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Nokia vs. Android

Two years ago Nokia sold 30% of its smartphones in Western Europe. Today it sells 15% in that market. Its unit shipments went from 5 million to about half that and its market share went from 55% to 11%. Its rank in the market went from first to fifth.

The fall is exceptional and dramatic. The two charts below show smartphone market shares. The top chart shows global share and the second shows Western European smartphone shares (European share data sourced from IDC).

The other perspective is shown the the following chart which shows actual units shipped.

One striking thing is how volumes collapsed into Q1 and Q2 this year, coinciding with the public decision in February to deprecate Symbian. The other interpretation I would make is that within the two year time frame Nokia’s share has been completely absorbed by Android, not Apple. Whereas most commentary shows Nokia suffering at the mercy of Apple, it’s Android that took share in Europe.

Can a Windows Phone portfolio turn Nokia’s fortunes around? The first problem is that such a portfolio will not be available until next year. The second problem is that the competition will not be standing still. The third problem is that the market itself may not be growing as fast as expected.

It’s becoming increasingly difficult to see how Nokia can weather this turbulence and odds are against it.

  • Vatdoro

    "within the two year time frame Nokia’s share has been completely absorbed by Android, not Apple. Whereas most commentary shows Nokia suffering at the mercy of Apple, it’s Android that took share in Europe."

    I would venture to say that most of the market that Android took from Nokia are low-end pre-paid (somewhat-smart) phones. Apple doesn't currently play much of a role in the pre-paid market, but if that were to change I think we'd see a pretty good up-tick in Apple's market share in Western Europe.

    • arvleo

      I doubt that it was low-end phone market because we are talking about only Nokia "smartphones" and those were for upmarket high-end consumers not low-end.
      Again it would depend on what Horace included as smartphones but i suspect it were high-end N-series phones rather than low-end ones.

      • RichyS

        But Nokia count anything running S60 as a smartphone — even if consumers just view them as a featurephone with keypad and a larger than normal screen. Not many people add any apps to their Nokia devices.
        The only really top selling device from Nokia that could be defined as a smartphone was the N95. But, again, my experience from designing mobile data solutions in a large European telco at the time suggests that most didn't actually use it with a data package.
        So, Nokia sold a lot of 'low end' S60 devices in that time.

      • http://twitter.com/aegisdesign @aegisdesign

        In 2007 when the N95 came out, data packages were very expensive. You can thank phones that don't really work without an internet connection for changing that.

        Secondly, Nokias even today use a lot less data than other phones as they're hardly ever online. eg. Nokia Maps has the maps available offline unlike Google.

        You can get away with not downloading any apps on a Nokia smartphone because they come with a lot of apps by default. For instance, to use Twitter, Facebook, Office docs, BBC iPlayer I'd have to download apps on an iPhone but they're all there already on a Nokia. Similarly there's a lot of features built in to the phone which are apps on other platforms. eg. VoIP or ringtone/theme/profile customisation or DLNA media sharing.

        So, the Nokia idea of a smartphone and the iPhone/Android idea of a smartphone might not marry up in some people's minds but really they're just different.

      • asymco

        The data comes from IDC and their definition of a smartphone includes all Symbian devices.

  • Eric

    Maybe Nokia had the potential to succeed with their new Microsoft strategy if only they hadn't simultaneously announced the death of Symbian – now their future survival is looking very, very unlikely particularly as WP7 is quantifiably not popular with consumers.

    Elop may or may not have been right with the chosen strategy – a number of his comments used to justify the strategy have been proven to be lies – but without doubt his biggest mistake was the manner of the announcement, killing the cash cow with no immediate replacement. It's shows such breath taking incompetence that I even wonder if he was put up to it, perhaps by Ballmer suggesting that Symbian needed to be killed if Microsoft were to stand any chance and Elop bought it hook, line and sinker.

    It's simply not possible to argue that Elop is a competent CEO when he can drop such an almighty clanger.

    • Dave

      "a number of his comments used to justify the strategy have been proven to be lies" — what were his lies, I haven't been following this closely?

    • Sander van der Wal

      You need to consider the alternative: what would have happened if Nokia would have kept its move to Windows Mobile a secret until they had a smartphone ready for sale, all other things being equal.

      Given that Elop thinks that it is about ecosystems, Nokia's Symbian/Qt and MeeGo/Qt ecosystem would have been betrayed more than they have been betrayed now. Investments would have been bigger. Nokia would be shown as completely unreliable.

      And, the Windows Phone ecosystem would have been smaller, because it was Nokia's reputation that fueled the influx of new developers in Windows Phone. So the new phones would not have lots of apps to entice people.

