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Opinion: Finnish phone giant must phase out Symbian or die

The situation at the world's largest phonemaker Nokia Oyj. (HEX:NOK1V) has deteriorated substantially in the last year and a half.  Unable to compete against Google Inc.'s (GOOG) Android and Apple, Inc.'s (AAPL) iOS in the lucrative smartphone market, Nokia made a bold gamble and partnered with Microsoft to deliver Nokia Windows Phones.  

I. Another Brutal Quarter for Finland's Nokia

The deal was presumably first conceived with the installment of ex-Microsoft Corp. (MSFT) VP Stephen Elop in September 2010, just a month before Microsoft's formal launch of Windows Phone 7.  The pact was formally announced on Feb. 11, 2011.  As part of the pact, Microsoft pledged to pay Nokia billions divided into a series of quarterly payments, the first of which began to trigger last year.

Nokia on Thursday reported [PDF] its financial results for Q1 2012, a key barometer of the deal and the company's overall health.  The results were slightly worse than expected.

Financial Times information indicates that of the 27 analysts surveyed Nokia was estimated to make $7.45B USD.  Actual sales came in at $7.34B USD -- appr. 1.5% lower than expected.

Nokia's problems are numerous.  Smartphone sales fell in half on a year-to-year basis (51 percent).  But Nokia's feature phone sales also fell by 16 percent (with a 32 percent revenue erosion), thanks to fierce competition by Samsung Electronic Comp., Ltd. (KS:005930) which is pushing hard to become the world's top seller of mobile phones (both feature and smartphones) in 2012.

There are, however, some promising signs from Nokia.  The company has commited a lot of effort overhauling its feature phones with the new Asha lineup based on the lightweight S40 operating system.  Likewise Nokia's Lumia 900 is by some indications close to becoming Microsoft and Nokia's first major sales hit in the U.S. -- despite difficulties in Europe.

Lumia 900 in Hand (3/6)
The Lumia 900 LTE (Click image to enlarge) [©: Jason Mick/DailyTech LLC]

Nokia's smartphone sales have fallen to 11.9 million units for the quarter (which closed in March, before the Lumia 900 LTE launch).  

The issue appears to be all about execution.  Nokia's Lumias are one of the most promising product lines on the market, but it started with its lowest end models first, only bringing more exciting models to bear this spring.  The result is that the public were conditioned that Lumia is synonymous with low end hardware -- not exactly the best image to cultivate.

Likewise Nokia has allowed the Symbian lineup to linger around far too long.  Customers know this is a dying platform and few are signing up.  Nokia has put itself in a problematic situation.  First it has committed to Microsoft which demanded a certain uniform set of standards (in terms of hardware spec, including device buttons).  At the same time Nokia has a broad lineup of Symbian devices that do not meet those standards.

Nokia's response is to essentially do nothing and hope to slowly rebuild its lineup via brand new Windows Phone models.  While this approach certainly breeds some bold designs, it also does not speak to the reality of the sales crunch facing Nokia.

The just-slightly-worse-than-expected quarter did trigger a bit of a reaction from Nokia.  The company demoted veteran sales Vice President Colin Giles, two year after his rise to the position.  Mr. Giles will not be replaced -- Nokia plans on "reducing a layer of sales management" -- shrinking its core management echelon (the Nokia Leadership Team) from 14 (with Giles) to 13 (without).

III. Analysis: How to Fix the Mess

At this point it is imperative for Nokia and Microsoft to work together to relax Windows Phone's requirements enough to allow Nokia to transition its Symbian line to Windows Phone within a quarter or two.  

Nokia is at least well positioned to weather the storm with $9.8B USD in cash.  While the net loss of $1.34B USD for the quarter helped to chip away at that war chest, it's not to late for Nokia to make the necessary changes.  

Nokia wide
[Image Source: TechnoBuffalo]

The company is at a turning point.  From our perspective if it does four key moves, it will turn around and (re-)experience success.  To recover it must:
  1. Swap out Symbian NOW.
    Launch a new brand, and place all Symbian phones in this brand, transition them to be budget Windows Phones within 1-2 quarters via a relaxation of the spec.

    Symbian is dead.  Face it.  Nokia should just count these as lost sales if it cannot convert them to Windows Phone.  A handful may dispute this, but they're in denial of reality.
  2. Use Lumia as a Premium Brand
    Continue to push Lumia as the premium Windows Phone brand.

    The Lumia line is not Nokia's problem.  In fact, though the marketing has been somewhat poor, it has many impressive models.  Nokia needs premium models to compete with Apple and Samsung.  Growing Lumia alongside a new low-end Windows Phone brand that swaps Windows Phone into existing models makes perfect sense from this differentiation perspective.
  3. Put 41 MP Camera Phone on Verizon
    Launch the PureView Windows Phone variant on Verizon Wireless -- a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD).

