Nokia's earnings disappoint as it struggles to combat Apple's iPhone - Page 3

The difference is, there was nothing else out there to compete/compare against the 1st gen iPhone. It was competing against itself, and against people's expectation of a radically new concept.

Your analogy is not even in the same league.

What analogy? I questioned the presentation of a seven year old phone as an example of current design, and you still haven't come up with something.

The fact that he mentioned my name means it has everything to do with me, so again I ask, what is that meant to mean?

Their phones can do FLASH! OMG, thats supposed to make them beat the iPhone! And they can multitask! And they have a removable battery!

Gee how could so many nerds be wrong?

------

(and snakes on a plane was supposed to be a blockbuster!)

Interesting. Why do you take that as an insult? We know your presence simply enlivens any discussion of Nokia.

By the way, I've already said my piece earlier about Nokia. Since it seems like you haven't read it, I said Nokia is one of the two biggest threats to Apple IF Nokia can execute, as their management already seems to recognize the breadth and depth of what they need to do..

Good, user oriented design is hard. The first thing you have to do is ignore the criticisms of the technirati and keep your focus.

So far Apple seems to be the only company able to do that consistently. And for all the negativity and crap they get from "experts", they are wildly successful. Other companies can see this, but they just can't help themselves. They really can't break from the past.

The best example of this is Android. Just having multiple hardware makers was so successful for Windows Mobile. Just like open source was a guarantee of success for Linux.


They can't do it. It's simply not in their DNA. The proof is in the products that are shipping. The application fragmentation mess for Android is going to be a complete nightmare. People complain that Apple charges for OS upgrades for the iPod Touch - but at least they offer them! Many of the first generation Android phones have yet to offer any OS updates.

Apple has little to worry about from anyone in the market today, and they are well on track for keeping their lead. OS, hardware, app store, iTunes - they are firing on all cylinders. No one else comes close to their performance.

After the recent announcements from Apple is this still a good thing to bring up?

It's not feature dominance, but experience dominance. Not so subtle, and a very important distinction.

Profit wins, and Apple is ruling the roost right now. We'll see how it plays out going forward. I think Nokia has their work cut out for them, but that's just my opinion.

I love mine too but it was perceived as strange lookIng at launch. We say beautiful, others said goofy. Long live the cube!

The whole user experience of the N95 would certainly count. It was horrific. I had to help a friend navigate the awful menus and I hadn't used it before. It was about first principles and luck to find out how to do pretty basic things. He'd had it for months and was tech savvy but was infuriated with it.

I do know that and have acknowledged that. What I was trying to do was to give an answer to where much of the R&D money had gone in the yesteryears. Apple for sure has done a huge number of ground braking work on the usability and end user experience side. The others were stuck in the tech-cycle for too long and fortunately Apple broke that cycle.

But what I was also trying to point out was, that unless someone had brought the features and optimised the designs (Nokia, Qualcomm etc.), Apple couldn't have made the iPhone either. Also no user base on the phone side allowed them to be much more revolutionary in the UI department than anyone else who cares about an existing user base. That does not mean that Apple didn't do a great job. Just trying to give some plausible reasons for why Samsung, Nokia, Motorola etc. didn't change the OS and UIs so much. Similar story with RIM. The one's who's marketshare is down (low user base to alienate) did a lot of different trials with OSs and UIs (look at Motorola and Samsung a few years back for example).

The way I see it is that a UI revolution would have happened eventually (2, 5 or 10 years later who knows) since the tech cycle was nearing it's end CPU and feature wise (memory, GPS, RFID, BT, Cameras etc). The vendors already were toying with touchscreens (Nokia 770-> for example). Apple just forced the next cycle with touchscreens to begin earlier (good thing) with their UI and usability which could be created from the ground up without any carryon baggage. And they hit a home run with it.

Regs, Jarkko

I did say Ovi (the services concept), not Ovi store. Ovi was announced Aug 29, 2007. The main point was about cloud services (like Apple's App Store in March 2008 and .Mac/Mobile Me before that). Yes Ovi store was released later but was on the roadmaps before Apple's Store announcement. So at least the idea was not a copy. The end result may well be.

Regs, Jarkko

Thanks for your measured analysis. All of it.

(Your quoting mechanism needs a little work, however )

Which first generation Android phones haven't had at least one OS update?

