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How Samsung beat Nokia

Nokia currently estimates that Devices & Services net sales in the first quarter 2012 were EUR 4.2 billion, comprised of Mobile Phones net sales of EUR 2.3 billion (71 million units), Smart Devices net sales of EUR 1.7 billion (12 million units),

via Nokia lowers Devices & Services first quarter 2012 outlook and provides second quarter 2012 outlook » Nokia – Press.

We don’t have the total number of Samsung shipments, however estimates exist. They range between 41 and 44 million smartphones and 44 and 47 million feature phones. The low end of that range would imply Samsung shipped 85 million phones.

Nokia’s press release indicates that it shipped 83 million.

This would be the first quarter that Samsung beat Nokia in total phone shipments. It had already overtaken Nokia in sales volume and profitability last year but this is the most cited metric of market performance: being the biggest in volume. Here is the tale of the shipments:

How did this happen?

The answer should become visible when we look at at another set of data. If we split the smartphones from feature phones the charts look like this:

Looking at product mix, Samsung growth is shown to be almost entirely due to smartphones while Nokia’s stagnant growth seems to be a failure to have any smartphone traction.

It’s even more clear when showing the above mixes of devices as percents of total.

As a percent of total, Nokia has shrunk its smartphone business from a peak of 24% in Q3 2010 to 14% last quarter. In the same time frame Samsung’s smartphone share of portfolio has exploded from 10% to nearly 50%.

Note that both companies have seen non-smart device volumes contracting. Samsung’s level is approximately the same as it had in late 2007 and Nokia’s is lower than at any point in the last six years (perhaps longer).

So the answer to the question of how Samsung beat Nokia is told in the following chart:

Samsung was able to convert its portfolio to smartphones while Nokia failed to do so. This is the sort of transition that can only come about from an explicit strategic intention on the part of management. Market demand can steer you in any number of directions, but a vision of a future should provide the compass for making the big bets.

The bet Nokia made many years ago was that there would be a continuing, substantial business in the “low end”. And low end meant feature phones. This strategy was still in evidence last year under the moniker “the next billion” users. The decisions were not driven by whether the products would be hired for different jobs, but that they would hit different price points. In other words, segmentation of customers by their ability to pay for devices rather than categorization of the jobs they hired mobile devices to do.

Perhaps Samsung was no wiser, but they were more pragmatic. Being non-dogmatic meant being flexible. They ran with off-the-shelf technologies and managed a transition to smart devices faster than anyone expected. It may not be a perfect strategy but it beat a bad strategy.

  • UncleAlbert2

    I wonder what happened in Q1 2011, as that seems to be when the Nokia smartphone collapse began and has continued ever since (apart from a slight uptick in Q4/2011 thanks to the release of the N9).

    I would still maintain that had Nokia continued with MeeGo as the upgrade for Symbian users, even if it was alongside Windows Phone, they wouldn’t be in the mess they’re in now, where they are desperately trying to create an ecosystem that isn’t even theirs – others will benefit if Nokia can make any success out of Windows Phone, which isn’t looking particularly likely.

    Nokia needed to change – improve, become more efficient, more flexible – but the changes that have been made under Elop have been nothing but disastrous, particularly as the company did have a potentially winning (MeeGo/Maemo plus Qt and Symbian Belle plus Qt) solution on its hands.

    • JL8490

      Q1 2011 was “The Burning Platforms” memo by Elop, basically telling loyal Symbian users and developers that their devices and software were not only end of life, but also bad products.

      The especially disastrous fact was that this was 10 months before the first Lumia devices (710/800) shipped. Toni Ahonen named this combination of Osbourne Effect and Ratner Effect, “The Elop Effect”.

      • UncleAlbert2

         I know, I was being facetious.

        It has all been really frustrating and disgraceful, particularly as Nokia had just about gotten to the point where they had a pretty solid software strategy in place based on Qt as *the* platform (Symbian Belle and MeeGo-Harmattan – both running Qt – make for very usable devices), only for Microsoft to come along and get their former employee to pour petrol on the whole lot and set light to it.

        Now he is talking about selling assets (eg. patents? feature phone business?) to keep the Windows Phone dream alive. I wonder who he will sell those assets to – let me guess, Microsoft? Surely Google would be interested, and would pay a lot more than Microsoft.

      • oriorda

        I think Elop now needs to bring Del Boy into the negotiations. Trotter International Traders is a one stop shop for marketing ideas that make an impact from Peckham to Peking. Know what I mean?

      • APai

         qt/ meego/ symbian/ meltemi/ tizen are all interchangeable or can form a solid platform or had the making of a stable and viable platform – one big ecosystem that developers could target to effectively. symbian could have been given a decent end of life with meego as the way forward. in the one year that has gone by – they could have pushed n9/ n950 and simultaneously pumped ALL efforts towards meego. but no, the trojan just destroys a viable fantastic ecosystem in favour of his boss who has the killswitch to his brain. 

      • Svdwal

        Nokia had the Qt strategy in place since they bought TrollTech in early 2008. The problem was that they did not implement that strategy properly.

        An example: there has been the strategically very bad idea to put two different User Interface API’s on top of Qt, one for for Maemo and another one for Symbian. This would have made source code compatibility, the strategic reason to buy Qt in the first place, dead in the water. Rick Green came in a year later and killed this idea, but then they had wasted a year at a time when developers were flocking to iOS and Android.

        And this has been documented in Business Week, MeeGo was not going to be finished in time to stave of Apple and Android. That was one part of the burning platform, the other PART being IMHO Symbian/Qt not getting any kind of traction among developers. 

      • UncleAlbert2

        Nokia had Qt in 2008, but it took a good couple of years to add the mobility extensions to Qt to make it usable on the Symbian and MeeGo mobile operating systems and to update those operating systems to support Qt. Nokia did not buy Qt in a state that was suitable for mobile, they had to build it (and still are building it), but that took 2 years and just as it was ready for prime time they were literally paid off to dump it along with Symbian and MeeGo – all for WP, which doesn’t support Qt. Mindless.

        Bear in mind also that Nokia always had Maemo6 ready to go (aka MeeGo-Harmattan) which is (was) API compatible with MeeGo “proper” – so even if the real MeeGo wasn’t yet ready for prime time, Nokia still had “Plan B” which was Maemo6 that could be replaced like-for-like with true MeeGo when it was ready.

        As for Symbian/Qt not getting traction – that’s simply not the case, and would have benefited from the MeeGo/Qt devices. At the end of the day, the platform would have been Qt, not Symbian or MeeGo or whatever, and (in theory, and usually in practice) applications developed for the Qt platform would have been easily portable from one OS to another (from MeeGo to Symbian and vice versa).

        But getting Nokia to kill off MeeGo was an absolutely inspired move by Microsoft, and all it took was a billion dollars. Once that happened, the strategy fell like a house of cards.

        Eventually Nokia will pay the full price for their lack of vision and backbone.

      • Svdwal

        At the end of 2008, at their Developer conference in Budapest, Nokia started telling developers that they should port to Qt now. At that time Qt was not usable because it had memory leaks and you had to pay for a license to use it, or GPL your own source code. Using Symbian/Avkon/S60 was of course free, and there was no requirement to Open Source your code.

        Both these and other issues were fixed later, the licensing a couple of months later by introducing the LGPL.

        Nokia also kept peddling Qt to developers at all kinds of developer conferences, both their own, and others, like one hosted by Joel Spolski (of JoelOnSoftware fame) in Amsterdam, which was very much not about mobile software at all.

        But progress was very slow. Porting might have worked, but everything else required for a Qt app to be sellable in an App Store, even Nokia’s own Ovi Store just did not happen either, or at a pace that would bore the pants of a glacier. 

        Then there was the two different UI’s for Maemo and Symbian, with incompatible API’s at the source level, introducing the issues that Qt was bought for to prevent in the first place. This was introduced autumn 2009 and killed of a year later with Rick Green coming to Nokia at the same time as Elop. 

        All these things kept lots of people off porting their apps to Qt. Each and every time Nokia said they were ready, there appeared another problem preventing people to sell Qt apps. So people waited. And waited. And waited some more. All in all some three years. 

        During that time it became clear that developers on iOS were staring to make serous kinds of money, at least compared to what mobile developers were used to. So they moved.

        By the time Nokia finally got its Qt act together, Elop wrote the “Burning Platform” memo. Three years of quick promises and slow delivery had resulted in very little traction.

        So as far as I could see, they had the strategy. It was just very badly implemented: too slow, not understanding the needs of developers, company turf wars, management not understanding software.

      • aftoy

        Can you imagine the high fives at MSFT when Elop parachuted into NOK. Only problem is, the trojan opened his mouth much like the Osbourne/Ratner effect and eviscerated NOK. They had the plan but the execution was amateurish. The only chance for WP7 and they shoot themselves in the foot. After the KIN debacle this doesn’t surprise me. Jaws may be dropping at MSFT in 6-9 months.

      • Walt French

        Never works out well to eviscerate a business partner. People remember. 

        And Microsoft needs all the champions it can get; no benefit if Nokia wakes up dead one morning and WP8 has nobody—which is about the level of support that LG, HTC, ??? give to WP7 today.