    America was recently bumped to the second largest smartphone market in the world, but it still is the world's most lucrative market.  Thus U.S. market success is as critical now as it ever has been.  Nokia did a good job placing a high profile model into AT&T's lineup.  AT&T is America's SECOND largest carrier.  Now to complete its push, it need a Verizon Lumia.  Verizon loves exclusive handsets -- the Pure View would be the perfect model.  The price of admission will simply be putting an LTE modem onboard.
  4. Win Chinese Smartphone Buyers
    Move aggressively to bring, push the full Lumia lineup to China.

    While the U.S. market is still perhaps the most critical market, for the reasons outlined above, China is now the world's biggest market.  And it's a market Nokia has traditionally excelled in.  A big China push will help compensate for poor sales in Europe.
  5. Don't Forget About Feature Phones
    Improve feature phone marketing efforts and turn back Samsung in developing markets.

    If Nokia feature phones were booming, things wouldn't be quite so bad for the Finnish phonemaker.  As is, the situation is dire not just due to plunging smartphone sales, but also due to the drop in both feature phone sales and profitability.  Feature phones are Nokia's revenue workhorse.  Smartphones may be the 3 point shot, in basketball terms, but Nokia must not neglect the easy layup -- feature phones.
If Nokia does these three steps, again, I see it returning to success. If it does not, the likely outcome will be death and marginalization.  That would be a very tragic outcome, given the promise that this company has.  But recall, I predicted Hewlett-Packard Comp.'s (HPQ) phone market exit, literally one day before its Palm unit was shuttered (and, no, I had no inside knowledge, just was looking at the big picture).

The reality is that the smartphone market is among the world's most competitive businesses to be in.  HP learned that the hard way.  Research in Motion, Ltd. (TSE:RIM) continues to learn that the hard way, and is very likely to vanish from the market within a year.  Nokia is in a similar position to the Android phonemaker HTC Corp. (TPE:2498) -- it's hurting, but not out of the game yet.  But like HTC, Nokia has little margin for error if it hopes to avoid following in the footsteps of Palm and RIM.

Sources: Nokia [Earnings; PDF], [Sales VP resigns]

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There is some contradiction on your post....
By nangryo on 4/19/12, Rating: 0
RE: There is some contradiction on your post....
By Omega215D on 4/19/2012 10:57:41 PM , Rating: 2
Actually there are plans for it. It may be on Symbian first but it is stated that a WP7 version is in the works. Read up on PhoneArena, they got some better staff members there now.

Also, I thought Symbian is still used quite a bit in many other countries, especially in the basic and feature phone set that more people can afford compared to smartphones.

By Calin on 4/20/2012 5:02:46 AM , Rating: 2
Feature phones are using S40, which differs much from the current "top dog" Symbian (Symbian Belle), or the previous Sybmian (Symbian Anna), or the Symbian before that (Symbian^3) or the one before (Symbian^1, much of a rebrand of S60 5th Edition), which is an update of the Symbian S60 3rd Edition, which was more complex than S40.
S40 was updated too, but how much I can't really say.

RE: There is some contradiction on your post....
By JasonMick on 4/20/2012 9:58:19 AM , Rating: 4
Jason, do you know that the 41MP phone is Symbian? There is no WP7 version (yet) or plan for it.

You may look into this.
Not true.

Nokia executive was explicitly quoted by a Finnish newspaper as saying there will be a Windows Phone version... do a sure for "Nokia PureView", I did an article on it a while back...

Ditch Symbian, it's dead. The faster you ditch it, the better. No reason to launch the 41 MP with Symbian at all if you have a Windows Phone version, it's just going to create confusion.

RE: There is some contradiction on your post....
By JasonMick on 4/20/2012 10:06:16 AM , Rating: 4
Err... nvm, just realized that I actually put the link in the article, and explicitly wrote that there was a Windows Phone variant.

Did you not read the actual article or follow the source links before posting your complaint?

By french toast on 4/20/2012 11:20:26 AM , Rating: 2
Hi Mick decent article, i agree on some points, firstly that Nokia made a mistake launching midrande offerings first, second about getting that awesome camera tech on a WP8 device as soon as possible.

