Nokia’s downward slide worsens
My last blog on Nokia had appeared 3 months back. That was around Nokia WP7 tie-up. Nokia has been having a continually downward spiral and generally unexciting products over the last 4 years now. To me the last of Nokia’s giant products was really the Nokia N-95. After that, Nokia slipped into a catch up game trying to match Blackberry, Android and Apple innovations.
A precipitate of Nokia’s slow, steady decline is now that Nokia is loosing market dominance in the very markets where it was unbeatable till a few quarters back. For instance, in Western Europe which was Nokia’s backyard, Q1,2011 saw Nokia being relegated to No.2 position in Mobile phones and in Smartphones. Samsung and Apple are the new leaders in mobiles and smartphone categories. While Nokia’s decline has been a long time coming, this sea change in its home market underscores just how much ground the company is losing in traditional areas of strength.
Nokia is one of the most recognized and appreciated brands in Europe, but Samsung was the one understanding the trends first and moving faster. Samsung understood early the trend on touchscreen devices and became the market leader on feature-phones by providing a full range of devices at very competitive prices. On smartphones, Samsung has quickly moved to Android as well as investing in its own platform, Bada. Flexibility and being able to address all market segments have contributed to Samsung’s ability to quickly adjust to the market trends.
Apple, on the other hand, coming from nowhere in the mobile phone business, capitalized on its strong brand and user-experience innovation. It took years for competitors to come up with devices that could challenge consumers’ preference for the iPhone. And now, iPhone has caught the fancy of all and is galloping up in volumes. Like Western Europe, Apple is mounting the pressure on Nokia volumes globally as well. There were 5 million units that separated Apple from Nokia in the Q1,2011 Smartphone shipments. While Nokia tries staying afloat with rehashed Symbian and Annas, Apple’s juggernaut has been more definitive in terms of its upswings.
Stephen Elop’s illustrations on “How to put Symbian to sleep?”
It has become increasingly hard to see how the once-mighty Nokia can ever regain its formidable status. For a company that once dominated the handset market, its first-quarter results and the planned cuts in operating expenses seem to condemn the company to a slow decline over the next two to three years into a faint shadow of its former glory.The company has failed on so many fronts that only its low-end products are seemingly saving it from complete annihilation.
What happened to cause such a hugely successful company to fail will be analysed by many aspiring business graduates and industry experts alike. But there is no simple answer to this debacle.
The next few quarters are going to be very dicey for Nokia. The Nokia-WP7 alliance would be rolling in 2012 onwards and Symbian’s slow death is a planned inevitability (see Elop’s presentation themes on Symbian phase out). Having said that Elop wants to sell another 150 million Symbian Smartphones. The question that begs an answer here is if Symbian is the proverbial burning deck, then why would a user buy it in the first place. That puts into question, will Elop make 150 million Symbian studded Nokia Smartphones sell? The statistic and the argument don’t feel compelling enough. Nokia could be relegated to 10% of the smartphone market shares before WP7 is launched. That could be a disaster situation for Nokia but that is what stares beleaguered Nokia at its face.
With its share price at a 13-year low, it’s perhaps difficult to imagine if Nokia can sink any lower in terms of its worth.
The latest to cast doubt on the company’s hopes has been the ratings agency Moody, which last week downgraded Nokia’s credit rating from A2 to A3. This followed a similar move by Standard & Poor’s a week earlier.The analyst viewpoints driving this demotion have revolved around the probability of Nokia regaining its dominant market position, given the threats and uncertainty that surround its partnership with Microsoft for the Windows Phone 7 (WP7) platform. Adding salt to Nokia’s open wounds was the reports that the Taiwanese smartphone vendor HTC, Asia’s second-largest smartphone developer, had surpassed Nokia in market capitalization. On balance, HTC’s sudden rise could be attributed to the huge demand for smartphones running on Google’s Android platform, albeit that HTC’s handsets are recognised for being among the best today.
Nokia’s dilemma in choice of OSs
“.. we must build, catalyze, and/or join a competitive ecosystem”.
Stephen Elop has sent the rumour mills ablaze with the statement of “joining” a competitive ecosystem. Elop’s first quarter at the helm of Nokia operations has seen a mix of good and bad news for the no.1 mobile devices company in the world. Net Sales have grown but profits have nose dived and while ASPs have been north directed, Nokia’s fall in smartphone market shares have been staggering. Elop is having a rough time steadying the ship and is now expected to announce major changes in strategy on 11th February. Many see it to be Nokia’s move into Android or Windows Phone.