      • APai

         “I would still maintain that had Nokia continued with MeeGo as the
        upgrade for Symbian users, even if it was alongside Windows Phone, they
        wouldn’t be in the mess they’re in now”

        spot on

  • http://twitter.com/bergie Henri Bergius

     It would be interesting to see Nokia’s Maemo and MeeGo phones also in then portfolio mix. But I’m not sure if the numbers are available.

  • http://twitter.com/DigitalPoss DigitalPossibilities

    This is very interesting, but maybe the more interesting comparison and question is how did Samsung beat HTC?

    • http://twitter.com/JimDis Jim D

      Indeed! And also other Android handset makers. Sony Ericsson saw the writing on the wall and made a remarkably quick transition to 100% smartphones based on Android but failed to gain any significant market share or profit. What is it about Samsung? Is it the marketing? The distribution channels? The trusted brand name? Superior hardware? The cooperation with Google? Or is it simply that they basically copied the iPhone aesthetic early on?
      Everyone I know and almost everyone I see in the streets of Stockholm
      has either the iPhone or a Samsung look-alike. It’s almost as if everybody wants an iPhone but people who don’t like/trust Apple buy the Samsung galaxy..

      • kankerot

        What a load of rubbish in that people buy Samsung due to a negative consequence of the Iphone.

        “Everybody wants an Iphone” – yes that is the opinion of the year right there.

      • APai

         nobody wants an iphone in India – due to its inflexibility and pricing over the top. value wise samsung with android has replaced or going to kick nokia big time. also, the strength of android is that you get a handset for almost ANY pricepoint with loads of options. there are compromises to be made – but then you get what you pay for.

      • http://twitter.com/handleym99 Maynard Handley

        “nobody wants an iphone in India – due to its inflexibility and pricing over the top”

        Well you’re entitled to your opinion. But I have shipped from the US, what, maybe three unlocked iPhones and five iPads (some iPad1, some iPad2) to friends in Thailand, who wanted them before Apple was selling them in Thailand…

      • APai

        “Well you’re entitled to your opinion. But I have shipped from the…”
        dude, you should come to India to see like only 1% or lesser people having an iphone. you may ship any number of iphones, but that’s a drop in the ocean. individual buyers come with an iphone from US all the time, but it still cannot match the sales from retail outlets.

        I do not think you understood the context well enough. When i said “nobody wants an iphone…” I meant that in context to the overall market.

        of course iphone/ ipad sells in large numbers in india via grey channel, but it simply cannot match the retail channel sales for other phones. iphones through official channels are pathetic. airtel/ vodafone have priced it out of reach – it costs something like $900 for the 4s 16gb!!! and $750 for the iphone 4 8gb

      • Asd

        No,I bought galaxy phone(SGS2) because i wanted a galaxy phone(SGS2)..

      • Dennis Forbes

        Ignoring the laughable notion that people only choose alternatives because they’re Apple haters, the success of Samsung is a success of excellent products: They come out with competitive devices with contemporary software, and get rewarded well for it. Compare it with Sony (Ericsson) — they consistently release *new* devices with year old+ operating system variants (with a horrifying upgrade history that puts doubt on their “coming soon” disclaimers). Their Playstation Android phone came out with a chipset that was obsolete a year earlier. LG is a virtual repeat of SE’s problems — again treating software like some last minute optional addition. They rightly suffer because of it.

        Even Motorola was guilty of this. Each new Droid was hotly anticipated, but then it would come out with the last major version and the balloon deflates.

        HTC has done a great job on the software side, but they had a bit of a drought, not least because of their firm commitment to Snapdragon processors that fell behind for a while (compare with Samsung who is open to using everything. They have LCD and AMOLED devices. OMAP and Tegra and Exynos devices. Etc). If you’re in the market for a handset and like the look and features of Android, there just hasn’t been anything from HTC in six months that was very competitive.I’ve jumped between makers with ease. Right now I’m enjoying my Android 4.0 GS II, after having a Nexus One before that (and a G1 and a Magic+ before that) and in about a week I’ll take possession of a new HTC One X. Shortly after that Samsung will unveil the almost certainly awesome GS III, but I doubt it will take much shine off the One X. HTC is back.

      • Anamika

         Price points. You get an Android from $150+

    • OgilvyTheAstronomer

      Jonny Ive’s designs, obviously :)

  • http://kaizenity.blogspot.com/ FalKirk

    “The bet Nokia made many years ago was that there would be a continuing, substantial business in the ‘low end’.”

    I read comments THIS MONTH in which people who tried to tell me that Nokia was going to be just fine because of Nokia’s extensive distribution channels and Nokia’s long reach into third world countries. Good luck, Nokia, with your strategy of selling low-end, no-magin, no-profit phones. Oh, but you’ll be okay without making any profit on each phone sold because you’ll make it up in volume!

    Others said that Nokia would be just fine because of their sterling brand. A brand is not some magic talisman you wave around to create sales. It is the embodiment of the good will that you have built and accumulated with your customers. Betray your customer’s trust and your brand will seemingly go from magic to tragic in the blink of an eye.

    On the other end of the spectrum, can we please, please stop hearing from analysts and pundits alike that Apple has to sell a low cost phone or die? It’s called “capitalism”, not “marketsharism” and the goal is to generate capital (“wealth in the form of money or other assets”) not market share. Market share is only important when it is a multiplier of margins. If you have no margins, no amount of market share will help.

    • APai

      ” Nokia’s long reach into third world countries.”
      It’s really funny to hear that. people in third world have ditched nokia full scale – because there are so many options which give more features for cheap (albeit with rock bottom quality). by the time these people realize they had enough of cheap/ bad products and they might want to come back to nokia, things might have changed drastically already!

      “Betray your customer’s trust and your brand will seemingly go from magic to tragic in the blink of an eye.”
      well said. these days, credibility is the currency – look at all those arab spring, and other revolution happening aroudn the world. people are tired of tosh, and “PR manufactured” brands.

    • Walt French

      And you can read the prolific writer Tomi Ahonen on his Communities Dominate Brands blog, claiming today that all Nokia needs is some good marketing: “THIS IS CRYSTAL CLEAR… there is no problem currently with bad phones, there is no problem with bad promotion, there is no problem with bad pricing. It has to be reseller channel.”

      Tomi’s theory is essentially that the Burning Platform memo is killing Nokia, not the monster disruptions (Froyo 2.2, that roughly doubled Android speed and crossed a divide of usability; iOS 4.0 that brought power-savvy multi-tasking to iPhones) that engulfed Palm months earlier, and that led RIM to its (so far, futile) effort to join the current capabilities with QNX in the same 2nd quarter 2010.

      Horace must be familiar with Tomi’s work, although seldom quoting it. I think it clearly spells out an opposite theory that businesses work by doing what has always worked.

      • http://kaizenity.blogspot.com/ FalKirk

        “Tomi’s theory is essentially that the Burning Platform memo is killing Nokia”-Walt French

        Bad marketing is no more solely responsible for Nokia’s failings than good marketing is solely responsible for Apple’s successes. Marketing can amplify your product but it is not the product.

      • OgilvyTheAstronomer

        Nokia’s failure is due to bad marketing like Apple’s success is due to good marketing: not at all. Marketing is always trotted out post-facto to justify poor analysis.

    • Anamika

      Apple is already selling low cost mobiles. The carrier model like USA is allowing iPhone to be priced in a segment it should not have been in first place. In a competitive  market like India where user buys phone for full cost the $900 iPhone would have been a big hit.

    • OgilvyTheAstronomer

      If Apple ever got tired of completely ignoring the analysts, the second best strategy available is to do the opposite of whatever the analysts suggest.

  • RobDK

    Great article as always, Horace.

    The first asymco article I read was this one titled ‘Assessing Nokia’s Competitive Response’ from July 2009:

    http://www.asymco.com/2009/07/07/assessing-nokia’s-competitive-response/

    It is interesting to compare what Horace sketched out to what has happened. My guess is that they are two years ahead, i.e. the 2014 response of ‘First products that are roughly comparable with iPhone version 1 begin shipping’  is equivalent to the 2012 release of WP7. 

    Unfortunately for Nokia, things have changed even quicker than Horace estimated back then! So they are still way behind the curve…

    • kankerot

      I think you need your brain examining if you consider the Lumia 800 comparable to the first gen Iphone. The reality distortion field lives on.

      • APai

        i think you fail to get his pulse there. he probably meant that relatively. 800 is compared to iphone – shipped by volumes 800 is at a similar position of the first version of iphone, unknown territory for a new phone/os and the kids forgot that nokia made smartphones in the USA – so it’s a clean slate.  what is left is for microsoft and nokia to put their collective efforts together and try and clinch the smartphone market.

        (who knows, IF nokia is lucky, lumia might repeat the success of iphone, once people get bored of iphone/ android phones – but that’s a big IF)

      • http://www.facebook.com/profile.php?id=710235 Daniel Drew Turner

        That’s an interesting observation, APai — not to contest, but do you have links to the data about users switching to other feature phone manufacturers?

        The comment I was going to make was to ask about the nature of Nokia’s commitments in developing countries where the infrastructure and carriers support only feature phones. Last summer I was a visiting researcher at HIIT in Helsinki and we worked tangentially with Nokia on a project to design an online tool for potential voters in developing countries, and our research showed that people overwhelmingly accessed the internet through feature phones, using WAP browsers or even using tools that took SMS. 