I would like to add to that, putting some high end features worthy of a smartphone, like HD displays, and multicore processing.(Despite what elop says)

Elop has been a disaster for Nokia, there is no way around it, from making inaccurate out of touch comments such as ''Multicores drain your battery''(lies) to stopping the Successfull N9 from taking to its full sales potential, ie not launching it when it was ready Q4 2010, then hampering it by cutting support, not selling it in any well off prosperous markets, no marketing support for it, and in the few non affluent countrys it did launch in, they put a prohibative 750euro price on it!! ...despite that the N9 actually out sold the entire WP eco system in Q4 2011!! and he cut support for it??

Nokia has gone from a profitable company, with the largest market share, and even PROFITS when he took over, right up untill the infamous 'burning platforms' memo and it has been a unmittigated disaster since then.

If he wanted to introduce a new operating system he should of done it in a smart way, EDGE IT IN untill it builds up enough demand and the eco system matures enough to swim, look at Samsung, they have several operating systems, they are not stupid enough to announce they are dropping all support for their current line up, then put all their eggs in one basket..a unproved unpopular one at that.

Samsung have 3 operating systems on the go that i know of, and they are now the biggest mobile phone company (by volume) in the world, so if they can do it, whats wrong with elop?? (they also sell WP7 by the way, AND Tizen as well as Android)

He has cost Nokia billions, shut down the Finish factories and moved production out of ESPOO, chopping jobs, had he just went about things with some proper thought kept Meego going in the high end, edge WP7 in to take the midrange and replace Symbian SLOWLY, he would be CEO of a profitable company.

The bullsh*t peddled by the american led media..the 'anti symbian' media, has infulenced and clouded his judgement, despite what everyone thinks, Symbian has a CLIMBING market share when that trojan horse took over and was making the company profits untill that memo.

The american led media have given what was too be honest a sub standard operating system (although it is catching up even now) and used that as some kind of reason to go plunging in the deep end with out a float, media dont run companys profits do, you dont announce to the world you are cutting support for it while its still making profits..suicide.

You can see why some have called him a Trojan horse can't you?...

By IronChef75 on 4/19/2012 7:28:37 PM , Rating: 5
THAN expected. THAN, THAN, THAN!!!

By karielash on 4/19/2012 7:35:37 PM , Rating: 2
You should get a badge.....!

By inighthawki on 4/20/2012 2:24:19 AM , Rating: 3
This one always intrigued me how people mess it up. I know the words are similar, but they are different words, sound a bit different, and mean completely different things. It's like confusing the words "bed" and "bad"

By corduroygt on 4/19/2012 11:32:50 PM , Rating: 2
Leaks from MS suggest no WP8 for any of the WP7/7.5 phones out today, and the developer who said there will be a upgrade to WP8 for all WP7 phones has retracted his statement to just "the apps will be compatible"

How will it feel to not get the new OS with still most of your contract remaining?

By jimbojimbo on 4/20/2012 12:21:49 AM , Rating: 2
I have a Droid 3 from last July so I know how it feels. :(

By Reclaimer77 on 4/20/2012 12:28:30 AM , Rating: 1
By datdamonfoo on 4/20/2012 12:24:45 PM , Rating: 2
This, of course, isn't true. There has been no leaks stating that WP8 will be on current phones one way or another. All that exists right now are rumors. And the most current rumors as of today (4/20/12) say that the Lumia phones will all be updated to Windows Phone 8.

By corduroygt on 4/20/2012 1:34:01 PM , Rating: 2
You are wrong. All indicators point to WP7.5 devices not getting WP8 updates. The only person who said so retracted his statement, and the current rumors say no upgrade path from mango to apollo:

well you see, what happened was...
By chµck on 4/20/2012 12:27:46 AM , Rating: 3
It is my opinion that nokia should not have gone with WP. It is a new OS that is not mature yet.
The fatal mistake was when Elop announced the partnership with MS. At the announcement, he flat out said that they were going to kill Symbian. This caused the developers to leave in droves (thousands in a few days).

Besides that, nokia should have revamped their own phone development, hardware and software. I guess they kinda got the hint and now we have nokia belle, which is a feature-packed, rock solid OS. Then we will have carla, which will support dual core phones, then donna, then something that starts with an 'e'.

Before you say something about "finally" getting dual core phones, think: Funny how it took someone actually using a single core processor phone (lumia 900) to realize that phones can indeed run well on single core processors. The ignorance is blinding. My N8 with belle is already as smooth as a fast android phone. Think of how smooth the newer phones with processors that run twice as fast well be.

But of course, everyone is entitled to get whatever they want :)

RE: well you see, what happened was...
By matty123 on 4/20/2012 8:17:33 AM , Rating: 2
While it's true single core phones can run the OS smoothly enough {except perhaps android -> I wouldn't know seeing as my first android is dual core.} the real use for more processing power is for third party apps, I just recently got a Galaxy S2 and certain apps like FPSe, Playstation emulation {for certain games}, Nintendo emulation, dos box, GemRB {for infinity game emulation like baldurs gate 2 exct. all benefit greatly from the added power and these are just the apps I have tried.

