often that he had been wrong.
But the dastardly part of the memo is that Elop said one thing, while clearly doing the opposite. So where the sentiment and main themes of the memo were indeed the right direction for Nokia - Elop then took the past year and did the exact opposite. Yes, Mr Rumsfeld, did you say 'we will be greeted as liberators?'
The Burning Platforms memo said the future would be about smartphone ecosystems. Elop then took the world's largest and strongest ecosystem and torpedoed it. He then proceeded a few days after this memo to announce that Nokia replaces the Symbian, MeeGo, Ovi Store and Qt development tools based ecosystem - by far the biggest in the world, and being open source based, it was also the most robust and strongest for the future. He replaced it with the smallest and weakest of them all, the one by Microsoft called Windows Phone, which is not open source and where Nokia has no control of its future, becoming in effect the slave to Microsoft. We are just celebrating Black History Month in the USA. Imagine after the US Civil War which freed the slaves, if some slaves who were free (Nokia) would then voluntarily move to some other country where they still had slaves (like many countries in Latin America) and voluntarily sold himself and his family as slaves again? How idiotic is this?
One year ago, in February 2011, Windows Phone was already so weak, the then-new OS was already shrinking in size perilously, YES! All other new operating systems grow - Microsoft Windows Phone was already shrinking. Microsoft gave away 2 million Windows Phone handsets but couldn't then maintain that level in real sales. A year ago, it was already being outsold by not just bada of Samsung, but Microsoft's own older OS, Windows Mobile. Still now, the latest quarterly data from the USA, Microsoft's best market - tells us that Windows Phone cannot outsell even Windows Mobile. The tiny market share of Windows Phone fell by more than half in the next nine months after Elop selected it.
Elop proceeded to destroy his existing strong ecosystem, from abandoning the promised evolution path for developers from Symbian to MeeGo, to terminating the Ovi store branding, to shifting away from Nokia's long-standing supplier chain partners, to selling sets of its patent portfolio, to selling its advertising arm, to selling whole factories and thousands of designers and programmers. Elop talks one thing, he does the exact opposite.
THE CRUEL BOTTOM LINE
This kind of management communication is one of the future strategy of a corporation. The effect of that strategy is best measured 'by the bottom line' ie how did Nokia do, before and after this memo.
In 2010, Nokia Corporation as a whole (including the networks unit and Navteq and other parts, including handsets obviously both smartphones and dumbphones) had sales of 42.2 Billion Euros (about 57 Billion dollars). Where the hardware side of the mobile industry where Nokia competes against Motorola, Ericsson, Samsung, Alcatel-Lucent, Apple, RIM, Huawei and ZTE - grew by 12%, Nokia's sales also grew.. by 4% from the difficult year 2009 before. Nokia's growth was hampered by the NokiaSiemens Networking unit. The growth engine for Nokia was its smartphone unit, which generated 17% growth in revenues for Nokia in 2010.
Now in 2011, guided by the Burning Platforms memo, while the mobile telecoms hardware industry grew again by about 12%, Nokia did not see growth in revenues. Nokia total corporate revenues fell by 9% to 38.7 Billion Euros (52 Billion dollars). So Elop's Burning Platforms memo and his subsequent actions swapped revenue growth of 5% for revenue decline of 9%. The true 'bottom line' destruction in Nokia revenue growth was a decline of 14% in revenue growth - this while the industry grew 12%. The effective damage was thus 26% to Nokia's relative position against all its major rivals like Samsung, Apple, Sony, RIM, HTC, Ericsson, Alcatel-Lucent, Huawei etc.
DRIVEN TO LOSS-MAKING
Usually, when a CEO forces his company 'on a diet' to make sacrifices, it is because the corporation has become loss-making, then the CEO forces austerity measures to help a smaller company recover profits. Elop seems to be doing the opposite. Again, remember 'Greeted as Liberators' - Elop does strictly the opposite of what he tells is the smartest thing to do.
For the full year 2010, Nokia total profits grew by 72% from 2009 when the annual profits had shrunk to perilously low levels. Even so, throughout the economic crisis of 2008-2010, Nokia was the only major legacy handset maker with a full portfolio of both smartphones and dumbphones - who generated a profit in the handset unit in every quarter of the economic crisis. The crisis pushed Samsung, LG, Motorola, SonyEricsson etc into loss-making and finished off several of Nokia's long-standing rivals like Palm and Motorola, and resulted in Ericsson finally ending its handset production last year, selling its share of the SonyEricsson partnership to Sony. But yes, Nokia was the only major full-portfolio handset maker who weathered the economic crisis so well, that its handset unit never reported a loss in even one quarter.
After the Burning Platforms memo, for 2011, Nokia profits plunged into loss-making. This took Elop by surprise and Nokia issued a profit warning and all three ratings agencies have issued warning after warning downgrading Nokia ratings. The profits now for 2011 had vanished and instead of 2.1 Billion Euros of a Profit as Elop inherited in 2010, he now pushed Nokia into generating its first annual loss ever since Nokia Corporation reogranized and focused on the telecoms sector two decades ago. Nokia's corporate loss for the full year was 1.1 Billion Euros. So his memo and Elop's further destructive actions directly caused 3.2 Billion Euros of losses to the company for the full year.
MAYBE WAS NOT THAT BAD?
So maybe Tomi is now 'cherry-picking' the most extreme data points? Maybe ---------------
It is not called show art
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J’avais dit pareil (sauf que j’aurais bien fait voir la mère par un psy, pour être sur)![[:petrus75]](https://forum-images.hardware.fr/images/perso/petrus75.gif "[:petrus75]")
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