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Nokia's evaporating brand value

Nokia reported Q1 results following very closely the warning issued last week.

There were few surprises. There is much more detail in terms of regional performance which might be a better indicator of how the smartphone strategy is playing out. I plotted the data in three charts.

Regional Sales Value

A year ago Europe and China were nearly equally valuable as regions to Nokia (€2.1 billion and €1.9 billion, respectively). Even though sales fell across all regions, China fell so much that it has become the fourth in value and nearly the same value as Latin America (€577 million for China vs. €542 million for Latin America). This is a significant reversal for a very important market. The drop in value is a staggering 70%. Is there some clue as to what caused this?

Regional Unit Volumes

The data on volumes shows that Europe’s drop is consistent (35% drop in value coupled with 32% drop in units). This implies an erosion in pricing but not a very large drop. However, in China the volumes fell less rapidly than sales (70% drop in value and 62% drop in volume). The pricing story was significantly worse. This story repeats in Middle East, Africa and Asia Pacific where volumes held but value dropped. This implies significant change in pricing in those regions. That’s borne out by the chart below:

Regional Selling Prices

Prices in Europe dropped by about 4% but in China they dropped by 21% (from €80 to €63). In APAC the drop in price was 25% and in Middle East and Africa it was 30%. In the Americas prices increased with North America up by one third and Latin America by about 6%.

This uplift in NA is primarily due to the Lumia launch as channel was being filled. However, note that North American volumes were extremely small: only 600,000 units sold (inclusive all models).

As the Lumia line was not available in many markets, and as only 2 million were sold, it’s hard to see its impact. The only clear effect was on North America prices and that overall smart devices ASP held the line (down only 2% y/y and up 2% sequentially). The €220 average price for Lumia was well above the €143 for all smart devices sold. Nevertheless, smart device volumes were down 50% to about 12 million units–nearly the same as RIM’s pitiful results.

What these data points add up to is that Nokia cut pricing aggressively while losing volumes. The price cuts were “forced” by conditions and probably were designed to slow the drop in demand. Emerging markets, once Nokia’s core growth area, showed dramatic value contraction due to price pressure. Nokia’s brand value, which normally allows for price premiums regardless of functional value, is clearly evaporating in its last bastions.

  • Roel

    Damage could be worse than reported. Big drops in sales ussually mean big increments in inventory. We still have to see how that inventory is being accounted for. Most probably it will be scraped and further losses will pile up.

  • kankerot

    The regional selling price – how did you work this out? Is it from numbers in the report?

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

      Sales in a region divided by units sold in a region equals price per unit in a region. The third chart is a function of the first two.

      • kankerot

        What I meant to say do they break out volume by region. I can understand the calculation its straight forward.

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

        Yes, they break out volume by region. Page 7, first link in post.

  • UncleAlbert2

    Hardly surprising when Elop took a dump on Symbian and retailers/operators no longer wanted to stock the hardware. If anyone is to blame for the continuing losses, it’s the bungled announcement from Feb11 that destroyed value in the remaining product lines that were needed to sustain the business until an alternative came on stream, and assuming that is Lumia it’s not going to make a difference for at least another 2 quarters.

    Elop and his team appear to be overly surprised by the near total collapse of Symbian since the announcement – surely this is admission of his/their own incompetence?

    If Nokia lose another $1bn+ in Q2 (likely), and maybe Q3 also, their remaining cash pile will be looking pretty non existent. No matter, just sell off the patent war chest to Microsoft for a pittance, that will buy another quarter breathing space.

    Somebody get rid of the idiot in charge before it’s too late…

    • Walt French

      “Hardly surprising when Elop took a dump on Symbian and retailers/operators no longer wanted to stock the hardware.”

      Certainly this is ONE possible explanation. But I have yet to see anybody refute the notion (originally, Horace’s, I’m pretty sure) that Nokia started dying back in 2007 when they ignored the iPhone. Elop wasn’t even at Microsoft then.

      Or maybe it was RIM that was pegged as a dead man walking in 2007, for utterly dismissing a disruptive product. To similar effect, though, except that Nokia had a low-end business that they could’ve assumed safer. Safer, that is, until Android came on the scene and it became obvious that cheap Android phones would naturally stomp all over cheap Nokias. So I’ll give Nokia the benefit of the doubt: they started imploding in 2010 with the Froyo release, an upgrade that effectively doubled the speed of Android java and put Symbian into the “clearly not competitive” bucket.

