Towards the end of Batman Begins, Morgan Freeman's character asks Rutger Hauer's character if he had "read the memo". Its a pun on the flip in positions between the two characters at Wayne Enterprises. Morgan, who was once retired to obscure research projects at Wayne, becomes the CEO, while Rutger, who was once the CEO, is fired. Unbeknown to Rutger himself until he is told to read the memo. When I woke up this morning, the net was abuzz with a similar statement. "Haven't you read the memo?". But this time it was not fiction but fact. But similar to the movie, Nokia seems to have flipped from CEO to being fired, in the smartphone market that is.
Stephen Elop, Nokia's CEO, has written an honest review of his company's prospects in the mobile market, and especially the smart phone market, where Nokia has been in a free fall since last couple of years. My intention in writing this analysis, is not to recapture what Elop has already said, but to put things in perspective and check the ways out of the current mess for this once stalwart company. when I last wrote on Nokia (not for this blog), it was 2004 and the World was a different place. The company was on top of the mobile business, followed distantly by Motorola and Samsung. There was no iPhone then, neither was Android and BlackBerry was about a paging device.
Nokia is not a stranger to innovation. Some facts:
- The first smartphone from the company, Nokia 9000 Communicator, came out in 1996.
- The N-Gage mobile telephone and handheld game system was released in 2003.
- Nokia released its first touch screen phone in 2004, long before the iPhone.
But from 2004 until now, nothing much happened at Nokia, in terms of great products and innovation. Were the Finns spending more time in sauna and less looking around the mobile market?
Couple of things. In many ways, the products I listed above were ahead of their times. The Internet was just taking off in 1996 and telecom carriers were living off Graham Bell era networks at that time. N-Gage, a phone, was so niche, it created a new product category in phones, but bizarrely was competing with gaming devices like PlayStation, Nintendo DS and Microsoft Xbox. Touch screens were very expensive to manufacture in 2004, due to being premium products and lack of economies of scale. Not being able to see the type of success it thought it deserved, Nokia shelved the N-Gage, stuck to the archaic Symbian for Communicator and could not create an ecosystems of applications for the touch screen devices. Being content with growing candybar mobile sales in Asia and Europe, Nokia ignored the high-end North American market. Not a single product of Nokia took off in the US. All the while, the company looked happy selling cheap phones by the boatloads in markets in India and China. Higher volumes, but lower margins, which slowly got wafer-thin due to increasing competition from cheap Chinese imitators.
Meanwhile, Apple redefined the architecture of phones, Blackberry became The Phone for business users and Google redefined the mobile platform with Android. The beauty of iPhone is not just being cool but also its ability to create a whole new universe of consumer applications on a phone. BlackBerry's had an explosive growth due to email application, which made a must for business users. Android as an O/S is not only fast, but also smart. Symbian, could do none of these. Why?
Let's just look at O/S market share numbers now:
2005
Symbian: 67%
Microsoft: 14%
RIM: 7%
Linux: 6%
Palm: 5%
2010
Symbian: 37.6%
Android: 22.7%
RIM: 16%
Apple iOS: 15.7%
Microsoft: 4.2%
Over a period of five years, Nokia lost a staggering 30% of its O/S market, with Microsoft losing about 10%. This 40% went to the new players, Apple and Google, both doing an incredible job of hacking at the high end and low ends of the smartphone market respectively.
What now? It seems that according to Elop's memo, things are going to change. Nokia might finally start making phones that will have a different O/S than Symbian. Reports indicate that it could be Windows Mobile 7. If this reports are true, this must be great news for Apple and Google. Why? Because two wrongs don't make a right. Already on a slippery slope, Nokia could do better than hand-shaking with another loser in Windows Mobile (WM). It's a much better choice to go with Android. Because the higher-end market is already in the firm grip of Apple, who makes its own hardware and O/S. Apple does not lease its O/S to other companies. The lower-end of the market is being eaten alive by Android, which is just an O/S as Google does not make phones anymore. HTC, LG, Motorola and Samsung benefited tremendously by launching neat products with Android inside. Nokia, although joining this bandwagon, can put an immediate tourniquet on the blood bath in the lower-end products by embracing Android. In the North American market, what good will come out of going with WM 7, which has 4% penetration? Nokia can also open its phones to both WM 7 and Android devices and compete with the rest of the pack. Either way, still looks like a slippery slope.
Elop's memo has come a little late in the day. Almost five years late. The questions he raised should have been raised when Apple took the smartphone market by storm few years back and Google was exploding with Android since almost two years. Both companies are redefining the way people communicate and connect while the company whose motto is "Connecting People" seems disconnected. No matter which way Nokia choses to go, it looks like too little, too late. Late for the kill and absent for the slaughter.Unless Elop does something miraculous that is.