        So there still is a strong need for feature phones in dozens of huge regions, with hundreds of thousands of people. Of course margins won’t be as high in these markets (nor should they be), but maybe these are areas Nokia has committed to?

      • Anamika

         Carriers don’t dictate which phone to buy atleast in India. Price is a big factor hence iPhone does not have a big share. Android are entering $100 segments don’t think Nokia can survive there as well.

  • kankerot

    So Horace what would you advice Nokia do right now? Pack up their bags and don’t forget to switch off the lights when they leave their office?

    • http://sumocat.blogspot.com Sumocat

      Upon learning they’re driving in the wrong direction, most people head in a different one. They don’t usually abandon their vehicle on the spot.

    • Walt French

      My personal belief is that Nokia’s doing everything it can. Everything, that is, for having only awakened a year ago to the smartphone challenge. 

      That does NOT mean it will succeed, or that if it survives, it’ll do so without huge pain.

      That earlier link to Horace’s long-term projection for Nokia was priceless.

      The question in my mind is why, having lost the initiative in phones, Microsoft continues to offer such a lackadaisical product: a comfortable OS, to be sure, but in almost no way a leader in setting its approach as the new paradigm to beat.

      • Canucker

        Microsoft cannot afford to cede mobile. Microsoft knows that WP7.5 is a stop-gap and they are pinning their real future on Windows8/Phone 8. So is Nokia but they couldn’t watch their platform turn entirely to charcoal whilst Microsoft pulled together its release later this year**. The big question is whether Windows (Phone) 8 is the right direction. It’s certainly not what Apple is doing.  Microsoft is trying to make the PC/tablet/phone ecosystem coherent despite the inherent differences in touch versus key input (or vertical verses horizontal screen formatting). While Microsoft has a great history of iterating and improving, I think they’ve possibly blown it in taking this direction and will end up having to separate the two formats (or users will, in effect, do it for them). Apple likely evaluated the new Microsoft model a few years ago when they were contemplating how to evolve the OSs and discarded coherence as too much of a compromise of appropriate UX. 

        So, Apple and Microsoft are still betting on very different horses…. with companies such as Nokia taking the risk for Microsoft.

        **At least they are not in the situation that RIM is in, peddling EOL’d devices for another 6 months until they can get BBOS10 out of the door.

      • Walt French

        I have to concede that your scenario is the only one that makes *any* sense. But if Nokia knew that its first real opportunity was going to come late in 2012, they shouldn’t have so dramatically slammed the door on Symbian. Some of that injury is self-inflicted.

        They could even have started building Androids, with the intention of abandoning the OS once WP8 got its stuff together. That’d have seeded at least SOME devices that could have been forward compatible and created some positive buzz, as well as revenues.

        Regards the UX issue on Win8, I think Microsoft is mistakenly trying to straddle an even wider chasm: business vs personal use. People buy iPhones and personal tablets to do personal things, and that includes trying the latest game a friend proposes, social interactions, etc. Speed (even at the risk of bugs) and novelty are desired features. All these are anathema to the IT Dept. 

        Microsoft certainly has excellent chances at replacing the airline pilots’ chartbook, or field technicians’ references, etc., but the actual number of devices that are candidates there is limited (all the more so by the ARM/X86 divide) — by definition, those uses mostly don’t exist today, or already are comfortably done on iPads.

      • kankerot

        OSX is taking on aspects of IOS and you could argue IOS will be taking on aspect of OSX. However will the two merge? Possibly but not in the near future.

        The desktop and Mobile are as mentioned two different metaphors primarily touch vs type. MS it seems is trying to shoehorn both together into a cohesive product but we all know there will be compromises and this will affect user experiences.

        It is a persuasive goal that developers could write apps that could work across phones, tablets and PC’s. If MS wants to attain this goal then it will not be a native solution as we know x86 apps will not work on WOA (windows on ARM) devices.

        The other problem for MS is legacy support. What is likely is that come October we will have another Vista style disaster for MS to then re-assess and in 2013 bring out a more appropriate solution as they did with Windows 7.

        Can Nokia hang around until 2013 when the smartphone market will be even further in the hands of Apple and Samsung?

    • http://www.asymco.com Horace Dediu

      No, not at all. There are plenty of opportunities for Nokia. The post is only an explanation of why Nokia lost a position of leadership it held for 14 years. The answer may lie in a direction that is not easy to observe and will require a plan of discovery.

  • http://twitter.com/squidlr squidlr

    Nokia – a now a totally unfashionable company connected with a different era, the pre iOS and Android years of the early to mid 2000′s. The Nokia logo looks dated as hell and many people have their gnarled and busted up Nokia phones stowed away in drawers with a lot of other old junk as they moved onto better cell phones. Unfortunately for Nokia, the Windows brand is also associated with days of yore too.

  • http://twitter.com/studuncan Stu Duncan

    Smartphones are the new feature phones.  Samsung got that with Android.  Nokia didn’t.

    Most people buy the $0 phones, but never install apps (or Facebook at most).  They may technically be smartphones, but they’re used as feature phones.  The difference is in the cost: data plans give more revenue to telecoms, higher margins give hardware profits to hardware mfgrs.  The customers pay the same up front, but $20 or so more every month.

    • http://twitter.com/handleym99 Maynard Handley

      I hear an awful lot of this “Most people buy the $0 phones, but never install apps”.
      Do we have any REAL evidence for it, apart from Apple fans wanting to tar Android users as idiots, and vice versa? 

      I know plenty of people with iPhones who don’t use ALL the features of their phone, but they certainly use plenty of them. They use email all the time, they play movies and songs, they take photos. Depending on their personalities, they may use skype and some form of messaging a lot, or maps a lot, or play a lot of games. 
      Or, to give a different example, when I see people on their phones before, say a popular music concert (and nowadays that is 80% of the audience, doing something while we wait for the event to happen) mostly they are not using those phone to talk. Some are in social contact  (facebook, twitter, IM, fourspace, etc), many are playing games, some are reading web or mail or instapaper or ebooks, some are checking traffic or weather, etc etc.

      Maybe eighteen months ago people WERE using their cheap Android smartphones as feature phones, but I think we’re seeing the end of that era every day, as things like Twitter and FaceBook and Angry Birds are so well known that they are used as punchlines or plot points on TV sitcoms.

      • http://wmilliken.livejournal.com/ Walter Milliken

        There is certainly some hard data around. One recent data point (taken from data from web analytics firms like Net Applications and StatCounter) suggests that Android phones are used much less on the web than their market share would suggest.

        For application download and use, there are firms likes Nielsen, Flurry and Distimo that track that kind of information. A quick search didn’t turn up recent public data on app installation rates on Android versus iOS, since obtaining details tends to require accounts with those type of firms. But some data on app installations does filter out through various news reports, which I think is the origin of comments like Stu Duncan’s.

        I think it’s fair to say that the publicly reported data does show distinctly different network usage and app installation and usage patterns between Android and iOS, but the underlying reasons for these differences aren’t necessarily clear.

  • Buckeyestar

    Estimates? These are worthless numbers.

    • aftoy

      How did you miss the first sentence? Maybe the font was worthless.

      “Nokia currently estimates that Devices & Services net sales in the first quarter”

  • Svdwal

    Horace, the Elop Effect is widely quoted as being the cause of Nokia’s lack of traction with smartphones, but apparently you believe this is not the main reason Nokia lost traction. Is this because it appears that Nokia’s smartphone mix had already changed direction somewhere in 2010, as can be seen in the Nokia Portfolio Mix graph?

    • Walt French

      I’d argue that the die was cast in 2007. And that by 2010 you’d already seen Palm fail, RIM panic and jump to QNX, showing the severity of the tsunami. Also in the same 2010 Q2, Android roughly doubled its capability with the Froyo update and Apple introduced battery-friendly multi-tasking, showing the long lead times for necessary technical capabilities.

      All this is sufficient, before we start talking about ecosystems or apps or network effects, which obviously ALSO matter.

      • http://twitter.com/handleym99 Maynard Handley

        There are actually many similar cases in history, though the details are always slightly different.
        Some obvious examples are mini-computer manufacturers in the face of PCs, and then twenty years later, workstation manufacturers in the face of (substantially improved) PCs. More niche, but more recent, is film manufacturers in the face of digital cameras. As we speak dedicated game consoles, in the face of PCs (at the high end) and phones/tablets (at the low end).This last case is worth considering because it’s a lot easier to speak confidently when you know the outcome. Is it CLEAR that game consoles are dead, that MS and Sony and Nintendo should just pack up and stop wasting money? In the case of Nintendo, especially, there is the problem of what else do they do? If their skills are “create great entertainment”, then perhaps they should transition to a software shop, perhaps one that creates hardware dongles for iPhones that augment the gaming experience. But if their skills are “create cheap game consoles and force abusive contracts on game developers”, then their choices are limited (although “give up and give the money back to the shareholders” remains an option and perhaps the best one).

