Nokia’s fall from grace: The Background Story

Yesterday, Tomi Ahonen posted yet another magnum opus chronicling Nokia under Olli-Pekka Kallasvuo’s reign. It makes for absolutely compelling reading, especially — and I mean especially — if you’re drinking the Apple Koolaid, or if you are curious as to how Nokia was once regarded as an impregnable super-brand and now is effectively relegated to bottom-feeder status. Almost everyone in the mobile industry (even if they’re new to it) knows it wasn’t always this way.

Tomi’s piece is most definitely not a defence of Nokia, however it sets the record straight on a number of key points that the rest of the market [or media] simply does not appear recognise.

I tweeted the post — but I also asked Tomi for permission to republish the post in full here in order to make sure it goes out to the largest amount of readers. I know many of the executives in the audience don’t have time for Twitter. Thank you for permission, Tomi.

I strongly recommend getting a cup of coffee to read along with this one, or saving it for the evening commute. It’s a long one, but I hope you’ll find it engrossing.

Right then, let us begin…

Over to Tomi.

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Wall Street is a Cruel Mistress. The business press are buzzing with the rumor that Nokia is searching for a replacement for Olli-Pekka Kallasvuo (OPK) their CEO who has only run the company for 4 years following Jorma Ollila who is now the Chairman.

Nokia is the world’s bestselling mobile phone brand – selling more mobile phones as numbers 2 and 3 combined. Nokia is also the world’s largest smartphone maker – selling more smartphones than numbers 2 and 3 combined. Nokia is profitable where most rivals are struggling to make profits. None of Nokia’s big 5 global handset makers have managed to migrate customers to smartphones in meaningful ways, while Nokia’s market share in smartphones is better than its market share in dumbphones. By all measures Nokia is executing well. Why is Wall Street demanding his head on a plate?

I think its a combination of 6 factors. There is Apple’s iPhone of course. Then there is the question of Nokia’s profits. There is one particular Nokia phone model, the N97. There is the smartphone operating system Symbian. There is OPK’s promise to investors that he would restore Nokia’s market share in the US market. And lastly – but very importantly – there is the relative lack of sophistication and knowledge of the US based analysts who are far more familiar with the easier and simpler PC industry than the complex mobile industry. This is another very long article, so please bookmark the page and read it when you have good time. Grab a cup of coffee to go with it.

WHAT DID OPK INHERIT

OPK took over from Ollila to run Nokia in the summer of 2006, four years ago. What was the mobile world like back then? Nokia was the world’s bestselling mobile phone maker. For the full year 2005 they had achieved 35% market share. Their big rival was Motorola who was nearing 20% market share with their surprise hit phone ‘Razr’ and many analysts were accusing Nokia of having missed the boat on flip phone design – thinking the world would soon all have Razr look-alike phones (how quaint, isn’t it. Today most phones are still candybar phones – the Nokia staple – even Apple’s iPhone is a candybar form factor, not a flip phone, as are most Blackberries and most Androids..).

In addition to Motorola’s Razr surge, the two big trends in mobile phones in 2006 were 3G phones and musicphones – and in both, Nokia was accused of having falled seriously behind. SonyEricsson was launching Walkman phones, Motorola its Rokr. And in 3G Nokia had only about 25% market share vs 35% in all phones where the South Koreans LG and Samsung had taken a surprising early lead.

In 2006 the tech world was not very impressed by ‘smartphones’ – the category of superphones that Nokia had invented exactly 10 years before – and most analysts felt that the very expensive smartphones would only sell to enterprise/corporate users with business-oriented smartphones like the Blackberry and various Palm, Windows Mobile etc devices. US analysts didn’t even believe in mobile data services in 2006, as the USA was the last country to discover SMS text messaging and didn’t really believe in SMS until the Obama Presidential campaign of 2008. And here was Nokia with its crazy notions of expanding the expensive smartphone market to consumers – the N-Series – with the cameras and music players and user-installed applications and video recording and forward-facing second cameras for 3G videocalls and internet surfing and picture messaging – all that was seen as a dangerous and costly gamble by many analysts.

But Nokia believed in its views. It had set up the Symbian partnership with its rivals (something we don’t see Apple or Microsoft or RIM even trying today) where all of Nokia’s biggest rivals – Motorola, SonyEricsson, Samsung, Panasonic etc were invited to join as part of the Symbian family – as co-owners! By 2005 there were 60 different smartphones manufactured by ten major phone makers using the Symbian OS, which powered almost 7 out of 10 smartphones. Nokia was the biggest minority shareholder in Symbian – but only minority, it couldn’t dictate Symbian development. The OS was being developed to meet the varying demands of the partners, including Motorola asking for improvements based on the laggard USA market, to NTT DoCoMo asking for improvements based on the world-leading Japanese mobile market. Nokia was there in that mess, but determined to keep it a partnership that helps all, rather than having the mobile phone industry fall into an all-out war of a dozen duelling smartphone operating systems and immense fragmentation.

So when OPK took over, Symbian powered most smartphones in the world. Nokia’s market share in smartphones was a fraction of that, obviously, being 48% for the full year 2006. Microsoft Windows Mobile based smartphones were the second biggest platform behind Symbian with 14%. RIM’s Blackberry had 8% of the market and Motorola who made both Symbian and Windows Mobile smartphones had 6%. Previous global number 2 smartphone maker Palm had fallen to 5%. The total worldwide smartphone market in 2006 was only 80 million handsets, about 8% of all mobile phones sold. Of the world’s Global Fortune 500 brands, only 7 were involved in manufacturing or selling smartphones, so the competition was not very fierce.

ENTER APPLE

The first thing that happened during OPK’s reign and changed ‘everything’ in the phones market was Apple entering the phones space, with Steve Jobs demonstrating his prototype iPhone in January of 2007. OPK had only had half a year in control, when the whole mobile world changed forever. And all the rules changed too.

Up to 2007, the best marketing machine in mobile telecoms had been Nokia, hands down. It was loved by the tech media and had the best customer loyalty in the world. But Apple is far better than Nokia in marketing. And Apple’s customer loyalty is legendary. A new kid was in town. Steve Jobs is the master showman even back home in the USA, where marketing and presentation is given far more relevance than in OPK’s home country of Finland, where you are expected to conform to the rules and stick to the facts. Not to brag, not to show off.

The iPhone 2G was not the best phone in the world. Apple has since made 15 major technical improvements to the original, over the past 3 years, and Apple itself has celebrated those 15 changes as radical and important. Nokia’s flagship N95 which was being sold before the iPhone 2G even launched in 2007, had 14 of those 15 technical abilities as standard features. And the N95 had tons more features and abilities that even the latest iPhone 4 does not support. By every reasonable comparison, the N95 was the superior phone in 2007. Except for one very visible drawback – the N95 didn’t have a touch screen. And most head-to-head comparisons of smartphones by international reviewers in 2007 found that the N95 bested the iPhone 2G.

