Nokia’s road to Feb.11th – the last 18 months. Part 1

Nokia strategy shift on February 11th 2011, came as a huge shock to most mobile industry watchers. At the time many expected Nokia to add either Windows Phone or Android OS to its offerings. But the general consensus was that it will keep its own Symbian and Meego platforms too.

Back then, Symbian was still the biggest smartphone OS in the world, shipping 100 million+ devices a year. And, after 3 years of treading water, the Nokia turnaround seemed to be just around a corner. The newly hired CEO appeared to be fixing the bloated and ineffective software operation, killing off competing Symbian UI renewal projects and streamlining the development process. With 5 million devices shipped, Symbian^3 OS appeared to be selling pretty well, improving company margins and profitability. After years of waiting, Qt – the new well regarded application and UI development framework for Nokia smartphones – was more or less ready and shipping, promising a smooth transition from aging Symbian to the next generation Meego OS. And everyone was expecting the first Meego phone announcement any day now.

After thousands of man years and billions of Euros invested into developing its own platforms, the thought that Nokia will simply abandon Meego and Symbian at a time when those investments were starting to turn the company around, was simply inconceivable. And yet, it is exactly what happened on February 11th.

Stephen Elop got on stage with Steve Ballmer in tow, and announced to the world that Nokia is abandoning all its smartphone platform initiatives, betting its future on the new, unproven and as yet unsuccessful Microsoft’s Windows Phone OS.

How did things get so bad at Nokia, that even its senior management lost all faith in its own abilities to turn company around?

September 2009 – February 2010. Nokia’s fizzled offensive

From the long term point of view, it’s easy to identify the point where Nokia’s downfall started. January 9th, 2007. The day iPhone was introduced and mobile industry changed. I wrote about “hows” and “whys” in my posts “How Nokia was disrupted. Part 1 and part 2”.

Here I’ll try to take a closer look at what happened during the last 18 months leading to February 11t.

In September 2009, almost 3 years after iPhone announcement, but with Android 1.x still struggling to find its customer, top Nokia managers were feeling pretty good about state of things. “We are on the offensive” – announced Anssi Vanjoki during Nokia World 2009, dismissing claims that Nokia is getting killed by new smartphone competitors.

And he had a point. At the time Nokia just launched the next generation Linux Maemo based superphone – N900, which was enthusiastically received by anyone who had a chance to play with it. While there already were a lot of problems reported with the new Nokia N97, the upcoming software update was supposed to fix them. Furthermore, the new flagship was selling at a rate of 1 million+ devices a month (huge number at the time, comparable to the iPhone sales), and there was a cheaper companion handset – N97 Mini – coming, that had to boost Nokia smartphone shipments even more. At the mid-tier, Nokia 5800 was still a hit, with 5530 and 5230 on the way to take Symbian Touch device sales to the new levels.

For 2010, a major Symbian rewrite was coming. In the first half of the year S^3 had to fix all the underlying S60 stuff that made it so hard to do touch, with Symbian^4 ushering the next generation modern touch based user interface for next Christmas. And Nokia had a killer device– Nokia N8 – in the works, scheduled to launch sometime in the second quarter of 2010. In addition to the next generation, consumer ready Maemo 6 based Nokia N9, scheduled for the holiday season.

With its smartphone market share close to 40%, and holding steady, good device line-up for the next 6 months, and a solid upgrade plan for 2010, it’s no wonder that Nokia execs felt pretty certain about the future.

And then it all fell apart. Nokia’s new offensive fizzled in less then 6 months.

While Nokia Q4 2009 results, as seen by outsiders, were pretty good, the reality was catching up to them. Nokia was able to push almost 10 million of its new touchscreen devices (N97, N97, 5800XM, etc; ) into the sales channel. But hardware mistakes in N97 design made the usability problems impossible to fix, dealing a huge blow to Nokia credibility in the eyes of the best, high end customers, and (most likely) resulting in huge product returns.

The realization of what a deep hole they are in, must have hit Nokia management and board sometime between December 2009, when they made their Capital Markets Day presentations, and February 2010.

At CMD in December Nokia execs still sounded very confident about their strategy, all but promising Symbian^3 release in the first half of 2010, and the second major Symbian milestone (presumably S^4) , in Q4 2010. And, even though Nokia has decided not to be present on Mobile World Congress show floor in February, they’ve had an even bigger place booked next door to MWC, to show off next generation Symbian devices.

Sometime in late 20009/early 2010, Nokia management figured out that their next generation Symbian^3 and their new flagship – N8 – are not even remotely ready for the spotlight, and will have to be delayed by about 6 months. Symbian^3 launch at MWC was cancelled, and in Barcelona we saw a very different, much more humble Nokia. There were no more loud ‘We are on the offensive” proclamations and the huge showroom felt like ghost town, with no S^3 devices and only few outdated S^1/S60 handsets on display. Nokia’s EVP Anssi Vanjokki even made a surprise admission to All About Symbian’s Rafe Blandford, that their Nokia N97 flagship is crap.

All these problems – N97 debacle, S^3 and N8 delay – couldn’t have come at a worse time. iPhone 3GS was already stealing troves of most profitable customers  all over the world. Then, in the first half of 2010, second generation of Android smartphones started shipping worldwide, providing another very good alternative to the bug ridden Nokia flagships.

At that point, with no champion device of its own, Nokia had to admit the defeat at the high end, and move heavily down market, pretending that this was a plan all along, under the “democratization of smartphone” slogan.

Furthermore, to keep its high smartphone unit volumes, and the appearances that it is still doing ok, Nokia had to resort to buying market share by price dumping. Which resulted in falling profitability and margins, and was still only a very temporary fix.

This is Part 1 of our look into the last 18 months of Nokia as we knew it. In the part 2 we’ll cover appointment of Anssi Vanjoki as head of Nokia smartphone division, his plan to save Nokia on the strength of Symbian/Meego/Qt stratetgy, and his failure to convince Nokia Board that it is enough, hiring of Stepehen Elop and other events that lead to Feb. 11th

 

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • Anonymous

    Good stuff

    I think Nokia’s unbelievably arrogant/naive creation of Symbian Foundation as an Open Source panacea for all ills (in reality an attempt to get their rivals to share development costs) was hugely ill-timed and was a huge factor in the Symbian delays as they kept thinking that everything would work out once all the legal steps and structures had been agreed rather than looking at the actual software and the steps required to improve it rapidly. i.e they needed to get something better into the market and fast not indulge in grandiose strategy initiatives (funnily enough it transpired that Samsung were way better at this and managed to waste a lot of Nokia time in the Foundation whilst sorting alternatives for themselves behind the scenes, it must’ve been very embarrassing for the Nokia board to have been so comprehensively out-manoeuvred and today Samsung has overtaken Nokia).

    A colossal waste of time and peoples’ loyalty and let down for those placed into the Foundation.

  • http://twitter.com/rodrigottr Rodrigo Arantes

    Can’t  wait for part 2.

  • http://www.videoconverterfactory.com/tips/dvd-to-mkv-file.html DVD to MKV File

    We should not forget Nokia is the world largest cell phone manufactures, but it lacks of creative ideas, I hope it will have more creative features in the future.