Nokia already has Symbian and Meego Oss for its devices. While, there is merit in letting the ageing Symbian slowly drop off and possibly feature it only at the low end devices, Meego would be Nokia’s high end devices.Unfortunately, there is a little problem: a phone today is appealing if it comes with developers. And developers go where there are a lot of phones. There are no MeeGo phones, therefore there are no Meego developers.Developers today build for iPhone first, then Android. If they have a good reason (i.e. Microsoft paying) they build for Windows Phone 7. If they are in the enterprise, maybe they look at BlackBerry. If they want to support the existing bunch of devices, they suffer and go with Symbian as well. Hard to think they will pick yet-another-OS
Will developers go for MeeGo? Honestly, it is hard to be optimistic. Thus, there is just one alternative, unimaginable until a year ago: that Nokia will start building phones with a third party OS, like any other device manufacturer excluding Apple.
Options? Probably just two: Android or Windows Phone 7.
While Elop could leverage his old roots at Microsoft to forge a new Nokia-WinMo combo, there is one problem – Windows Phone 7 is still not a winner (yet) and it needs to attract developers (a lot). Going with Microsoft is a bigger risk, but Nokia will be treated as “special” for sure by Microsoft. In any case, it must be an attractive proposition, because Microsoft will offer the moon.Windows Phone 7 needs developers and, possibly, having Nokia behind it will attract them. If that happens, we’ll have a third OS with equal chances to Android and iOS.
However, Nokia could take the Android root. Google is not the easier partner to work with and Nokia will probably not be considered “special” by them. But it is a sure bet. Nokia with Android will sell a lot. It is a killer combination.
So, from what it looks Elop would have to choose between being Android’s many wives, loosing differentiation but boosting sales or partnering with WinMo, which will take time in terms of the developers base building up, sales kicking in. What is it… the Hobson’s choice?
Windows Mobile 7.0: Microsoft’s Mobile Web Future depends on it (Part V)
This is the final part of the five part series profiling Microsoft Windows Mobile 7.0. In the earlier posts, i had discussed hardware, software perspectives, developer perspective & platform shortcomings and Microsoft’s service strategy around WinMo 7.0.
For long Microsoft has been sidelined in the smartphone computing space by the Androids and Apples of the world. Windows Mobile 6.5 never gave any hope and as a user and a technoholic, I hope that Microsoft gets its game right with WinMo 7.0. This is not only important for Microsoft but also from an eco-system perspective. The Android juggernaut needs to have some competition from Microsoft to maintain the balance in the industry. Apple is competitive but then it is very elitist and specific. Android seems to be taking the mid end devices fully. Competition from Microsoft space in the mid end could liven up things a bit, which otherwise is becoming Android monopoly.
Summing up the overall strategy
Looking slightly longer term, we think this is an area Microsoft will need to pay special attention to if it wants to join in the looming battle for the Living Room, with mobile devices as a key part of that. Although it has Zune and Windows Media Player, Microsoft has nothing with the market presence and direct link to the consumers’ wallet that iTunes has. It is also not seen as a visionary player in understanding people’s overall media usage.
The WinMo 7.0 release saw a refreshingly humble Microsoft tone for the smartphone world. It spoke of “elegant co-existence” with partners, which will have pleased network operators. Its approach was in stark contrast to the way some manufacturers have approached working with distribution channels.
Microsoft has used its full weight to build an impressive coalition for the launch. This was necessary, given that it is trying to build a strong position from a low starting point. (It provides a good example for other manufacturers with forthcoming operating system launches, such as Nokia and Intel’s MeeGo and RIM’s QNX)
Windows Phone 7 and the way it was brought to market has a good chance oflifting Microsoft’s position in the mobile arena. Microsoft desperately needs this to work well, so that the company becomes relevant again in mobile. The agenda in smartphones is currently being set by Apple and Google, and some observers believe that the battle is really about the future of computing, with the mobile domain as one vital part. Microsoft needs a strong position in mobile to play a part in that debate. To succeed Microsoft will need to see the launch as no more than a key first step and sustain the effort across all fronts. However, even if it does so, we see sales constrained by the high-end hardware specifications and the fact that it is launching into a crowded market.
Mobile is central to the Microsoft’s transformation into a services business. If Microsoft fails in mobile the shift of the wider business beyond a reliance on software licence revenue will certainly falter. More importantly, Apple and Google have proved that the market is still in its infancy, with newcomers still able to cause mass disruption with the right recipe of hardware, software and services. Should Window Phone 7 fail Microsoft arguably has little option but to go back to the drawing board or risk being further marginalised. However, failure at a time when others are becoming increasingly dominant would raise serious doubts about Microsoft’s ability to compete side-by-side in Web services.