But somehow with Apple, the facts no longer matter. The iPhone was the ultimate best phone ever – according to Steve Jobs – and because Steve Jobs says so, that started to become the storyline. The truth didn’t matter. That the iPhone 2G was not even a proper ‘smartphone’ – it didn’t even offer users the ability to install apps (this ability came a year later) and didn’t support industry standards like MMS and even today doesn’t support Adobe Flash. The iPhone 2G was not a 3G device, making it instantly obsolete for example for the Japanese market and didn’t have such abilities as GPS and stereo bluetooth. But that didn’t matter. If your smartphone didn’t have the one cool thing the iPhone did – a touch screen – it seemed that your phone was old-fashioned.

Nokia was manufacturing over 50 phone models when OPK took over. The iPhone was outrageously expensive and with that price point, it could ‘afford’ to install a touch screen. Nokia sold a wide range from superphones more expensive than the iPhone (yes thats true) to far cheaper dumbphones with basic T9 keypads. It would have been prohibitively expensive to abandon the existing product lines of its existing 50 or so phone models at Nokia in 2007 and migrate them all with reckless abandon to touch screens (and a dumb move too – even today in 2010, more QWERTY based texting-oriented phones are sold than touch screen phones; and more basic T9 keypad based phones than all QWERTY and touch screen phones put together).

But it was not only about the phone with Apple, i.e. the hardware. And no, I’m not talking about the UI or the apps or the App Store or the iOS eco-system. Something far more devastating changed with Apple’s entry to phones. For Nokia, someone changed the rules of the game in January 2007 and didn’t bother to tell Nokia. Because Apple was in the game, now anything Steve Jobs said was the word from god. And no matter how severely deficient the first iPhone models were, because they were Apple phones, that meant they were the world’s ‘leading’ phones. And if you didn’t match the current iPhone model with a potential ‘iPhone killer’ – then you were obsolete. Suddenly in 2007 Wall Street lost its respect for facts, and started to believe Apple’s version of the story, ignoring the truth. And most analysts who would study the iPhone would come from the PC side of the tech industry, far more familiar with the relatively simple and easy PC industry than the remarkably complex mobile telecoms industry. Those PC industry experts were very familiar with Apple’s accolades and could see in the iPhone the long-held promise of the pocket PC. Again it didn’t matter that Nokia was the first phone maker to boldly call its smartphone a ‘multimedia computer’ – the truth no longer mattered in 2007, when all stories were now spun by Apple’s PR machine. Besides, with Apple’s touch screen, the ‘pocket PC’ metaphor seemed far more compelling than with Nokia’s early smartphones with keypad based navigation.

I do not mean this as a criticism of Apple, I mean it with admiration. Apple are masters at marketing. They know how to wow the investors and Wall Street. They know how to play THAT game. So for example, RIM has sold more Blackberries every single quarter since Apple launched. The past 3 quarters when Apple’s iPhone unit sales have been flat or declining, and the iPhone market share has shrunk from 17% to 14%, in the same time Blackberry’s unit sales have grown and its market share has grown. How does Wall Street report the story? They keep repeating the factually opposite from the truth story – they keep repeating the myth that RIM is losing market share to Apple’s iPhone. The exact opposite is the truth. Apple is losing market share to RIM! But with Apple, Wall Street is hypnotized. Facts no longer matter, it is what Apple says.

So suddenly the rules of the game changed. Now its the ultimate game of hype and spin-the-story. And Nokia was Finnish to a fault, being the ‘stick to the truth’ very honest and open story, any problems too, bring them into the open and volunteer as much truth as possible. This had been a good strategy back in the Era Before the iPhone – when the rivals were other very engineering oriented, facts oriented rivals like Motorola, SonyEricsson, Samsung etc. Now there was a new kid who seemed to play ‘unfair’ and start to distort the market opinion with all sorts of bizarre claims and facts and ‘innovations’ which certainly were not invented by Apple and often were simply established industry standards. Look how Apple handled the Death Grip problem. First, it denied the problem and told customers to hold the phone differently. Then Apple said there is no hardware problem, there was a software bug in the display of the phone. Only after Consumer Reports verified the problem, did Apple do a formal acknowledgement of the issue, but then, Apple blamed the press (for supposedly spreading a false story) and then took the child’s excuse – everybody else is doing it too (which turned out not to be true) and then finally said the problem is miniscule (again not true). This is the modern spin-doctor way to handle a crisis. That is the Apple Way. Fight the story, control the story, deny it all, change the story, blame the reporters, blame the rivals. Spin doctors that Donald Rumsfeld and Dick Cheney would be proud of.

When facing a rival like Apple, what Nokia needed from a CEO, was a showman and a brawler. OPK is not that showman and its not in Nokia’s ethos to go out and fight. What Nokia needed was over-hype and super-celebration of its huge legacy of achievements and every possible new tidbit it was doing. Nokia has a trophy cabinet full of innovations and patents and true world leadership it could celebrate with every major phone launch, but Nokia doesn’t do that well. It is understated. It is the wrong rival to Apple, Nokia can’t win in a marketing-spin game. Not with OPK in charge. That is not his style (nor the style of previous CEO Ollila either). It is anathema to Finnish management style. They want to ‘do it’ rather than ‘say it’. They want actions to speak rather than words. They believe in cooperation, not competition. They want to work with their rivals, not fight with them in public like Apple does with Adobe and Microsoft and now HTC and Samsung etc. And then Nokia are bewildered why is Apple getting all the accolades for deploying solutions and systems that are industry standards and Nokia has had on its smartphones for years already.

This was a total change and it hit OPK and his team hard. There was an unreal aspect to the coverage of the phones market, in particular the smartphones market, after the iPhone launched. Nothing was the same, and still up till today, Nokia has not adjusted to the press relations and analyst relations and investor relations side of the new world order in the iPhone Era.

Consider how unfair this issue is. Apple has today 2% of total phone market share. Nokia has 34%. Apple has 14% market share in smartphones – and has lost market share now for 3 straight quarters. Nokia has 41% market share in smartphones and has been growing market share in the same period. Of Apple’s flagship phone the iPhone 4 – with its 5 major improvements now in 2010 – Nokia has had 4 of those in its phones long before 2007. Why is Apple given any credit as the ‘leader’ and Nokia accused as ‘having lost the lead’?