      The current situations sucks, but the alternative is worse, imho.

      • http://twitter.com/aegisdesign @aegisdesign

        They didn't have to keep it secret.

        All they had to do was announce that Windows Phone was to run alongside Symbian/MeeGo and attract developers to both development tracks.

        They'd have a strong Symbian/MeeGo Qt track AND a strong Windows track.

        Everyone knew Symbian was on borrowed time so developers weren't really spending time on that anyway but they were spending time on Qt increasingly which meant there were apps for MeeGo being developed that were easily backported to Symbian. If they'd announced Qt for Windows Phone then it would be all good.

      • addicted44

        Actually, Nokia did announce this (that Symbian development will continue…however, they dropped Meego).

        The problem was not the announcement itself, but the "burning platform" memo that preceded it (and don't tell me it was supposed to be private…you don't send an email out to all employees of a company of the size of Nokia and expect the email to be private). Nothing could reverse the conviction that Nokia was indeed completely ditching Symbian after that cluster*ck of a message.

      • Davel

        I don't see how you pull this off. You switch to a third party OS, so Hopi have to announce it. Microsoft invested big dollars into Nokia. How do you keep this a secret?

        If you leave it in the open, you have 2 internal platforms and you add a major new one, how do you credibly explain how you pull it off? What is the strategy? You can't answer these questions without looking the fool.

      • Sander van der Wal

        No, announcing WinPhone and keeping Qt(Symbian/MeeGo) alive would not have worked either. Because Qt was the new developer platform, not Symbian and not MeeGo. This is where everybody keeps missing the point. Both Symbian and MeeGo woud have been invisible behind Qt. And invisible means irrelevant from the developer point of view.

        The problem with the Winphone announcement was that there would be no Qt on top of it. So Noka would have two competing platforms, one of which, WhinPhone, would be on the majority of devices. And the other, Qt, would be on the minority of devices.

        Now, which of these two platforms will be the developers preference? Answer: WinPhone, because of the bigger revenue potential.

        The only way for Nokia to prevent the current situation would have been to put Qt on top of WinPhone. But that would not have worked because there would be no way in hell Microsoft would have allowed that. And secondly, given Nokia's track record, it would have taken years to put Qt on WinPhone.

      • RichyS

        "All they had to do was announce that Windows Phone was to run alongside Symbian/MeeGo and attract developers to both development tracks. "

        But that's what Nokia did do.

      • asymco

        Not quite. They said they will make Windows Phone their only platform and "gradually" reduce their commitment to Symbian. They said they still expect to sell 150 million Symbian phones but followed up with a statement that all Symbian employees would be outsourced to Accenture. One analyst has already stated that he does not see more than 100 million Symbian shipping before it's all over. I find that number optimistic.

        The signal to developers, operators and distributors was that Symbian's days were numbered. Nokia assumed that consumers would be oblivious to the signal (stating that most people don't know what OS is on their phones). Unfortunately, the channel was not willing to make the same assumption and stopped ordering the product.

      • http://twitter.com/aegisdesign @aegisdesign

        Not on Feb 11th it wasn't. They announced the death of Symbian and MeeGo and that Windows was the "primary" smartphone platform with no bridge between the two.

        They backtracked somewhat later on Symbian but even with today's announcement of Belle (which looks great) and some semi decent handsets, everyone knows it's a dead end.

        The N9 announcement was similarly badly handled with the CEO himself leaking a video of their Windows product the day after. Surely not a mistake. The only difference there is there are enough geeks who passionately care about the platform that there's enough interest to at least make it a semi underground hit for people who don't get about a gazillion apps.

      • asymco

        Betraying Symbian/Qt at a later stage is not the only alternative. Nokia could have maintained a portfolio of platforms (as Samsung does now). Nokia went from being "religious" about Symbian in an exclusionary way to being "religious" about WP7.

      • EWPellegrino

        True enough, but then Nokia would likely have been left in the same situation as other WP7 licensees, with minimal ability to customize the experience.

        Jumping into the Icy Sea and committing completely to WP7 was perhaps suicide, but for Nokia being a commodity maker of WP7 and Android would have just been a slower death surely?

      • asymco

        I hope this won't come as a shock but Nokia has no ability to customize the code.

      • RichyS

        But they are more likely to have influence with Redmond, I suspect.

      • EWPellegrino

        The sea-ray phone that has been leaked appears to use virtual buttons rather than physical buttons which MS require as part of the spec. The reports are also that Nokia is using Ovi stores not Zune stores.

        There are lots of ways you can customize a platform without having code level access – lots of things that only the licensing agreement prevents – things like Moto using Skyhook.

