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The more you look at the Nokia fiasco, the odder it looks. The annual R&D budget tops $7.5 billion, the number of people working in R&D is 17,000, yet they can’t produce a stream of market-leading devices. The N8 launch is now delayed.
What’s even odder is that it is said: ‘Nokia now sees itself as a software and services company’.
That’s not how the rest of the world sees Nokia which is as a mobile phone manufacturing company and the most successful one in the history of the wireless industry.
But the whizz has gone.
Nokia agonises over operating systems and daft new technologies like 3D and forgets about sex appeal.
The company used to know that. It sold its Zippo phone for $950. Sex appeal = margin, and Nokia is now saying its Q3 2010 margin could be 7%.
Nokia phones outsell the iPhone 15:1, but the iPhone makes 5X more profit.
It’s all very well seeing yourself as a ‘software and services’ company but it’s selling phones that brings in the revenue.
The new CEO shouldn’t have been a software guy; he should have been a phone designer
You have my sympathies entirely, AndyRem, I agree with it all, and I can’t understand why Nokia haven’t contacted you yet – maybe their CEO is slightly distracted at the moment.
Yes, I do, but sadly it won’t make any difference – there are far too many people who believe their own hype, who will carry on trying to force as many pointless functions as they can into machines that can’t even perform their basic operations satisfactorily.
And I haven’t heard from NOKIA yet!
Well, well AndyRem, I expect you felt better for that.
So Nokia could be holding back the launch of the N8 (whatever that is…) because of software problems? What a refreshing change! I’m just a simple consumer and it really hacks me off that the biggest contribution the whole ITC industry seems to have made to this world is to cultivate a global tolerance of shoddy, poorly-implemented, disposable products.
Is everyone falling for the army of gadget-hacks’ hype over the latest i-Whatsit? I can’t be the only one who would be happier with a SimplePhone (TM) that can get a signal to make calls in the middle of the UK, that will transmit and receive texts and emails without falling over, and that I don’t have to be wary of accidentally applying a microgram-force too much to the screen while stroking it (trying to find the comms application that some idiot stuck at the bottom of three pages of things that I will never have any need for), in case I end up on Facebook? And that if I have a reminder for an appointment I can ‘snooze’ it for a day, an hour, a week or whatever, and not ONLY 5 minutes (you morons, HTC).
There WILL be a revolution, and common sense will be victorious: my only worry is that it will be too late I will be long gone.
NOKIA, give me a call…on my old 3-something-something-something
If all the electronics companies continue to turn into “software and services” companies, where does the advanced hardware needed to run this come from?
If they think somebody else is going to develop this for them for little or no money (because all the money’s in the software and services, dummy 😉 they’ll be sadly disappointed.
I think it may be harsh to blame Nokia’s manufacturing arm for their problems. You don’t just forget how to make phones efficiently. I suspect the N8 delays are more down to software problems and the general lack of sexiness of their range is down to a management team who simply lost the plot. Statements about being a software and services company tend to confirm my second point.
Damned if they do, damned if they don’t. Hire a phone guy and the world remarks “what nokia needs is fresh blood”. Hire an outsider and the world remarks “what nokia needs is a phone expert, not a newbie”.
You’ve said it all, Robert, Nokia has gone from being focussed, sharp and sexy to fat dumb and happy and it will be God’s own job to repair things. Appointing a CEO who knows nothing about phones makes you think Nokia still doesn’t appreciate the seriousness of its problems.
Spot on, vikram, poor execution is bedeviiling Nokia. They seem to have lost control of their manufacturing operation. They are showing all the signs of a too-big, too-rich, too-complacent organisation. And the really worrying thing is they think they’re a software and services company rather than a phone manufacturing company. So they’ve also lost focus.
Well cricket’s certainly in decline, VO, and the Vikings liked a bit of rumpy-rumpy, but it seems the present generation doesn’t even want a sexy telephone.
Its not a decline, David. Those northern, sad people are sexy in the same way that cricket is exciting.
I saw other problem as well. Nokia is primarily a phone manufacturing company.Good hardware is their strength, and I love their phone. But the problem occurs when they announce some phone and did not launch it for next 6 month. N8 is one example, but for me in india more relevant example is of E-5, it is showing “coming soon” since last 5-6 month in Nokia’s india website. IT is a medium price business phone, which is supposed to be good hit in emerging market and competitors already launched their model.How to justify 6 month delay in product availability from a world leader. Is leadership of “world Leader” sleeping ? Wake up time guys.
