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Why Nokia’s Q2 results are irrelevant

Nokia posted some financial results this morning.

They are not good. But I won’t bore you with anything beyond that.

There’s a lot of handwringing going on across the marketplace with people surprised that the figures don’t look good.

Well obviously.

The company is mid-way through changing strategies. This second quarter came more or less immediately after the now famous February ‘Windows Phone’ announcement. Indeed, for much of the second quarter, I imagine the majority of staff were wondering if they’d still have a part to play on-going.

When the company made their announcement in February, what they were effectively saying was, ‘expect NOTHING from us for ages’.

Yes. Pointing at their dire financial results is, well, pointless. The fact the company’s sales slipped in Q2? Foregone conclusion.

Guess what, they’ll be rubbish in Q3. And — NEWSLFASH — Q4 will be a shocker, too.

In fact, here we go — it’s time for an EXCLUSIVE NEWSLFASH LIVE PREDICTION: 2011 will be a rubbish year for Nokia.

Tah dah.

2012? I think the first half won’t look good financially either.

Nokia has a simple task ahead: Create brilliant Windows Phone handsets thereby delighting the consumer. Everything else — including Symbian, MeeGo and the like, it’s all a diversion at the moment. The company’s ability to survive the next 12 months depends on Windows Phone 7. Nothing else matters.

I know success with WP7 is a big ask. A very big ask. I think the company has got the wherewithal to deliver. Similarly, it’s highly possible that it’s game over already. We’ll just need to wait and see.

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

47 replies on “Why Nokia’s Q2 results are irrelevant”

The best insight I have seen so far in the situation of Nokia. At the moment anybody expecting good results from Nokia is delusional, but also the big question remains if Nokia can turn around or not.

At least the patents are definitely worth a lot (I would guess 10-15 bln. $ when comparing to the latest auctions from Nortel, etc.)

Agreed Philipp — the patents, and to a lesser extent, the logistical
network, frameworks and capabilities. There’s still immense value — and
still opportunity to turn it around. It’s very much wait-n-see though.

I really don’t adhere to this rationale… By the time WP strategy ramps up, the Nokia brand would have simply sank (if you look at the current trend of decline it obvious)! The fans would have churned to competitors because their beloved Symbian and Meego are not maintained/supported correctly, the followers would have also churned following the market trends (i.e iOS and Android), then what would be left for Nokia, and what would make people come back? 

Why would anyone return to Nokia for WP7? MS itself knew that and bet on a strong brand to save its struggling OS, but the strong brand will probably vanish in the meantime…

Now hold on there — I know what you’re saying, but it’s irrelevant. The
decision is made. It’s WP7 or bust. Literally bust.

That’s it. Decision done. Now it’s about either delivering or failing.

Why would anyone return? Well, there’s a ton of brand equity there — I’m a
fan. I’m a basic Nokia fan. If they deliver a brilliant WP7 device that
makes me feel good, with market-leading optics and all the usual stuff I
expect from Nokia, I could be highly persuaded.

I agree – once you’ve left the Symbian ecosystem (is there one even?) for either iOS or Android, and then got used to all the lovely integration and increasingly slick additional services, the wrench back to WP7 assuming price & form factor are right will be a major issue.

Apple & Google are doing a bang-up job of making mobiles do so much more than they used to. I now find it easier to check my 3 GMail accounts on mobile rather than PC. All my Firefox bookmarks are in my mobile, magically. GMaps syncs my places, of course contacts/docs/etc etc are synced. Why would I put myself through so much pain to learn a new OS, re-set everything up for WP7?

Something that a lot of people underestimate : in several countries (mainly non-European), Nokia have a lot of non-technology aware high-end phone users that use the phone only because it is a Nokia and they are used to the logic… I really believe these users are lost for Nokia with WP!

My other  point is that Nokia should have a B Plan! And not only technology wise but also marketing and strategy wise. Apple, is taking the market with only one iPhone model, marketed correctly, easily maintainable and bringing high margins. Nokia should fight Apple with Apple’s weapons. One high-end Meego Phone, with renewal cycle of 6months to one year. Very strong branding and marketing. Superb experience in all aspects and for all user categories. A lot of focus on this single product to demonstrate it is worth it! 