      • http://twitter.com/aegisdesign @aegisdesign

        The later version of the leaked SeaRay hardware added the hardware buttons back.

        I would be very surprised if Nokia's level of customisation in Mango based handsets will amount to more than having bundled apps – A Nokia store, Nokia Maps app etc.

        There was some talk of Nokia adding in some of the N9's swipe gestures which seem to be appearing in Symbian Belle now also but we'll see.

      • Sander van der Wal

        I do not think that Nokia could have maintained a portfolio of platforms in this case, because none of their platforms would be big enough to attract developers in sufficient numbers.

        Consider, most money is being made on iPhone. Second best is Symbian (without Qt right now, but more Qt in the "future"). Android is third. WinPhone might be fourth or fifth before or after Bada.

        Standard C and Standard C++ code is portable between iOS, Android and Qt (/Symbian). Not so with WinPhone. With no code reuse between Qt and WinPhone code bases, why would anyone develop for WinPhone, while there are two better selling alternatives?

        No, it had to be a complete transition, strictly to attract enough developers.

      • handleym

        "Standard C and Standard C++ code is portable between iOS, Android and Qt (/Symbian)."

        I agree with the conclusion of your post, but this is a silly statement.

        First Android uses Java and iOS uses Objective C. They're all as similar as C# is to "Standard C and Standard C++".

        Second writing MOST of the code for MOST apps is not an issue of language, it is an issue of frameworks. The learning curve to go from one language to another is substantially smaller than the learning curve to go from one framework to another — and that's even apart from more subtle issues like the UX and visuals that users expect on each platform.

        Yes, if your app is, say, voice recognition, then the ability to port easily a large block of standard C code matters. But that is NOT the average app. The average app is something like a to do list app — the UI/UX/visuals is pretty much the entire app and porting the app is a question of understanding frameworks, not of understanding languages.

      • Sander van der Wal

        All other things being equal, platforms that support platform-independent code get more apps faster than platforms that do not support platform-independent code.

        iOS has no problem at all with Standard C/C++ code. There is no need to rewrite that code to Objective-C, just compile and/or link. For a bigger app (like an OpenGL game) that is a massive time and money saver.

        Android can also use Standard C/C++ with the native SDK. More troublesome to call C/C++ from within Java, but it still much less work than rewriting code.

        Apps that are little more than a bit of UI on a platform-provided engine, yes, those are not worth the effort to make portable. But there are plenty of apps that are worth that effort. Half of the apps are games, and games are very much the kind of apps that use very little of a platform's framework.

      • handleym

        Sander,have you ever actually WRITTEN professional code for a modern platform? Not toy programs for a CS101 class, but programs that behave like a Mac or Windows or iOS or Android program and that were sold? I have, and, I'm sorry, but I am right and you are wrong. The points you make are IRRELEVANT.The size of modern platforms (frameworks and APIs) is substantially larger than the size of modern languages; which means that the learning curve is in the platform not the language. Go speak to any professional programmer in this space and they will agree with me.

      • Sander van der Wal

        Yes. I have been writing software for Symbian for the last 12 years, and iPhone for the last 3. Professionally, running my own business.

        And I have no quarrel with the idea that platforms are much bigger, and take a lot of time to learn compared to a language. I have experienced that myself.

        But I do have a quarrel with the idea that existing code is worthless. Because rewriting a significant amount of code adds to the amount of time it takes to release a product in a competitive market.

        And as a business owner I would say that a professionally employed programmer has an interest in telling people that code needs to be rewritten all the time. So I am not that likely to take their word at face value. And as a business owner I would say that a professional free lance programmer has an interest in rewriting existing code too. So I am not likely to take their word at face value either.

      • http://twitter.com/aegisdesign @aegisdesign

        But that hasn't happened. The growth of Windows Phone developers hasn't accelerated.

        It's growing, apparently, even though sales of actual handsets have been going in the opposite direction. But there was no spike in ex-Symbian developers moving to Windows.

      • Sander van der Wal

        True. But that is most likely because there weren't that many Symbian-only programmers left. I suspect most of them were already also iOS and/or Android programmers 2 years before the announcement.

        And for iOS and Android programmers there is a lot of opportunity costs involved in supporting WinPhone. Better wait until that platform becomes successful.

    • Kevin

      Sorry but you are putting 2+ 2 and getting 5. Big fan of Symbian, but what you paint was never reality.

      Symbian demise was mostly lack of execution and shortish vs long term ie doing what was right for the business in the very near term.
      This meant operators were just not touching the phones, except the very low end. Which meant the marketing mix was way off.