      I’m not much into this “brand value” logic, since it is obviously so ephemeral. Today, it’s Apple’s, and I hope for their sake that they look at this post and remember that you have to earn your customers’ trust — and business — every day. Nokia’s mistake, way before the current “idiot in charge,” was to get disrupted in a way that few survive.

      • gladiator

        The seeds for Nokia demise set in well before then I suspect with their canning of Hildon o/s and sticking with Symbian. 

        Elop simply accelerated the decline and as Tomi Ahonen puts it he combined the Osbourne effect and Ratner effect into the “Elop effect”.

      • JohnDoey

        Nokia saw iPhone as a niche multimedia phone they could easily copy, not as the replacement mainstream form factor.

      • Svdwal

        At that time there were already hints from Nokia they were working on the Next Big Thing. Smartphones weren’t setting the world on fire, Symbian did not work as an OS to develop for. So they decided to create a new kind of device, an internet tablet. Powered by Linux. GTK as the UI layer. Qt came later, after the iPhone/iPod touch announcement.

  • kankerot

    Just scanned the report.

    Nokia accelerated the introduction of the Lumia devices. —> I suspect Symbian sales were collapsing faster than they expected and so Lumia were rushed to market resulting in problems – L800 battery, L900 connectivity, L800 + L900 camera.

    China sales collapsed 70% –> Chinese operators were prioritising Chinese manufacturers at the low end. Nokia cannot compete against this but their plan is to drive price points even lower. Looks like more pain to come.

    Lumia margins are above 16%. Symbian margins are below 16%. From the conference call.

    Something to chew on. As volumes and value of sales decline – suppliers may start to ask for quicker payment terms from Nokia and buyers may try to buy more on credit and squeeze Nokia. The report indicates this – DSO is up and AP is down.

    Nokai feature phones are being squeezed by lower priced smartphones whilst they are still stuck in the mud with their Lumia sales.

  • Canucker

    There is a Damacles sword over the entire, current Nokia Lumia line regarding its upgradability to Windows Phone 8 software (from WP7.5 Mango). Microsoft is not talking about this but is in a quiet period before their reporting of results. If the current devices are not upgradable, then Nokia will be starting from zero with a whole slew of pissed off people sitting on EOL’d devices they bought only last month or so. I can’t believe they would be so stupid to think people won’t care. In fact, if this is the case (no Windows Phone 8 upgrade), then surely Nokia knew it last year and decided to screw buyers by releasing a stop-gap phone to keep their financials from totally cratering.

    We look at RIM as being badly run but at least they came clean with the lack of compatibility of their BBOS 7 devices (and paid the price).

    • JohnDoey

      We know they knew because they told us. They initially said the first Nokia/Microsoft phone would be Windows 8. Then, everybody said, what, in 18 months? And then they started saying “soon … soon … soon” and shipped this poor 7 phone.

  • https://twitter.com/#!/reda_ek Reda

    I guess we can spin it as evaporating brand value (which is true) but the reality is I believe the lack/availability of products to capture the smartphone demand (in particular at the lower price points).

  • https://twitter.com/#!/reda_ek Reda

    I guess we can spin it as evaporating brand value (which is true) but the reality is I believe the lack/availability of products to capture the smartphone demand (in particular at the lower price points).

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

      The brand evaporation interpretation is with respect to price collapse in markets where Nokia used to be able to draw a premium price. Those are all low end (feature phone) markets.

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

      The brand evaporation interpretation is with respect to price collapse in markets where Nokia used to be able to draw a premium price. Those are all low end (feature phone) markets.

      • https://twitter.com/#!/reda_ek Reda

        Thanks for your reply, but that was my point. If a user is “upgrading” to a smartphone and you don’t have a smartphone to offer, then the only way to incentive another feature phone purchase is to lower the price (by the way, I’m assuming Symbian is considered a feature phone by end user). In the case of China for example, Nokia can only offer a dying platform which many do not consider to be on the same level as Android (i.e. a smartphone).