No matter the OS to emulate another architecture {as I understand it} at least 10 times the power is needed of the original {if it's emulated in software} so iOS, Win 7.5, Android and Symbian will all benefit from added power for certain third party apps.

By chµck on 4/20/2012 2:06:50 PM , Rating: 2
Yes, you would need more powerful processors for emulators and games, and up to a certain frequency, it makes more sense to add another core rather than keep increasing the frequency. Since the ARM architecture and the x86 architecture are different, I'm not sure about the 10x things. Also, processors now are much more efficient than the ones found in those consoles.

It would be more efficient and probably faster to move processing over the the GPU. For example, take a look at how an x86 processor competes against a videocard at something like protein folding.

And for reference, the GPU in the N8 is faster than the one in the iphone 4, so it handles games just fine, and much of the UI work is GPU-accelerated.

By Arsynic on 4/20/2012 11:46:34 AM , Rating: 1
Shitty logic.

If all phone manufacturers thought like this, then there would be no Android.

Numbering Failure
By arthur449 on 4/20/2012 4:45:08 AM , Rating: 3
First off, you have section "I." followed by "III."

Next, at the beginning of your numbered list, you write, "From our perspective if it does four key moves ..." then list five items. What's more, at the end of your numbered list you write "If Nokia does these three steps ..."

Either you were intentionally trying to confound the writers reading your opinion piece, or there was a significant amount of self-editing without a thorough read-through afterward.

What's wrong with you Jason?
By MrMilli on 4/20/2012 8:42:06 AM , Rating: 3
Jason I feel you are becoming more and more detached from reality. DT has never been a front runner in correctness or objectivity but you have taken it to a new level.
FYI, Nokia sold 12 million smartphones. ~2m Lumias, ~2m N9's and ~8m Symbian phones.
Your idea to kill Symbian NOW and continue with WP altogether (while also completely discounting N9 sales), sounds a bit insane. It seems they are one of Nokia's worst selling phones. The fact that the N9 is outselling every single Lumia while being much more expensive, available in a limited amount of countries and with no ad support, tells the whole story I think. And the main reason the Lumia 900 is now selling so well is because they are basically giving it away for free (I'm not saying it's a bad phone but just that it wouldn't 'sell' this fast if it was priced higher).
The fact is that even with all this advertising (last years Symbian phones and N9 got very little ad support), people don't want 'Windows' on their phone. So many people still have a bad after taste from it. Not because Windows is bad on a computer (personally I think it's the best) but because of the actual people that used it (noobits). On a basic computer these people are almost forced to use Windows but they have other chooses for their phone and it's not going to be Windows. Personally I think that WP7 has many pros but the cons just outweight them (or blur them).
The question on everybody's mind is why Nokia didn't continue with Meego, an obvious superior product. Especially after all the cost Nokia (and Intel) poured into it's developement. The most obvious reason is of course mr. Elop but I don't think that's the only reason.
Since August of last year Nokia offers phones with Symbian Belle. As much as you don't want to admit, Belle is a very usable platform. It's user friendly, it's GUI is GPU accelerated and the app store is thrieving. In fact, the N8 is one the most sold Symbian phones. Proving that once Nokia's 808 PureView is launched, it will outsell all Lumias put togehter, even though it's running Symbian.
Elop called Symbian 'a burning platform'. Still to this day, that makes me laugh. True, back then the Symbian UI needed an urgent make-over but it's core OS is one of the best out there. Symbian wasn't burning, no let's face it, Elop wanted it dead. End of story. If only Nokia would have invested more into Symbian to get Belle out sooner, given it more ad support and actually put it on a phone looking like a Lumia. If it would have done all that at the beginning of last year, Nokia would still be selling +18m smartphones. It think Nokia's original plan to put Meego on the high-end and Symbian on everything below it, combined with Qt, was an excellent plan. Too bad it never happened.

By KIAman on 4/19/2012 8:12:50 PM , Rating: 2
Yes, the VP of sales was totally responsible for the poor sales of Nokia. /sarcasm

Maybe they should focus on the real problem.

Nokia's Main issue is price
By Saravanavsk on 4/19/2012 8:35:50 PM , Rating: 2
In India, Samsung is the leader n mobile sales..It achieved based on the budget phones..
If nokia able to sell lumia 610 phone in the range between 8000 to 10000 indian rupees.
Then lumia 610 can make a dent in the samsung sales..Bcos, samsung's most indian budget mobile(bada & android) sales are between in the above mentioned money range only.