The first Android phone was the HTC Dream. It was released with Android 1.0 and now runs 1.6. The second Android phone was the HTC Magic and also got an upgrade to 1.6. In fact, there's not a single Android phone on the market still running Android 1.0 or 1.1.

Don't I Know it. The darn skype tags are inserted after you press "Submit Reply". Now Skype extensions are disabled so hopefully that was the last time that happens.

Regs, Jarkko

I suggest you take a look at this chart

Take a look at what has happened since the middle of 2007.

That's numbers talking.

I'd ease back from those market-share numbers a tad. Because they are a little bit misleading.
Nokia sell a huge number of handsets. Most of them are pretty basic. But nowadays even the low-end handsets are getting web and email functionality.

That functionality means almost everything they make is now classed as Smartphones.

The result of this transition means the number of smartphones is growing hugely - and the market-share of smartphone sold by Nokia is increasing.

But what Apple is selling isn't the same type of product at all. The iPhone a device that sells unsubsidised for $600 and nets about $300 pure profit on every handset sold. That's unusual. One Apple iPhone makes more profit than about 20 netbook sales for Dell.

Nokia also makes some high-end handsets, which in terms of market positioning are comparable to the iPhone. These top-end handsets get the N-Series label. This is where the big profits are in the handset market. Low-end phones have a lower retail value and much much slimmer profits.

So if you dig into Nokia's sales numbers, these highly profitable N-Series devices are not selling. Nokia are selling less N-series devices every quarter, and about a half the number back in the pre-iPhone heyday.

This is why the market is taking a dim view of Nokia. After three years of the iPhone, Nokia's response has been to talk in a dismissive way about this new upstart - but their competing products have not arrived.

Instead we are getting this bizarrely confusing message about Symbian 3, Maemo, Meego. Nokia's answer to the iPhone is always something in the future. The market is getting tired of waiting. And in a market where people upgrade every 24 months. 3 years of waiting can do a lot of damage.

Like Apple, Nokia control every aspect of hardware, software in an integrated way. Unlike Apple, Nokia are not using this control to make outstanding products.

C.

Again, although the N95 was an extremely popular phone, it is still a very old phone, it was released over three years ago.

I've used N97's and that is how they work, very frustrating and annoying most of the time I give up on the fingers and look for something pointy, like a stick.

I was trying out a SonyEricsson X10 today, while trying to scroll to select the language in the set up wizard it went straight into Indonesian, it took ages to get it back again, the book was useless it suggested the inbuilt help files which were also in Indonesian.

I don't want to be annoyed by phones, I just want to use them.

Such as delaying the launch of Symbian^3...

...that went down well on the stock market.

Apple has been winning and everything looks like they will continue to win. They male more profit than any other cellphone vendor out there. That is the only thin that matters to good companies. Assuming that selling 2x$30 phones is better than selling one $600 phone simply because you can count it as two sales is not how companies make money.

PS: Apple apparently also makes the most profit from PC sales so do you think they care about increasing their marketshare if it means lowering their prices to a point that means losing profit per quarter? Of course not.

Here a sweeping and slightly racist (or culturalist) observation.

Europeans have a habit of deciding the merit of a thing or an organisation by what goes into it. The level of effort, the genius, the creativity and so on.

Americans have a habit of deciding merit based on outcomes. An organisation is only as good as its (last) product.

Nokia would score very well when measured by its inputs. But very badly on outcomes.
Europeans should shift to the American method of appraisal.

C.

(And I say this as a European myself)

The App store is a part of the iTunes store which was around long before then.

Nokia was one of the companies Universal BMG turned to when trying to break free of iTunes.

The Nokia music store failed and was rolled into express music which is on quite a few of the cheap smartphones which bring down Nokia's average handset selling price.

That is the roots of OVI.

If this is true, then one should value the inputs, as you call them, for durable items like trucks or bridges. But in the technology field a lot of products are ephemeral (mobile phones, home entertainment, etc.) where the hardware is a mix of rapidly-evolving production economies and blind consumer fashion. In the case of Apple, their underlying OS is somewhat durable, in that they continue to build upon the same foundation year after year, but the components and packaging of their hardware products change with each new technology update (more or less).

So ultimately I think one needs to strike a balance that optimizes the hardware and software components at hand and integrates them in a manner that serves the end user, and not necessarily the developer, or carrier, or IT manager. You simply cannot please everyone, and Apple has figured out who the ultimate target audience is.