But Nokia doesn’t know how to sell itself to Wall Street. Not to match Apple’s amazing PR spin machine and Steve Jobs’s stage presense.

Apple yes is the most profitable phone maker (it is the most profitable tech company too) but it is 100% certain that Apple could not sustain that level of profits if it sold 20% of the world’s phones. That is classic ‘niche’ luxury bracket market share profits – its what Porsche does in cars. Nokia is not a Porsche, its more like Toyota. Nokia’s motto is not ‘connecting rich people of the West’. Nokia is connecting people. Period. All people including the poor in Africa. Selling new phones as cheap as 25 dollars, unsubsidised. Selling 3G smartphones as cheap as 100 dollars, unsubsidised. Thats one sixth the price of an iPhone, yet its a 3G smartphone. And Nokia is still doing it profitably. It is patently unfair to do any financial comparisons of Apple’s niche smartphones-only luxury goods strategy to Nokia’s mass market strategy.
Apple will never, ever, have 20% of the global mobile phone handset market. Never. It cannot hope to have it, why? Because Apple has a huge investment in its design and look and feel, which is expensive to maintain with its expensive California based designers. Apple’s price points are far above the industry average in anything it does. Look at the Mac line of PCs. The Macs have always been premium priced PCs. The Macintosh sells in the 3% or 4% market share globally. That is what Apple is good at. The Mac has never had even 15% of personal computers. Never, not one quarter in 26 years since launch. That is Apple. It is a luxury premium design brand. That is not a true rival to Nokia! And if Nokia abandoned its 35% market share in the mass market, and put all its effort to win some share in the small 4% luxury bracket where Apple currently is, I’d get a shotgun and go shoot the CEO myself. No, Nokia has been doing the right strategy (for a mass market brand). It has had to manage its global dumbphone market share (profitably) while migrating its customers to smartphones (profitably) and has been able to do that, where Motorola, Samsung, SonyEricsson and LG have been spectacularly unable to do that.

But now that Apple is in the game, and as Apple is the master at stealing the spotlight, suddenly Nokia is being compared to Apple! How unfair is that? Its like comparing Toyota’s total range of cars and their average engine performance, to the performance of the Porsche! Giving no credit that some Toyotas have four doors or big cargo ability or diesel engines, etc. Just on Porsche’s particular one advantage! Come on, Toyota sells taxis and family sedans and rugged off-road vehicles and cheap city cars and luxury sedans and hybrid eco-cars and minivans – and some sports cars too. Porsche cannot offer anything in almost any of those other categories. Porsche is pure performance at luxury niche prices, profits and markets. Toyota cannot be compared to Porsche, not fairly. Compare Porsche to Ferrari or Aston Martin, and compare Toyota to Ford or VW or Nissan. But no, Nokia finds itself now constantly compared to Apple.

And then that bizarre and cruel twist of the facts. While Nokia’s market share in smartphones is growing and Apple’s is declining, the storyline for nine months now and counting, has been from Wall Street – that Nokia is ‘losing market share to Apple’s iPhone’. This is absolutely categorically factually untrue! For the past year the exact opposite has been happening. Apple’s market share peaked in Q3 of 2009 and is in decline. Nokia has turned its market share decline back into growth. And with any other tech brand as Nokia’s rival, there would be sanity with the tech reporters and business press. But its Apple and their hypnotic way to change the perception of reality.

PROFITS

Which brings us to OPK and Nokia profits. When he took over, Nokia had 21% profit margins. Last quarter (Q1) Nokia reported 4% profit margins. During his tenure Nokia reported for the first time in more than a decade, a quarter of making losses (last year). And twice this year Nokia has already issued profit warnings. This is a very valid Nokia investor concern and the CEO has to take very strong leadership in profits.

So again, the nemesis. Apple makes ever bigger profits one quarter after the next. But Nokia is in three businesses, in the ‘dumbphones’ business, in the ‘smartphones’ business and in the networks business. In the dumbphones business, since OPK took over, almost for the full 4 years Motorola has reported losses. SonyEricsson has reported losses about half the time. LG has reported losses several quarters and even Samsung reported losses a few times. Nokia’s handset business has never reported a loss! Does Nokia master its core business? Yes. Does it get credit for it? No, because a luxury niche smartphones-only maker called Apple makes tons of profits.

In smartphones Nokia has been making profits too. Not all its rivals do that. Yes, Apple and RIM make profits, but HTC and Palm have been making many quarters of losses, Palm did them for three years straight until bought out by HP. The smartphones business is no guarantee to make money – witness how quickly Google pulled out of the market with its Nexus One ‘superphone’ and even more astonishingly Microsoft, who pulled the plug on its own smartphone ‘Kin’ project in only 6 weeks. Nokia keeps making profits in the smartphones space – a market it invented and it utterly dominates – selling more smartphones than Apple and RIM combined. But because Apple makes massive profits, and Nokia only modest profits – Nokia is punished. It is not compared to the other major handset makers like SonyEricsson, LG and Motorola who have struggled deeply in attempting to shift to smartphones.

In networks the story is truly bleak. Ericsson has been barely profitable countless quarters and making lossses in many more. Alcatel has reported many quarters of losses. Canadian Nortel and American Lucent were making losses and were sold. Motorola’s networks division was deeply in the red until sold to NokiaSiemens Networks now. But Nokia’s networks division has been on the threshold, making mostly slim profits, but falling into losses several quarters. Is it fair to compare Nokia’s brave and mostly successful performance in this deeply unprofitable industry against Apple’s niche smartphones performance? I think not. But networks do about a third of Nokia’s total business and is a heavy drag on its profitability. To put it another way, the handsets business (dumbphones and smartphones) are far more profitable than Nokia’s corporate profitability. But the networks unit has hurt Nokia’s corporate performance.

Is that the responsibility of the CEO? Yes, definitely. Is it something OPK could have done and fixed? Yes, he could have sold the unit or spun it off. Or he could have instituted severe staff cuts to reduce costs. Or he could have increased networks division prices trading NokiaSiemens Networks market share for better profits. Yes OPK could have been a more ruthless CEO and made painful cuts and forced the networks unit into better profitability, helping Nokia’s bottom line immensely. He didn’t do that. He was a more ‘Finnish’ CEO respecting the individuals and giving the division time. Was he too soft? Its a tough call, but this is management difference very strongly between US and European managements. OPK is definitely a European manager.

SYMBIAN

Then we have the Symbian operating system. The analysts seem to hate Symbian. There are continued calls for Nokia to abandon Symbian and adopt Google’s Android. There were many who suggested Nokia should have bought Palm to get its operating system and replace Symbian with Palm.