      • https://twitter.com/#!/reda_ek Reda

        Maybe another way of rephrasing this would be: do you have any data that shows that Chinese users are migrating from a Nokia feature phone to another “equivalent feature phone” from a local Chinese manufacturer

      • https://twitter.com/#!/reda_ek Reda

        Maybe another way of rephrasing this would be: do you have any data that shows that Chinese users are migrating from a Nokia feature phone to another “equivalent feature phone” from a local Chinese manufacturer

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

    So here’s where we stand:

    - Nokia has 6 months of cash and their bonds are rated just above junk. The Lumia is already out and it is no iPhone killer. It isn’t even an Android killer. If Nokia has a phone in the pipeline, they need to bring it out fast. And using a baseball metaphor, the new phone needs to be a home run. It may even need to be a grand slam. I don’t see it happening- Windows Phone 7 has dismal sales numbers. What was going to save them? Nokia. How’s that working out for them? So now, instead of Nokia saving them, it’s going to be Windows 8. Hmm. A conversation for another time.- RIM is in a death spiral. Their developers are abandoning them and they’ve run out of time to transition to QNX.- Android phones are still selling in large numbers but Android has no traction on tablets and Android never had any ambitions on the desktop. That makes them a one-trick pony. A very good trick but one trick nonetheless. No one who wants integration between their phone, their tablet or their computer will buy an Android phone.And with Apple gobbling up 80% of smart phone profits, Android is as much a threat to the iPhone as costume jewelry is a threat to a jewelry store.

    Conclusion: RIM and Nokia may soon drop out of the running and Windows may continue running, but so far back in the race, that no one cares. That only leaves Android and iOS. And iOS has all the money. Not much of a race.

    Question: So whither the smart phone industry? An iOS/Android duopoly with iOS skimming off all the profits? If you were Apple, could you ask for anything better? Android sells the majority of the phones and keeps the regulators off Apple’s back, leaving Apple free to suck up all the profits. Is it possible that the smart phone wars are already over but we simply don’t know it yet?

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

      I think Google has ambitions on the desktop, just not with Android. They’ve certainly been talking about cross-platform cloud services as their core strategy: Android on phones and tablets (ahem), Chromebooks as a tablet/laptop alternative, and Chrome browser on the desktop.

      Personally, I don’t expect this strategy to fly very well; the user experience is hurt by intermittent connectivity, and it tends to be a bit bandwidth-hungy on cell-connected devices (especially if it’s advertising supported). But it may fall into the “good enough” category for some users. My guess is that it will only find serious uptake among users where the critical issue is price (which also makes them bad advertising targets) and/or very low entry effort (all you need to do is get a Google account).

      Nokia doesn’t even have that degree of strategy, though Microsoft does. The question there is: will Microsoft actually do more than try to trade on their old reliable, the Windows desktop monopoly?

      What I’ve been reading about Win 8 suggests they may be trading too much on their brand, while basically splintering their OS market into two basically incompatible versions: Win 8 for their classic corporate market (which will probably *not* want the Metro overlay stuff), and Win RT to compete with the iPad (and maybe iPhone?) in a market Microsoft has no traction in. And they seem to think people will buy Win RT “because it’s Windows”… As far as I can see, this is roughly the same thing they did with WinCE, except now the desktop can run the mobile platform as an overlay, and they claim the whole thing is one unified OS. Maybe the core parts of the kernel are roughly the same, but that’s also true for iOS/Mac OS X.

      Possibly there’s more depth to the RT story than has been revealed yet, but I’m not seeing a whole lot of improvement in Microsoft’s approach as much as a new marketing spin on a split OS approach.

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

        You make a great point about Chrome. I’m embarrassed by the fact that I forgot to mention it. 

        Perhaps Google should be even more embarrassed by the fact that their desktop efforts have been so underwhelming that they made no lasting impression on me.

      • Canucker

        It’s OK, Chrome/ChromeBooks/GoogleTV, etc are all in beta so don’t count. Heck, seems Brin thinks Android is still a beta product. The only  product Google truly cares about is its golden egg, Search. Google is doing everything in its power to protect Search.  I don’t blame them. It’s their source of fusion energy.

      • Canucker

        It’s OK, Chrome/ChromeBooks/GoogleTV, etc are all in beta so don’t count. Heck, seems Brin thinks Android is still a beta product. The only  product Google truly cares about is its golden egg, Search. Google is doing everything in its power to protect Search.  I don’t blame them. It’s their source of fusion energy.