Yes, It is irrelevant, what I’m arguing about is not that part, but the rationale developed afterward.

Nokia couldn’t wait. They simply didn’t have the option. Remember back in
February, even the ratings agencies were threatening to downgrade Nokia if
they didn’t do EITHER Android or WP7.

The company had no choice.

All the talk about MeeGo or Symbian is simply irrelevant. The teams there at
Nokia responsible for those OSes failed you. Quite simple.

Now it’s all about the company’s survival.

Irrelevant to you, me and many others.

BUT

The big unknown is the damage this does to the brand, right now and over the next 12 months until  a decent set of WP7 devices appear. Repeatedly telling the public that Nokia is a dead dog, doomed, in the toilet, etc means come new handset time that premium cachet is gone in the consumer mind. Remember a scant few years ago, all the non-tech/geek women walking around with the N95 simply because they asked for ‘the best Nokia’? Even though they only ever used it as a phone? Maybe for a few snaps? It was the Nokia name that justified the £500 or new 24 month contract.

And no matter how good WP7 is as an OS, it’s still WINDOWS. There’s a reason MS deliberately do not put ‘Microsoft’ anywhere on the XBox.

Do you know what the results would have looked like if the PR on 11th February was handled differently? When you know that you have a 1 year lead time to propose something based on WP, why do you announce that you simply kill you main other platforms?

What would have happened if Nokia was downgraded? That was irrelevant! that’s only a mark defining if you can get funds from banks… Now that they are loosing money do you think they will keep their mark? Anyhow they still rely on their own funds to move on!

“All the talk about MeeGo or Symbian is simply irrelevant. The teams there at 
Nokia responsible for those OSes failed you. Quite simple. “When I see the N9 I really doubt what you are saying here… Nokia could even have abandonned Meego, and gone back to maemo with harmattan UI it would have been good!

Anyhow all this talk is now irrelevant, In two years time we’ll know what the fate have reserved for Nokia!

I think the company had to announce a switch from Symbian to [something
else] immediately. The existing stuff wasn’t working. The ratings agencies
are extremely important in terms of the company’s market reputation. To have
continued with Symbian would have been suicide.

I think the PR — announcing the death of Symbian even when more new
handsets were due to ship — was unavoidable. The company HAD to announce a
new way forward and that required an acknowledgement on Symbian.

I do agree that it was conceivable for Nokia to keep Symbian alive provided
they made it clear it was no longer core.

Nokia was downgraded anyways, wasn’t it? So the argument doesn’t count. The way the “transition” has been announced and handled so far is leaving me speechless.

You can’t argue about it – if there is some clever logic behind it maybe? – that’s not going to work as soon as you look at the Q figures and the stock market.

Kamikaze. But why?

Nortel used to be worth more than Nokia. Much more. This could go all the way to a yard sale.

we’ve all seen the N9 a distraction… yes its distracted everyone from their current handsets and they’re saying “what is that?!”

It even got Apple to stall iOS5 and work on making it buttonless

Its Clear Meego and the N9 should be Nokias focus… sadly Flop is going to stick with his company (microsoft) and the shareholders are too scared to do anything else

The logic behind was to make savings in software R&D which wasn’t the core competency of Nokia. But this logic is also to put aside as the losses from this Quarter alone do counter-balance all the saving Nokia could hypothetically make…

Also I still can’t understand how a brilliantly executed N9 was done by a company not able to do software R&D?

My belief, is that Nokia had only one problem : internal organisation. Lack of accountability and the famous overcrowded matrix that makes everyone do whatever he wants…

Yes — it was downgraded if memory serves. The serious damage was averted by
the WP7 announcement though. It bought the company at least a year to get
its house in order.

Kamikaze? Possibly. It was the only route for them.

You’ve not described anything that cannot be done on Symbian as it is or WP7 Mango as it will be, so your assertion that “Apple & Google are doing a bang-up job of making mobiles do so much more than they used to” is fatuous and ill-informed.