      Elop was left with few choices.

      • Bob

        Obviously Symbian sales were much better right up until the announcement – look at the charts above.

        The one thing that hastened the demise of Symbian was the announcement on Feb11, and Elop then had to backtrack a week or so later confirming that Symbian wasn't actually dead but would be supported until 2016. He killed Symbian on Feb11, and only realised his mistake a week or two later with a failed attempt to resurrect it, by which time it was too late.

        Potential buyers, and more importantly operators, took him at his first word and switched to another platform. Genius move by the CEO. Perhaps if he'd thought ahead, and been less critical of Symbian in the first place then Nokia wouldn't be in the even worse mess it is now.

        I'm not arguing that Symbian is the right choice for Nokia, just stating what we all know which is that Elop made a catastrophic error when he announced the new strategy. Either he's a complete fool, or someone else is pulling his strings – someone who dearly wanted it to be announced that Symbian had been killed, even if it was premature.

    • Kev

      HP has done a similar thing by discontinuing their PC business without another revenue generator in its place. I don't see how the CEO can't see how stupid that is.

  • http://twitter.com/aegisdesign @aegisdesign

    It's ironic that Nokia are actually getting out good software these days. Symbian Anna was out last week, Betalabs releasing some great software, Belle due in less than 48 hours, Harmattan getting great reviews and developer support, Qt maturing nicely.

    But Nokia are after filling that 5m a quarter hole of their own making in their European units with Windows which barely sells 2m worldwide.

    • pvt_zim

      the odds are definitely against the microsoft – nokia combo but i would not count them out. microsoft managed to crack the console market. and part of that success is that they did something similar to what apple is doing now: they built / are bulding an on-line ecosystem around the xbox that sony is still playing catch up with. if they find a way to do something similar with wp7 i think there is a chance they can pull off getting on the map in the smartphone space.

      of course that may require buying nokia to verticalize but hey, they can now do that at a discounted price. (reflecting on Eric's comment above it may have been their plan in the first place. i have to admit that i'm a sucker for conspiracy theories :P) they may also convince themselves that there's a lot more money to be made from an ecosystem completely under their control and give up their age-old licensing business model. you never know with excel pivot table decision making :) they certainly have some building blocks even if i have to acknowledge that 1 + 1 does not equal 2 in the m&a business.

      here's a bit of insight into how the xbox came to be:
      http://www.vg247.com/2011/08/02/the-xbox-story-pa
      http://www.vg247.com/2011/08/03/the-xbox-story-pa
      http://www.vg247.com/2011/08/04/the-xbox-story-pa
      http://www.vg247.com/2011/08/05/the-xbox-story-pa

      the point i wanted to make with these articles is that there definitely are smart people at microsoft who may be able to pull off something like this against microsoft's management. (my pet theory is that in a lot of companies value is being created in the trenches in some cases against management strategy or the lack of it. it's not every company that is on a 20 year plan as apple as mentioned in one of the comments threads here.)

      edited for grammar.

      • pvt_zim

        this just came in while i was writing my post:

        Free WP7 Apps vs. Free Android Apps
        http://wp7designcorner.blogspot.com/2011/08/free-

      • addicted44

        Really, all those numbers say ($14, vs. $1) is that either the app isn't really worth much, or neither platform is worth developing for (I think its the former).

      • EWPellegrino

        Consoles are a very different business though, and MS were effectively able to buy it by selling Consoles at a loss for years and by buying up rights to games and making them XBox exclusive.

        In phones MS isn't making the hardware, so it can't sell at a loss and there's no single App that would make people switch platforms, not even Angry Birds.

        WP has an awful lot against it, it has bad branding, it has Bing dragging it down and it is up against two extremely effective competitors.

      • pvt_zim

        true, i agree that consoles are a different business but that's kind of my point. it was a different business for microsoft as well but they managed to establish a foothold there. i am not saying that the recepie is the same. and they may fail like they did with zune. but i see a chance that they can pull it off. more so if we consider tablets. it looks like apple phisically can't make enough of them to meet demand. there's money to be had there which i'm sure microsoft would like to have a piece of. microsoft sw + nokia hw + xbox live like indie ecosystem + skype & xbox integration. looks good on paper to me. not really innovation, more like grind. but microsoft can grind.

      • EWPellegrino

        FIrst off MS won't be entering the tablet market until they release Windows 8, which is currently expected around Q3 2012. By then Apple will probably be on the iPad-3, possibly iOS-6 and most likely able to ship considerably more iPads per quarter than it currently is.