        One thing that is perhaps clear from all these examples is that a company in this position ought to spend all its time talking to people OUTSIDE the main business — in our case, talking to people who play games on PCs and mobiles — along with hiring some execs (and giving them real power) who come from outside the console world. Otherwise it’s all too easy to just live in the bubble of like-minded fans, spending all your time thinking about better consoles and ignoring the fact that the bulk of the world has zero interest in consoles. 
        By these lights, Nokia certainly did the right thing by hiring someone like Elop — but they may have left it too late.

      • Walt French

        BTW, since you seem to be a fan: there’s a great piece today by Christensen about hiring, finding the people who are able to do with the challenges you’re now facing. Used some Intel project as an example of not recognizing the unique challenges. Could’ve been written for Nokia (or RIM) with some minor fact changes.

      • gladiator

        Do you have a link to that article?

      • Walt French
      • Svdwal

        Of course all that, but that is not what I meant. For the sake of argument lets start by stating that it looks like Nokia’s response was to withdraw from the smartphone market and stick with feature phones for the Next Billion. This is of course much too strong, but it does make Nokia’s actions to create Memelti and pester developers about creating apps for the Next Billion a consisten strategy.

      • Walt French

        If it’s a consistent strategy, it’s incredibly bone-headed. They consciously gave up the part of the market that has gone from a single-digit share to about 50%? … and after lopping off all its profitability and growth, decided to put all its eggs into a basket (feature phones) that is destined to disappear entirely in just a couple of years?

        That is just too obviously suicidal to have survived more than a few moments of scrutiny by a firm that has seen several huge transitions in communications. Yes, they might not have anticipated the speed with which all this has happened, but the outlines were clearly there.

        I don’t think it’s possible for Nokia to have intentionally “withdraw[n] from the smartphone market.” This was a failure to respond to the iPhone disruption.

      • Walt French

        If it’s a consistent strategy, it’s incredibly bone-headed. They consciously gave up the part of the market that has gone from a single-digit share to about 50%? … and after lopping off all its profitability and growth, decided to put all its eggs into a basket (feature phones) that is destined to disappear entirely in just a couple of years?

        That is just too obviously suicidal to have survived more than a few moments of scrutiny by a firm that has seen several huge transitions in communications. Yes, they might not have anticipated the speed with which all this has happened, but the outlines were clearly there.

        I don’t think it’s possible for Nokia to have intentionally “withdraw[n] from the smartphone market.” This was a failure to respond to the iPhone disruption.

      • Svdwal

        A year before iPhone was introduced, mobile apps were declared dead and web apps were to be the future of mobile computing. At that point, iPhone could only run web apps and Jobs said publicly that was all that was necessary.

        And then something happened and suddenly Apple decided to release a native SDK and an App Store that actually worked properly.

        So, no debate about the disruption and its effects. But saying it was obvious at that time that the smartphone, with people buying and installing apps, was alive and kicking…

    • http://www.asymco.com Horace Dediu

      It’s human nature to blame individuals for system failures. I think that it’s an easy way to avoid doing analysis of the real causes. The evidence shows that there was a structural failure to embrace the disruptive impact of smart devices. Nokia was in the market for smartphones before any other company but failed to realize their potential. I think mostly because economic forces and operator requirements compelled them to preserve the pursuit of devices as network “terminals”. The commitment to build mobile computers is asymmetric to much of what Nokia was convinced was its value add.

      • Svdwal

        I saw Nokia acting in the smartphone market, and I would say that they lost faith in the potential of smartphones, instead of not recognizing that potential.

        Apart from the guess about the motives, around 2006-2007 they came up with a new strategy, the feature phone one. Killing of the high end Communicator range was one consequence of that strategy, and moving of Symbian to an Open Source consortium was another one. It was also the time apps were announced dead and buried, and web apps were to be the Next Big Thing.

  • http://twitter.com/chrismaddern Chris Maddern

    How Samsung beat Nokia – “They copied Apple more closely than Nokia did”. 

    • zdrav

      The iPhone would never have existed without all the innovations that Nokia made. Technology doesn’t exist in a vacuum.

    • OpenMinde

      There is definitely a truth in this statement.  Apple is the most successful smartphone maker.  Samsung copies the Apple products most salivary and second most successful one.

      • APai

         i’d go as far as to say, apple copies everyone else too, samsung combined. if there’s a good feature, you’ll see it in the next edition.

    • APai

       “They copied Apple more closely than Nokia did”.
      as an end user, i probably wouldnt mind who has the bragging rights. i’d go with the better handset and that’s the samsung one!

  • warcaster

    Weren’t you the guy who said Android is not helping manufacturers? I also laugh at Nokia for ever saying that sticking with Symbian and whatever they had back then, is a better solution than choosing Android.

    Guess they was wrong…Nokia is moving fast towards an acquisition, maybe by Samsung or Huawei in a couple of years.

    • Rob Scott

      Motorola is struggling
      HTC is struggling
      Of the first tier OEMs only Samsung is having some success. They are also the ones who have ripped off the iPhone/iPad the closest.
      Also Samsung has Bada.

    • http://www.noisetech-software.com/Home.html Steven Noyes

      Sony? LG? HTC? Moto?

  • gprovida

    I think Nokia looked at a much longer and slower transition time towards Smartphones based on income and geography customer categories, income for third world and geography being primarily US where being behind Europe on standards allowed them to leap in 3G and 4G quickly.  Nokia had no market in US so nothing to loose.  Of course the pace of change was much more explosive, Nokia’s plans for upgrading Symian or other OS was too long or infeasible, so they made the decision to go with MS, anticipating more leverage with MS and the legal uncertainty Android was introducing.  So Plan 1, we have time failed and Plan 2 MS will be there fast enough, good enough, and we got powerful allies in Service Providers and Android was an IP train wreck are still TBD. 

    Personally, I think Plan 2 is deeply flawed and all these plans fail to address, “what jobs the customer needs done and will pay for?”  SAMSUNG has been a fast follower of Apple, but again the IP problem is out there on the near term horizon and if they need to jump off Android they end up with Nokia on a weak platform for MS.  Their own Bada is not in either of these classes and my bet is as burdened with IP violations but its small size has it below the MS, Oracle, and Apple RADAR.

    • UncleAlbert2

      Bada currently outsells Windows Phone (but then, what doesn’t). Bada is (most likely) going to be rolled into Tizen, the spiritual successor of MeeGo (sadly, sans Qt for native applications).

      Some people believe the future of mobile platforms is going to be based on HTML5 (eg. Tizen and Mozilla Boot2Geko), which would largely render proprietary mobile platforms obsolete overnight. Not sure I’m convinced of that just yet, although early demonstrations appear to make it look credible, but if Android does become a problem for Samsung then Windows Phone certainly won’t be the only alternative.

      Oh, and it’s “lose” not “loose”. ;-)

  • melgross

    It was easier for Samsung to see what was happening than it was for Nokia. The reason is pretty simple. Nokia is almost entirely a cell phone manufacturer, with a networking business on the side. Samsung is a consumer electronics manufacturer to a large extent. But they also have other more industrial businesses supplying parts for other manufacturers, as well as other industrial businesses.

    As a result, Nokia hasn’t had the experience of seeing what was being done in the business other than some finished products. Samsung was highly involved in making parts for those newer smartphones, particularly for Apple. As a result of that. Samsung could see how they were being made, the CPU and gpu inside, etc. therefor, Samsung was abreast of all the newest developments long before they came to market, as Nokia was not.

    Samsung could also see the increase in orders for those parts they supplied in advance. Sometimes a year in advance. Nokia had no such advantage.

    Of course, Samsung’s management took advantage of that, even to the point of copying major features of their largest customer, while Nokia’s top management were still saying in public that the iPhone was a boutique product.

    We see the results.

    • http://twitter.com/studuncan Stu Duncan

      Very good point – Samsung seeing the future coming down their product lines.

      Interesting thought: what happens to Samsung’s future when Apple buys HonHai and gives 100% of production to that division?

      • aftoy

        Hon Hai does not have SoC or chip level capability.

      • http://wmilliken.livejournal.com/ Walter Milliken

        I don’t see Apple buying manufacturers — they seem to prefer to have flexibility and alternate sources. On the other hand, they seem to be happy enough to invest capital in favored manufacturers to get what they need.

        I’m not sure Samsung’s advantage was seeing incoming orders — the iPhone’s early ramp up wasn’t all that obvious, I’d say. Samsung’s advantage may lie more in product flexibility and vertical integration.

        My impression is that they have a “first follower” strategy somewhat reminiscent of Microsoft — if something is clearly gaining market traction, copy what’s winning as much as you can and use any avenue to gain market share. Not really all that uncommon a model in many product sectors, though Samsung has clearly overstepped the bounds, in Apple’s opinion.

        Samsung also seems to have a “throw everything at the wall and see what sticks” development/marketing strategy. Unlike some other companies, they seem to actually succeed with this, possibly due to management agility.

  • JolietS

    No offence Horace or others, but a metacomment is in order:

    I see now how few commenters here have deep insight into the root causes (eg. ex-Nokians who were there). Nevertheless, lot of these folks make really smart, informed-looking comments ,which I know for a fact are off base. This constitutes majority of the ‘curation’ of your content, Horace, and makes me question how much I can trust other, similary smart-looking curated content on your site regarding eg., Apple..