The problem with Symbian is that doing all that stuff is nowhere near as iOS, Android or Windows Phone. You are correct in identifying the lack of a cohesive Symbian ecosystem; that’s why so many have left the elder OS and traded superior hardware for superior software(s).

Windows Phone on Nokia will deliver both the superior, easy-to-use interface offered by iOS and Android and the killer hardware that only Nokia seem to know how to make.

That is why Nokia have adopted WP as their primary smartphone OS going forward, and that is why (if the timing is right) users of all OS’s will regard a Nokia WP device as attractive – especially the bazillions who have fond memories of solid Nokia dumbphones or pioneering smartphones like the N95.

Have a look at WP Mango: it is a doddle to use, and integrates well with Google services, let alone the gamut of MS services like Xbox, Zune, Office, etc. You won’t have to ‘put yourself through so much pain to learn a new OS’ because it is so easy to use.

“And no matter how good WP7 is as an OS, it’s still WINDOWS. There’s a
reason MS deliberately do not put ‘Microsoft’ anywhere on the XBox.”

This is something I’ve been thinking about and Ewan, maybe you can add your 2 cents here as well.  Do you think the windows/microsoft brand is toxic in the eyes of mobile buyers??  WP7 devices have been out for a while now with dismal sales, maybe it’s the OS, while praised by geeks and the tech savvy, is being passed on by consumers.  Could it be the tiles look of the OS is too generic looking? Or is it that Apple and Google have done such a good job marketing their brands over MS?

Do you think when buyers see that blue-tiled wp7 device, they think of the blue screen of death they always got with windows? or the viruses, worms, etc…??

As a long time Nokia user and fan of the company, I find it rather scary that the CEO thinks just by slapping a nokia logo on a wp7 device that that will bring customers in.  Could it be that Elop is overplaying Nokia’s brand name in the eyes of consumers??  Honestly, it seems like most people, at least the ones I talk to, see MS as an afterthought.  like a bad relationship they want to distance themselves from.

Q2 results sure contribute to sliding Nokia towards irrelevance 🙂
Seriously, though, they might be irrelevant to you but relevance is a very subjective thing.Your vision of relevance is not Nokia’s (nor mine or anyone else for that matter).I think it depends on what question you want to answer, and it’s not very clear in your post.In my humble case, I’m looking at elements that might inform me how bad the quarter really was.For example the China adjustments are probably the biggest cause for concern taken out of Q2 results, and for that alone, they are far from irrelevant (seriously, go look at China numbers).Q3 results will also be relevant to see if the hemorrhage is contained or not, and in what shape will Nokia be when the first WP7 handsets launch.

I could go on and on with other bits of relevance but I’ll stop here and respectfully disagree. 

I think you mean disruption…

N9 is not the first buttonless Nokia – the N900 pre-dates it by a good two years, but I don’t think that influenced Apple’s thinking with the iPhone 3GS and 4 – those devices still don’t feature proper multitasking, which was the major feature on Maemo on the N900.

But it is interesting to see how multitasking has been approached on WP Mango and the N9 – there are some similarities there with Maemo and Symbian and I’m sure we’ll see more Nokia-style multitasking on Apollo next year.

Whilst I agree that Meego could offer an OS and UX to compete with iOS and Android, the battle is now for ecosystems, and that is the area where Meego is particularly weak. There are no services like Office, Xbox, Zune, iTunes, Skydrive, iMessage, GMail, Hotmail, etc around Meego – and that is what people are increasingly asking for (apparently – I am happy with what the N9 offers out-of-the-box).

I don’t think Elop has any more affiliation with Microsoft than any other previous employer, and let’s not forget that Nokia had alliances with MS before he was even appointed.

Furthermore: if Nokia collapse, Windows Phone probably will as well, so if the Trojan-ists are to be proven right, we’d have to see MS make a move on Nokia pretty much imminently. As Elop has publicly denied any takeover negotiations between Nokia & MS such a sudden move would expose his public denial and leave him open to prosecution under disclosure legislation – something I’m sure he’d want to avoid as it could involve a prison sentence.