Here life is utterly cruel to OPK, to Nokia and to Symbian. A decade earlier, Nokia could have very easily developed its own OS for use with only Nokia branded smartphones. That would have been the better thing for Nokia but not for the industry. Nokia has believed in open systems, partnering and industry standards (where Apple, RIM, Microsoft and Palm have all been pursuing proprietary solutions that create industry fragmentation). So rather than create only its own OS, Nokia invited its rivals to join in the Symbian Partnership: Motorola, Sony, Ericsson, Panasonic, Samsung, etc. Who does this? Especially where Nokia had invented the smartphone and had a huge lead in smartphones, and Nokia very much in public said it believed that in the future the smartphone market would be enormous? Why ‘gift’ this advantage to rivals? But that is the Nokia Way. They believe in cooperation with rivals, especially on standards. Nokia wanted a global standard OS. They had 10 handset manufacturers providing Symbian phones by the time OPK took over Nokia in 2006.

So what did Nokia and Symbian do when the iPhone appeared? They first started to develop a touch-screen oriented Symbian evolution. Note that if you compare the ‘advanced’ Apple OS/X or iOS of the iPhone 2G in 2007, Symbian was MILES ahead of it in 2007, in everything else except touch interface (and please please remember, even today in 2010, the majority of all phones do not use touch screens, not even smartphones). In 2007 Symbian supported apps (Apple added app support in 2008); cut-and-paste (Apple added in 2009); folders and multi-tasking (Apple added in 2010). Even today, Apple doesn’t support Adobe Flash, the internet industry standard which Symbian has supported for most of the decade. Why is Symbian ‘accused’ of being old fashioned and Apple’s iPhone OS ‘celebrated’ as being modern?

But the Apple interface looked futuristic, and its touch interface was ‘intuitive’ and definitely modern. Far more modern than keypad navigation. But this is only one aspect of the OS. By any other measures, Symbian was ahead in 2007. But this was now the Era of Apple’s iPhone, and nothing mattered except Apple. So no matter what else you had, if you didn’t have touch interface, you were obsolete. That was suddenly the new thinking in 2007. No matter how unfair, that is how the world reacted to Apple’s spin.

Yet consider what Nokia did. Symbian was a partnership. Nokia spent a billion dollars to buy out its partners, and then Nokia would have owned Symbian to do anything with it. What did Nokia do? This is totally Nokia philosophy – the best thing for the industry, not just for Nokia’s short term interest? Nokia turned Symbian into a Foundation and made it fully open source. Apple’s iOS is not open source. Microsoft’s Phone 7 is not open source. Neither is RIM’s Blackberry OS or HP’s Palm. Who is ‘advanced’ and who is retarded? Who is the true leader? But this is how Nokia does things. The Symbian OS is still used by leading smartphones made by Samsung, SonyEricsson, various Japanese phone makers – and of course Nokia. Apple, RIM and Palm do not license their OS to anyone else. Is this the ‘right thing’ or the ‘wrong thing’ for Nokia to do with its smartphone OS strategy?

If you were Nokia with Symbian after Apple’s sudden success of its App Store in 2008, what would you do? You’d want an app store, wouldn’t you? The Apple iPhone App Store has received all the big press and attention. Did you know Nokia launched its first app store in 2003? Yes, five years before Apple’s App Store. And then while Nokia was carefully working with its carrier/operator partners – where Apple rudely bypassed the operators/carriers and deployed its App Store to bypass the carriers/operators – Nokia still was able to build an app store – with operators/carriers. Again that Nokia mindset of cooperation, not abuse. And how is Ovi doing? It was the world’s third most successful app store behind Apple’s and GetJar’s. Still, where is LG’s app store? Samsung’s app store? Motorola’s app store? SonyEricsson’s app store? Nokia has the world’s 3rd most used app store and gets no credit for that, while Nokia started before Apple and works through its partners, not against them. And Apple gets all the accolades as it thumbs its nose to the industry and bypasses the chain. Yeah I like Nokia’s approach more, even if it takes more time.

And the first Symbian touch screen version was not very good. Nothing first generation usually is (remember all the missing ‘standard’ parts in Apple’s iPhone OS in 2007). But what is Nokia and Symbian doing with it now? They do as they always do, keep improving. The touch interface is getting better. It need not be as good as Apple in the touch department, as long as it is good enough. Nokia is not trying to become a Porsche of supreme performance only in one type of vehicle; Nokia does the full line of phones to all market segments. So as long as its ‘sports car’ is reasonably good, if that same platform (Symbian) also supports business phones and youth phones and cheap Africa smartphones, etc, then it is far more suited for Nokia’s vast market – and its partners who make smartphones for other markets! And you know what? Nokia is now selling more touch screen phones than Apple does. Yes.

Then if you were Nokia, what is the perfect strategy? Seeing the new operating systems like Google’s Android and Samsung’s Bada and Microsoft’s Phone 7 – all operating systems developed after the iPhone – what would you want in an ideal world? You’d want Nokia to embark on its own super OS for ‘modern’ touch-enabled smartphones. But not to do it like Apple or Microsoft with proprietary systems. And you’d want Nokia to license the new OS to rivals, not like Apple and Palm and Samsung, but more like Google’s Android and Microsoft’s Phone 7. And you’d want Nokia to use Linux as the basis of that new OS, like Google Android.

Better than that, you’d want Nokia not to abandon its vast Symbian developer community. So you’d want the tools to be made compatible for Symbian developers also to be able to develop on the new OS,wouldn’t you? That is opposite of what Microsoft did, when it abandoned Windows Mobile developers when switching to Phone 7. And where there is a Linux heritage to Google Android and Japanese Linux Mobile phones and Nokia’s new OS, you’d want Nokia to pursue ‘compatibility’ into the future, among all Linux OS platforms including Android, wouldn’t you?

And if you could ask for one more thing, a partner, a global giant partner, so Nokia isn’t doing this alone. That theoretical smartphone OS strategy is ‘everything you have in Google’s Android’ – but more and better and even more kind to Symbian partners and Nokia’s heritage. That is not the quick solution and not the cheapest solution, but it is by far the best solution for Nokia, its developer partners, its handset manufacturing partners and Nokia’s future – as well as the industry. When Apple and RIM and Palm and Samsung all selfishly release smartphone operating systems only for their own platform, that only hurts the industry with unnecessary fragmentation.

So now Nokia. This is exactly what Nokia is doing with MeeGo, the Linux based totally new smartphone OS, developed together with Intel. They have over 20 manufacturers already signed up to release devices using the MeeGo operating system. The development tools for Symbian will be harmonized with MeeGo to allow smooth migration. This is Nokia’s future smartphone OS. Isn’t this the ‘perfect’ strategy for Nokia?

