Nokia didn’t have any smartphones until late 2011. Only smarter phones. And what’s a smartphone anyway?

After Nokia issued a profit warning last week, I was trying to wrap my head around the steepness of its decline in smartphones. And then I realized that we’ve been looking at this thing the wrong way.

There is no Nokia decline in smartphones, there never was, and there never could have been. Because before the fall of 2011, when they released first Lumia phones, Nokia was never in a smartphone business at all.

What’s a smartphone?

The devices we call smartphones today were invented in 2007. By Apple. The first smartphone ever – was the iPhone. Just like with tablets after the iPad, the category of devices we used to call smartphones before iPhone, seized to be. It should have been folded into a wider “mobile phones” category, where they belonged all along.

“Smartphones” before 2007, were just smarter high-end phones, with apps as another feature among many. Other features included camera, e-mail, limited web browser, wi-fi, GPS, maps, etc;

Before iPhone, there was nothing inherently different between the smartphone and top of the line feature phone. Yes, smartphones could run third-party apps. But so could feature phones. J2ME apps were more limited than native ones, but they still were apps. As were apps on Qualcomm’s BREW platform. The main difference between smartphone and feature phone back then – was the level of access to handset functionality through various APIs. But both of them were still phones. Optimized for their primary purpose – voice calls and SMS messaging.

It’s amazing that for all the talk about smartphones for more than a decade now – nobody came up with a clear definition of what it is. Here’ what Wikipedia has to say about a smartphone today:

A smartphone is a mobile phone built on a mobile computing platform, with more advanced computing ability and connectivity, than a feature phone.

It’s so vague, and, with the emphasis on mobile phone, so wrong – it’s laughable.

In India, Nokia is advertising its S40 Asha phone line as smartphones. Many smartphone aficionados are truly pissed about the whole thing. But if we compare Nokia Asha 303 to the uber smartphone of 2007 – N95 – why exactly Asha is not a smartphone? It has faster CPU, more RAM, same connectivity options, maps, can do e-mail, browse the net, has apps and its own appstore, and a better keyboard. The reason some people are up in arms against labelling Asha a smartphone, is precisely because the smartphone today is a completely different kind of device then it was in 2007.

If I had to define a smartphone now, I’d say:

A smartphone is a pocketable multi-purpose communications and computing device with always on connectivity to cellular networks, rich Internet browsing, voice, messaging and other communication and discovery options, media playback and creation capabilities; expanded via highly developed third-party software application ecosystem.

It is a bit vague – and if you have an idea for a better definition of what is a smartphone today – do share it in comments. One thing I’m sure about -“mobile phone” functionality, while a must have feature of modern smartphone, is certainly not the main or even the most important one. And placing today’s smartphones into some subset of mobile phones – is a mistake.

Nokia’s smarter Symbian phones

Which was exactly the mistake that doomed Nokia back in 2007.

Nokia management saw the coming disruption of a phone becoming a computer in your pocket years before almost anyone else in their industry. And they tried to get ahead of disruption through their NSeries phones. Insisting that NSeries are not mobile phones anymore. They are multimedia computers.

Unfortunately, after the decades of legacy of making phones, and dominating mobile industry for so long – they had no idea how to make anything else, but a phone. With some computing features tacked on top of it. CPU, RAM – those were just cost items on bill of materials (BoM) – up there with camera sensor, Wi-Fi chip or GPS chip.

And software/OS? That was what those guys at Symbian Ltd, and Nokia S60 division did. A thing that is supposed to make all those chips and sensors that Nokia hardware wizards crammed into a device work together, and be presentable to the user. All within a tightly constrained BoM, hardware specs set in stone before the software part is even halfway done, and real computing/processing requirements are understood.

So Nokians looked at the iPhone – and all they saw – was a poor phone with some nice software overlay on top. As a phone – the original iPhone and even iPhone 3G were so far behind the devices Nokia made – it didn’t seem like a threat at all.

