How Nokia went from mobile powerhouse to Windows Phone maker

How Nokia went from mobile powerhouse to Windows Phone maker

Summary: Can Nokia's decision to rely on a single outside platform for smartphones — Windows Phone— get it back to the top?

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TOPICS: Mobility, Nokia
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It's no secret to anyone in the tech world that Nokia is in some degree of trouble. Sales have been plummeting through the floor, and revenues have dropped along with them, though this was mitigated until this year by performance in emerging markets.

Given the news today that it is laying off up to 10,000, the Finnish handset maker will have to work harder to avoid slipping further into decline. And company chief Stephen Elop had more bad news for investors, revealing Nokia expects its second-quarter smartphone losses to be larger than predicted.

"During the second quarter 2012, competitive industry dynamics are negatively affecting the Smart Devices business unit to a somewhat greater extent than previously expected," the company said in a statement. "Furthermore, while visibility remains limited, Nokia expects competitive industry dynamics to continue to negatively impact Devices & Services in the third quarter 2012."

Lumia 900

Can Nokia get back to the top with its Lumia phones? Image credit: Ben Woods

It hasn't always been this way. Cast your mind back to 2007, when Nokia was doing well — really well: it had just under 38 percent of the market by total number of mobile devices sold, according to Gartner figures. Now this has slipped to just under 20 percent, and if you exclude feature phones, it makes even more depressing reading, with its smartphone share tracking globally at around 1.5 percent to two percent.

It seems that Nokia just doesn't 'get' the smartphone section of the market right now. Also on Thursday, it agreed to unload its luxury Vertu handset brand to EQT VI, part of the private EQT equity group, which cements its short-term low-end ambitions.

The 10,000 staff redundancies will happen at some of Nokia's research and development centres, along with some at manufacturing centres. The cutbacks are an effort to stem the tide of several billion euros in lost revenue seen in the last 12 months, but are also just the latest in a long line of restructuring and profit-warning announcements.

In February 2011, Elop sent a memo to Nokia employees warning them of the bumpy road ahead, saying the company was "standing on a burning platform". And platforms are something that Nokia doesn't seem to be able to get its head around, even though Elop recognised at that time the importance of the development ecosystem.

"Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem," Elop said in the memo.

Changing operating systems

Back when Nokia started out, its handsets used the Nokia OS, sometimes referred to as NOS. This was later replaced with the Symbian platform in a string of incarnations, and this OS is still used on Nokia's lower-end Asha handsets.

At the same time, Nokia pursued an open-source platform called MeeGo, developed in tandem with Intel, which later became Tizen. In autumn last year, the company decided to put Tizen on the back burner and funnel its open-source OS work on Meltemi, aimed at low-end handsets.

However, with the removal of the Uln R&D facility in Germany, home of the Meltemi project, its future can be assumed to be in serious jeopardy. So that leaves Nokia with a single platform — Windows Phone — and it's not even one it owns.

Given Elop's astute recognition that Nokia was being eaten alive by faster-reacting competitors and their accompanying ecosystems, the company's decision to stop building its own OS and rely on an outside platform suggests it is in pretty dire straits.

Now, Nokia is essentially just another OEM smartphone manufacturer that uses the Windows Phone platform. This is all well and good until Microsoft's platform gets more support from other device makers, at which point Nokia might find it harder to make its devices stand out from the competition.

Enter Windows Phone 8

On the other hand, slimming down and putting all its resources behind one OS might be exactly what the ailing company needs to survive for now, until it becomes clear whether Windows Phone 8 has the features to woo more buyers to the platform.

Our competitors aren't taking our market share with devices; they are taking our market share with an entire ecosystem.

– Stephen Elop, February 2011

Dominating the smartphone market might be a faraway dream for Nokia right now. However, getting a stronghold in emerging and low-end markets isn't inconceivable. After all, from 1998 until March this year, Nokia was the biggest seller of mobile devices in the world. It just happens that in the last few years, the highly visible — and desirable — smartphone category wasn't one of them.

Indeed, Elop himself said on Thursday that Nokia is keenly anticipating the next Windows Phone OS release, describing it as an "important catalyst date" for the Lumia range. At the same time, he was keen to emphasise that the company is focusing on bringing devices to market at lower price points than its current cheapest Windows Phone handset, the Lumia 610.

"We will be bringing devices with price points lower than the Lumia 610," Elop said in a call with investors and analysts. "We need to compete with Android aggressively, and the low-end price point war is a part of that." 

For Nokia, which started life as a paper-manufacturing and electricity-generation business, the road to recovery might not be what people expect. But it's unlikely to get easier if the company is forced to keep cutting its R&D budget and facilities.