You didn’t know all that, did you? Isn’t this a very prudent, well thought out, strategic path for the brand whose smartphone OS (Symbian) in Q1 of 2010 still sold more than Apple and RIM and Android – combined! Give the developers a growth path into a cutting edge touch-oriented Linux OS, but along the way, don’t abandon the Symbian platform and the Symbian handset partners and developers.

Because Nokia has a strategy already in place for MeeGo, there is utterly no point in even considering going Android. Buying Palm would have been idiotic in this environment. But then consider true Nokia rivals SonyEricsson, LG and Motorola – they do not control their destiny. They don’t even make a smartphone OS. They are utterly dependent on Google or Microsoft (or Symbian or MeeGo) for their smartphone future. Which is the right strategy? And what of Samsung? Nokia saw smartphones as a strategic direction in 1996. Samsung launched its own smartphone OS, Bada, now in 2010. Is Nokia not miles and years and yes, lightyears ahead of its real rivals, Samsung, LG, Motorola and SonyEricsson, when it comes to smartphones? But no, now there is an Apple in the market, suddenly Symbian is ‘obsolete’ and Nokia is ‘lost’ in its smartphone strategy? No, OPK, life is not fair. Wall Street is giving you no credit for the best strategy in smartphone OS’s and is rewarding Apple for very sub-optimal, proprietary, industry-dividing, hurtful, excluding smartphone OS strategies that even refuse basic internet standards like Adobe’s Flash being supported.

With Symbian, Nokia has failed in communicating clearly its strategy. It didn’t defend Symbian’s reputation when it should have. It has ignored Apple’s ‘improvements’ and let them enter into the folklore of Apple’s supposed leadership. This is as much OPK’s and Nokia’s PR failure as it is a failure of Wall Street in understanding Nokia, Symbian and MeeGo. If more QWERTY phones still are sold in 2010 than touch screen smartphones, then isn’t there at least some merit in saying that Symbian will allow excellent QWERTY use, for enterprise/business phones – where Apple utterly fails – and for the youth segment that is addicted to SMS. No, Nokia doesn’t know how to fight a PR war and with a better OS and a far superior OS strategy, they lost the perception war. Now all think that Symbian is a dinosaur in its death-struggles..

US ANALYSTS

So then there is that aspect, that the country where there are more Nokia investors than any other, is the USA. It is Wall Street which decides what the majority of Nokia investors feel and think, not Helsinki or Stockholm. And American analysts are very knowledgable and have high standards of reporting and analysis. They have excellent tools and there is a huge resouce of various tech analysts who support Wall Street bankers. The USA tends to lead most industries of high technology so there is an abundance of competence to do deep analysis of computers and rocket science and nanotech and microbiology and home electronics and automobiles and the internet industries and almost any other, including the fixed landline telecoms industry. As it happens, the one technology area, where the US domestic market lags the world leaders by many years is also one that is evolving currently the fastest – and that is mobile telecoms.

American domestic mobile industry analysts are very much behind the times, when it comes to mobile telecoms. This is due to no fault of their own – they are very competent and hungry for information and are doing a professional job. But it is the US domestic market which has stagnated, fallen years behind the world leaders, driven now by true industry dinosaurs like the carriers Sprint, AT&T, Verizon. Note that almost all traditional major mobile tech vendors from North America have gone bust including Palm, Lucent, Nortel and now Motorola which was in the process of splitting into two. American mobile telecoms is so far behind, it took outsiders like Apple and Google to come and revitalize it. The US domestic mobile industry is a corpse, rotting.

Now understand, I am an ex Nokia executive and a Finn. You might forgive me for arguing that Finland leads the mobile world (and indeed there would be plenty of evidence to suggest that) but I do not claim that. The world’s leadership in mobile has shifted from Northern Europe to Northern Asia, where Japan leads closely followed by South Korea, Taiwan and Singapore. And note, I live in Hong Kong, so I am not somehow championing my new home country either.

Very quick evidence. Those cool things you liked about the iPhone? GPS? 3G? WiFi? App Store? 5 megapixel cameraphone? Touch Screen? Games? HD video recording? Video calls? – those were all invented and done first on mobile phones in Japan, years and years before the iPhone (obviously all done in Japan before Nokia did it too).

Or consider the carriers/mobile operators of America. That ‘all you can eat’ data plan you like on the iPhone? Invented in Japan. The 70:30 revenue sharing that Apple’s iPhone App Store offers – was invented in Japan but they offer a far better deal: 90:10. Mobile wallet/mobile payments? Invented in Japan. 2D barcode based coupons you see now on Times Square? Invented in Japan. The mobile internet? Invented in Japan. Idle screen services. Invented in Japan.

It is very clear that Japan is currently the world leader in mobile. And South Korea, Taiwan, Singapore come far ahead of Europeans, who come ahead of the USA. So take your ‘superphone’. The top Samsung Galaxy from South Korea that went on sale last week – offers a built-in pico projector! For the same price roughly as the iPhone 4. Think about that for a moment. Where was that first sold? In Singapore. And HTC? Based in Taiwan. Apple manages one new smartphone model per year, which it doesn’t have time to test well enough, that it fails the Death Grip test by Consumer Reports. HTC is releasing 6 new smartphone models mroe this year before Christmas of 2010. HTC does have time to rest its smartphones well enough, that it gets on average 2 complaint calls per day. Apple’s iPhone 4 generated 750 complaint calls per day in its first 3 weeks and growing.

If you wanted the world’s best analysis of a rocket program, whether by a company or a country, you’d go to NASA or any US based aerospace analysts. While Iran also has a rocket program, the world’s best rocket science analysts are not in Iran today. So similarly, the USA is behind in mobile telecoms. Not all telecoms, but yes, in mobile telecoms. Years behind. And yet, Wall Street has tons of analysts who specialize in mobile telecoms (ie ‘wireless telecoms’ haha). They do their best, but they are guided by what they know, and what they can see in their own market. They cannot know how outdated some of their views are, because those analysts don’t get to make pilgrimages to Japan or South Korea etc to study the most advanced mobile markets.

Now, which was the Western smartphone maker who first put a camera on its smartphone? Not RIM, not Apple, not Palm, not Motorola – it was Nokia – based on studying Japan. What was the first Western smartphone maker who first put a 2D barcode reader on its smartphones? Nokia again. TV-out? Nokia. App store? Nokia. Touch screen? Nokia. Etc. Nokia has been tracking the most advanced markets and brought innovations to the smartphone space for the whole decade, but the US based tech press do not know this, and do not understand this.