“so your assertion … is fatuous and
ill-informed.”

Thanks for the attitude adjustment Steve. Did I kick your puppy?

For your info, I have used every OS, extensively. I have a box in my office with dozens & dozens of phones of all flavours. I swap between new different OS devices on an almost daily basis, including having to set up all accounts etc all over again.

I *know* that doing anything on Symbian as implemented in the N8 was worse than awful. It’s bullshit. Utter rubbish. Terrible. The N8 was unusable as a day-to-day device, unless you were misogynistic enough to put up with the truly awful UI, complete lack of consistency, random alerts/warnings/interruptions etc.

 I know that from turning on a Gingerbread device to having all emails, contacts, photos, documents, and (vendor-specific) apps etc is one simple email/password login away. No-one can beat that. iOS comes close, but requires a cable sync, that’s changing in iOS5 (not sure if that counts for setup of a new device though).

Nokia might nail ease of setup for WP7. Maybe.

But when you have invested heavily in choosing, configuring and maybe paying for apps from an app store, over several years, you do not want to loose all that just to then have to learn a new OS.

Why would a consumer put themselves through this? Nokia’s hardware is no better than HTC’s. Look at the curve HTC/Samsung have been on the last 2 years in terms of design & quality. Amazing. They already parallel Nokias’ build quality so there’s a major – possibly the ONLY –  differentiator gone.

Your statement that “only Nokia seem to know how to make…killer hardware” is simply not true. If Nokia were the top of the game and HTC/Samsung made Fisher-Price devices, maybe consumers would want to shift. But that is not the case.

I’ve used WP7. It’s OK, but no easier to learn/use than iOS or Android. Personal preference. But that’s if faced with a choice *from scratch*, not having to abandon 2+ years of OS familiarity, apps and settings.

Mike

Some good analogies there, Milan!

WP7 is a nascant OS and therefore crippled in many ways, but especially because it lacks any kind of 3rd party app multitasking. This is the reason is has not yet taken off, rather than some kind of intellectual boycotting of MS softwares, which are selling well elsewhere.

Mango will deliver multitasking along with a host of other features that will raise WP’s game to that of iOS or Android in most respects. Next year Apollo will take WP to the next level and become an attractive alternative to iOS and Android. Nokia will use their market connections and manufacturing excellence and ingenuity to drive WP devices into the mid-sector where the big sales numbers are.

The Metro UI will come into its own with Live Tiles that actually work in Mango (they’re currently more like big, dumb buttons in Nodo) and if you’ve seen some of the imaginative renditions of how Metro could be easily themed there’s much to look forward to when Nokia get to contribute to the OS as agreed.

I agree that Metro risks being overly simplistic for power users who like to run manifold app shortcuts over multiple homescreens, but this is not the prerequisite of the majority of smartphone users, who live with a handful (i.e. typically less than 9) apps on a day-to-day basis.

That said, I have gone from nine homescreens on my N900 to just three, and from three homescreens on my N8 to just one. Both devices are now easier and faster to negotiate, so even as a power user myself I can see the logic of Metro’s proposition. I’m using far less battery as well, I might add…

You are quite correct – Nokia (and Elop) cannot hope that slapping a MS logo will sell devices in big enough numbers and Nokia will work with MS to develop WP beyond Mango – that’s why the deal with MS was more attractive than that offered by Google if they adopted Android, where they would be granted little influence over the OS.

Nokia will contribute Maps and other services & features to WP alongside contributions from other manufacturers who will mutually benefit from this alliance.

Windows Phone has not yet been on the market for a whole year. hardware offerings are limited and no major manufacturer has gotten behind the OS just yet. With Nokia pioneering Windows Phone and the support of other manufacturers, Windows Phone could well be the next big thing in Mobile.

Four years ago, no-one would’ve given Android odds on becoming so dominant so quickly, or Nokia losing their top position, so anything is possible in Mobile.