        WP7 is purely a phone platform, and it lives and dies the way all phone platforms do – with carrier interest. So far carriers are pretty uninterested, and it's hard to see exactly what Nokia is going to bring to the equation that HTC and Samsung didn't.

      • Hamranhansenhansen

        XBox is just a Windows PC rigged for use with a TV and game controller. It leverages the DirectX from Windows.

        The equivalent smartphone is not Windows Phone 7, it would be what Microsoft has announced as Windows 8. So when Windows 8 ships, that will be the START of Microsoft’s XBox-like mobile strategy.

        Windows Phone 7 already failed. They already said it will be replaced by the real Windows from the desktop.

      • CndnRschr

        Shhh, we are still counting on Nokia not realizing that WP7 is a Hail Mary stop gap (it's also that is teaching us what not to do). And we are even fooling a bunch of disconsolate WebOS devs with promises of future riches too. Not to mention the HTC guys are running scared over Googles love-in with Moto. Just zip it!

        Eight, eight, eight!!

        Thanks,

        Steve Ballmer

        P.S. What do you reckon I can get away with putting in a low ball bid to Apotheker for HP's PC business? I'm thinking 100 million* plus a free WinPhone 7 for everyone the C-suite. And a Zune HD.

        * Yen, that is (snicker)

      • addicted44

        I don't see how XBox is considered such a huge success…

        1) It is WAY behind the marketshare leader (Nintendo Wii)
        2) It is not all that far ahead of Sonys PS3, despite the later start, and higher cost of the PS3 (its fair to say that Sony blew this, because of their insistence on including Blu-Ray, which made the device prohibitively expensive, and slow to roll out).
        3) Over the lifetime of the XBox 360, MS has LOST money (they have shown profits only for a few quarters, but that has largely been because many costs, such as the $2Bn write down due to the RROD issue were attributed to other divisions).

        I would agree that the Kinect is a huge success, but I would hardly extrapolate the success of a single accessory to representing success in the entire console space.

      • Dave

        Xbox was a hit because microsoft ran it as a loss leader for years. They wanted in.

        They bought a lot of studios and produced good content. The live thing came later. Also the last generation was due to the market leader screwing up. They were late, they relied on hardware ( blue ray ) that was not ready, so by the time they hit the market Microsoft was selling for a year and a half. The games were second gen. Plus the reports were that sony's dev environment was harder to work with. Oh yeah and they were more expensive.

      • Davel

        This is davel not Dave

      • handleym

        I'm not sure I'm convinced by the XBox analogy. Presumably the ultimate goal here is to make money, not to "win" by having maximum marketshare, or highest number of fanbois or whatever.

        XBox turns a profit now, yes, but hasn't yet covered it's earlier losses. Will it ever do so? This is not clear to me. I'm not a gamer and don't follow that market, but the impression I get is that the low-end gamer market has all switched to games on their phones/tablets, while the high-end gamer market prefers monster computers with 8 processors and dual high-end GPUs. MS COULD introduce a new XBox that is so compelling both high and low gamers have to have it, or they could create something truly compelling with Kinect, but both of those seem like long shots to me.

      • EWPellegrino

        In MS' case the goal is not to win so much as to not lose. They feared that consoles could end up the dominant platform in the living room and that they could end up substituting for windows so they had to get into consolse. They feared the browser so we got IE. They fear the same thing about smartphones, so they had to get into smartphones.

        If MS could get huge market-share in smartphones, even with no profits, it would happily do so as it would help them sure up their desktop dominance. It would help them with search, it would help them with browsers and then there's all the little cross platform incompatibility issues that they are the masters of.

        In the same way that MS refuses to give up on Bing and refuses to standardize IE we can expact MS to keep spending money on mobile long after it's clear to everybody else that they've no chance whatsoever.

  • kwyjibo

    It's not Nokia against Android. It's WP7 against Android – Nokia has relegated itself to merely being another manufacturer, and it's backing the wrong horse to boot.

    • asymco

      The title refers to the situation at present. In the future, Nokia will be a proxy for WP7 but that may not be for six to nine months. In the mean time they face a seriously deteriorating market position and any recovery will have to come from a far lower base than I think they or Microsoft expected.

  • gctwnl

    The last graph probably also illustrates nicely why Samsung is Apple's target in the legal proceedings in Europe. Samsung has grown very, very fast with their Android offering and have surpassed Apple as the #1. If history is any guide, the iPhone5 might provide another yearly 'bump' for Apple, but still, Samsung is getting the best results from Android (for so far it is representative: they also advertise heavily, much more than HTC, in The Netherlands, that might help as well).