      • Shameer Mulji


         As far as I can see, this is roughly the same thing they did with WinCE, except now the desktop can run the mobile platform as an overlay, and they claim the whole thing is one unified OS.”

        It’s unified in  a sense that Metro Apps will run seamlessly on Win8 tablets and desktops / laptops irregardless if they’re running X86 or ARM processors.  Where the “fragmentation” occurs is when you want to start using classic desktop apps.

      • Kizedek

        Yeah, “in a sense”. That sounds kind of “meh”. I mean, we have widgets on OS X. And if the iOS app developer hasn’t upgraded and expanded his app, you can always run an iPhone or iPod app in the center of your iPad screen — but that’s a fall back, not a “feature”.

        The real test will be if MS puts out a decent ARM tablet version of Office. You need to be able to pick up your document on whatever computer or device you are using and carry on where you left off. If they don’t, all this talk of “unification” is just hot air.

        Apple has separate dedicated desktop and touch tablet versions of:
        Pages, Keynote, Numbers, iPhoto, iMovie, Mail, Safari, iCal, Address Book, iTunes… (am I missing anything?)

        MS is missing the point. They present a superficial or false “unification” as though that is a big deal, and as though they are beating Apple to it; but that sets them up for a fall, because there is still confusion about it and what software users will be able to use in a given situation and what the point is.

        Apple on the other hand celebrate the differences between desktop and touch paradigms of computing and it has shown the way to create unique experiences and interfaces that go beyond desktop computing. MS just wants to cram all experience back into a Windows context because all they have at this point is the brand. Metro, as pretty as it is, in and of itself doesn’t qualify as a new “interface” because it just presents the apps, it isn’t the apps — it’s the equivalent of the sliding pages of app icons on iOS, or Dashboard or Launcher on OS X. WOW!

    • JohnDoey

      I think the smartphone market is dying just like the dumb phone is dying. Pager/Java phones are as dead as candy bar phones. What is doing well is iPods, as usual.

      The fact that analysts consider iPhone to be a smartphone is what keeps many from seeing the big picture. We are in the 11th year of iPod’s domination and there is still no competitor. iPod first ran iTunes and QuickTime, then games, then OS X and Safari and calls and texts and maps and 3rd party apps and still no real competitors.

      So all that is happening is iPods are replacing both feature and smartphones. You can see it easily. With iPad, iPods are replacing PC’s.

  • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

    Since Nokia’s WP phones are considered “Flagship” devices for MS, is there a possibility that MS would keep them running, either through equity purchase or outright acquisition? It would alienate other manufacturers, but then other manufacturers aren’t doing a whole lot to support WP.

    • Canucker

      Their $250 million per quarter transfer payment is a form of non-voting equity, I guess. It’s certainly material to allowing Nokia to snatch a gasp of air every few hours.  There’s not much left to own, unfortunately.

  • http://twitter.com/coold coold

    Hi,
    There are arguments against current Nokia strategy of choosing the Microsoft OS by Ex Nokia employees like Tomi Ahonen. He opines that choosing Meego would have been a better path for Nokia in terms of sales and brand value. Do you think this argument holds merit ?

  • gamburg

    Brilliant analysis as always Horace! 

    Any changes to your projections for Q1, given the sales data released today from Verizon?   

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

      Growth at Verizon seems to be reasonable at 45%. AT&T saw 33% in Q1 last year.

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

        Interesting data in the Verizon earnings call transcript: 6.3M smartphones sold, 3.2M of those were iPhones and 2.1M were 4G. That leaves only 1M non-4G non-iPhone smartphones.

        Given how much Verizon is pushing 4G, I find this very interesting — it looks like non-4G Android has tanked, and I wonder what will happen when the iPhone goes 4G, if Verizon has been pushing people towards 4G phones to fill their new 4G network. Of course, many of the more recent, shiniest Android phones have been 4G, so maybe I shouldn’t read too much into this. But it’s still clear that desire for iPhone dominates the desire for 4G service right now.