By sprockkets on 4/19/2012 10:25:51 PM , Rating: 2
Nokia's smartphone sales have fallen to 11.9 million units for the quarter (which closed in March, before the Lumia 900 LTE launch).

And what about that Lumia 800 phone, yah know the "first" good WP7 phone to debut? And the one on T-Mobile, the 710? Those have been out for months.

Not looking good. But look on the bright side - TMobile's site shows 4.5 out of 5 for their Lumia phone. Most androids don't come close.

Makes Sense
By Visual on 4/20/2012 9:52:34 AM , Rating: 2
Fail to meet expectations by 1.5%, get fired. Makes sense.

NOK will out-sink RIMM
By DukeN on 4/20/2012 12:11:34 PM , Rating: 2
Atleast RIMM can fall back into the Enterprise market where it massively dominates.

Poor Nokia, they have to price-cut their top phone model at launch aggressively to get moderate sales (with minimal quantities at launch, still couldn't sell out). And their money maker is Symbian, which they want to ditch but can't as it's their fiscal life line.

Face It
By bplewis24 on 4/19/2012 11:51:37 PM , Rating: 1
Nokia signed it's death certificate when it spurned Android to partner with WP7. Nothing will save them now.

Windows Phone will live on, but Nokia will not.


Jason - Jason... You are becoming too attached.
By Aries1470 on 4/19/12, Rating: -1
By mckinney on 4/19/2012 8:51:17 PM , Rating: 2
Jason is fanboy DT viewer want him to be.

I like Nokia, too bad they didnt get a better CEO. Elop said in an interview that they went for Windows Phone to help "enter the US market". For a company of that size to react to current market conditions at that time (not future global growth) is poorly planned. How could they overlook the big picture with China? They bled 70% market share in the east. They should have focused on keeping market share there instead. At least Elop is honest to say "actual sales have been mixed". With their stock down, MS should look at buying them, unless they think it is a risky investment, or Nokia should entertain shipping an Android phone also.

Also, for all of the talk, where is ATT's pre-order numbers for the Lumia 900 launch? Within a day of opening online pre-orders, ATT bragged about the Iphone 4S presales figures of 200,000 units in the first 12 hours. It has to be better than Kin. I mean, your giving the phone away for gods sake. After a week at the top spot on Amazon, the 900 is down to #5.

As far as Verizon, I dont get the impression they think the handset is great. If you read between the lines, they want to push another OS to leverage against Apple and Google.

Nokia should have launched it for the holidays, I would have got instead of the Skyrocket. Unfortunately it sounds like there will be no upgrade to WP8 for current devices (not that Samsung is much better at getting ICS out for the Rocket.....)

By drycrust3 on 4/19/2012 9:13:33 PM , Rating: 2
On the 100th anniversary of the Titanic, there is always something sad about watching "an unsinkable ship" slowly but surely going to the bottom of the sea.
With every major rethink in technology there will be winners and losers. Nokia managed the transition from being an telco instrument and equipment supplier to being a mobile phone supplier with success, but the huge technical advantage they had over competitors then has now been lost.
Their competitors have the technical advantage, which means Nokia has to use its strengths, like designing snappy looking phones, or getting better use out of their contract with Microsoft, or own brand kiosks in the shopping malls in China, to stay in the market.

By Martlark on 4/19/2012 9:46:55 PM , Rating: 4
Nokia wasted many years and billions of dollars entertaining follies such as Maemo and the n series. It was very obvious that they would not be able to convince any other mobile manufacturer to take that OS up. And so it was doomed to be a Nokia only cul de sac. Once again a big company has deluded it's self into believing that it can ignore the market place and impose it's will un the unwilling. Hubris is the only winner here.

By Church of Dirac on 4/19/2012 11:32:37 PM , Rating: 1
Once again a big company has deluded it's self into believing that it can ignore the market place and impose it's will un the unwilling.

Seems to be working well for Apple...

By messele on 4/20/2012 7:29:30 AM , Rating: 2
Odd as Apple re-defined the market and companies like Nokia struggled to see what was happening under their own noses.

Witness RIM and their still stuck in the mid 2000's BlackBerry.

RE: Jason - Jason... You are becoming too attached.
By B3an on 4/20/2012 12:18:43 AM , Rating: 3
You do know that when you write "M$" (is it still 2001?) it's only going to make you look like a retard and no one take you seriously.

By messele on 4/20/2012 7:36:28 AM , Rating: 2
Yeah I agree with B3an. Changing letters to other characters in names is not clever and does indeed make you look like a sweaty early 2000's mouth breather.

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