    • CndnRschr

      Samsung is not matching their handset sales success over Apple with profit performance. Nor is Samsung marketing a single model. I think Apple is going after Samsung not because of its "dominance" but because it truly thinks that Samsung has strayed too close to plagiarizing Apple products. Apple is so confident in its own business plan that it thinks that the main competition to be worried about is "copy-tition".

      • Davel

        Samsung is big enough not to make those profits for a while if they can get share. They are still making money. And who cares if it is one model vs ten?

        If the consumer thinks samsung is a premium phone as good as any on the market and they can choose the features they want samsung will win.

        Apple needs to defend it's turf. They may not win in the courts but they need to make it painful so these guys think about if it is worth it to copy apple.

  • Kristian

    This is units sold. The worst picture comes from the revenue and proft share. Apple takes the most of the money and profits. Apple hasn't yet entered fully in the market with cheaper iPhones. Their focus has been in the high end. Soon they will take focus on the 'middle class' and then the real competition starts. Remember that the Apple has the manufacturing problem. They can't produce iPhones that speed that they would like to yet and meet the demand. They also has to make contracts with every single operator in the world. They still don't have the biggest operator in China. All other mobile phone manufacturers has these contracts. If I remember right Apple has something like 230 operators so they are in the half way at the moment. Others should be worried.

    • Hossein

      While profit matters, I disagree with you. At this point, we are observing a "platform war" in the smartphone world. The best scenario would be coming out as the #1 platform and doing so profitably, but if that is not possible, high profit margins will get the second seat to gaining market share.

      Once the dust settles (saturation point) it would be very difficult to change the market share values. Then the winner would have as much time as it likes to "harvest" make money from the "acquired land." As an example, see how difficult it is for Apple to make a dent in the PC OS market share, even with its (truly) superior product.

      • asymco

        The idea that smartphone share is hard to displace has been something I used to also believe (around 2004 when I began modeling the market.) However I've been proven wrong. We've seen a tremendous amount of churn in mobile platforms since then. Not just Symbian but Palm and Blackberry and Windows Mobile have seen tens of millions of users switch out of their platforms. Given current trends I believe over 400 million smartphone users will have switched platforms by 2013.

        There is a distinct lack of stickiness about mobile platforms vs. PC platforms (with iPhone perhaps a notable exception–though it's still early.)

        One reason is the limited investment in learning, data and applications for each platform. The second reason is the rapid product cycle which obsoletes quickly. The third is the rapid replacement cycle where phones last between 18 and 24 months, far less than what a PC is hired for.

      • Hossein

        Displacements in smartphone market are frequent now because it is not a mature market yet. I guess game consoles share some of the characteristics of smartphones that you mentioned. But it takes a much longer time for one platform to significantly displace another one. Why is that? (I believe because that is a mature market that has been saturated, meaning that most game players have already bought a console).

      • handleym

        Hossein, you miss a significant point.
        A company that makes little to negative profit per device sold is not in a position to dramatically improve that device. Let's talk hardware because software operates on somewhat different rules.

        In the PC space this did not matter much in the past, because component suppliers (Intel, Seagate, Micron etc) did all the research. In phones (and even in laptops now) it DOES matter. Consider laptops. Apple has spend what, four years perfecting how it builds unibody devices. They had cash, which they used to perfect their manufacturing; they had the vision and common sense to try to use the same manufacturing techniques across most of the line, from iPhones to iPads to MacBook Airs to iMacs and Mac Minis. The competition has been fretting about how save a dollar — and now finds itself simply UNABLE to manufacture "Ultrabooks" of Apple quality at Apple price points.

        It seems likely that the same will play out in phones — it's already played out in tablets. To hit Apple prices TODAY, manufacturers have to skimp on things like the quality of the battery, or the camera, or the speaker. This will only get worse, not better, if the manufacturers eat their seed corn by selling at no profit, desperate to gain market share, and then find themselves, at Apple's next refresh, unable to compete at the hardware level.

      • Hossein

        True if a manufacturer does not make ANY profit. I don't find that Samsung is loosing money in their Smartphone venture. Their profit margins are not close to those of Apple, but they are making money. I would also understand why they would be willing to *reduce* (not eliminate) profit to gain market share at this point.

        Unfortunately, I do not have any data on game console market share evolution. I suspect that would make a very interesting asymco post.

      • asymco

        Let's not forget that game consoles are 20+ years old and that they went through at least seven generations each of which took years. Smartphones is a young sector. As long as it's immature it will take unpredictable turns. How long before it matures? I'm suggesting another half decade at least. Only then can we talk about "holding land" and turn the discussion to a zero sum game.

