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Nokia says the fightback starts now. Oh Really?

2010.Realization that iPhone is a threat from new dimensions (user experience). Planning begins on reshaping the software base as a market-driven (not technology-driven) asset (5 year cycle). Apple begins to be evaluated as a competitor in devices and services, although still not compliant with current market definitions.

via asymco | Assessing Nokia’s Competitive Response.

I wrote these words a year ago based on observations made three years ago.  My expectation was and still is that Nokia does not quite understand what they are competing for and what the competition actually consists of.

On Friday Anssi Vanjoki wrote that “The fightback starts now.” He seems to contradict my timeline which has the “fightback” starting in 2014.

How do we settle this?  Let’s turn to the claims:

In the article he says they sell 2 in 5 smartphones on the planet, yet, he turns around and says that Nokia is now the challenger in that space.  He says Symbian is the way forward on smartphones, yet he says MeeGo is the way forward on ‘connected devices’. He writes that he is obsessed with getting Nokia to being number one in high-end devices (presumably by volume or sales or profit) but a recent survey by third-party tool developer Appcelerator shows 90 percent of developers surveyed said they were interested in the iPhone while 81 percent expressed interest in Android; for Symbian and MeeGo, the related figures were only 15 percent and 11 percent, respectively.

I’m not ready to revise my timeline. The fightback begins in 2014.

YLE: Nokia's smartphone share crumbles in Finland

Roughly translated:

Nokia is rapidly losing share in the smartphone market in Finland. The iPhone is becoming a large part of the market.  Sales grew in the first quarter but a growing slice of revenues is going to Nokia’s competition.  iPhone share of the Finnish smartphone market has not been previously disclosed but Sonera Sales Director Juha Koivuniuemi reveals it to be more than 20 percent.

Nokian asema murenee huippupuhelimissa myös Suomessa | Talous ja politiikka | YLE Uutiset |

I should mention that I had previously estimated iPhone share at 17% in January.

Reminds me of another phenomenon: the iPhone in Japan.

Nokia: Throwing in the towel

“We have long maintained that the company’s ponderous corporate culture would eventually find its footing, but with competitors attacking fiercely at both the low and high end, deterioration in its core European market, and a lengthening timeline for Symbian^3, which may not live up to expectations anyhow, shares will plunge well below recession lows,” he warns.

via Nokia: Charter’s Snyder, Long-Time Bull, Throws In The Towel – Tech Trader Daily –

But at least Nokia management can take comfort in having a higher P/E ratio than Apple.

iPhone on top down under

The most impressive number for us is the change in units shipped. For example, leader Nokia held 66.6% of the marketshare in Q1 of ’09, and 45.2% in Q2 for a 7% change in units shipped. Meanwhile, Apple held 10.2% in Q1 ’09 and 40.3% in Q1, ’10 for a 532.1% change in units shipped.

Nokia bullish on N900: sales substantially above expectations

A spokesman for Nokia, the world’s top cellphone maker, declined to comment on the sales number, saying the company was pleased with sales, but an executive was more bullish.

“Sales have substantially exceeded expectations,” Alberto Torres, head of Nokia’s solutions business, told the Open Mobile Summit trade conference in London this week.

via Nokia top model N900 sales below 100,000: Gartner | Reuters.

If Alberto Torres’ expectation for a flagship product is substantially less than 100k for a launch quarter, I wonder what disappoints him.

40 percent of US iPhones are sold to enterprises

Four out of 10 sales of the iPhone are made to enterprise users. When the iPhone came out, what most people heard in the first year from ‘07 to ‘08 was oh my God, it’s not BlackBerry secure. This is not going to work on the enterprise space.

At the end of the day, it’s just software. That’s all it is. And by the time the 3G came out in ‘08 they had solved about 80% of the security issues.

So enterprises today view the iPhone as a mobile computer. It happens to have a voice application on it.

via AT&T exec: 4 out of 10 of our iPhone sales to enterprises | ZDNet.

Compare Apple’s approach to that of Nokia:

Who benefits from the shift from business to consumer drivers for technology?

Consumer tastes have overtaken the needs of business as the leading force shaping technology.

via New King of Technology – Apple Overtakes Microsoft –

Why is it that other “consumer-oriented” companies like Sony, Nokia and Phillips have not benefitted from this shift?  As far as I can tell they are no better off (and sometimes quite a lot worse off) than Microsoft has been during this transition.

Clearly, although the paradigm did shift to consumers, simply being consumer focused is not enough to benefit from this shift.

Instant messaging: AFK

In 2007, 14% of Britons’ online time was spent on IM, according to the UK Online Measurement company – but that has fallen to just 5%, the firm says, basing its findings on the habits of a panel of 40,000 computer users.

The study was released shortly after AOL sold its ICQ instant messaging service $187.5m (£124m) – less than half what the company paid for it in 1998.

And in September 2009, a survey of internet use by the New York-based Online Publishers Association found that the amount of time spent by surfers on traditional communications tools, including IM and e-mail, had declined by 8% since 2003.

via BBC News – Instant messaging: This conversation is terminated.

In other news today Yahoo and Nokia announced a worldwide partnership. Yahoo will provide e-mail and chat services on Nokia phones. The services will be co-branded.


Plus ça change, plus c'est la même chose

And so this morning, the handset maker announced another sweeping overhaul of its management structure, its second reorganization in less than a year.

via Nokia Reorgs Evidently Biannual | John Paczkowski | Digital Daily | AllThingsD.

Why Nokia's board backed the CEO in a stay-the-course strategy

Nokia chairman Jorma Ollila said the company’s management is fully supported by the board

via Nokia board backs CEO, new device strategy | Electronista.

In my assessment of Nokia’s competitive response to the mobile computing disruption I had anticipated an effective re-organziation to begin in 2013, so it came as no surprise that a stay-the-course plan is still being supported at this stage.

This is to be expected because a disruption, by definition, discourages a symmetric response from the incumbents.  Indeed, management would face serious scrutiny and probable dismissal if they did address the challenge head on. A symmetric response would begin with a declaration that the entire asset base of the company is a sunk cost to be written off.  That would include its products, distribution network, development processes, resources and priorities.  Such a response can only come about from a near-death experience.

You can certainly see the dilemma: It would be absurd for management to declare that their top rank position in the mobile phone market is an undesirable situation to be in.  It would be even more absurd if they suggested scrapping their entire world-leading volume business to re-focus on a new business–doing basically what Motorola has done when they were facing oblivion.  The chances are, however, that this is precisely what needs to be done, and the sooner the better.

So being sensible is the path always chosen.  Being bat-shit crazy is not an endorsable strategy.

Essentially, management is paid and incentivized to protect an eroding asset, not to destroy and replace it.