The biggest problem for Nokia is managing this market share loss. IMHO managing the down phase is 10 times more difficult than managing growth.
From a market space Nokia is in a really bad shape.
The low end phone only model is disappearing completely, while “whitebox” chinese phones (MTK chipset)are stealing the entire “feature phone” market,especially in China and India.
In the rest of Asia and America Samsung and LG are getting stronger and Stronger.
At the high end Apple, Anderoid and RIM are making laughing stocks out of Nokia, so they are loosing the sexy “must have” and the business markets.
By any metric a pretty S**ty report card!
Point is they don’t simply need to fix one problem, the cell phone division is riddled with problems. If Nokia goes from 40% to 20% market share over the next 2 years, do you think those 17000 engineers will accept 1/2 pay?
We’re told it’s all gone soft and services, Mike – a sad decline
“OK it’s cold in Finland …. but those are not excuses for giving up on sex appeal.”
I thought that was all they DID do up there 🙂
Dave, I think you’re 100% right. Sex reared its head 3 years ago with the iPhone and Nokia hasn’t managed to rise to the challenge. OK it’s cold in Finland and the boss is a lawyer but those are not excuses for giving up on sex appeal.
If they don’t they should, usually disagree, and if they do maybe this Microsoftie’s been brought in to share their pain. But I agree with with your analysis – they are in a bit of a bind – and it’s mostly their fault. They have enormous strenghts – the best RF in the business, the most trusted brand for reliability, the most formidable manufacturing arrangements in the industry – but the guys at the top are paid handsomely for their judgment and if their judgment leads them to 7% gross margins, then it’s reasonable to say their judgment is faulty. And when did Nokia last bring out a sexy handset?
I tend to agree with usuallydisagree. Software is the key differentiator. But as David says, sex appeal is right up there too. Basic hardware performance is only interesting as far as allowing fast software performance. If you have bad RF, just blame the network (see Dilbert: http://dilbert.com/2010-09-21/).
In the past, Nokia won the market because they had a) efficient high volume manufacturing – they still have this – and b) the best user interfaces. With Motorola you were clicking 5 times to get to a feature, with Nokia once or twice. And the menu was nice and logical. What Apple have done is take this leadership away from them by taking UI up to a new level. And then they added the sexiness factor which Nokia had never had to think about in the past.
So I think Nokia’s focus on SW is right, but they also need to get sexed up. Hardware will be commoditised.
I haven’t seen any evidence that ‘Nokia agonises over operating systems’. Their operating system strategy seems pretty decided to me. Bloggers agonise over Nokia’s operating systems a lot, but Nokia doesn’t.
Nokia has to see itself as something other than a phone maker as margins on hardware become tighter and tighter with increased competition from their real competitors (which are SonyEricsson, LG and Samsung mainly and not Apple). As the quality of cheap Chinese phones improves, the prices and margins will fall even further. Nokia has to add some value to make a more compelling package and this is where the software and services come in. This is the ONLY way to open up margin generating opportunities as hardware competition slashes profits.
It doesn’t look good for Nokia having to delay the N8 further, but after the fiasco of the N97 quality, what choice might they have?
Nokia are a sad case and I couldn’t agree more that the new CEO should have been a phone designer. But I suspect the problem is much deeper. If you look at Samsung’s phone design team they are a selection of young and older designers of both genders, all dynamic enough to get products out quickly that are customised to trends in all of their customer groups. Nokia meanwhile try to carry on with the “one size fits all model” for much of their target market but without a product that every cusatomer group might want to buy.
I got lots of criticism after saying Apple smartphones (and iPads) were now the must have fashion accessory from people saying they were essential to their work but that’s missing the point. Apple are the Armani of consumer electronics and so can charge decent profit margins on products that cost no more to produce that cheaper competitors. Such is the image that people are buying unlocked iPhones in markets where they are available and selling them for about US$200 more in markets Apple isn’t addressing yet.
Nokia had that kind of brand awareness and market leadership worldwide (except in Japan) and could have kept it but instead chose to go for the lower cost highest volume market, including the mythical market for low cost phones in India and China – the two markets that are happily paying over the odds for unlocked iPhones.
I hope Apple never release a cheap phone – it would ruin their image. Nokia should have done the same.
That said, I use a Nokia as they have the best r.f. front ends and where I live the issue of actually getting a signal far outweighs any fashion 🙂