The problem is made worse, by the fact, that most US carriers/mobile operators do not carry Nokia’s top phones. They were seen as too expensive. It wasn’t until the iPhone came along, that US carriers were willing to accept that consumers would be willing to buy ‘expensive’ smartphones. Up to then, the most expensive phone for consumers in America was the Razr. It was a mid-price phone in Europe and advanced Asia at the time. But an ‘expensive’ phone in America.

So in 2006 Nokia had a true superphone, the N93. By many features it was equal to the iPhone 4 of today and beats it with many features (but was not a touch screen phone obviously). In 2007 Nokia introduced the N95, far better than the iPhone 2G and in most tech specs matches or beats the iPhone 4 today (except not touch screen obviously). In 2008 Nokia brought us the E90 Communicator – the most awesome Nokia superphone ever, and the last Nokia phone to regularly defeat the iPhone of that time (the iPhone 3) in tech press comparisons (but the E90 was not touch screen). And fast forward to 2010, now we have the N900, again a master class of superphone design (which now is touch screen). But these smartphones are not carried by US carriers. The US carriers will not offer subsidies so that US consumers could pick one up for 199 dollars on a 2 year contract (European and Asian carriers/operators offer them!). So is it no surprise, that Nokia’s reputation in almost all of the rest of the world is one of a superphone maker of very high quality premium luxury phones, but in the USA, Nokia is thought of as a garbage brand of cheap phones?

So the US analysts had no ‘heritage’ of comparing Nokia’s best with those of the US domestic smartphone market like say the Blackberry Bold or Palm Pre or Motorola Droid or Apple iPhone. The Nokia flagship models were all missing from the US. So the US analysts were very easily convinced that the iPhone was the best phone on the planet. Also that as it looked like all phone makers were now ape’ing Apple (based on premium phones released in the US market recently) and as Nokia didn’t release an iPhone clone, clearly Nokia had ‘fallen behind’. And as the US analysts would read each others’ thoughts (and not tend to read Japanese or Korean or Finnish or Swedish language analysis of the market haha) – some ‘group think’ emerged, where if the other US analysts also thought so, then it must be true, that the iPhone is the world’s most advanced smartphone. This is for example the fallacy that follows RIM analysis time and again – even though Blackberries are growing unit sales and growing market share, while Apple is losing unit sales and losing market share – the madness of Wall Street thinking is that RIM should abandon its brilliant QWERTY oriented messaging phones, and try to copy Apple’s touch screen. Lunacy! RIM is not losing to Apple, RIM is pulling away from Apple! If Wall Street analysts got their heads out of their behinds, they’d look at the facts and insist Apple launch a QWERTY phone to reverse the Apple decline in market share and catch the big growth wave that propels Blackberry.
But no. The US press were hypnotized by Apple to obsess about the iPhone’s multitouch screen and if you didn’t have it, you were rubbish. Even though QWERTY outsells touch. No, if you’re not touch, you are ‘not modern’. But again, this is something OPK could not control. Nokia sells its shares on the DOW and therefore it has to live by US analysis.

But this is something Nokia could have tried to influence at least. The N-Series HQ was moved from Espoo to New York. Anssi Vanjoki, Nokia’s most charismatic senior exec has been based out of New York for some time. Nokia should have been educating the US media and analysts. I do not know to what degree they have been doing that (and I am sure they have tried) but clearly they have failed, if today in 2010, the US tech press says ‘Nokia is falling behind Apple’ (when facts show the opposite is true). Nokia have failed, not in the technology race, but in the perception race. And truth be told, they have been taking a black eye from the masters. Apple had been doing the same punching of Microsoft for decades now haha, and beating up Sony pretty badly for a decade now starting with the iPod. So small solace, but at least Nokia wasn’t losing to a marketing novice. They were beaten in the PR game by the best. With Apple laughing all the way to the bank.

TAKE BACK US MARKET

So if the US analysts were a fact Nokia HQ had to deal with, and suffer the consequences, there is one self-inflicted wound which hurt OPK dearly, and more quarter after quarter, as time went on in his stewardship. It was OPK’s promise to shareholders when he took office, that he would restore Nokia’s market share in the US market. This has been the most dismal failure of Nokia in what I really think has been a very solid run of management. There is no Apple effect here, there is no ‘reality distortion’ here, and there are no mitigating factors. This is OPK’s fault on a personal level, and his very visible commitment. Utter failure.

OPK promised that Nokia would regain its market share in the USA. The opposite has happened. Almost every quarter since he took office, the US market share of Nokia in mobile phones and in smartphones has declined. Think how bizarre this is. 93% of the world’s mobile phone accounts are outside of the USA. In that market, when OPK took office, Nokia had 35% market share in all phones, and about 50% in smartphones. Today outside of North America, Nokia has about 36% market share and about 52% in smartphones. It is only in North America where Nokia is a failure (apart from Japan and South Korea where domestic standards and domestic phone makers rule those small markets).

In the US market Nokia has suffered continuous losses in market share. This to me is unacceptable and since the new CEO committed to regaining US market share, OPK should have achieved it. No matter how. If that meant creating CDMA phones for Verizon and Sprint, then be it. If that meant creating USA-only iPhone clones, then so be it. If that meant (remember the commitment was from 2006) creating Razr clones to match Motorola’s US success, then do it. And Nokia had huge profits back then – bankroll that US invasion. If it meant Nokia’s US sales had to be subsidised from other markets, no biggie, its only 8% of the world market. Nokia EASILY could have afforded to do this.

But yes, change the leadership. OPK should have taken personal responsibility, and talked to the CEO’s of Sprint and AT&T and Verizon and T-Mobile USA, to find out why they are not selling more Nokia, and then appointed the type of manager to the US project, that gets the job done. Hire someone from one of the US carriers to do it, someone universally respected by the US industry. And keep meeting with those CEO’s every quarter, fly to their HQ’s and bring them every year to visit Nokia’s fantasyland, the special Nokia private lab and future showcase they used to call Generation Nokia (I think it was recently renamed, I forget what its called now, but this is like the Disneyland for telecoms engineers, where only 2 visits are arranged per day for VIP guests, to showcase Nokia’s view of the future; its a truly breathtaking place, I’ve seen it once..)

There are reasons why US carriers do not support the world’s bestselling phone brand. There are reasons US carriers won’t support the world’s bestselling smartphone brand.
There are reasons the US carriers don’t support the mass market phone brand that generates the most SMS text messages – where carriers make most of their profits. There are reasons of history and of politics and of personalities. Nokia know this, but OPK was a new CEO, and he was the boss, and he could have – and should have – made all the personnel changes (and policy and price and design changes), until these 4 US carriers were satisfied. Nokia needed the US market to experience Nokia’s best, not Nokia’s worst phones. And Nokia needed US carriers to promote its phones, so US consumers would adopt them.