How hard can it be to add touch, bigger screen and write a few (thousands) lines of code, to make the successor to N95 behave like iPhone, and kill it on overall specs? Especially when Nokia could hire a bunch of third party contractors and throw them at the problem, if they needed to.

Or, for the matter, why not buy up a bunch of Internet startups, call it OVI, and become a mobile phone based Google, when all phones become computers? It looked like a no brainer from a phone company point of view. How hard can it be, when Nokia already more or less owned high-end mobile hardware biz?

That’s how a disaster like N97 happened. Why OVI was such a mess and died in the end. And that’s why the transition to Symbian^3 took so long, and ultimately failed. With its obsession on frugal resource use, cheap, underpowered CPUs and with no idea what makes software great, Nokia was still trying to make a better phone.

While failing to see the key thing that made iPhone different and successful. That it was not a phone.

Smartphone disruption

Even though very few were able to grasp the importance of this back in 2007, Steve Jobs tried to hammer in the message that iPhone is not a phone repeatedly on the announcement day. Watch at least the first few minutes of the launch presentation. It’s amazing how right Jobs was 5 years ago:

An iPod, a phone, and an internet communicator” – notice, how “a phone” is just one function squeezed between media player and Internet communicator? The iPhone was not a phone – it had a mobile phone capability – but it wasn’t the only one, and not even the most important one. Internet browsing and communications, media playback – were at least as important as a phone. That was the crucial difference and radical departure from prevailing mobile (smart) phone paradigm.

And Apple labeled its device – a smartphone. I have no idea if it was intentional. Probably not. But by putting an iPhone into the same category as the smart high-end phones of incumbents, Apple played a cruel joke on mobile device vendors in general, and Nokia in particular.

All this time when Nokia thought it was competing in smartphones, building an ecosystem, developing new Symbian touchscreen devices, etc., etc. - it was just making smarter phones. Nokia 5800, N97 and even N8.

To make matters worse, fearing the cannibalization of its Symbian cash cow, Nokia was unintentionally sabotaging the best possible response to iPhone and emerging Android they had – Maemo OS. Drawing up multi- year transition plans, great on paper but impossible to implement within reasonable time limits. Killing the bird in the hand – the best mobile computing device they ever made to date -Linux based N900 with GTK UI/app framework – for a mirage of Qt transition and incomprehensible merger with Intel’s Mobilin.

Nokia top managers were well aware about disruptive innovation theory. From what I heard, Clayton Christensen’s “Innovator’s dillema” was a required reading for Nokia execs. Heck – they even had Clayton Christensen keynoting at one of the last Symbian Summits.

The problem was that, contrary to most known examples in business history – the disruption started at the top this time. Nokia thought they were ahead of it – they were building and dominating smart phones at the time, after all. And nobody told them that they were making the ultimate sustaining technology devices, perfecting the mobile phone features like camera, penta-band antennas, USB-on-the-go and  HDMI/TV-out, few users cared about. While paying too litle attention to the disruptive user experiences enabled by better software on faster CPUs and bigger RAM chips.

So Apple and later Android started replacing Nokia smart phones with new kind of devices – the true smartphones we have today.

It started slow. In 2007-2008 Nokia barely noticed the bite Apple took out of its most lucrative $600+ NSeries smart phones. In 2009 Nokia started feeling the heat, and tried to respond with N97. We all know how that worked out.

By early 2010 Nokia was forced to admit that they do not have a device to compete with iPhone, and abandoned the most lucrative high-end market. Though they were still able to keep their faux market share, by replacing S40 phones with heavily discounted Symbian devices at lower market tiers.

Then, in the second quarter of 2010, upper mass market Android 2.1 smartphones exploded, and took over still pretty profitable $400-600 smarter mobile phone price market. Nokia margins and profits evaporated. And Symbian 3 devices – still more phones than smartphones – were only able to halt the fall for a few months.

