Why is anyone surprised by Nokia's poor 2nd quarter performance?

Why is anyone surprised by Nokia's poor 2nd quarter performance?

Summary: Of course Nokia is showing poor financial results, did anyone expect anything different?

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I don't understand all of the articles and Tweets expressing surprise that Nokia's 2nd quarter 2011 financial report is bad. Of course their results are poor, they are completely changing the operating system strategy on their smartphone platform so they will have poor results for the next couple of quarters as well. It would be major news if they actually showed positive results. There have been a couple new devices released, running Symbian, and they still sold 88.5 million mobile devices in the 2nd quarter.

Nokia gets slammed quite a bit for their current Symbian smartphones, but I personally keep going back to using the Nokia N8, Nokia E6, and Nokia E7 when I need a smartphone that gets excellent RF reception, great battery life, solid camera functionality, and reliable performance. Symbian may not be the flashiest OS around, but it still works very well and is highly customizable so people shouldn't totally forget it.

As readers here know I am a huge fan of Windows Phone 7 and think it is one of the best mobile operating systems around. Sales of current devices have not been great, but I think a lot of that has to do with lack of carrier promotion in stores, lack of advertising by Microsoft, and a minimal amount of exciting hardware. I'm not convinced that Windows Phone 7 will resurrect Nokia, but I do think their devices will likely be the best Windows Phone devices available starting in late 2011. The fact that the Nokia name is on a WP device should also help get Windows Phone into more hands and when more people try it the more likely it is that they will share their positive experiences.

Topics: Hardware, CXO, Nokia, IT Employment

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  • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

    There may be some named theory in straight-ahead MBAese that goes something like this: niche and first-adopter dominated market sectors more closely resemble meritocracies. Once mainstream, less so. Obvious example: Beta was technically better than VHS.<br><br>Which laundry detergent is "better" than the other? What could a detergent maker do to sweep the board? How could a word processor take the market away from Word?<br><br>Now, if I'm on to something here, that does not speak well for the chances of mobile platform makers who seem to be saying that they are getting their ducks in a row and next year they will have the killer product. Smartphones, definitely, and tablets, maybe, have escaped first-adopter-land.
    DannyO_0x98
    • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

      @DannyO_0x98

      Don't mistake Android's 'surge' in popularity for long term market strength. In mobile technology, over the last 5 years there have been wild swings in market positioning/power. Android is hot right now, but even among device manufacturers the market has been pretty fluid (see Motorola). Most Android owners aren't married to Android or even a particular company that makes Android phones. The strongest form of loyalty, at least in the US markets, is to the carrier and often that's simply because of the contracts and the perceived hassle in switching carriers.

      Android's weakness is in its ecosystem, the race to the bottom (a flood of cheap Android devices - including tablets), and in its fragmentation. Right now, there are several websites where you can buy a cheap Android tablet for under $60. Even on Amazon, it's not hard to find an Android tablet for around $200. Android phones are also very cheap to come by.

      While cheap phones help give Android a 'dominant' market share, they undermine the brand as a whole. It is easy to 'side-load' Android phones with apps that were never paid for or purchased through any market. This is a gaping hole in the Android ecosystem. In fact, one could argue that there is no Android ecosystem, simply a Google ecosystem or a Amazon ecosystem.

      There is real risk to the US carriers over the long term to keep promoting Android phones. As the market becomes saturated with cheap Android devices, the incentive for the consumer to renew or to sign a new contract for a phone will continue to decrease. Why would a consumer sign up for a two year contract to get a new phone when they can purchase a similar phone for less than $100?

      Right now, it's easy to see Android gobbling up more market share over the next few quarters but I would expect the pace of to decrease. I also expect within the next 12-24 months for carriers to start to move away from Android. (Not having to purchase a phone via carrier means no need for a data package or contract). Carriers lose control when consumers don't need their phones subsidized.
      retnep
      • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

        @retnep : gr8 article review !
        paragnerurkar
    • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

      @DannyO_0x98
      The usual way a big player like Microsoft elbows its way into a market that is leaving "early adopter land" is to bury its (usually fledgling) competitors under a tsunami of advertising.

      That's going to be a little difficult in this case because both Apple and Google have enough money to match anything that Microsoft could throw at them. In fact Apple is out there now, spending ungodly sums of money on both iPhone and iPad.

      I think Microsoft's chances of success with WP depend entirely on getting lucky. It could happen that the 'cool kids' decide that WP is the Thing To Have. No one can ever predict those things. If it happens, they win. If it doesn't happen, I think they missed the train.
      Robert Hahn
  • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

    If Verizon would carry a Win7 Phone (Mango) with a slide out keyboard, I would dump my RIM Blackberry in a second. I need a physical keyboard, on screen keyboards don't cut if for me.
    CowboyJake
  • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

    "I?m not convinced that Windows Phone 7 will resurrect Nokia, but I do think their devices will likely be the best Windows Phone devices available starting in late 2011. "

    Have to disagree with both. WP7.5 is the best bet for Nokia and will likely revive the company, at least to the extent possible.
    Nokia the best WP7.5 ? I am not sure either. I think Samsung Galaxy S2 windows phone will be the best. HTC has a couple of killer windows phones lined up. Nokia will have to do something exceptional to better that.
    sunilgmishra
  • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

    Well maybe nobody though they would come up with the idea of "changing operating systems" and leave a year plus gap in having a credible product strategy.

    By the time they get to launch they will have soaked up every cent of the money MS gave them to not choose Android.

    Having dominated the smartphone market MS has put it in the bin. If they come out of the bin next year someone else will have to mess up. There are not going to be a lot of iphone or android users jumping ship unless WM8 is something special?
    martin23
  • nokia will be out of business in three years

    there is a fundamental, disruptive shift going on in the phone business at a pace unprecedented in business history. former incumbents die within a few years (nokia, rimm and motorola will all be bankrupt by the end of 2013) while entrants absorb all the profits, revenue and marketshare within a few years. (apple, htc, samsung). absolutely amazing to watch.

    anyone thinking that nokia will survive because of wp7 must live in lala-land.
    bannedfromzdnetagainandagain
  • RE: Why is anyone surprised by Nokia's poor 2nd quarter performance?

    Despite introducing Windows Phone devices some time next year, I still don't see a turnaround for Nokia.<br><br>They're basically doomed, and are now hoping for an acquisition, maybe from Microsoft or Samsung, to keep the lights on.
    Theseus
  • big question... will Nokia step up?

    No, it's not even slightly surprising Nokia's sales tanked. They basically made the announcement that all of their current and new future smartphones are already obsolete. Hardcore mobile market observers may think "so what?" -- didn't we know SymbianOS's days were numbered? Well, many presumed it, but it wasn't necessarily common knowledge among all customers. So Nokia sent nearly all but die hard SymbianOS fans looking elsewhere for their new phones. With new W7P Nokias more than a year away, for some mysterious reason. Somewhere, Adam Osbourne is laughing.

    The real question is whether Nokia will step up with really competitve W7P offerings. For some time now, both Nokia an RIM haven't felt the need to actually compete on hardware with Apple and all those Androids. Nokia has a few gigantic but interesting Linux phones, but their recent SymbianOS phones, like RIM's latest, seem like Androids from 2009, at best.

    This may not only be Nokia's risk, either. In placing Nokia in the shotgun seat on the W7P platform, every other hardware vendoe knows they're at best second fiddle. It doesn't take much to put W7P on an Android platform and test the market potential, but MS may well be tied up with Nokia's success or failure here. And starting out after years of heavy losses, the last year largely self imposed, doesn't suggest a certain success.
    Hazydave