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Topics: Mobility, Nokia

Ben Woods

About Ben Woods

With several years' experience covering everything in the world of telecoms and mobility, Ben's your man if it involves a smartphone, tablet, laptop, or any other piece of tech small enough to carry around with you.

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29 comments
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  • The Asha handsets run Series 40 not Symbian. Series 40 is in no way related to Symbian.

    How much of the bad press given to Symbian is written by people who don't know the difference between it and Series 30 & Series 40?
    URNumber6
  • Elop, if I were you I would seriously consider to drop the Lumina brand for a name that is appealing, fresh. Lumina sounds unappealing, outdated, old.
    pcsdca@...
  • @pcsdca

    Though that would be pretty hard for Elop to do, because Nokia does not have a Lumina brand name...
    Jack Schofield
  • Hi URNumber6,

    Thanks for the comment, you are indeed correct. As far as I understand it, S40 runs on top of Nokia's own proprietary OS, unlike, say, S60 which runs on top of Symbian.
    Ben Woods
  • I mistyped, I meant Lumia series
    pcsdca@...
  • I recall the times when flip phones were all the rage, and Nokia stubbornly refused to make them for several years. I kept my regular Nokia phone, but my husband switched to Motorola. I watched with dismay how Nokia tried to push all kinds of phones - sliding, rorating, but no flip. It was then when the long path to irrelevancy has started.
    ForeverSPb
  • Firstly I'd like to point out NOKIA invented the smartphone - not Apple, not Samsung, not Google, not microsoft, NOKIA.

    At the time Elop announced Symbian and MeeGo would be shelved and replaced with Windows Phone 7 NOKIA were selling more smartphones than Apple and Samsung COMBINED and their sales were increasing.

    Elop killed the OS with the largest market share on the planet (NOKIA's Symbian) and replaced it with the OS with the smallest (Microsoft's WP7). When he did so he was holding millions of dollars of Microsoft shares.

    Samsung, LG and HTC had all already tried to market WP7 devices, all had failed. There was no reason to believe this strategy would be a successful one for NOKIA. Why would you put all your eggs in a basket you already know to be full of holes?

    The urban myth that Symbian was failing before Elop publicly deprecated it simply isn't true. NOKIA's sales figures are publicly available check them for yourself. The sales were growing right through 2010. In Q4 2010 Elop closed the Symbian Foundation, in Q1 2011 Elop 'leaks' the burning platform memo, followed shortly after by the announcement Symbian was deprecated and then the sales nose-dive. That's the easily verifiable order of events and it's not coincidence. Remember NOKIA's customers are carriers and retailers not Joe Public. What carrier/retailer is going to take a device declared obsolete by it's own CEO into their inventory? Surely Elop must have foreseen that response? He's either an imbecile or a saboteur, I suspect the latter.

    Elop has killed all of NOKIA's open source projects Symbian/MeeGo/Meltemi/PySide/Qt (Microsoft have stated open source is a 'cancer').

    He has alienated China Mobile (a carrier larger than all major North American carriers combined) as they were part of the MeeGo working group and had publicly announced their commitment to offering MeeGo phones to their subscribers (The two largest carriers in China, who hold over 90% of the market between them, wont offer Lumia devices so I don't believe that story about Lumia's taking 7% of the market in China either - wait till the true figures are released 0_o).

    He has artificially restricted the markets for NOKIA's award winning phones like the N9 and the PureView (they don't run WP7).

    He has transferred thousands of NOKIA's most valuable patents into third party companies where Microsoft is getting a cut of the license fees even though they made no contribution whatsoever to developing the patented technologies (Microsoft wont buy NOKIA - they don't need to).

    He has gifted the right to use Navteq to Microsoft so they can be used on any WP7 mobile whether or not it's made by NOKIA.

    Now he's got rid of the head of the feature phone division (could it be Series 40 with swipe looks to have better sales potential than WP7?).

    He has replaced numerous NOKIA managers with Microsoft ones.

    Every single decision Elop has made has been to the benefit of Microsoft and to the detriment of NOKIA.

    There's a genuinely shocking story here that just isn't being told, instead we get articles by authors who don't even appreciate the difference between Symbian smartphones and Series 40 feature phones.

    It's genuinely sad to see a great European technology company being dismembered and thousands of Europeans losing their jobs in the middle of an economic crisis all in a vain attempt to make Microsoft's failed OS popular.