In early 2011, acceptable quality Android smartphones got to the $300-400 level and started replacing Symbian phones there. You can see that clearly in Symbian sales crash in the first half of last year.

In 2012 Android went even lower, and now we are witnessing Symbian sales crash in high volume $150-250 mobile device market.

What now?

The good news are that in late 2010 Nokia recognized they do not have their own competitive smartphone platform. And took radical steps by going with Microsoft’s Windows Phone and more or less stopping Symbian and Meego development.

The bad news – Nokia mobile phones are being replaced by Apple’s and Android smartphones at a much higher pace then anyone expected. Furthermore – a theory that there will still be a significant market for old style mobile phones, which will help Nokia during transition – seems to have been wrong.

If there is a price where mobile phones can survive – we haven’t found one yet. From $600+ few years ago to $150 today – whenever Android gets to that level – mobile phones, even the smarter ones with Symbian, get quickly replaced by smartphones.

The question now is whether Windows Phones sales will ramp fast enough to compensate the losses Nokia is suffering in legacy phones.

For all intents and purposes – Nokia today is going through the same transition Motorola and Sony Ericsson went a couple of years ago. Moving from legacy phone business to smartphones. Neither Sony Ericsson nor Motorola survived the transition as an independent company. Whether Nokia will be able to – I don’t know. The signs for now are not too promising.

At this point – Nokia is a complete newbie in smartphones, entering the market with an unproven Windows Phone platform. And with rapidly declining legacy mobile phone business, that is now turning from a modest profit generator into a loss anchor.

Maybe Nokia does have a true killer smartphone on Windows Phone 8 in the works. Maybe the Linux/Qt based Meltemi OS will be a true smartphone OS, able to compete with cheap Androids. And maybe world class logistics, distribution and sales organization Nokia built over the decades, will be able to move those next generation devices in big volumes.

I hope so.

Update: I do not argue the definition of smartphone from the technical point of view. File system, photo, video, tv output, connecting to PC anywhere, the architecture, the efficiency (vastly superior to anything else out there) and so on. For as little as it matters – I do agree on these points. And I even agree that before 2007 – it was right to call N95, N93 and other Symbian devices – a smartphone. Because those devices where phones first and foremost. With other smart functions/capabilities secondary to to the main – phone- functionality.

I would have much preferred that industry and media had came up with some other term/category to put iPhone and Android into. Unfortunately that didn’t happen and these true mobile computing devices, that have a phone function which is equal, if not less important others – have co-opted the term. They are called called smartphones today and ideologically, they are very different from what a Symbian devices is. I tried to tackle this issue here.

There is a crucial difference between Symbian’s – mobile phone first, and Android/iOS – mobile phone just another app in a connected pocketable computer – approach. It results in a very real business consequences. Different trade-offs are made when designing the devices, different features are prioritized, and users start choosing the devices for different reasons to do different things.

If anything – today’s Nokia Q1 results, and the fact that Android is equally easy taking over both Symbian and S40 devices, when it reaches the same price level – is another indication that Symbian is much closer to S40 then it is to iOS or Android.

For more detailed story about how Nokia was disrupted check here

My early thoughts about the smartphone/true mobile computing devices – are here.

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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  • 1234

    iphone is just an extension of your desktop computer, it can’t connect to an usb drive for example. It is not a pocketable computer. With symbian and android you can. Only problem with symbian and nokia is: lack of (3rd party)apps and support for them.

  • Martin Ghosal

    forget Symbian, that’s a lost cause, the real definition of a smart phone is the N900, I think a “smart” phone should at least be able to do some real-time multitasking? 

  • Anonymous

    Indeed it was. Psion was running it a looong time ago. 

    http://www.garethjmsaunders.co.uk/blog/wp-content/20051130psion7.jpg

  • Anonymous

    you might want to take a look at this

    http://en.wikipedia.org/wiki/History_of_Symbian