Stephen Elop, Nokia's CEO, has written an honest review of his company's prospects in the mobile market, and especially the smart phone market, where Nokia has been in a free fall since last couple of years. My intention in writing this analysis, is not to recapture what Elop has already said, but to put things in perspective and check the ways out of the current mess for this once stalwart company. when I last wrote on Nokia (not for this blog), it was 2004 and the World was a different place. The company was on top of the mobile business, followed distantly by Motorola and Samsung. There was no iPhone then, neither was Android and BlackBerry was about a paging device.
Nokia is not a stranger to innovation. Some facts:
- The first smartphone from the company, Nokia 9000 Communicator, came out in 1996.
- The N-Gage mobile telephone and handheld game system was released in 2003.
- Nokia released its first touch screen phone in 2004, long before the iPhone.
But from 2004 until now, nothing much happened at Nokia, in terms of great products and innovation. Were the Finns spending more time in sauna and less looking around the mobile market?
Couple of things. In many ways, the products I listed above were ahead of their times. The Internet was just taking off in 1996 and telecom carriers were living off Graham Bell era networks at that time. N-Gage, a phone, was so niche, it created a new product category in phones, but bizarrely was competing with gaming devices like PlayStation, Nintendo DS and Microsoft Xbox. Touch screens were very expensive to manufacture in 2004, due to being premium products and lack of economies of scale. Not being able to see the type of success it thought it deserved, Nokia shelved the N-Gage, stuck to the archaic Symbian for Communicator and could not create an ecosystems of applications for the touch screen devices. Being content with growing candybar mobile sales in Asia and Europe, Nokia ignored the high-end North American market. Not a single product of Nokia took off in the US. All the while, the company looked happy selling cheap phones by the boatloads in markets in India and China. Higher volumes, but lower margins, which slowly got wafer-thin due to increasing competition from cheap Chinese imitators.
Meanwhile, Apple redefined the architecture of phones, Blackberry became The Phone for business users and Google redefined the mobile platform with Android. The beauty of iPhone is not just being cool but also its ability to create a whole new universe of consumer applications on a phone. BlackBerry's had an explosive growth due to email application, which made a must for business users. Android as an O/S is not only fast, but also smart. Symbian, could do none of these. Why?
Let's just look at O/S market share numbers now:
2005
Symbian: 67%
Microsoft: 14%
RIM: 7%
Linux: 6%
Palm: 5%
2010
Symbian: 37.6%
Android: 22.7%
RIM: 16%
Apple iOS: 15.7%
Microsoft: 4.2%
Over a period of five years, Nokia lost a staggering 30% of its O/S market, with Microsoft losing about 10%. This 40% went to the new players, Apple and Google, both doing an incredible job of hacking at the high end and low ends of the smartphone market respectively.
What now? It seems that according to Elop's memo, things are going to change. Nokia might finally start making phones that will have a different O/S than Symbian. Reports indicate that it could be Windows Mobile 7. If this reports are true, this must be great news for Apple and Google. Why? Because two wrongs don't make a right. Already on a slippery slope, Nokia could do better than hand-shaking with another loser in Windows Mobile (WM). It's a much better choice to go with Android. Because the higher-end market is already in the firm grip of Apple, who makes its own hardware and O/S. Apple does not lease its O/S to other companies. The lower-end of the market is being eaten alive by Android, which is just an O/S as Google does not make phones anymore. HTC, LG, Motorola and Samsung benefited tremendously by launching neat products with Android inside. Nokia, although joining this bandwagon, can put an immediate tourniquet on the blood bath in the lower-end products by embracing Android. In the North American market, what good will come out of going with WM 7, which has 4% penetration? Nokia can also open its phones to both WM 7 and Android devices and compete with the rest of the pack. Either way, still looks like a slippery slope.
Elop's memo has come a little late in the day. Almost five years late. The questions he raised should have been raised when Apple took the smartphone market by storm few years back and Google was exploding with Android since almost two years. Both companies are redefining the way people communicate and connect while the company whose motto is "Connecting People" seems disconnected. No matter which way Nokia choses to go, it looks like too little, too late. Late for the kill and absent for the slaughter.Unless Elop does something miraculous that is.
2 comments:
Dude,
Nokia + WM 7 is the most awesomely irrelevant combination I've ever heard of. People are no longer buying Nokias in India. There was a time when Nokia meant either value for money or quality. Now there are cheap Chinese phones braneded by Indian firms that are on the cheap end. Quality is clearly B'berry or iPhone...there is almost no other player in the higher end. I guess Android is a player but the average user here chooses either iphone or bb...
Anyway, I totally enjoyed your article.
Hey man,
Saw your comment only today as I have not been checking my blog. Since I wrote this post, Nokia went from bad to worse. A few days back, it announced terrible quarterly results, got dumped and down 20% with takeover news around. I wish I had this prescience when it comes to picking blockbusters than predicting deadbeats :)
I will miss the good old Nokia tho.
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