      • http://twitter.com/aegisdesign @aegisdesign

        More like 30+ and the entire market crashed at least once after the Atari VCS / Colecovision/ Intellivision era, disrupted first by home computers and then by PCs.

  • poke

    As always it's important to remember that there's more to selling phones than just making phones people want to buy, since the carriers exist as gatekeepers. No doubt Samsung has positioned itself as the de facto replacement for Nokia among European carriers. Who knows what kind of negotiations are going on behind the scenes? It seems clear that European carriers have lost faith in Nokia and Samsung has been the main benefactor.

    • http://twitter.com/aegisdesign @aegisdesign

      There's quite a bit of rebranding of ZTE phones too.

    • John

      In Europe, the carriers do not have such a strong position as in US. It is common to buy phones off contract. Heck, my carrier (O2) does not even offer phones on contract, you bring your own, buy one for full price or get a separate payment plan for the phone.

      • EWPellegrino

        O2 certainly offer post-pay phones in the UK, Germany, Republic of Ireland and Czech Republic. Maybe they don't in Slovakia, but that's not really indicative of the sales channel of Europe in general.

      • http://twitter.com/aegisdesign @aegisdesign

        That's not common in the UK at least where nearly everyone is on slightly subsidised PAYG handsets that are locked to a carrier or massively subsidised handsets on a contract.

        You can buy unlocked SIM-free handsets here but it's not common and is only of minor benefit in the long term over the price of a free handset + expensive contract.

  • Omar Grant

    I'm not surprised Nokia has given up the market to Apple, look who they are partnered with now. Its that prevalent mentality that Microsoft's business strategy is a good one that has cost Nokia its position in the market. It will also be that same assumption that will eventually push down everyone else and help to elevate Apple. If you're not in the market to innovate and make high quality compelling products, I just don't see Apple's competitors moving forward vertically.

  • CndnRschr

    Horace's thesis from these data is that Nokia gave share up to Android, not Apple.

    Apple isn't stupid enough to underestimate Microsoft. It isn't scared of them either (or Google).

  • CndnRschr

    It seems that Elop and Apotheker went to the same business school. The one that teaches you should let your customers know your plans before your own staff. Another rule being that you do not need to have thought about what you are going to do after the announcement, it’s only the announcement that counts. The third rule is that it is better to ad-lib during a question period with analysts than practice answers to obvious questions and even better to provide three incompatible and incoherent answers than one. Lastly, it always helps to describe your current efforts and assets in terms of disaster phraseology such as "burning platform". The tuition rate at this school must have been pretty low….

    • Omar Grant

      Heh, that sounds pretty harsh.

      • CndnRschr

        So was the stock market on the HP news (shares down 20% – over $10 billion in value). A fifth rule: have an employee leak your earnings before the markets close so you have to come clean while shares are trading. Oh, and do this two quarters in a row in case people think it was unsanctioned and said employee had been identified and fired.

    • Davel

      The hp CEO sounds like an ass. To not have the courtesy to tell the guy that we are getting rid of the division shows who he is. No one in the company will trust him.

      He is betting the company that he can do what IBM did. I wonder. He may be killing an iconic American company

  • Davel

    Who is other in these charts? Are the Chinese no name phones taking share?

  • http://twitter.com/JanCifra @JanCifra

    I think an interesting perspective on the decline of Nokia is one of ecosystems. A number of pundits, executives and industry observers have predicted that there would be space for 3-5 ecosystems in the mobil phone market. Based on what we are seeing – that is not true. The market share reallocation seems to point to a 2 player game and that may have strong ramifications for Microsoft. If they want to be a player in the market they have to drive a strong wedge into this chart with a strong product launch of a Nokia WP7 smartphone that will bring developers and consumers on board. With every day passing Android and iOS move forward while the WP7 ecosystems suffers the lack of a flagship solid product supported by a major player. MS is running out of time and without a strong launch of the mentioned phone will soon face a choice similar to that of HP and WebOS.

    • davel

      There are already a number of Win 7 phones, but apparently no one cares. I do not know what the problem is but microsoft and its partners need to figure something out soon.

      • asymco

        The problem is that Microsoft has not kicked off its marketing and promotion campaign. The budget is assumed to be above $1 billion (but less than $2 billion). They are waiting for Nokia's phones to launch whereby they will open their wallet. The strategy at Microsoft is that after you build the API, you build the software, then you recruit partners then you buy share. They were going to do the share buying last fall but they decided to hold off because Nokia was in negotiations. They did not want to spend the money on the initial launch partners because they were not committed enough (and partly because the software was not good enough.) LG was very disappointed with this and said so publicly.

