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The Nokia Era Is Over

“Problems Deepen at Nokia.” That was the headline I first thought of when I started writing this blog. Then it struck me that the current market situation is reflecting more than just problems at the world's (still) biggest wireless handset manufacturer.

A major upheaval is occurring right in front of us, and it features a readjustment of market share, sales, products, and technologies in the communications industry. Nokia's travails represent an entire chapter in the unfolding saga, and the conclusion is inevitable: The era of Nokia is over.

I wouldn't call what is emerging the Apple era, either. Despite Apple's astonishing success in the MP3, smartphone, and tablet PC markets, the company does not yet have a lock on these sectors, and competitors are steadily, albeit laboriously, whittling down its leadership. Also, the market is in flux; Samsung is shipping competitive smartphones and tablets; Motorola Mobility is no longer on a downward slope; HTC is hitting good shots; and, most importantly, Google — even though it doesn't itself make wireless phones — is angling strongly for a leadership position with its Android operating system.

And then, there is Nokia. Once the smartest kid on the block, it is now seen mainly as a plodding player in a market it helped to turn into a global phenomenon. Today, Nokia revised downward its second-quarter and full year 2011 outlook for its Devices & Services section. The company said “multiple factors are negatively impacting Nokia's Devices & Services business to a greater extent than previously expected.”

Here are Nokia's three reasons for the current situation:

  1. The competitive dynamics and market trends across multiple price categories, particularly in China and Europe
  2. A product mix shift towards devices with lower average selling prices and lower gross margins
  3. Pricing tactics by Nokia and certain competitors

Is anyone surprised at this development? I would consider it strange for Nokia's executives not to have anticipated the sales slump, anyway. The company is making major strategic changes in its operations, and president and CEO Stephen Elop's decision to discard the Symbian operating system in favor of Microsoft's Windows OS was bound to have some negative impact. (See: Nokia Details First Steps in Road to Recovery and Nokia/Microsoft Alliance Carries Downside for Cell Phone Giant.)

Elop should have anticipated a lull in sales as consumers, developers, and partner telecom service providers stand aside while Nokia sorts out its problems. If he didn't, somebody should ask for his scalp. But Elop might not have been alone in not anticipating the trouble ahead. Disappointed investors today dumped the company's shares, and its ADR fell about 15 percent on the New York Stock Exchange by midday on Tuesday, May 31.

Hold on to your seat. It's going to get really bad at Nokia before it starts getting better. All indications are that the company is embarking upon a years-long reorganization that will initially leave it with a much smaller share of the mobile handset market and crimp its future ability to dominate the sector. Rivals are not standing still while Nokia resolves internal issues. In a market that moves at the speed of light, Nokia made several strategic mistakes: It didn't give customers more than they were used to, and it grew complacent.

Elop compounded the problem, in my opinion, with the decision to dump Symbian. If Nokia had instead said it would offer both Symbian and Windows without putting a time limit on the older operating system, it would have retained the market and sales that are now fast slipping away. That action has already doomed the company, at least for the next several years. By the time Nokia bounces back, the world will have moved in a different direction, much as it did when Motorola fell into a funk.

The Nokia era is over, but who is taking on the leadership mantle?

25 comments on “The Nokia Era Is Over

  1. Himanshugupta
    May 31, 2011

    Time is tough for Nokia and the wireless segment is ruthless for making wrong strategy decisions. I thought that Nokia will keep its stronghold in mid and low end mobile segment but it seems like there is tough competition even there. Nokia story is still in development and it can go either Apple way or Motorola way.

  2. Mydesign
    June 1, 2011

      Bolaji, you are right. It seems that nokia era is going to end because of their business policies. Initially there is only limited number of players in mobile handset sector and they gained a hug market share. But later on when more players and devices released to market, they had lost their grip. I think one of the main reasons for this is their inability to cope with the market requirements. They didn’t modify either their business plans or product models to combete with the other players. When others are coming with innovative products and advanced features, they are still trying out with Symbian and Windows mobile. Recently they had also announced about the shutting down of OVI store also.

  3. Susan Fourtané
    June 1, 2011

    “The Nokia era is over, but who is taking on the leadership mantle?”