        Personally, I don’t see 4G as a compelling feature — geographic (as opposed to population-measured) coverage is still pretty pathetic even in the US, so if you’re not in a major city, forget about 4G for a while. Also, data caps haven’t changed, and the most compelling driver for 4G speeds is stuff that burns your bandwidth cap *very* fast, like high-quality video.

      • http://profiles.yahoo.com/u/IWQ7HIPZ4UJ5YWJB7JSYZ7QXKM watchdog

        I think Verizon has already stopped launching any other non-LTE smartphones. The iPhone 4 and 4S may soon be its last remaining 3G smartphones.

        I’d guess that when Apple releases its next new iPhone with LTE, it will include some software or service that will make LTE seem very compelling. Siri may work better. New 3D maps with voice. navigation. etc.

        We’ll have to wait and see if Apple is able to wrangle the carriers into increasing LTE data caps. My current belief is that they will fail.

      • Jago

        Not all Verizon LTE  devices are smartphones. I believe they include dongles in that 2.1M number.

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

        The transcript I looked up said the LTE “device” number was 2.9M, of which 2.1M were specifically called out as phones. I think the dongles and MiFis are in the 0.8M difference there.

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

        What is it about 3G that is not good enough?

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

        Personally, I’m quite happy on 3G actually — and I was very surprised and pleased with how fast AT&T rolled out 3G to my non-metro area, since when I bought my iPhone 3G, we actually had 3G service in our area. I’m not expecting 4G rollout to be that fast.

        The main compelling case I see for 4G LTE speeds is HD video; current 3G speeds that I see (generally I’d estimate in the 1MB/s ballpark) are probably marginal for anything much above SD video.

        Myself, I’m a low-bandwidth user — I still live inside my 200MB cap. That’s because I don’t stream *any* content to my phone, and I don’t visit a lot of photo-heavy websites either. Mostly I read text-heavy sites on my phone.

        Faster web loading would be nice, but it’s not a killer need for me, at least. I suspect my iPhone is actually the rendering bottleneck at least some of the time, anyway, based on what I see when I’m using my home WiFi connection.

        What bothers me about LTE as a service is that its most compelling use case is something where most customers are going to really rebel at the ultimate pricetag, given current bandwidth caps and costs.

        Let’s look at the largest capped plan I know of: Verizon’s 10GB data. 10GB/month works out to a whopping average rate across the entire month of 31kb/s, approximately. Of course the user isn’t online 24×30, so we can assume something under 10% active time, with the rest of the day offline. That works out to roughly 300kb/s while active — well below typical 3G speeds, much less “4G” or  LTE. With a tiny 1% activity fraction, the user’s average active bandwidth rises to roughly 3Mb/s — good enough for decent, but not HD, video streaming, and now demanding something like 3G+/4G/LTE link rates.  So even with the VZ’s high end $80/month 10GB plan, you could only use mid-range 3G+ link rates for a tiny part of each day (about 14 minutes!) without running off the end of the cap. LTE’s higher data link rates do *nothing* for the customer here….

        From what I’ve read, LTE is more compelling to the telcos as a way of improving cost per Mb and cramming more data into the same piece of congested spectrum. I’m guessing that’s why VZ is pushing it. Of course, they’d be happy if people started adding $100/mo in data overages, too, but I’m guessing from all the early LTE iPad stories that customers will back off the HD video usage in a hurry.

        My expectation is that LTE will mostly matter for a few high-end luxury users who can afford the bandwidth, and for everyone else it will matter for occasional use in special circumstances, such special personal events or situations, plus some business uses (the obvious one being news reporting).

        I don’t think the spectrum will support more than a handful of users at a time in one cell area doing HD video streaming, and I don’t think this will change unless there’s a disruptive new technology well beyond LTE. So I don’t see the telco prices changing a whole lot anytime soon.

      • Russ Johnson

        Horace
        Do we know that Micro soft is not using NOKIA to get their windows 8 program off the ground and then once launched license the software to many other manufacturers. Wou
        Dn’t that make the deal with NOKIA make more sense? They might be break even with Nokia, but make a ton of money selling the software to others once it has proven itself.
        I guess what I am wondering is whether or not the deal with Nokia is in any way exclusive of others or just a stepping stone for Microsoft to get a foothold in the mobile market.