Hang on – it’s going to be one hell of a ride, and the best seats are on the Nokia rollercoaster – not on the safe seats on the Android or Apple bus…

Milan, let me chip in my two cents with this observation — it’s long been
commented that Nokia has great hardware but utterly dire software. Yes,
Symbian was technically superior, but the UI, the way it worked, the user
experience… dire.

If memory serves, *I* was one of those people saying, ‘Come on, give me
Nokia hardware with *anything* but Symbian running’.

So I am really keen to see what Nokia can do when they don’t have to worry
about the actual UI. I think a lot of other consumers will be too.

Ewan, I agree with what you said, trust me, i have a N8 next to me mainly for the camera and thats it.

The thing is, I’m not against WP7, from my experience with it i like it and think it’s a nice change of pace to android and iOS and with mango coming, I think wp7 will have a lot to offer.

however, nokia did give us great hardware without symbian recently and that is the N9.  I know the ecosystem rant and everything tied to it, however, i see no reason why nokia cannot continue to produce 1 meego phone per year ala iphone.  In fact, meego can become their high and mid end phone.  the N9 is running very well from all the video’s and reviews i’ve seen on whats considered ancient hardware, the same ancient hardware powering the iPhone 3GS which is rumored to be apples mid-priced phone for the future at around $350. they can keep producing the N9 and drive the price down to match the 3GS and come out with a high end meego phone next year (HD screen, N8’s camera, omap 4 etc…)

Elop putting all his egg’s in MS’s basket is risky and with while Nokia does have great hardware, i think when samsung’s WP7 version of their GSII comes out with all the high end specs, people may very well go with that over nokia.

Nokia management was ignorant for years with over playing their brand name and loyalty, producing mediocre handsets and pissing off those who dropped money for a N97, n900, etc…  Elop’s statements and strategy is no different than his predecessors and that type of close minded thinking will sink nokia even further imo.

Hey – no offence intended. My wording was inappropriate, so I do apologise. No puppies were hurt in the making of this post!

Your Symbian experience differs from mine; I only receive one ‘warning’ on my N8 and that’s seemingly because I cancelled a download mid-way and I keep getting reminded. I believe there’s a fix, but it’ll wait till I do a hard reset – something I have not had to do in over four months of totally reliable service. Maybe I am an anomaly, but I’ve been running Nokia devices for years and only had one ‘dud’ (an X6 with a dodgy capacitive screen sensor). Conversely I have had to send back two HTC’s three Samsungs and one Palm Treo.

You are partly right about inconsistencies in Symbian, but things like the old double-tap have all-but been eliminated in ‘Symbian^3’. That said, compared to the Android devices I’ve used and devices owned by friends, the N8 (and my N900 and X3-02) all give superior WiFi and cell service which is more important to me. I get consistently better reception and connectivity than any other device. The nicest of UI’s are rendered irrelevant if the device cannot connect to anything…

I have no trouble syncing my (Nokia) devices to Google services and to my PC over the air. Admittedly, I use services like Nuevasync to achieve this, but that is my point: Nokia make crap softwares and services (Maps excluded) and great hardware, which is where I take issue with your comment about HTC:

Do you really maintain HTC’s handsets are as good as Nokia’s? Really? The N8 still rules as the ultimate cameraphone for all conditions. The quality of Nokia’s build on N8, E7, C7 and E6 eclipses anything by HTC or even Samsung. The quality of microphones, loudspeakers and battery life easily exceed the vast majority of top-end Android devices. The SGS2 and Experia Arc feel like cheap plastic toys alongside Nokia hardware, which is right up there with iPhone4, which costs 2 to 3 times the price.

Consumers do get locked in to ecosystems – and that’s why it’s important for Nokia to surround itself with a suitable ecosystem – something Meego cannot deliver on time. But apps come and go – how many paid-for apps of the same type have we all downloaded onto our devices over the last year? At least Nokia (and soon Windows Phone) offer full social network and search integration baked in to the OS to minimise the setup cost when a new user comes in from another ecosystem.