Windows Mobile 7.0: Microsoft’s Mobile Web Future depends on it (Part III)
This is the third of five part series profiling Microsoft Windows Mobile 7.0. In the earlier posts, i had discussed hardware and software perspectives around the WinMo7. This post discusses the shortcomings in the platform and how Microsoft is wooing the developer community to earn back relevance in the apps space.
Platform Shortcomings
Two main problems remain with the Windows Phone 7 operating system at this stage. Firstly, there is no opportunity for manufacturers or operators to add their own interface layer (although Hubs and tiles do allow for a degree of customization). Microsoft argues that it is putting consumers first and has heavily invested in a strong and consistent interface. The implication is that there is little benefit in manufacturers undertaking further customization that will only confuse users.
Secondly, there is no multitasking. Windows Phone 7 does support some background processes, such as playing music or synchronising e-mail while using another application. However, it does not currently support flipping between live applications in the way that Symbian and Maemo users have had for a long time and Apple users have recently acquired with iOS4. Microsoft may possibly. This would be a thorn at the start and one would expect Microsoft to address the Multitasking measure in future.
Developers
Microsoft is using established strengths and resources to attract developers. It has relied on existing Silverlight and XNA development frameworks, and removed licence fees for many tools, including Visual Studio 2010 Express and XNA Game Studio 4.0. The consistent environment and tools provided by XNA Game Studio 4.0 will enable developers to port games from Windows, Xbox 360 or Zune to Windows Phone 7. Variations in hardware and screen sizes will be limiting factors, but demonstrations of ported titles reveal a rich and consistent experience. The use of common code and tools is a step forward for Microsoft, which has historically had an abundance of tools and developers but a lack of commonality across platforms. Unsurprisingly, Microsoft cites this established developer base with deep existing knowledge of its tools as a significant opportunity.
This will be important, because application developers typically develop for three or four platforms. The current pecking order for many of them is Apple, Android, Blackberry, other. The last category includes, of course, Symbian, MeeGo, Flash, Java (for Qualcomm’s BREW, Sony Ericsson’s Cappucin and Nokia’s Series 40 feature phones) and Microsoft. If Microsoft decides it needs to address these developers, the task will be to pull itself out of the “other” category.
Windows Mobile 7.0: Microsoft’s Mobile Web Future depends on it (Part II)
This is the second of a 5 part series profiling Windows Mobile 7.0. In the earlier post, I had discussed about the benefits and losses of hosting a vertically integrated model for Hardware design in terms of user experience, Operator tie-ups and Operator services and the fact that WinMo will solely be devices competing at the high end mobile computing spectrum.
Software
Windows Phone 7 is a drastic step for Microsoft, in that it completely discarded the Windows Mobile platform and allowed designers to start largely from a blank sheet of paper. The exception to this was the work done in developing the Zune user interface, which has been carried across to Windows Phone 7. The “clean sheet” approach may have resulted in a lengthy development cycle as Apple and Google grew exponentially, but we believe the outcome vindicates the decision to build an entirely new platform, designed from the ground up for Microsoft services. Indeed, Windows Phone 7 puts further pressure on Nokia to ensure the swift delivery of MeeGo and Symbian^4, not only to alleviate further drops in market share, but to bolster a weakening position in developer support.
Unusually for Microsoft, the design has been led almost completely from a consumer’s point of view, even though the company has ambitions for Windows Phone 7 in the enterprise market. The emphasis throughout has been on quality of execution rather than stuffing it full of features. The interface is very smooth, slick and fast on all the devices CCS Insight has used. It has also been designed with fresh thinking and it contains a number of neat innovations. For example, the camera interface shows a glimpse of the previously taken photo at one side of the screen, making it obvious how to get back to an earlier picture.
The architecture of Windows Phone 7 is also innovative. It is based on “Hubs” — areas of the software that manage access to different types of content. Microsoft provides six Windows Phone Hubs: People, Pictures, Games, Music and Videos, Office and Marketplace. In addition to these it is also possible for handset manufacturers and carrier partners to create Hubs as a way of presenting their own content and services. Beyond this, Microsoft’s partners can create tiles for the home page, so that users have a shortcut (containing live content) to the Hubs. Hubs effectively blur the line between applications and services, enabling closer integration of services with aspects of the phone. Examples are already seen in the way that the People Hub integrates with Facebook and in the way some of the music service applications connect to the Music Hub.