    As for the topic at hand, I see it being very simple: Samsung, the fine-tuned product execution machine, bet on Android (among other platforms), which surprised with its fast evolution and ability to stretch to lower price bands, whereas Nokia management made the mistake of believing in its internal platforms’ capability to deliver.

    • aftoy

      We don’t need to be ex-Nokians to know that MSFT did the same (see Ballmers Youtube video response to the iPhone), how about RIMM’s Laziridis’ response to the iPhone, and tell us about Palm. So yes, your simple response is really smart, informed-looking and now I expect to see it quoted by Bloomberg, WSJ, Barron’s.

    • http://twitter.com/richardlamsdale Richard Lamsdale

      You are perfectly entitled to your view, but you should be aware that the arrogance with which you dismiss others’ comments is quite staggering.

    • Joe_Winfield_IL

      “No offence, but…” is the weakest, cruelest disclaimer in the English language.  It’s as though, with those three words, anything that follows is permissible.  You almost lost me there, but I was curious.  Then you dropped the term “metacomment,” ostensibly to convey self-awareness and intelligence.  At this point, you had me hooked; surely the paragraphs to follow would enrich my day through sheer brilliance and uniqueness.

      Well, color me disappointed.  You set us up to believe that you had some (any at all) insight to this situation, something proprietary that can only come from inside the Nokia organization.  But what followed was an incredibly vanilla and (admitted by you) simplistic diagnosis of the situation.  You encompassed the whole transition of power from Nokia to Samsung in a single run-on sentence.

      All that would be fine, but I really have two issues with your post:

      1) You implied, or perhaps I only inferred, that you have this coveted inside knowledge.  If you do, you forgot to include it; your comment was devoid of insight.

      2) You implied that Nokia employees necessarily have better insight than keen observers.  If this were true, wouldn’t Nokia be in a better position today?  Do you think those closest to the wreckage, those who played an integral role in Nokia’s fall, are the best suited to analyze it?  To my eyes, Nokia would have benefitted had they taken outside counsel early on in the smartphone renaissance. Instead, Nokia suffered from an inability to see the forest from the trees.  

      Senior management was so focused on the company’s strengths and strategies that they somehow missed a major macro level shift in the broader technology sector.  It seems to me that Nokia (like everyone) failed to anticipate Apple’s brilliant move of downgrading telephony from the central function of a phone to one of many capabilities on a mobile computing device.  This in and of itself is acceptable; Apple didn’t exactly call all the phone vendors to issue a warning.  The crime was in the company’s reaction when the shift in power became evident.  Nokia (like RIM) chose to dig in on existing strategies, refusing to update their models with new information when it was early enough to effect a change.  By the time Elop put out his burning platform manifesto, the company had lost control of its own destiny.

      Meanwhile, Samsung acted like a good windsock.  The company’s strength is in identifying (not anticipating) current trends and consumer taste, then putting out exactly what people want.   Samsung is a very fast follower and an excellent manufacturer, which has been exactly the right position for any company not named Apple since 2007.  They are excellent in making products that look and feel like market leaders, and fortunately for Samsung the market leader is production constrained.

    • http://twitter.com/gerrymcgarry Gerry McGarry

      You don’t read this site much as there is at least one ex-Nokian here.

      • simon

        Horace himself is an ex-Nokia employee, I don’t know if he knows that or not.

    • JohnDoey

      The root cause of Nokia’s failure was not at Nokia. It was in Silicon Valley.

      I’m in Silicon Valley right now. I know it hurts to hear this, but we are 5 years ahead of everyone else in computer software. That is just a fact. Until the rest of the world admits this, Silicon Valley will continue to dominate everything via software. Every industry, no matter what it is, has a giant target painted on it, and there is at least one Silicon Valley startup that is coming for you. They are coming with software. Tons of it. Layers and layers of it, working together. And they are going to absolutely destroy whole industries, just like Apple destroyed music players, high-end PC’s, phones, and now low-end PC’s, simply by offering a product that had 1000 times more software on it than any competitor.

      We get distracted by the beauty and functionality of Apple’s hardware, but their success over the past 15 years has been software-based. From 1997 through today, Apple’s hardware has become more generic, while at the same time, their software has become much more unique. Their hardware has become simpler, fewer components, while their software has become much more complicated, much larger, spreading out from Macs to iPods via iTunes, and then OS X running directly on iPods and iPhones, iPad, AppleTV, and now iCloud. OS X is Apple’s core product, and it simply refers to “our software.” The unique features that they have built to serve the unique needs of their clients are almost all in software.

      You can also see this in the lack of hardware models. If you ask a software developer to design hardware, he or she will want 7 billion of the exact same model, because that makes software development much easier than 7 billion different models. You see Apple prioritizing software development with things like having only 2 iOS screen sizes, each now in both low-res and high-res. That is responsible for about 75% of the apps in App Store even existing. Any more screens and those developers would be priced out by higher development costs.

      So it isn’t Nokia’s fault that Silicon Valley is currently taking over the world with software. There is a big fat Nokia sitting on top of all kinds of moribund industries, taking little or no advantage from software. They are all going down no matter what their boards of directors or management decides, unless they are willing to do what Steve Jobs did to Apple in 1997, which was to remake the whole company around software. Apple literally merged with a software company to get that done. Steve Jobs came back to Apple when Apple bought “NeXT Software, Inc.” for the sole purpose of adopting NeXT software. That is the software that enables iPhone to run so long without crashing, and to run real object-oriented PC-class native C/C++ apps. Xcode is the NeXT developer tools that were used to create World Wide Web in 1990.

      There’s no mystery. A device with 1000 times more software on it than its competitor is operating at a whole other level. It’s a new thing. It’s not just a phone, it’s a video editing studio. It’s whatever you want it to be, because it has MORE sophistication than the devices it is morphing into. Pretending to be a really slick DJ metronome is child’s play for an iPhone. iMovie is a much more complicated app than any metronome. iMovie is much more complicated than almost any consumer app or devices. The sophistication is there in Apple software to be anything. Nokia’s software can’t even run a real Web browser yet. It is amazing! Even their Windows Phone does not have HTML5, which is from 2007.

      So Nokia did not really have a chance to save itself. For proof, look at all the other companies who similarly did not save themselves against Apple software: Sony, HP, RIM, Dell — they are all obsolete companies, not just obsolete products. They have almost no software and almost no software development skills.

      And a key thing to keep in mind is software takes FOREVER to develop. You can’t keep throwing money and bodies at it and speed it up, same as a novel. If Tom Clancy is half-way through his new book, you can’t hire another writer and speed it up. The new writer would have to read the existing first half of the book, take many meetings with Tom Clancy, before he could even start writing. In practice, that takes more time than just leaving Tom Clancy alone to write the rest of the novel. So it will take companies years to embrace software and start developing their own unique and valuable product offerings. Anyone who is not doing this aggressively is just waiting to be eaten by a tiger out of Silicon Valley. That tiger is already on its way. There is going to be carnage for the next 10 years in every industry as software takes over everything.

      • RobDK

        Absolutely brilliant! Spot on! OSX is the deal!

      • aftoy

        How Samsung Beat Nokia is the discussion. How did Samsung become Apple?

      • Davel

        They didn’t.

        Samsung is copying Apple hardware.

        What software is Samsung writing?

        Samsung is a hardware company. They are not an integrated hardware software computer company.

      • Joe_Winfield_IL

        If you agree with this comment, it’s because they embraced the best software they could quickly put their hands on.  They didn’t write it, but they used it as well as they could.  Amazon is doing the same thing with the Fire.

      • Davel

        Horace mentioned this sometime ago.

        The fact that Apple and Google are computer companies that got into the phone space and killing them

        As for Apple. It has always been a software company. The difference between the original Mac and other computers was software.

    • http://www.asymco.com Horace Dediu

      Those with the deepest insight into Nokia are those who were (or still are) there. Their perfect information allows them to see exactly what is happening and hence make all the wrong decisions.

  • dpgj

    It is so wrong. Nobody beated Nokia harder than itself and someone had to fill in the vaccum so happened Samsung was the most effective. Remember, it was sometimes Nokia rolled out Symbian which got nowhere, its smartphones were introduced years before Apple but could not (even now) get the point, its design and innovation were practically on the casing instead of how a phone could be. For years Nokia made nothing remarkable even though the past momentum kept its profit growing. Nokia was dying long before Apple introduced iPhone.

  • Relentlessfocus

    Horace, in your penultimate paragraph you make the point that Nokia was trying to hit price points rather than thinking through the job which people were buying their phones for. I’m assuming by this you mean a smart phone allows a far greater number of much more sophisticated apps and the better ability to use internet data and that people were buying cheap Sammy Android smart phones rather Nokia feature phones because somewhere in the greater mix of smartphone apps were apps these buyers wanted on their phones. Hence price points alone mislead Nokia in their analysis of this end of the market and Samsung’s cheap smart phone strategy won out.

    Many observers have commented and many surveys support the suggestion that Android phones in general are used far more in the style of feature phones, that Android phones have fewer apps purchased, fewer apps downloaded and they use less data than the iPhone. My guess is that wealthy Android users probably buy apps and use data more like iPhone users do but lower end Android owners don’t. Gruber frequently makes the point that it’s his opinion that people don’t really know what phone they want until they walk into a shop to buy a phone and talk to the sales person. Obviously it’s in exactly those areas where feature phones compete with smart phones that buyers have less money to spend and thus less to spend on apps and data and thus are more “phone agnostic”. So Gruber’s point strikes me as particularly apt for this end of the phone buying public.