    Bolaji,

    Nokia's reign is over. Apple is the next heir to the throne in Mobileland. 

    Pretty much it seems that Apple and its iPhone is taking on the leadership. Nokia's mistakes is a great opportunity for any competitor at the moment although Apple is the only one with what it takes to lead the mobile market and keep customers satisfied and willing to follow each and every Apple innovation or upgrade. 

    -Susan 

     

     

  4. Daniel
    June 1, 2011

    @Susan, I don’t think Apple would be the leader. Nokia enjoys the leadership, when there are only a limited number of players in market. So they enjoy the monopoly, but now the scenario is different, “n” number of players is in market. In my opinion, I don’t think anybody can have a major share; it may be shared fairly among different players.

  5. saranyatil
    June 1, 2011

    Apple can be a mobile land king only in the smartphone segments, when it comes to asian markets Nokia is a better player with respect to low end models. They started to build the trust starting with low end model and then got into the smart phone market.

    Now with so many players in the low end segment they are also loosing their place.

    The situation is like they are neither doing well in the high end segment nore low end.

  6. DataCrunch
    June 1, 2011

    A trip down memory lane:

    Source: Yankee Group

    If we look at the worldwide market, Nokia, although declining, is still the leader with a significant market share:

    Worldwide Mobile Terminal Sales to End Users in 1Q11 (Thousands of Units)

     

    Company

    1Q11

     Units

    1Q11 Market Share (%)

    1Q10

     Units

    1Q10 Market Share (%)

    Nokia

    107,556.1

    25.1

    110,105.4

    30.6

    Samsung

    68,782.0

    16.1

    64,897.1

    18.0

    LG

    23,997.2

    5.6

    27,190.1

    7.6

    Apple

    16,883.2

    3.9

    8,270.1

    2.3

    RIM

    13,004.0

    3.0

    10,752.5

    3.0

    ZTE

    9,826.8

    2.3

    6,104.3

    1.7

    HTC

    9,313.5

    2.2

    3,378.4

    0.9

    Motorola

    8,789.7

    2.1

    9,574.5

    2.7

    Sony Ericsson

    7,919.4

    1.9

    9,865.7

    2.7

    Huawei Technologies Co. Ltd.

    7,002.9

    1.6

    5,236.1

    1.5

    Others

    154,770.9

    36.2

    104,230.3

    29.0

    Total

    427,846

    100.0

    359,605

    100.0

    Source: Gartner (May 2011)

     

  7. tioluwa
    June 1, 2011

    The name “nokia” really seams to be fading on the global market, and in the mouths of consumers, however, if you check their hands and look in their pocket, you will still find nokia phones everywhere.

    There is a part of the world where “smart” is the key (mostly in developed economies), however, in developing economies, there are still a masses who simply want a durable phone and nokia is still king there.

    However, the introduction of Android i fear has the potential to really threaten Nokia.

    Blackberry and Apply are in total control of the smart phone market, but android is really coming up. many apps that are only available on blackberry and iPhones are now available on Androids also, and android phones can be gotten at reasonable cost. This however, i think is still a far cry.

    what the future holds however, time will tell, but in a way, Nokia is still King.

  8. seel225
    June 1, 2011

    Bolaji, such a good analysis on Nokia's ups and downs. I feel Nokia era is not over it is just like 'Quiet before the strom'. Almost every industry has ups and downs but that is not the end of its future. Nokia was the world leader in market for so long time, it has served various high end and low end customers. Smarthone market is good right now but there are people using Nokia phone is more than smartphone users.I would personally like to have one good smartphone with Androied or Apple OS. I hope some time next year Noika will release some good smartphone. I wish good luck for Nokia's future.

  9. Wale Bakare
    June 2, 2011

    Bolaji you have pin-pointed an interesting area left to be decided by the
    yet to be seen new innovations in world of smartphones.
    By the time Nokia bounces back, the world will have moved in a different direction,
    much as it did when Motorola fell into a funk
    “.

    Nokia still remains much active in the world markets despite easy ride by Apple's
    iphone series and continuous growing market of Android based smartphones.
    Will Nokia be able to hold on to the market lead in next few years? Well,
    may be, may be not.