Every time I read the comments from tech geeks bemoaning Apple's closed policies versus Android/Linux/Microsoft (in terms of developer leeway) I imagine someone at Apple looking at two groups on a whiteboard: one group contains all the self-proclaimed tech experts on the entire planet, represented by a small circle, and then everyone else, as represented not by a large circle but the remaining space on the whiteboard, from edge to edge. Who would you cater to?

They got lazy. They never bothered innovating the OS or the UI to work well in a touch based environment. They simply did a rough port of S60 from their messaging phones over to their consumer touch phones. And while they were among the first to facilitate user installed app, the Ovi app store was a disaster. And on it goes...

Nokia still doesn't get it. The future is about mobile cloud computing, and apps which draw from the cloud. Instead of developing the ecosystem through Ovi, they keep trying to make the OS pretty.

Apple Inc. earned over 13 billion for the quarter and Nokia can't even break 500 million????? I find this much too funny!!!

Apple Inc. earned over 13 billion for the quarter and Nokia can't even break 500 million????? I find this much too funny!!!

Fair enough but even the general Ovi cloud was vaporware for more than a year (Public Beta in late August 2008). The idea of a services cloud may not have been a direct copy of Apple but it has been behind Apple at every stage in reality. Apple doesn't pre-announce with much lag to release so Announcement dates are not really a comparable stat. It was pretty clear where Apple was headed from the iPhone announcement.
I can announce something when I think my competitor will do it and then spend 13 months to release something but it doesn't mean I am the innovator. It's like people claiming HP beat the iPad to the punch because Balmer held a quarter-baked Slate at CES. Just because Apple doesn't (generally, iPhone 4 excepted) leak or pre-announce doesn't mean that it isn't first to market in a meaningful sense. It is with the iPad and was with the cloud and App Store.

It was when there was no competition. 3 years ago is closer than 7 and lets face it, most Nokia phones released since then have been reviewed as "meh", N97 et al. vs. iphone and Android.
Your defence of Nokia is admirable but I notice you stick to meaningless semantics about crappy designs of the last decade and not about the core facts of this topic. Nokia is taking on water. Nokia's profit was 15% of Apple's and key metrics like ASP are eroding badly.

I crunched the numbers. When talking iPhone, one must look at the whole year not just one quarter, since iPhones are released once a year. (Numbers below are from Nokia estimates of global smartphone market, and Nokia, RIM, Apple filings.)

From Apr 08 - Mar 09: 165M converged devices (aka smartphones; Nokia's term) sold, Nokia sold 59.6M or 36.1%, Apple sold 15.8M or 9.6%, RIM sold 26M or 15.8%. (Note RIM numbers are for Mar 08 - Feb 09).

From Apr 09 - Mar 10: 193M converged devices sold, Nokia sold 75.6M or 39.2%, Apple sold 30.1M or 15.6%, and RIM sold 36.7M or 19%.

Apple increased its market share from 9.6% to 15.6%, RIM from 15.8% to 19%, and Nokia from 36.1% to 39.2%.

But note: To get that growth, iPhone Average Selling Price (ASP) dropped from $640 (at end of Mar09) to $622 (at end of Mar10) or 2.8%. Nokia's smartphone ASP dropped from 190 to 155 euro or a whopping 18.4%. RIM BB ASP dropped from $369 (end of Feb09) to $310 (end of Feb10) or a whopping 16%.

So for last year, Apple grew 6% market share "with only one phone at that price" while its strongest competitors each grew 3% share while introducing many more models AND taking a big cut in price. But you're saying that it's a "no brainer" that Apple can't do it again. So looking forward, what happens if you're right and Apple tries the exact same thing and can't do it?

First, I don't think they need to lower prices because Apple just got rolling in Greater China (at full price), S. Korea, Japan, Vietnam. Far from saturating even the rich people there. It's been a hit in Singapore and Thailand (per Admob data where it's got higher numbers than US.) Same goes for US, UK, Australia, France, etc.

What about places like India - no contracts, not as many rich people? Apple mgmt says studying what to do. Apple averages 55-60% margins on $600-800 iPhones (Nokia devices average 32%). Compare that Apple is selling a 16GB iPad 3G for $630 at maybe 30% margin and that's with the added cost of a $95 screen, 2x battery, and aluminum frame. So it's clear that Apple could go much lower on price for iPhone if it wanted to, especially in countries where subsidies and contracts aren't popular, such as India. And it could do it today (or June), before Symbian^3/MeeGo/Win Phone 7/BB 6 even arrive.