    Your point is that a jobs to be done analysis is applicable to this end of the phone market and that seems to run counter to the above observation. So I’m not convinced that Samsung beat Nokia in the low end of the market because of the job people wanted the phone to do and perhaps not for some other reason? Do you have any evidence that its a jobs to be done situation?

    • JohnDoey

      If you have less money to spend on computing, then at the very least, you have to have access to Web apps, to the real World Wide Web. NOKIA has not yet offered this on any phone they have made. Their current Windows Phone does not even support HTML5 apps. Nokia may have sold over 1 billion phones with a “Web browser” bullet point on the box, but they did not actually unite their users with any actual computing resources. They did not actually put those 1 billion users onto the actual World Wide Web. They sold them some cheapass BS crap and iPod users are drinking the milkshakes of Nokia users.

      A dude can be rescued off a desert island, and you can take him to the mall and get him $250 of jeans and tops at GAP, and a $0 iPhone 3GS at Apple. Now, he is ready to start his own business. He has native C/C++ computer apps like iMovie and Keynote, and he has HTML5 Web apps like Facebook and Twitter. He can do anything. Think of the tasks you do to get a job or start a business: documents, email, presentations, Facebook, Twitter, accounting, credit card billing — all can be done on his iPhone 3GS, his sole computing resource. Which cost $0.

      So why would anybody recommend a Nokia phone to that guy? If he has a Nokia phone, he would have to buy an iPod touch or iPad to get native C/C++ and HTML5 apps. Next, you will tell him to get a Windows PC and an IT consultant.

      So it’s not bullet points or even jobs hired to do, it’s just plain old FAILURE. Nokia failed to leverage the free computing resources of the Web for their high-end users and their low-end users. Apple has done that for all. Apple’s low-end users get a real computer with real apps and the real Web. Even if they pay $0.

      And a $199 iPod touch just brutally mutilates Nokia’s whole strategy. That is 25 cents per day for a device that for many people, replaces a whole PC, and goes all day on batteries. And runs iMessage and FaceTime for free, and Skype for a very low cost.

      The thing is: Apple *is* the low-end. There is no room under a $0 iPhone 3GS or a $199 iPod touch or a $399 iPad to do anything less. That is why Apple’s only “competition” is half-tablets — devices that have 46% of the size of iPad’s screen so they can sell at 46% of the price of an iPad. That is not a cheaper, more low-end device — that is just half a device.

      So the “low-end” that Nokia was planning to sell to simply has way, way better low-end computing resources to choose from at Apple. And Apple sells computers with phones. Nokia does not sell phones with computers. So people are going to Apple with their low-end dollar.

      BTW, iPhone 3GS is the #3 smartphone of all time. Not some crap that has been stripped down for the low-end market. Low-end users deserve the best device that can be made at the lowest price possible, not a car with the wheels left off and no seats so it can meet a price point.

      • Carlos

         Please, check your facts. An iPhone 3GS is 349€ (in Spain) that’s about 459$.
        I’d like to get any phone for 0€, but maybe the companies involved want to earn some money.

      • aftoy

        The article and discussion is how did Samsung beat Nokia, why the bluster about iPhone 3GS?

    • http://www.asymco.com Horace Dediu

      I did not mean to suggest that Samsung’s approach was based on a JTBD methodology. I believe that Nokia’s has not been. For Nokia to challenge the threat of Android (and iPhone), it needed to focus deeply on a problem it could solve. Nokia always had the ambition of avoiding commoditization. This has not been Samsung’s approach.

  • Saumya Vish

    This is interesting. What I feel, as a purely marketing person, Samsung won because of Google and human boredom. Android was so damn well marketed that everyone wanted an Android phone. It was the new thing for those who could not afford, or did not like an iPhone.
    No one that I know uses Android like a ‘smartphone’, differently from how they would have used a Nokia or Blackberry. No one that I know, who is on Android, is actively using Android specific apps, that justifies buying into a ‘smartphone’. People still use it for email, phone calls, texting and the odd facebook and twitter. All of which can be done with equal elan on a Nokia S60, S40, Blackberry or many other non-android, non-iOS phones. But people have been swayed by the aggressive Android hype, buying a phone which offers features most don’t use, but satisfied in the thought that they bought something ‘more than a phone’.

    Perhaps Nokia needed a new marketing agency.

    • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

       Thinking that Samsung won entirely because of Google means underestimating the engineering, operational and strategic effort needed for such a feat. There are many smartphone manufacturers using Android, yet Samsung is the only one profiting. I agree that Samsung would have had a much more difficult transition in the absence of Android, but the same might be said about the fate of Android in the absence of Samsung. It will be really interesting how the Korean manufacturer react to the assault from the likes of Huawei and ZTE. Bada is a sign that they take the challenge seriously and are ready to disrupt themselves from the low end, if that is what it takes. Can they learn the additional engineering and operations lessons fast enough to pull it off? The start of the Tizen adventure does not look too promising from that perspective, but there is still time to change.

      • JohnDoey

        Samsung has just been cloning Apple. Like, releasing products with literally the same dimensions, same charging accessories, same box designs. They have released apps that have icons from Apple’s apps, that have the exact same design as Apple’s apps. The reason for this is that there are many places in the world where you can buy Samsung phones but not Apple phones. In those places, if you want an iPhone, you get a Samsung iPhone. And everybody wants an iPhone. Apple has done the marketing, they built a great and unique product.

        So Samsung’s success compared to other Android makers is not because of Google, it is because of Apple. Samsung is different from other Android makers in that Samsung copied Apple more slavishly. Therefore, more success.

        I know there are a lot of phone people here, and investment people. I’m an artist and producer who publishes for consumers, so I am only interested in consumers. For consumers, it is iPad and iPhone and iPod and Mac and PC and for a remarkably small minority, there is also Xbox, PlayStation, and Wii, and then there are maybe 10 million Kindles. That’s all. That’s the consumer computing world. There is nothing else at all. Samsung doesn’t have a single model that has sold 10 million. I cannot bring my content to that. I cannot bring my apps to that. Once the iPhone is available everywhere, Samsung is toast.

      • aftoy

        Samsung doesn’t have a single model that sold 10M? Fantasy? Galaxy SII sold 10M in 5 mo. Galaxy Note 5M in 3 months. Your credibility takes a hit every time you open your mouth. Take your 11 touch iDevice and one of those generic search apps and use it.

      • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

        The figures say that there were more than 40 million people who wanted a Samsung smartphone in the last quarter. iPhone is a remarkable product, but the figures show that some people want a Samsung phone. They voted with their wallets, a way of measuring success defined by Steve Jobs himself. Freudian rationalizations that explain how the subconscious self of the Samsung buyers actually desired an Apple will not change the numbers: more than 40 million Samsung smartphones sold last quarter.

        I will not let the fact that I am an iPhone buyer blind me when faced with such massive numbers. Data about the past (quarter) may not be useful to predict the future, but it is good enough to describe the past. Probably Apple took again most of the profits. The slice left for Samsung is big enough, though, to call them a profitable business. With Apple taking a gross profit of 20B $ per quarter people tend to forget that 1-2B still makes a decent business. You may be right that Samsung has copied shamelessly what Apple created. Whether that was illegal remains to be decided in court. The outcome of the trials involving Samsung and Apple is not very obvious right now.

      • Davel

        Would Samsung have sold all their smartphones without Android?

        Samsung makes chips. They don’t do software.

        Where are the bada Samsung phones in America? Do they sell them in Europe?

      • saumyavish

        I am sorry, but I think you are putting way too much emphasis on engineering here. Its more about distribution and marketing. Where I live, Samsung devices a more easily available than dust. No one has heard of Huawei or ZTE. I wanted to pick an HTC for my dad, but couldn’t find a store selling it. I have seen gazillions of low end and mid end Samsung devices and they suck. Android is pretty much like windows. We may soon come to a point when people will be assembling their own Androids.

        Samsung is trying to spread its OS risk and has a fantastic distribution and marketing machine. They will launch every OS available to them and see which one takes off better. It certainly isn’t engineering.

        Will Samsung release numbers of how many android devices they are selling at what price points? I am sure the majority are at the lowest price points.

    • Dave

      Of course I could do all of those things on my Nokia. However, when the time came to replace my handset, Samsung’s Galaxy S With Android was doing all of the things my Nokia could do, but better, more reliably, and with greater versatility.

      I was a self proclaimed Nokia fan boy for years; I used their handsets exclusively. What I think has changed now is that with the Android development pushing hardware further and faster, Nokia has lagged behind and will have a difficult time catching up.

    • JohnDoey

      Android was not well-marketed. Almost no consumers ever expressed a desire to buy an Android phone. Almost no consumers even know what that is.

      Android’s success is totally vacuum-based. iPhone created a vacuum at other phone makers which needed to be filled with an actual computer operating system, not a baby phone operating system. Android is not a real computer operating system (no native apps) but it is much better than any of the other baby ones, and the Google name made people at least think they were getting real computer stuff. So Android filled that vacuum.