        Thakns for your article
        Russ J

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

        Microsoft and Nokia are both in agreement that they want to see the platform be widely licensed. Elop himself said he dedicated himself to the success of the platform and that meant the success of licensing it to his competitors.

  • John Sails

    One thing that surprises me is that Microsoft has not been affected yet by Nokia gloomy outlook, in terms of stock price or analysts comments , considering that if Nokia fails with its Windows Phone bet, they will be left without any significant manufacturer, and consequently  the launch of WP 8 will be also affected.

    • ChKen

      Don’t be surprised, Microsoft’s share price has been defying logic for a while.

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

      I believe Microsoft’s share price already reflects zero value from mobile.

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

      I believe Microsoft’s share price already reflects zero value from mobile.

      • lenin lukose

        Reallty is the so called analysts are predicting the death of Microsoft ever since the company was formed. Poor guys.

        Even a kid know once the Window 8 comes everyone will switch to it. There is no alternative there. Regarding Windows Phone 8 it will take time, but in two years they would capture a lions share. One need not study rocket science to predict this !!!!

      • unhinged

        No, but one would need to be higher than a rocket to believe it without any supporting evidence.

      • lenin lukose

        yes ‘one’ would need evidence. Only you !!! Rest know what is going to happen. Such dreams are floated by disgruntled employees fearing of job loss, otherwise everyone knows the future !!!!

  • http://twitter.com/surgeios surgeios

    How long before MS buys Nokia to fully battle Apple and the Google-Moto software and hardware manufacturers? Seems like the only way to have full control over their products and actually push them out?

  • http://twitter.com/surgeios surgeios

    How long before MS buys Nokia to fully battle Apple and the Google-Moto software and hardware manufacturers? Seems like the only way to have full control over their products and actually push them out?

    • Canucker

      Microsoft already owns Nokia in everything except title. No need to add the liability to Microsofts balance sheet through acquisition. A leashed dog has more degrees of freedom than Nokia.

    • JohnDoey

      When the first Windows mobile PC’s (ARM tablets) fail, Microsoft will panic. That is a time to watch for a hardware deal. Consumers absolutely will not buy artificially split hardware/software products if given a choice. They have been burned 10 times by now by that BS. Windows Ultimate on DVD and iPad 2 have the same retail price and only one works out of the box.

  • JohnDoey

    Their brand represents the best in antique mobile phones. They need to make it represent something else.

  • ChKen

    Just got back from two weeks in China, specifically, Shanghai, and Zhengzhou/Kaifeng. I have to say I was pretty shocked not to be able to identify one Nokia phone being used. I did see one instance of a QWERTY phone being used, but could not tell if it was Nokia, Blackberry or some other phone. Only a few short years ago, Nokia dominated in China, so the change is rather shocking, but the above charts do indicate the massive drop off in China.

    I would also point out that Shanghai is the NYC of China, so that trends there trickle out to other cities. So, that while I’m sure Nokia phones, both feature and smart, are being sold in China, the city where the tastemakers and trends start, Shanghai, it is increasingly hard to find a Nokia phone. It’s not looking very good for them. I didn’t see any Blackberries either, but Blackberry has never been a big seller in China, as far as I can tell.

    As far as iPhones and Android were concerned, I guesstimated that over half of the phones I saw on a lot of travel about Shanghai’s subways were iPhones. A surprising number of college and highschool-aged kids were carrying iPhones. Then again, Shanghai is the richest city in China. I didn’t see any fake iPhones. The most popular Android manufacturer I saw was HTC, not Samsung. Also, I didn’t see any smartphones over 4″ in size.

    Anyhow those were my unscientific observations. 

  • http://profiles.yahoo.com/u/IWQ7HIPZ4UJ5YWJB7JSYZ7QXKM watchdog

    In summary for smartphones, Nokia was already pushed out of the top end of the market by iPhone/Android by 2011, and now is being squeezed out of the bottom end of the market (where most of the non-smartphone-consuming users now enter), by the many cheap Android or Android-forked smartphones, especially in China. If and when these Chinese vendors expand further overseas, they will eat up even more market share.

    iPhone and Galaxy S II have dominated the top end of the market – reaching all the way down to consumers that can only “afford” free-with-subsidy or ~$350-400-without-subsidy.  There seems to still be much competition in the $150-350-without-subsidy market, though Samsung has a leading presence with both Android and Bada. Will Nokia be able to establish itself in this segment before Huawei and ZTE?  Will Apple move further down market into the $250-350-with-subsidy market before the top-end gets saturated? 