In countries with carrier subsidy like US, Apple has already dared any smartphone vendor to price over $199 (with contract and no rebate). Palm boasted it would, yet used a clumsy rebate and it is where it is. EXCEPT for iPhone, US consumers have been conditioned to wait for buy one, get one free on all smartphones. (That "wait-for-a-deal" mentality is what led to the downfall of GM and Chrysler.) Yet even $50-off refurbished iPhones are sold quickly. AT&T/Verizon data shows iPhone is still kicking butt despite BOGO. Can you imagine the gnashing of teeth if Apple decides to lower the price so that the new "iPhone HD" would be $149 with contract, and the older iPhone 3GS at free? And then do the same at Verizon? Would it then be time to call on the fat lady to sing?

Excellent post!

So what you are saying is, that the only people that deserve to own a phone are rich people.

I will ask this of you as well, are you saying that only rich people deserve to own a mobile phone?


When I look at the Apple store I see more than one model of iPhone, can you explain what you mean by "with only one model at that price"?

Most phones, yet you only list one.



you talk about profit, as a consumer the last thing on my mind when purchasing something is which item will gain the greatest profit for the manufacturer. My decisions are based on what provides the best value for money for me, and me alone. My defense of Nokia is no different than my defense of the Apple products that I have purchased. Nokia's pricing structure is an indication that their market share will continue to stay at the high levels that they are currently are. Remember, the majority of the worlds population cannot afford a phone with a average selling price of US$600

My point has nothing to do with that; you can debate that with someone else. Clearly, my comment is discussing the long-term health of the company making the device. A company that has a rapidly declining profit margin over a length of time will usually lead to the end of the company. Investors should invest accordingly (short, long, distress, whatever).


It's in quotes, which means the commenter that I was responding to said that. So it means whatever lav1daloca thinks it means. Of course, he's may be mistaken because I see two models. But if he sees one model, there's really no point to arguing with him/her as I'm sure in June, Apple will still have two models, and he/she will still only see one.

Even worse for Nokia, they decided to make navigation software free on most of their smartphones (those models that could support it) in order to fend off Google's Android phones. Let me add that of course, that would be incredibly good for consumers, especially those who aren't as rich but yet own smartphones.

But for Nokia, the millions spent on buying NavTeq will generate much less revenue going forward. They're still selling to car companies, but that may not last very long either. And let me add in the long-run it may lead to Nokia needing to lay off employees. Of course, that would be incredibly bad for them, as they would become less rich (if they couldn't find another job) and thus, find it more difficult to own smartphones.

Thanks for good crunching and wrap up.

Your points are valid and well thought out. But I guess what jfanning is trying to point out is that iPhones are expensive for a large number of earth's population. Yes a lot of people are buying them at the momen (wow factor, good ecosystem, good UI etc.). _BUT_ what if two things happen a) competitors phones become _close enough_ to iPhone's usability and app store ecosystem (think for example Qt) and b) people see the real price they have to pay for the iPhone (subsidies and contract are not allowed in many places). Is Apple then willing to drop their ASP down to the 3-400USD levels? They's still be almost twice as expensive as the competition. Would they still sell as well if those two things happen (which are not a long shot in my view)? That's why this part of the economy is so interesting, things change quickly.

As to hill60 et al that misunderstood what I was trying to say. It is clear that Nokia has failed badly in the high end (resting on their raulers too long). They've taken very long to turn the ship and it is still unclear as to have they done so. Judging from press and reports, they have indeed turned the wheel, but it is interesting to see will it turn or is the wheelhouse disconnected from the rear. They have done many things badly and have had a habit of announcing first, then writing code (badly). What I keep hearing is that things have changed (how many announcements have you heard of lately?). All I'm saying is that they have always tried to do thing their own way (much like Apple has) instead of copying other's business models and UIs. Now they are down in the ropes in the high end, interesting to see if they get a second wind.

Regs, Jarkko

NOKIA Has been a leader for years until their innovative and creative ability became complacent. In times like these even APPLE can't afford to become complacent and fall behind. Will NOKIA ever achieve its dominance again ??? only time will tell, as their pipeline must have some interesting things in it. One things for sure it's going to be a rough battle with APPLE at the helm.

Exactly