      • http://twitter.com/aegisdesign @aegisdesign

        I don't know about your local TV and media but it was wall to wall Microsoft Windows Phone adverts in the UK last Christmas with the WP7 launch, easily more than HTC or Samsung. People still didn't buy them.

        People equate Windows with PAIN and WORK on desktops and even more so on mobiles. Sticking that branding on a phone is a boat anchor.

      • selforganisingmind

        Absolutely correct. MSFT spent half a billion USD on the initial worldwide WP7 campaign and the US+UK at least were absolutely plastered with (god-awful) ads. When you see the end result – most observers will agree that less than 1.5m WP7 devices were sold in the launch quarter to end-users – that means the marketing spend exceeded the cost of goods sold for every WP7 device sold at launch. This truly pathetic outcome may be seen only as a minor phenomenon, but is truly emblematic of Microsoft's misunderstanding of the consumer market.

        I concocted three key arguments as to why Microsoft will continue to fail in a straight line to zero in smartphones. You could think of at least several thousand more reasons, but three sounds like a nice round number.

        See the next three posts…

      • selforganisingmind

        1. The Microsoft Windows brand is an unsurmountable liability. Ask the average consumer how willing he is to buy a car powered by Microsoft Windows software. How often do you see "smart" vending machines, such as airport boarding pass machines, or, even worse, train time displays in bluescreen mode? What does this do for the image of "powered by MS"? How much infuriating time does the average consumer spend rebooting his PC at work or at home? Vista was such a mass-market eye-opener of MSFT's demise there is no way back, not in this time-space. MSFT and Windows will hold on by being the de-facto corporate standard (or, rather, monopoly) for I don't know how long due to the inherent inertia of CTOs and the love of buggy unstable systems by IT departments for obvious (job-preserving) reasons that the understandably incompetent top management can't ever overrule, but in the consumer market MSFT/Windows is dead meat, period. The success of the iPad is living proof of this thesis. Consumers are thrilled to jump ship from the expensive, time-consuming, unreliable WIntel stranglehold.

      • selforganisingmind

        2. The "incremental utility function" (defined as the incremental degree of utility such as innovation, features, price, availability… vs existing platforms) of WP7 is zero at best and probably in negative territory. The iPhone was successful because it brought, let's face it, ease of use, full browsing (not that crapo wap that we had before), fun and utility (apps) into the hands of consumers, with an immersive touch UI – that was quite a fair bit for incremental utility function, right? (in addition, carriers could at long last market those data plans they had built their 3G networks for). Then Android, in early stages at least only a knock-off of the iPhone, simply brought the very same features to a wider market (non-iPhone carriers, non-Apple manufacturers, Apple-averse consumers all rightfully cheered) – clear incremental utility for Android, no question about it. But WP7? It is good for what, who, where? Okay so it doesn't have the silly rounded square virtual button-icons that Android knocked off Apple but coloured (incredibly annoying widgety) tiles instead, whoaaa. I mean, seriously. Incremental utility, please, or you are DOA.

      • selforganisingmind

        3. The fundamental idea behind WP7, that is also starting to transpire at Nokia (see Chief Designer's WSJ interview yesterday), is Uber-bonkers. If I understood it well, by being the exact opposite of the deeply immersive iOS and Android UIs, WP7 will be soooo boring you will keep your phone in your pocket or bag. And so, unlike poor iOS/Android users who routinely drop their phones in urinals (oh dear that ad agency deserves to die a slow and painful death) or get run over by trains or whatever because they are staring at their phones so much, unlike all that misery that comes with an immersive UI, WP7 will deliver pure and absolute boredom in a plastic tin. The degree of way-off-the-idiocy-charts (yes Horace even in log scale) of this marketing message is fascinating beyond belief.

        One word:

        REALLY????

  • Omar Grant

    Just curious, with relation to the companies like Microsoft pushing forward windows phone 7 under Nokia’s banner. Where is Nokia’s strategy with iTunes in comparison?

    I think you need more than just the phone itself, an ecosystem is necessary, some kind of media portal ala iTunes and the app store is the big draw.

    I don’t see this kind of strategy to combat the iPhones media ecosystem.

    • EWPellegrino

      I believe that Nokia is being reported as going with their own Ovi music store rather than the Zune store. Increasingly 3rd parties like Spotify and Hulu do offer media portals, so the lack of an integrated system like iTunes may not be a deal breaker.

      Though it's definitely not doing them any favours.

      • http://twitter.com/aegisdesign @aegisdesign

        I can't see them sticking with Ovi Music.

        Elop said the switch was all about joining another ecosystem because they couldn't execute their own. Switching out the OS but keeping the same lack lustre services isn't going to fly.