      That is why you see Android ramp up sharply and then level off, then ramp up sharply and level off. Those are individual phone makers replacing the previous OS on a phone line with Android, all in one go. They go from 0% on a particular phone model in one year to 100% on that phone model the next year. Sharp ramp.

      • Davel

        This is not true.

        In the USA Verizon had an effective coherent marketing campaign for Droid. Many confused Droid for Android. They are not the same.

        Droid stood for power, men, not Apple.

        They had commercials that laughed at the iPhone as a girlie phone. I know of male teenagers who don’t want an iPhone. The Droid commercials looked like terminator or transformer movies. They were clearly aimed at the male audience. Clearly for those who don’t like Apple or don’t like AT&T.

        Now Verizon discovered that Android was not iPhone and so got on the band wagon, but Verizon was the driving force for Android in the USA.

      • fiftysixty

        So by your logic, why didn’t Maemo/MeeGo succeed? They are Linux, and arguably more “computer OS” than iOS.

  • Michael

    I have a real hard time referring to any Blackberry, Nokia, Windows Phone, Palm, or Android as “smart”. Maybe we should call them “computer” phones, but calling them smart phones suggests they are good. Only the iPhone truly lives up to the moniker…

    • corey

       Hahahahahahaha

    • LarsFromMars

      Did you deliberately intend to make all iPhone users look like jerks, or is that just an accidental side effect of your arrogance?

      • aftoy

        or ignorance

    • I’m sorry but you misunderstand what Apple is. They are the technology of the future. Low learning curve, simple to understand, and easy to use. Technology for the masses. People who have no idea how to use a computer are drawn to Apple products because they are simply so easy to use. The iPhone is the smartphone for the dumb user. 

    • aftoy

      Huh? I have an iPhone4, but c’mon, truly? I also have an iPad, Galaxy Tab, iPod Touch4G that does what the iPhone does except make calls, not bragging. But I fail to see what the iPhone has over any other smart device. Geez.

      • JohnDoey

        >  But I fail to see what the iPhone has over any other smart device. Geez.

        That is because you fell for the con that the generic stuff is the same. It is not. It only seems that way to you because you are doing the same crappy low-end stuff on your iPhone as on those generic devices. That is not what most iPhone users are doing.

        iPhone has native C/C++ apps. Those are Real Computer Apps. They are not applets. They are not baby apps. They are the same apps from Unix, Mac, Windows, and console games. Other phones just have applets. Most of the world’s apps are C/C++, and the other ones that matter are HTML5 Web apps, which only Apple supports. Other devices simply have Web browsers with some level of HTML compatibility. So with iPhone, there is a clear and straightforward way for the developers of well over 90% of the world’s apps to port their app to iPhone. Porting means you only have to rewrite 10% or so of your app, and the other 90% of the code just works. With other devices, a complete rewrite is the only way. You have to look at a million lines of C and you have to write a million lines of Java. That is why the developer of VNC took over 2 years to get his app running on Android, while somebody else took his open source code and did an iPhone version in a few months. And trying to support the browser on any device other than iPad and iPhone is a nightmare. So you are just not going to get the apps on those other platforms. They don’t support them.

        iPhone has a much, much larger GPU than all generic devices. iPhone is designed to run real computer apps, with real GPU requirements. Nobody else even makes an ARM SoC with as much GPU as Apple. Nobody else is buying them. Therefore, generic SoC’s have tiny GPU’s.

        iPhone has a complete modern operating system, that draws its interface in the GPU and has all kinds of very modern features. iOS could be said to be “more modern” than OS X, whereas the operating system on Nokia’s phones or any Android-based phone could not be said to be “more modern” than even Windows 7.

        The iPhone touchscreen has 11 points of touch and 10 volts of sensitivity, while others have 4 points of touch and 5 volts of sensitivity. Many apps rely on more than 4 points of touch. They cannot run on your shitty generic phone.

        I could go on and on. But it’s totally your choice and your freedom to pay more for crappy generic stuff that comes and goes like a stink just so your neighbor can drink your milkshake with his iPhone. As a Mac user for many years, I am very, very used to showing up as a freelance artist at places where they are using Windows systems and I do the work of 10 of them and pretty soon it is just me working there. So I welcome you and everyone else who wants to use the generic stuff because it is so easy to run circles around you. I’m not telling you to get an iPhone in any way. I’m just telling you: don’t pretend they are the same as generic. They are not. They by definition have to be much better than generic, because that is why people buy them. To get something better than the generic PC/IT crap that is pushed onto people by everyone else.

        Being in denial about this is why Nokia and BlackBerry failed over the past few years. They looked at iPhone and saw ARM and GSM and thought it was generic and they made crappy generic phones to compete with it. iPhone is iPod OS X (nee Mac OS X) and the phone part is an afterthought. It’s a computer. It is not a phone. To make something like it, you have to first make a computer. Nobody else has done that. They have made the same baby app environments they were making in 2000-2005. Android apps are made with Java and run in a BREW-like environment. It is ANTIQUE. It cannot scale to the computing demands of the next 10 years.

      • http://twitter.com/zrxq zrxq

        That’s pretty much bullshit.

      • Svdwal

        Symbian OS can also run full C/C++ apps. It could do that in 2000, when the iPhone did not even exist. Or a GPU that could be used in a mobile device the size of a phone.

        Symbian’s problem was that it was hard to program for because of design choices that were necessary to make it run on the mobile devices of the late nineties. By the complexity caused by exxposing API’s at all levels of the OS, the middleware and the UI level. By creating hard to use API’s and not documenting them properly. By not giving developers the tools you need to be really productive, as you need to be in a small startup instead of a big waterfall-driven organisation where analysts through specs over the wall.

      • Quicksingle

        So how did Samsung overtake Nokia ? oh that`s right your nothing but an Apple fan boy. Sad

      • aftoy

        So I use the crappy low end stuff. Unfortunately I’ll guarantee 80% or more of iPhone users do the same. A cursory Google on your vaunted 11 point touch reveals that the iPhone is capable of 5 according to the iOS devs that I wasted my time looking for. The iPad does 11. Who is drinking Kool-Aid? 80% of consumers looking for a “smartphone” are looking for one that scales for the computing demands of the next 10 years. Spare me.

        Did your vaunted Mac claw back any appreciable market share from the PC in all these years even tho it was a better UI when it first came out. How did Samsung beat Nokia? How did PC beat Mac? Thats what we are discussing, not which one is better technically.

        So get off your high horse.

      • Davel

        I don’t understand why you go into geek land to support your point. It is completely irrelevant.

        What is important is function as Horace criticizes Nokia for not doing in their feature phones.

        A smart phone has apps to do things. Google reserves some of these for Android only

        A smartphone does browser

        There are a few others, but these are the basics

        To a consumer c or java is Greek. It is not important.

        What is important is the job they do and Android and Windows Phone do the job.

        Now you may prefer the way Applegets there and many do. So people may choose Apple because of the way it does the job. But you cannot say that Android does not have apps, or can’t send email, or can’t play music or can’t surf the web.

      • fiftysixty

        You may have some valid points in there, but they are surrounded by so much unfounded and outright wrong claims that it is hard to value them. And I’m an iOS developer myself, so I should be biased the right way to get your point.

      • aftoy

        So tell us JohnDoughy how you code. fiftysixty says it best

        “surrounded by so much unfounded and outright wrong claims that it is hard to value them”

        If your facts are sloppy your coding must be sloppy.

      • http://yorksranter.wordpress.com/ Alex

        “iPhone has native C/C++ apps.”

        you do realise Symbian S60 applications were in C?

  • simnett

    I am not sure I’d completely agree that Nokia’s bet was that they could “make it up in volume” on the low end. I think they also made the wrong bets on the high end.

    As you have pointed out in the past this turns out to be a very unforgiving market, so it’s unusually hard to recover compared with other markets (even other tech markets). So where I do completely agree with you is in the perhaps depressing conclusion is that a flexible, pragmatic, fast follower approach may be safer (necessary?), if you lack the ability to drive Apple’s level of consumer pull.

    • http://www.asymco.com Horace Dediu

      Fast follower is ok for a while. What I want to explore is the idea that by dividing itself into “Smart Devices” and “Mobile Phones” Nokia could do neither well. The implicit assumption that there are two types of devices which must be optimized for their respective markets could be considered dangerous. What sort of incentives and disincentives are created when management places these categories on equal footing? What would have been the consequences if all phones were considered equal? Would smart devices naturally “cannibalize” the low end which would have no explicit protection of resources and market access?

  • iphoned

    Interestingly HTC seems to have employed same strategy as Samsung and so did Moto, but both failed to match Samsung’s success.  Perhaps there is more than meets the eye?

    • JohnDoey

      Samsung and Nokia are exponentially larger than HTC.

    • http://www.noisetech-software.com/Home.html Steven Noyes

      Vertical integration. HTC never had it. Moto spun off (Freescale) or shut down all they had and became outsource kings.

  • http://twitter.com/octarine Jamie W

    The Elephant in the room here is that until Q4 2011 when they released the Lumina, Nokia didn’t ship *any* Smartphones. They shipped feature phones which they decided to call smartphones.
    The people who bought these phones were hiring them to do the job of a feature phone.
    Stick all the Symbian handsets under “feature phone” and remake the graphs.