I do maintain that Nokia are the only manufacturer (aside from Apple) who make killer hardware: name ONE device – just one, that combines a top-knotch camera, quality case (high-grade plastic included) quality speaker(s) and microphone(s) and camera flash. The SGS2 is probably the closest, but it still feels plasticy and cheap compared to an N8 or iPhone4. Drop the devices onto a concrete surface and you’ll really see the difference in quality and durability. Even the iPhone would generally fail this extreme test.

I guess that before you used Android you ran other smartphones – probably Symbian, so you have already disproved your last point – people can and do jump from one platform to another – you’ve done it yourself! Where do you think all those Android users came from? They too made the jump, and can and will jump to something that suits them better or offers something distinctive.

As you say, Windows Phone is as easy to use as the other OS’s – and that is where Nokia need to be, not modding and propping up an ageing Symbian so it can do all the latest cool stuff, albeit with workarounds and teccie-cludges and paid-for services like Nuevasync and Goosync…

Nokia need something that ‘just works’ and they need it real soon. Symbian cannot deliver that in time and give a useful product life going onwards. Neither can Meego (which is a real disappointment for me as I quite like what I see).

But Windows Phone can. And with Nokia’s hardware, Windows Phone takes on another dimension.

As for me, my next device will probably be the N9 as I like to have full control over my device and drag media on and off without having to encode it to play it, etc. beyond that, I hope WP will follow Apple’s path and become a bit more ‘free’ to allow me to use it as I want.

Because if it doesn’t – I too will have to join the ranks of Symbian and Maemo power-user refugees who now seek solace in the cold but irrepressible embrace of any one of a billion little green robots ;->

I think it might be about focus — I reckon they could definitely do a
MeeGo-per-year as you suggest, however if Elop had announced that, I wonder
if most of Nokia’s employees would have sat back and relaxed a little too
much. He did need to underline the ‘burning’ to get them all on side and to
get them focused.

certainly, if it wasnt for elop and the N9 Meego/harmattan was pushed out properly in time for the 2nd quarter perhaps? i imagine it’d take a nibble at the very least out of that 20million

regardless of whats said Elop=a Flop a complete disaster on a Michael Bay scale to Nokia

If I am going to have to buy a non-Symbian phone (which looks increasingly likely and will be the first one since 2002) I honestly don’t know what I’ll buy. I’ve been massively unimpressed with Android as a phone OS, I hated my iPod touch so much I gave it away and WP7 is out of the question in it’s current form. I might have to go back to S40 unless something interesting comes out.

If I am going to have to buy a non-Symbian phone (which looks increasingly likely and will be the first one since 2002) I honestly don’t know what I’ll buy. I’ve been massively unimpressed with Android as a phone OS, I hated my iPod touch so much I gave it away and WP7 is out of the question in it’s current form. I might have to go back to S40 unless something interesting comes out.

Was not S^3 doing pretty well up to Feb 11? The N8 was selling rather nicely and according to Tomi Ahonen ASP was up for the first time in a long time in Q4 2010. So why did Elop need to kill the momentum?

I must say that Feb 11th seemed to be more helpful to Microsoft than to Nokia. It killed other platforms, and even today Elop wants to eliminate any hope on Meego, just to focus on WP7. WP7 has weaken sales now, will have them in 2012, and Ballmer and Elop knew that in February. I don’t think that 2 losers make a winner here, so my take is that the strong relationship between them is what is moving the kamikaze strategy of surviving or miserably dying together, in the smartphones market. 

The first examples used for ecosystems in most of the articles use Zune, XBox, Office. As far as I know Office is in all platforms, including Symbian, and Zune and XBox services are existent in WP7 ecosystem only… which is a FAILURE, so, do we really think those are good examples of “ecosystem relevance”?

I must say, I agree with your statement. There wouldn’t have been such hype, and most probably, the N9 wouldn’t be as hot as it is, if it was not because of the fact that it’s the only chance of keeping jobs to thousands of employees. Was this deliberate? I don’t think so. Still, the only positive outcome of this kamikaze strategy that seems to be following a Microsoft Agenda. thanks Ewan for your views here, even if I don’t agree, it opens a very good discussion. 

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