  10. SunitaT
    June 3, 2011

    “By the time Nokia bounces back, the world will have moved in a different direction”

    Bolaji,

     I totally agree with your point that Nokia has missed the oppurtunity. It was in a very good position to capture the smart phone market. Not sure why it didn't adopt Android OS. It could have offered both Symbian and Android compatible mobile. Needs to be seen how will the win-Nokia will perform.

  11. t.alex
    June 3, 2011

    saranyatil, what if one day Apple decides to make phones and tablets for mid and low markets..that will be bigger trouble for Nokia.

  12. Susan Fourtané
    June 3, 2011

    t.alex, 

    Apple will launch a mini-iPhone. It will be smaller and cheaper than its big brother. With the mini-iPhone Apple will easily reach other markets that at the moment the iPhone is not reaching. 

    Now you see that in a quite short time Apple will be leading the market. 

    And once again: Nokia has made big mistakes and Bolaji has written quite a lot about this. 

    -Susan 

  13. Nemos
    June 3, 2011

    “Nokia's reign is over. Apple is the next heir to the throne in Mobileland”

    It is not that easy to be a reality. I believe we have overvalued Apple because Apple has manufactured 4-5 models, do you know how many models Nokia has designed? 


  14. Susan Fourtané
    June 3, 2011

    Nemos, 

    I live in Finland, 20 minutes away from Nokia's Headquarters. I know quite many Nokia people. Nokia's issues are known, talked about, lived and felt around here. 

    It's not a matter of number of phones designed or manufactured in the past, when Nokia was a Finnish company run by the Finns. Things have changed. Nokia is not the same company, not even in its own land. Trying to make things better they made things worse by making some real stupid mistakes. 

    When I say Nokia's reign is over I am not saying it being happy about it. It's just a fact. 

    -Susan 

     

  15. itguyphil
    June 3, 2011

    It's about QUALITY not QUANTITY. Apple has a fewer devices but their user bas loves them. Nokia has a plethora of devices but their user base might not be even satisfied with them. My dad personally went through 3 different Nokia models and did not like any of them.

  16. Nemos
    June 4, 2011

    I am not talking about quantity I am talking about the experience gained through the design. As many you design you gain more technical knowledge.

     It is very early for talking about   devaluing Nokia.

  17. t.alex
    June 4, 2011

    Susan, will there be a mini iPhone? This is not just to compete with nokia, but also Android.

  18. Adeniji Kayode
    June 4, 2011

    seei225;

    I really agree with you on that. Nokia has really made a name over the years and is well trusted for its products. For such manufacturere with such good performance, it can,t be over yet

  19. Adeniji Kayode
    June 4, 2011

    Nemos:

    I think I know what you are thinking and Ishare you thought on that.With all this phones made by Nokia, I think It has swarm the length and breath of “mobile ocean” I don,t think Nokia can sink yet.

  20. Adeniji Kayode
    June 4, 2011

    Well, I agree with the fact that Apple is really causing wave with its few product, but from my part of the world,Nokia is still more celebrated when it comes to mobile phones while Apple is just comin up but then its laptops and Ipads are coming up too.

  21. Adeniji Kayode
    June 4, 2011

    NEMOS:

    Like I said, I share your though on this one. With such vast experience, Nokia needs to come up with something new that people will accept just like products from Apple.

  22. itguyphil
    June 4, 2011

    Fair enough. But based on what you see in other parts of the world, do you think Apple will have the same successes where you are?

  23. Adeniji Kayode
    June 5, 2011

    Well, for now Apple is still behind in everything except in the area of Ipods while their Ipad is the first to enter our market but still slowly coming up due to it price.

  24. Susan Fourtané
    June 8, 2011

    t.alex, 

    Yes, there will be an iPhone nano. Smaller in size and price than the iPhone and also it won't come with a contract. The price is set to be $200 (U.S. dollars). 

    -Susan

  25. Susan Fourtané
    June 8, 2011

    Adeniji,

    All that was true before Nokia's deal with Microsoft. 

    -Susan

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