Windows Phone 7 serves up opportunities for deep third party integration. Third-party applications can make use of the same design elements used in Hubs, so that applications work like native software. This represents a fundamentally different philosophy to the closed Apple environment and application-centric ethos of the iPhone. For Microsoft, this represents a clear
point of differentiation as it seeks to win developer support.
Although Windows Phone 7 has a consumer-friendly design, Microsoft has built in significant capabilities for Office, including the ability to view, edit and annotate Office 2010 documents, integration with Outlook and collaboration with OneNote and SharePoint. As a result the platform has respectable enterprise credentials. However, the high cost of handsets will be a significant inhibitor to widespread adoption among businesses in the short term and the platform lacks the comprehensive device management and security policy features that characterized Windows Mobile 6.5. It is expected that WinMo 7’s enterprise capability will evolve much the same way as iPhone and Android did in the Enterprise segment.
The bigger play for Microsoft is positioning Windows Phone 7 as “a great gaming platform”. Microsoft has linked Windows Phone 7 into its Xbox Live service. This could establish Windows Phone 7 as the leading mobile platform for high-end games. Although the size of this opportunity is arguably smaller in volume terms than the more casual gaming segment, it could prove a highly lucrative opportunity for game developers. This would represent healthy competition for the iPhone, which has come to dominate gaming on high-end devices, particularly given Android’s limited standing as a games environment at present. However, Sony’s PlayStation Portable gaming platform is expected to migrate from dedicated hardware to Sony Ericsson Android devices in the near term. Such a move would not only increase competition but represent a solution for a far broader range of mass-market devices.
Continued here
Windows Mobile 7.0: Microsoft’s Mobile Web Future depends on it (Part I)
WinMo 7.0 is more than just another version of the Windows Mobile OS.WinMo 7.0 will be central to Microsoft’s ability to re-invent itself into a Mobile 2.0 service business, where Google and Apple are making all the money. Presenting a five part series on Windows Mobile 7.0 and its long term influence on Microsoft’s overall strategy
The launch of Windows Phone 7 is a critically important event for Microsoft. Analysts have defined it as a “make or break” moment in the company’s history. This is in part because of the scale of opportunity as smartphones enter the mass market, but more significantly because the battle between Apple and Google is largely being fought in the mobile domain, where Microsoft has yet to play a real part. Given that the mobile phone is now the most prolific computing platform on the planet, it is essential that Microsoft grabs a significant share. Success in all aspects of the mobile market (devices, software and services) will be critical to Microsoft’s future if it is to successfully diversify from a software licence business to one specializing in hardware and services.
Expectations for Windows Phone 7 are uncharacteristically low for a Microsoft product. The platform is launching relatively late into a crowded market, follows the ill-fated launch of Microsoft’s Kin phone and software earlier in the year and Microsoft’s previous efforts in mobile were wholly out of step with market requirements.
Hardware
Hardware specifications are far more tightly defined than previous versions of Microsoft’s mobile operating system. This rigid control of hardware design sees Microsoft moving closer to the vertically integrated model adopted by Apple and RIM, albeit using a range of manufacturing partners. Microsoft is restricting flexibility in how the platform can be deployed and customized in order to closely control the end-user experience and the “look and feel” of its own services. This is something that Google has not been able to master even as Android looks different in multiple versions of its OS. Microsoft’s tight leash on hardware design is a result of a careful examination of the factors behind Apple’s success as well as a deep understanding of the challenges in maintaining consistency of experience and time to market with a horizontal platform.
While Microsoft’s vertically integrated model for Hardware design may be great for the ubiquitous-ness of the WinMo experience at users level, the similarity of the devices means few operators will require more than one or two models. This means ten phones are competing for a small number of portfolio slots. That said, an unexpected opportunity has emerged in the second half of 2010 as high profile products suffer delays, in some cases caused by constrained supply of key components such as screens. This means that operators and distributors are seeking high-tier devices that can be delivered in reliable quantities.
Also important to consider is the fact that many operators are looking for a counter to Apple’s dominance at the high end. Whilst customization opportunities are limited with Windows Phone 7, it affords far greater scope for operator services than the iPhone.
Because of the hardware specifications, and especially the demands made by the software on the processor and memory, the phones launched in the near term will be high-end, expensive devices
The next part of this series will explore the software capabilities of Windows Mobile 7.0
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