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  • http://twitter.com/RobertCandelori Robert Candelori

    I think Nokia got caught out by the unexpected collapse of Symbian sales – I suppose they were relying on decent volume to carry the company while Lumia devices reached broad market availability.

    The problem is that Lumia is still in ramp-up and only hit plenty of markets this month after selected launch between November and March, while Symbian devices have simply fallen through the floor, as evidenced by the 50% decline in volume.

    The bottom line, though, is that it is still early days. We need to wait a couple of more quarters before judging the success or otherwise of the Windows Phone strategy. Signs in the United States are promising, but I have to say that Nokia has not replicated it’s AT&T marketing approach in countries like Australia (where I live) – i.e. strong in-store marketing, giving devices/incentives to sales people etc. Had they done so here and in Europe (which have a past of strong Nokia brand loyalty), the Lumia launch would not have been quite as ‘mixed’. Nokia has advertised a bit, but the in-store carrier efforts have been meagre in my experience. 

    Plenty of commentators have been arguing that Nokia should have switched to Android instead, or kept ploughing away with Meego, but the reality is that the numbers would have been little different I would guess. A platform switch to Android would have taken just as much time to get to market as Windows Phone, and Symbian sales would still have collapsed as a result of any announcement. Plus, Android would consign Nokia to further price pressures as it would have little to differentiate other than on hardware design. Microsoft is paying them 250 million euros per quarter, so it’s a fairly lucrative deal that Google wasn’t prepared to offer. Staying with Meego would have consigned Nokia to a death spiral regardless because it has no presence anywhere and no developer support – it’s just more of the same, like RIM is doing now with BBX. By the time Meego would actually get to new devices and into the market, it would be too little too late. 

    That all being said, Microsoft has moved slower than we all thought in getting Windows Phone to feature parity. Even with Mango, there are notable gaps and we’re yet to hear about the upgrade strategy for existing devices with respect to Windows Phone 8. Nokia to their credit is plugging the holes where feasible with their own apps & utilities. But, Microsoft has skin in the game and is prepared to spend big to make sure this deal works – they haven’t got a choice this time. For Microsoft, Nokia is too big to fail.

    • Shameer Mulji


       Even with Mango, there are notable gaps and we’re yet to hear about the upgrade strategy for existing devices with respect to Windows Phone 8.”

      There is no guarantee that WP8 will work on current and older Windows Phones.  The only guarantee MS is making is that apps designed for Mango will work on WP8, beyond that nothing else.

      Anybody wanting to purchase a Windows Phone is better off waiting until WP8 is out and running on phones with multi-core processors.  It’s only a matter of waiting six to seven months.

  • rupertstubbs

    It would be interesting to understand more about the importance of the platform ecosystems in purchasing decisions globally. 

    My suspicion is that it’s not as critical as it’s made out to be – you can have an iPhone and a PC, mostly working in Gmail and GoogleDocs. The only area where Apple is dominant is in tablets, and even then there are really no fundamental advantages in using Macs with them. 

    I also suspect that MicroNok are hoping that Win 8 will bind PCs, Tablets and Phones together in a virtuous knot. But they may not have got it together quickly enough for that to develop.

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  • Tim in the Highlands

    Ahonen points out that the Lumia average selling price is grossly distorted as it includes the Microsoft support payment – if you take this out their smartphone ASP has been monotonically decreasing. Suggest you put footnote in the article to this effect

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

      Interesting. It should also be noted that the ASP of the iPhone includes Google’s payments for search placement (also known as traffic acquisition costs or TAC). We don’t know the amount but it could be several dollars per phone.

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  • Jaggudada

    what about LTA. You haven’t elaborated how Nokia bucked the trend here?

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

      What do you mean?

    • seth_ze

      I’m guessing by LTA you mean Latin America. Firstly I don’t think that Nokia really bucked anything here. Their revenues and volumes were already low compared to other markets, so the smaller declines here is just because they had less far to fall. My suspicion is that White-boxers, ZTE and Samsung have not really focussed on this market yet because there is far more money to be made in China.

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