    It saddens me to say this, as I really used to favour Nokia handsets (I have a 9110, a 7650, an N70 to name but a few), but despite pioneering the concept of the smartphone, they never truly delivered a device that lived up to what people think of as a smartphone.

    • JohnDoey

      Agree. The word “smartphone” is meaningless.

      Nokia has yet to ship a device that matches the feature set of a 2007 iPhone. Nokia has no HTML5 browser in their crappy Microsoft software, and only 4 points of touch, not 11 like all iOS devices that have ever existed.

      We can pretend that these technical differences don’t matter, but I cannot port my iOS app to Nokia because of them. Not because of some mysterious buying patterns or company decisions — their tech just sucks. It’s crap in, crap out.

      • Carlos

         That’s a very narrow viewpoint. I can not port my software to IPhone because they do not allow inspecting wifi. Last time I chedked (it may have changed), I could’t port my GPS tracking because iPhone did not allow multitasking of third party applications. I have to say also “It’s crap in, crap out” of the iPhone?

      • http://twitter.com/PaulMaxime Paul Franceus

        You haven’t checked, since multitasking has been around in iOS for a long time. It’s just not arbitrary background processes. Location services is one of the allowed background services.

      • Carlos

         Thanks for the answer, I know iOS added some background process, but I have not checked the exact details so I don’t know if my software can run.

      • Walt French

        If you’re reliant on a helper app, you’re right that the iOS multi-tasking will stop you. If you’re using system resources, you’re probably OK.

        But iOS4.0, which defined Apple’s multi-tasking, was released in 2010 Q2. You’ve had almost 2 years to look into this. With your apparent indifference to the actual capabilities, I’m surprised you’ve elected to make pronouncements.

      • Carlos

        For different reasons I do not program for the iPhone so I have not read thoroughly the documentation.I was just saying that because a phone does not do one thing then you should not call it crap. I’m sorry if this looks that I’m ataccking your revered iOS.

      • Walt French

        Ahh,, I understand. You were using an example of what you didn’t know about iPhone to dismiss what JohnDoey said was impossible/impractical on Nokia.

        I thought your statement was to be taken at face value. All’s clear.

      • http://yorksranter.wordpress.com/ Alex

        “Nokia has yet to ship a device that matches the feature set of a 2007 iPhone”

        that would be the N95.

    • TT

      I guess you never used the Nokia N900, Nokia N9, and Nokia N950…

      • http://twitter.com/octarine Jamie W

        I had an N770 as it happens. I would have included the Maemo stuff above, but no one bought any and Nokia killed the project with a thousands cuts.

      • http://yorksranter.wordpress.com/ Alex

        or the N73, E71, E61i, N95, E90. the world didn’t, in fact, begin in 2007.

      • http://twitter.com/octarine Jamie W

        Feature Phones.

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  • JohnDoey

    Another way to say this is that Samsung was more aggressive and successful at cloning iPhone. Nokia dismissed iPhone as a “multimedia phone” (a phone for iPod users only) while Samsung said they will make what their customers want to buy, even if it is somebody else’s product. That is the pragmatism. Nokia wanted customers instead to buy what they happen to be making.

    • Quicksingle

      I agree, make what the customers want. That is why Samsung makes a multitude of devices, different specs, different price points. Customers are entitled to choice. What people want can vary with their needs and personal finances. Well done Samsung. Another smart phone company only makes one phone and the new one looks just like the old one. How lame !

    • http://yorksranter.wordpress.com/ Alex

      ” Nokia dismissed iPhone as a “multimedia phone””

      OPK-era Nokia called its N-series products “multimedia computers”.

      • http://www.asymco.com Horace Dediu

        Nokia’s smartphone categories at the time were, approximately, Multimedia (Nseries), Enterprise (Eseries) and Core (Cseries). “Computer” was sometimes added to Multimedia in marketing materials on the initiative of Anssi Vanjoki.

  • Albee

    Apple and Samsung sell mini computers that can make phone calls. Nokia and RIM have been busy selling mobile phones. When you completely misunderstand what your customers actually want you should expect to fail spectacularly.

    There comes a time when you have to sell the customer what they actually “want” rather than what your able to make. If you don’t do that, someone else will…

  • http://wmilliken.livejournal.com/ Walter Milliken

    I have to wonder if part of Nokia’s failing was understanding their market too well, but it was the wrong market: the carriers. The telcos, at least in the US, view themselves as being in the service business, not as a data transport utility (never that, please!). They defined what end-user services phones offered, and they wanted revenue from each and every one.

    The concept the iPhone embodies — a device which allows an arbitrary set of end-user services layered onto a single already-paid-for basic data transport service — is total anathema. My interpretation is that it took a desperate telco (Cingular, now AT&T) to break the normal business model. (I note that Steve Jobs is reported to have initially considered bypassing the carriers entirely with the iPhone, possibly due to understanding their service vs. transport utility stance.)

    Nokia may have assumed for too long that the powerful telcos would quickly throttle back Apple’s ambitions, since the iPhone was never in their best interests. And Apple didn’t want to play the game the way the apparent customer (the telcos) did. Unfortunately, the end-user market voted with their wallets, and dragged the carriers in a direction they very much did not want to go in.

    Even in the last week, there have been analysts arguing that Apple’s large carrier subsidies will stop Real Soon Now, because the carriers are in charge. Unfortunately for the carriers, they won’t be in charge until the vast majority of customers currently wanting iPhones and only iPhones are willing to buy something that comes from a better-behaved vendor. Ah, for the good old days of Ma Bell, when customers had no opportunity to move to a different carrier….

  • Alex Park

    One has to remember that Samsung supplies CPU, flash, LCD to Apple… Samsung knew or realized something Nokia didn’t…  

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  • http://www.itvale.com/ Saad Fazil

    Really like the analysis but disagree with the conclusion. Do you have more evidence to support that “The bet Nokia made many years ago was that there would be a continuing, substantial business in the “low end” is the major reason? Apparently much bigger reasons are:

    - inability to react fast to iPhone
    - iPhone and Android grabbing the market share from every incumbent
    - Samsung’s bet to side with Android 
    - Verizon’s decision to side with Android to counter AT&T/iPhone, which in turn proved to be a key factor behind Android’s success
    - (So far) WP’s catching up

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  • carvermk

    It’s pretty simple actually. Samsung won because of better video codec support offered through its Touchwiz UI, better phone functionality like black lists to avoid unwanted callers, the dual-core exynos processor, better screens with saturated colors and the Mali 400 GPU that offers better performance than the iPhone 4S or 4. In short, better specs, better functionality and an improved form factor that while obviously based on the iPhone, has actually come to supersede it, as the latest iPhone’s form factor is too fragile to stand up to a simple fall. 

    • http://www.noisetech-software.com/Home.html Steven Noyes

      All well and good but none of that mattered since this is about Nokia and not Apple. And as for you performance, you do realize the Mali 400 is somewhat a dog compared to the 543MP2? Places concern on your entire post.

  • kankerot

    A better title would be how Nokia beat itself. Horace likes to talk about disruption and is there a better example currently than Nokia?

  • Frank

    Please don’t let this site turn into Yahoo

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  • aftoy

    Interesting tidbits from HBS 2005 Cybersymposium on form factors for handheld devices. Note this quote.

    “The user interface needs to be simple,” agreed Nokia’s Wakim. Or as Miner put it, “iPod simple.”
    http://hbswk.hbs.edu/item/4627.html

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  • Sander van der Wal

    It appears that Nokia did indeed make the strategic decision tomfocus on dumbphones, according to this WSJ article: http://online.wsj.com/article_email/SB10001424052702304388004577531002591315494-lMyQjAxMTAyMDEwODExNDgyWj.html

  • Sander van der Wal

    It appears that Nokia did indeed make the strategic decision tomfocus on dumbphones, according to this WSJ article: http://online.wsj.com/article_email/SB10001424052702304388004577531002591315494-lMyQjAxMTAyMDEwODExNDgyWj.html

  • http://twitter.com/LenDeBaets Leonard De Baets

    Going back in time one can ask a similar question about how Motorola lost its covetous position to rivals Nokia, Samsung, and Ericcson. In ‘Entry and Competitive Dynamics in the Mobile Telecommunications Market’ by He, Lim, and Wong (2006) available at: http://www.sciencedirect.com/science/article/pii/S0048733306001405 provide interesting data and analysis pointing to the conclusion that Motorola was too inward-looking into developing technologies and ironically not inward-looking enough making use of it’s existing patents which competitors eventually did. It had the largest share of GSM patents, agressively licensed them out till competitors beat them to the GSM market. I don’t know if Nokia did as much trail-blazing in new innovations which competitors eventually took over as happened to Motorola.

  • Deshan

    I have used a Nokia 6600, N70 and a E66.. well i really didn’t find that i was using 3 phones because everything about them was the same.. But now i shifted to a Samsung Galaxy SL.. it was unbelievable what that mobile can do how advanced the touch system and colours were.. and new applications entering the Google play is just amazing.. and about Apple, it is a Samsung covered in a Apple skin (most of parts of the I-Phone are manufactured by Samsung) So Either way Samsung wins.. I switched my mobile phone brand from Nokia to Samsung and now i’m a loyal customer of Samsung