    The Lumia's are great looking devices, put any half-decent OS on there and they'd sell like hot cakes.
    URNumber6
    • Insightful...

      god. you really wiped the floor with poor old Ben.
      badmanbob
  • well said URNumber6... but Nokia was not just a European brand but a global brand.
    also, now more than Elop's incompetence-- it's the Board of Directors' incompetence, cynicism and negativity that they are letting Elop sit around and do more damage.
    If they can see he hasnt experience in mobile and telecom-- they should fire him and/or resign.

    it's almost as if MS bought them off-- and they took it for granted that they are paid and MS will somehow manage to make things a success.
    NN1nn1
  • Microsoft is on it's way to going out of businees. Who is going to want to partner with them after seeing Nokia completely crash?

    This is what Microsoft has to offer vendors:

    [b][i]"Microsoft charges Tablet OEMs a whopping $85 for Windows RT"[/i][/b]

    [b][i]"When Microsoft announced its tablet strategy with the Windows RT, many thought that Microsoft will change its pricing model for OEMs too, signaling a shift in strategy. Reality is however, vastly different with Microsoft requesting as much money as OEM version of the Windows 7 Home Premium."[/i][/b]

    http://vr-zone.com/articles/microsoft-charges-tablet-oems-a-whopping-85-for-windows-rt/16250.html

    Android is free.
    Joe.Smetona
  • @URNumber6.
    Great well thought out reply.

    The N9 had a real buzz surrounding it at the time, until its release was 'dulled' and restricted to certain markets. Never saw the light of day in the UK, (well, if it did, there was no marketing budget attached).
    Certainly the hardware - screens/digitiser-call quality and Nokia Apps in the Lumias are decent.

    All the Lumias (including the 900) have suffered bugs on release, which give the appearance of WP7 being rushed to market. Nokia has had to offer $100 cash rebates in the US, and replacement phones to its AT&T Nokia Lumia 900 Customers, due to connectivity issues/data connection speeds and memory management issues.

    This is Nokia's flagship phone!

    With a competitor like the iPhone, bugs like this are just not an option, especially if you're looking to gain large market share from the iphone. Once users buy a number of iPhone Apps, they have sticky feet to stay with iOS - its a big problem.

    When products like the new ipad are coming to market with zero real issues 'they just work' and are very rounded devices - by that I mean - there is very little overall weakness in any part of the design, with real technical differentials such as the retina display - it really ups the ante. This makes bug issues seems amplified for the competition, such as the Nokia Lumia/WP7.

    WP7 / Nokia Lumia is too little - too late. Even with Microsoft's deep pockets and devices suchs the Lumia 710 (great value entry level phone for the price) being sold below cost - its struggling.

    WP7 certainly grows on you with use (but it takes time), its not instantly simple and likeable like iOS.

    Also, its not conservative or mainstream enough - its too trendy for its own good. For me, the biggest weakness is information density (and the bugs) which is poor. Yep, others will disagree, but that's my general impression from owning and using one.

    There are also too many big player headline App releases such as RBS/Natwest 'Get Cash' app without using your debit card from an ATM released (this week), which have been produced for all platforms EXCEPT WP7. Microsoft/Nokia really need to be addressing these problems, and putting resources at the disposal of these companies to make sure WP7 is part of these 'headline' roll-outs.

    To make matters worse - The MS/Nokia Marketing Strategy has been a cock-up from the word go. Its about time MS/Nokia let us know whether existing Lumias will get a Windows 8 Upgrade. Its a disgrace if they don't.
    SoapyTablet
  • @NN1nn1
    You're absolutely right, NOKIA are a global brand. My apologies for focusing too much on Europe.

    In fact NOKIA's ultra-high-volume, ultra-slim-margin, ultra-robust-design has democratised mobile technology, they have put mobile phones in the hands of people who live in developing countries where no land line infrastructure exists. NOKIA have quite literally changed people's lives in the developing world so I imagine enthusiasts there will be even more saddened than me.
    URNumber6
  • @SoapyTablet

    You're right about the Lumia 900, I understand it had the highest return rate of any device in NOKIA's history. You remember NOKIA announced the UK launch would be delayed because of the high demand in the USA? I believe it was actually the high swap-out rate.

    iThings have had their issues too though: the wifi on the original iPad, the antenna on the iPhone 4, the alarm repeatedly went wrong on numerous iPhone versions to name but a few.

    I think you're right about the marketing too, the Lumia adverts are about as hip and cool as dancing dads wearing tank tops.
    URNumber6
  • Thank you. An interesting comment. Perhaps a little one-sided?