But instead of going the carrier route, humbly, and accepting the bizarre, often archaic ways of the US market, Nokia went defiantly its own way. For the N97 Nokia decided since US carriers would not sell its flagship phone of 2009, Nokia would sell it online, directly to consumers. If you recall, Google tried this trick too, in 2010 with the Nexus One. Both were marketing disasters. You can’t bypass the carriers. And Google can be forgiven for not knowing this. Nokia knew this, they were stupid to do this. That would not get them the US market and Nokia knew this. Yet they did it, including the flagship store on Manhattan’s Times Square etc. All blatantly fighting the US carriers, rather than humbly working with them.

The US market recovery was botched totally by Nokia. And for that OPK has to take personal responsibility. He did promise this to shareholders and Nokia was unable to execute. This is his personal failure. And this point does surprise me, that OPK did not force this to happen. There is ample and intimate Nokia knowledge of the US market, Nokia has been there for decades already. But newcomers like South Koreans Samsung and LG are the ones who are now bestselling phone brands in the US market and Nokia is ranked something like 6th or 7th..

THE ONE ROTTEN APPLE – N97

Then we get to the straw that broke the camel’s back. High tech is difficult. All tech companies stumble at some point. Mercedes Benz once made a car unsafe at any speeds (remember the launch of the A-Series which tipped over when it turned around corners?). Toyota was making cars recently which didn’t seem to have any brakes. And even Apple failed in phones now with the first phone ever in history, that Consumer Reports tells us the iPhone 4 has such a bad Death Grip problem that it cannot be recommended. So yes, in tech there will be the occasional failure. And while Nokia has had a great hit parade of awesome flagship phones, during OPK’s short reign, there was one failed flagship, the N97. The N93 was superb in 2006. The N95 was a technology showcase in 2007. The E90 was so far ahead in 2008, it still today beats most smartphones. And the N900 of 2010 is highly praised and the early previews of the upcoming N8 are also highly positive. In that string of superb hits, comes one blemish – the N97.

And the problem is, that the N95 and the E90 Communicator were never even suggested as ‘iPhone killers’ and were not touch screen phones. They were in a different class, like comparing a Range Rover to a Ferrari. But the N97 was offered to the world as an iPhone beater, being Nokia’s first touch screen flagship phone (with a slider QWERTY as well). On paper compared to its contemporary iPhone 3G and the later iPhone 3GS, the N97 seems to tower and indeed ‘devour’ its rivals (as from the LL Cool Jay rap lyrics). The specs sheet is impressive. But the N97 is not. It was a dud. A rare failure in Nokia’s long history of premium phones, but one of its worst. And Anssi Vanjoki even openly said so.

When any analysts, not just US analysts, were offered the side-by-side comparison of the N97 vs the iPhone, the faults and shortcomings of the N97 become blatantly clear. Most of all, its touch screen (resistive and not multitouch) is slow and non-responsive. The touch screen Symbian OS seems slow and counter-intuitive. And then there were bunches of other technical faults and this flagship smartphone from Nokia’s N-Series was indeed a flop. Nokia did as it always does, it kept fixing it, better software and hardware, and the final N97 version is not bad, but even then, its no match to the iPhone 3GS.

When Nokia finally did an ‘iPhone killer’ – that project failed. And this falls onto the feet of OPK. The N97 was a rare disaster phone for Nokia and with hind-sight, its clear to see, Nokia would have been better served by delaying the N97 until it was more-or-less bug-free, than hurrying the phone to the market. The lessons from the N97 were very painful to Espoo and no doubt those lessons are why Anssi Vanjoki delayed the N8 launch now, knowing its not good enough yet, and wanted to refine it before releasing it.

But for most US analysts, the ‘current’ flagship smartphone from Nokia is still the N97 and the ‘next’ flagship will be the N8 (they mostly have not taken notice of the N900 which obviously is not targeted nor sold to the US market but we have for example here in Hong Kong as the current flagship Nokia smartphone). So the more the iPhone gets amazing news stories from Apple’s PR machine (how many billion apps downloaded or how awesome is the iAd platform or the new version of the iOS operating system etc), the US press is reminded that Nokia’s entry in the touch screen smartphones is that expensive and failed N97 with the old Symbian OS and its lousy touch screen. If the N8 had been released for Q2 (and assuming it was not very flawed haha) probably OPK would have survived, by the skin of his teeth. But that the US market still thinks in July 2010 that the N97 is the best Nokia can do, that was too much. The straw that broke the camel’s back.

WHAT IS FAIR?

So we have 6 major faults that are assigned to Olli-Pekka Kallasvuo. Apple was one of those ‘once in a decade’ types of events. Think about it. When Sharp introduced the cameraphone in 2000, it didn’t change everything. When RIM introduced the Blackberry in 2001, it did not change everything. When Motorola introduced the Razr in 2004, it did not change everything. When SonyEricsson introduced the Walkman phone in 2006, it did not change everything. When Google introduced the Nexus One in 2009 or Microsoft the Kin in 2010, these did not change the whole industry. But when Apple entered the phone industry, suddenly not just were phone expectations changed permanently and thoroughly – the way marketing and PR to the investors and shareholders changed permanently and thoroughly.

But ‘unanticipated’ changes like this are what nimble managers are needed for, and executive wisdom to see when such a strategic change happens, and to adjust. Yes, Nokia was hurt and this media/marketing/PR side of Apple’s influence has hurt OPK’s reign and reputation. They should have fought back like Adobe fights with Apple or Microsoft fights with Apple etc. Now you have to put on a show and you have to brag about your greatness, else you will lose. Its no longer a ‘lets build it together’ world of cooperation, it is now a dog-eat-dog world of zero-sum: ‘for me to win, you have to lose’. That is the game Apple brought to town. And Nokia did not learn that lesson and did not adjust to it. The next CEO has to be far more brazen and bold – and vocal.

Profits is a fair point but an unfair judgement. Yes, Nokia’s profits are down, drastically, from 2006. But the market is fiercely competitive, and against Nokia’s traditional rivals, those who sell mass market phones to the world – Motorola, SonyEricsson, Samsung and LG, during OPK’s rule, Nokia has far outperformed these true rivals. The unfair part in profits is that the analysts are comparing Nokia to Apple and nobody can touch Apple’s profits. Not in PCs, not in musicplayers, not in tablet PCs like the iPad, and also no, not in smartphones. Its an unfair comparison. Apple is an aspirational luxury brand. But profits are a valid concern even without Apple. Motorola made losses and replaced its CEO. Nokia made its first-ever quarterly loss last year, and since then its profits have been very slim. This is an honest shortcoming of OPK. I would argue that the market has been fierce – the worst economic downturn of our lifetimes – and Nokia weathered that storm far better than its traditional rivals. But yes, its profits are down, and unfortunately now for Nokia, it is compared to Apple who reports ever stronger profits.