    At one point, you are inviting us to draw the inference that Symbian was, until relatively recently, a more popular smart-phone operating system with better prospects for the future than either IOS or Android. I am not sure how many people would agree with you.

    Do you not rather minimise the contribution of the iPhone to the landscape for the future of these devices? How would you envisage Symbian developing had it been allowed to remain? Do you believe it would now (or in the foreseeable future) be offering a cogent, attractive alternative to IOS or Android? If so, and more precisely, in what ways?

    Nonetheless, thank you for a very interesting and stimulating contribution.
    professorjohn
  • @URNumber6
    The iPad wifi issue:
    I didn't own the iphone4 at the time, a friend did though - his conclusion at the time of the problem - great - but it was poor at being 'a phone'. In contrast, Nokia Lumias are very good at being 'phones'. I did own the new ipad from the day of release and I did experience 'visually' the low signal wifi problem but what was not pointed out by the press that this occurred sitting next a larger laptop with much larger antenna (an old XP Laptop in my case) or other wifi generating device (the two would display different signal strengths for the same connected wifi. It never affected the actual wifi on the iPad in use though (well that was my experience). It worked to exactly the same distance as the existing kit I'd used in my working environment. Where I'd had issues with other kit at the maximum distance, so you did with the iPad, but it wasn't actually less. Basically it wasn't an issue (well not for me), but admit I saw the visual signal differential.

    I did wonder at the time, if it was attempts by the opposite press to dent it's sales because the device was actually 'incredibly' near perfect on release. Its difficult to find actual user complaints out there, especially of the retina display on the new iPad, most admit its a technical marvel.
    SoapyTablet
  • @professorjohn
    Before Elop deprecated Symbian it categorically was a more popular smartphone OS than iOS or Android, I would suggest the fact it was massively outselling both tells us a lot of people did agree with me. Here are the actual figures for your information: http://www.allaboutsymbian.com/images/news/smartphoneshipmentsq211.jpg
    You can very clearly see the moment Elop stabbed Symbian in the back.

    I would also like to point out at the end of Q4 2010 (the last complete quarter before Elop's assault on Symbian) the average selling price for a NOKIA Symbian device was around EUR 155. Compare that to the price of an iPhone which was around EUR 600. How many end users do you really think were weighing one up against the other? MeeGo was planned to be for NOKIA's high-glamour devices not Symbian.

    It's also worth noting, contrary to popular belief, the iPhone was not the first full capacitive touchscreen phone. Take a look at the LG KE850 which won a design and innovation award in 2006.

    There's no doubt the iPhone is a great seller and considered very desirable by many, however I can not think of a single new contribution it's made in terms of technology, in fact I'd suggest it's a very limited device compared to almost anything running Symbian.

    Look at this review of the N8 for example: http://www.mobileindustryreview.com/2011/01/nokia-n8-the-ultimate-test.html
    See how they connect a USB hard drive, a USB keyboard, a bluetooth mouse, an audio system and a full HD monitor via HDMI?
    Question: Is the N8 a smartphone, a computer or a full blown media centre?
    Answer: All of the above.
    Then we have great features like USB mass storage, file manager, full bluetooth connectivity to any device, Python scripting layer, Java, FlashLite, Web Runtime, side loading, the list goes on and on...
    Furthermore, the N8 was able to do all that with an extremely modest processor which means much better battery life too.

    No matter how desirable you may find an iPhone it is not really in the same league as Symbian in terms of power, functionality and efficiency.
    While we're at it let's put another myth to rest, NOKIA had their first app store in 2004, four years before Apple.

    As far as I can see Apple's biggest contribution to the mobile industry has been walled-gardens, tethered-appliances, restricted-markets, vendor-lock-in, all things anybody born and raised in the free world should instinctively rail against. It's a malignant influence, a glimpse into a restricted future where other people get to decide what's best for you.
    URNumber6
  • I Observed this site of yahoo very interested or we up date new inventions or Experiance share and builtup our knowledge
    rehman-0a2fc
  • NOKIA is TOAST.
    anonymous
  • The name is Lumia, not Lumina ... And means 'snow' ...
    Toon-f7335
  • People were saying at the beginning that if you mate two turkeys, you get a dodo. Sure, Apple weren't first. They watched everyone else's mistakes then tried to avoid them, whereas Microsoft seem to watch everyone else's mistakes & then copy them. No change there, then. I don't have a mobile 'phone. I've tried but I can't hear them ring & object to having to carry one in my hand to feel the vibrations. I look forward to one that works for me. iPhone 17, probably but I'm 69 on Monday... (& wrote an operating system that worked in 1966-7)
    Prof-Ken