Symbian is not a fair accusation of any failure of Nokia’s CEO. He did not design the OS, he inherited it. Symbian was in 2007 – now with hindsight – actually a far more potent and mobile phone-optimized OS than Apple’s iPhone OS – and Nokia has played its Symbian global market share leadership brilliantly with the upgrade evolution path to Symbian – including touch screen now – and the future OS of MeeGo with Intel. Ovi and Nokia’s software strategy was in place long before Apple’s and Nokia has been patiently building this too. Its the world’s third best-used application store, where again Nokia is miles and years ahead of its real rivals Motorola, Samsung, LG and SonyEricsson.

And for the future of its OS, Apple’s iOS is proprietary, using its proprietary tools, tightly controlled by Apple and only working on Apple devices. Palm’s is exclusive as is RIM’s and Samsung’s Bada. Microsoft is licensed to others but is using Microsoft’s systems. Google’s Android is the most open using Linux. Nokia’s new MeeGo is also fully open source and using Linux and licensed to rivals, but it is developed with Intel. And Nokia went through the trouble of ensuring a migration path with common tools to support current Symbian developers into MeeGo, and also is working to bring harmonization among other Linux OS tools like Android. Isn’t this the best possible smartphone OS strategy. But its a ‘complex’ story. Its ‘easier’ just to hear that Symbian is old and fragmented and difficult to develop for and its touch screen interface is cumbersome. The lazy story is to take the superficial and just say, Symbian is dead. This is not a fair criticism of OPK’s rule. Nokia has by far the best smartphone OS strategy of any in the industry and in the past 4 years Nokia has executed brilliant and elegant migration decisions on its two operating systems.

Then there is the issue of US analysts who live in the laggard US market and their views of advanced phones is very outdated. This is a ‘reality of life’ and Nokia is fully aware of this. There is no excuse that Nokia couldn’t navigate in this environment, knowing the landscape. But yes, it means that if Nokia introduced widgets or near field or FM broadacast or some artifical intelligence elements into its new phones, Nokia has a far bigger job of educating to do with the US based analysts. Nokia knew this. There is no excuse. Nokia failed its PR efforts with US analysts and journalists.

And finally the N97. OPK could not go personally test the phone. He should have been personally interested enough in its launch – as it was so critical also for the US market – to pay attention to final testing etc. He should have known as the N97 neared launch that there were problems and halted its launch. Or else, the moment the world started to complain, he should have stepped in, apologized for a bad phone, and fixed the issue. That N97 should not have remained long on the market as Nokia’s primary proof of leadership (ie lack thereof) as its ‘flagship’. Nokia could have taken an older world-winning superphone like the N93 or E90 or some other recent platform, slapped a few updated parts onto it, and launched that as the N98 and quietly discontinued the N97 – very quickly. This is what Apple will no doubt do very soon with the iPhone 4 – Apple cannot let the ‘Consumer Reports cannot recommend’ iPhone 4 to remain as a stain on Apple’s reputation. It will be replaced by a newer iPhone long before June of 2011, mark my words. Probably still during 2010 haha..

Similarly Nokia should have issued a new flagship quickly to replace the flawed N97. It didn’t and the N97 still today continues to stain Nokia’s leadership reputation, in particular in the US market.

Its a cruel world, Charlie Brown. OPK got to dance with Wall Street for four years as Nokia’s boss. He would have done fine were it not for the best dancer ever, Fred Astaire stepping on stage in the form of Apple. Now OPK is remembered for losing to Apple. This even as Nokia’s market share in smartphones grows and Apple’s share shrinks. Life’s not fair..

Incidentially. Four years ago, Nokia’s global mobile phone market share was 35%. Since then the number of rival handset makers has doubled. The market shares of the other top 5 makers have shrunk from 48% to 40%. Did Nokia do well? Before OPK took charge, Nokia’s smartphone market share globally was 48%. Since then the number of smartphone manufacturers has more than tripled. Nokia’s market share is still 41%, bigger than numbers 2 and 3 combined. And Nokia’s smartphone market share is better than its dumbphones market share – as the only one of the Top 5 phone makers, Nokia is able to improve its market share, as it migrates customers from dumbphones to smartphones. And is doing it profitably. Of its major smartphone rivals just four years ago, Palm died and Motorola’s smartphone market share was cut in half, Microsoft’s Windows lost three quarters. Nokia weathered the influx of over 30 new rival smartphone makers by only losing a couple of market share points over a 4 year period. Did Nokia do well?

Of the challenges he inherited, Nokia did not foolishly retool for all flip phones in the Razr craze and that was the right call. In the transition to 3G, Nokia’s market share in 3G is now the world’s best, so Nokia did not lose out in the migration from 2G to 3G. Nokia led the smartphone revolution, then the migration of smartphones from business phones to consumer phones – both initiatives Nokia started long before the iPhone. Nokia set up its app store with partners, and all along the way it is connecting people also for the very poor, and even manages to win consistently Greenpeace’s award as the greenest phone maker. While Apple uses Foxconn as its supplier, a manufacturer some accuse of being a sweatshop, Nokia set up the world’s largest handset factory into China so it can control the handset manufacturing process itself. Is this all good management? I think it is.
But OPK failed the US market, he presided over the launch of Nokia’s worst flagship phone. His rule coincided with the moment when Apple came to disrupt the phone market and his PR people didn’t adjust to this, nor to US analysts and their lack of understanding of the finer points of modern premium phones. And yes, Nokia’s profits have declined from the good old days. These are valid reasons why Nokia shareholders demand a change in management. The Symbian story is not fair, but it is not an easy issue to understand adequately either, so I can see why the lazy analysis says, Symbian is not good in touch screen, therefore Symbian is obsolete. Thats not true, but I can see why that argument is easy to make.

Sorry OPK. I think you did do a competent job steering Nokia through very tough times, and in all other markets of dumbphones and smartphones – except the USA – Nokia has shined. Unfortunately the US based analysts, press and investors will not prioritize the rest-of-the-world performance ahead of that within the US market. I think its clear your management was far better than those at Palm or Motorola or SonyEricsson or LG.. But it was not perfect and now Wall Street is demanding your sacrifice. Its a cruel world out there..

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This text was originally published on Tomi Ahonen’s Communities Dominate Brands site on July 21st 2010 and is republished with his permission.