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Apple shipped 21.6 percent more smart phones than Nokia in calendar Q2 2011, bumping the Finnish phonemaker to second, or possibly third place.  (Source: Venture Beat)

Samsung is also expected to have passed Nokia in sales.  (Source: Flickr)

The fall from #1 in global smart phone sales raises tough questions for Nokia CEO and ex-Microsofter, Stephen Elop.  (Source: Mark Vlander/Getty Images)
Apple is either #1 or #2 in the world in smart phones, depending on Samsung's sales, Nokia in second or third

As Finland's Nokia Oyj. (HEL:NOK1V) continues its downward slide in smartphone sales, the question partner Microsoft Corp. (MSFT) is likely wondering is exactly how much market share the company will have left when it finally puts out a Windows Phone 7 handset in October.

While Nokia in the U.S. has been shadowed by other handset manufacturers in the smartphone war, internationally it was one of the proponents of the "smart" phone and the top seller of the rich-media, internet-connected cellular devices.  But ever since Apple, Inc. (AAPL) and Google Inc.'s (GOOG) Android operating system exploded onto the market, Nokia hasn't seemed quite the same, delivering increasingly anemic hardware and software progress.  

Nokia's answer was to embrace the cutting edge Windows Phone 7 UI, but the problem was that it wasn't announcing immediately available product -- it was offering a product that would be available in about a year.  So rather than signaling the rebirth of Nokia's smartphones, the move seems to have been perceived by the public as a signal of the death of the current lineup -- and cause to switch to a rival phone maker.

Apple has now become the first to officially pass Nokia in smartphone sales.  Apple surpassed analyst expectations, moving 20.3 million iPhones in the second calendar quarter, while Nokia moved only [press release] 16.7 million.

Ex-Microsoft executive and now Nokia chief executive, Stephen Elop, tried to put a cheerful spin on the news commenting that the changes put in place had already "started to have a positive impact" on Nokia, and that, "We are making better-than-expected progress towards our strategic goals."

Despite the optimism, Nokia appears in very bad shape.  For the quarter revenue dropped 7 percent to €9.3B ($13.2B USD), while a net loss of €368M ($523.4M USD).  Smartphone sales dropped 34 percent, while overall phone sales (including non smartphones) dropped 20 percent, to 88.5 million units.

The latter figure is particularly disturbing for Nokia, as it indicates smartphones aren't the only arena it's falling short in.  And consider that Nokia's basic phones are still more profitable than its smartphones, that's very bad news for the bottom line.

Samsung Electronics Comp., Ltd. (SEO:005930) has not disclosed its quarterly smartphone shipments yet, but it looks likely to pass Nokia, as well.  The only remaining question will be who was first in smartphones globally -- Samsung or Apple.

For Nokia, likely to be bumped to third place, tough questions await.  Sure, Nokia, with its vast global market share, seems like a somewhat appropriate candidate to push the slick, Windows Phone 7 OS.  But will Nokia be able to appeal to Microsoft's biggest handset market -- the U.S. -- a market Nokia has traditionally struggled in?  

And with only one handset apparently set for release in October, will that be enough to generate any sort of momentum in the face of Apple's strong brand and Android handset makers broad selection of affordable handsets?

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RE: Apple v. Everyone
By Pirks on 7/21/2011 2:30:07 PM , Rating: 2
Jobs for president! The guy easily cracked the tough competition filled smartphone market and left other competitors in the dust in just 4 years, and I still remember everyone laughed how crippled and puny the first iPhone was (except for unusually good UI and web browsing there was nothing good going for it)

Jeez man, given Jobs's unique ability to correctly predict the future trends I feel like iPad will dominate the rest just as iPod and iPhone did, motherfucker left no space for others 'cause he can see the future and others can't.

Looks like Tony's prediction about Apple being largest market cap company in the world and everyone here owning personal or work-required Apple device in 5 years is dangerously close to fruition. I wanna see Motoman's face when he buys his first Apple device because his work requires it :)

You can't stop Apple because you can't predict the future like Jobs can. It's that plain and simple. There's nothing magic about it, it's just that very few leaders possess this rare talent. Gates got it (too bad he's left MS) and Jobs too, Ballmer unfortunately doesn't have one. He's good about jumping and throwing, that I give him but cracking new markets and pwning competition Jobs style? After walking through Uncharted 2 recently I say even Xbox franchise is meh, he didnt' pwn noone, Sony has unique crown jewel (Uncharted franchise) and is NOWHERE to be close to being pwned by MS. So compared to Apple's this is kinda failure. Billions in charges for RRODing Xboxes only add insult to injury.

Apple is the new MS, as ruthless and as brutal as MS was decades ago.

RE: Apple v. Everyone
By NellyFromMA on 7/21/2011 3:29:47 PM , Rating: 2
Don't forget the reach around. Its fair to share.

RE: Apple v. Everyone
By Reclaimer77 on 7/21/2011 4:00:18 PM , Rating: 2
You can't stop Apple because you can't predict the future like Jobs can.

Jobs will be dead soon. /shrug.

RE: Apple v. Everyone
By cjohnson2136 on 7/21/2011 4:03:12 PM , Rating: 2
But don't you know Jobs will die and then raise again three days later so he can save all the Apple users. Then a thousand years later that day will be celebrated with turtles leaving chocolate frogs hidden all over the place.

RE: Apple v. Everyone
By Tony Swash on 7/21/2011 6:46:03 PM , Rating: 1
Pirks I think we agree :) And that makes feel all warm and nice inside.

The interesting thing about Microsoft's figures was the second consecutive quarter of declining Windows sales. That's a bad omen and if the Windows sales decline shows any sign of accelerating then things could get ugly quickly. Meanwhile Nokia looks like it might be effectively dead before it can do anything with WP7. Without the one off patent settlement from Apple Nokia's loss this quarter would have been pushing a £1billion. Ouch.

So what of Apple and the future? Who knows whether Steve Jobs can stay at the helm. I do hope he survives and overcomes his health problems, not because I am an Apple fan but because I am human. Other than Gaddafi, Bashar al-Assad and few Serbian war criminals I would wish good health for everyone. The older I get the more precious life seems.

It took Steve Jobs fifteen year to do the almost unimaginable turn around that was done at Apple but now most of the pieces are in place. I think all that Apple has done until now is just a warm up. Their ambitions are vast. I expect that in three years Apple's sales in China alone will be as big as Apple's total global sales are now. Maybe more.

I know John Gruber is probably not the most popular commentator around here but he has a way with words. Here are his thoughts to mull over.

Apple is to the post-PC era what Microsoft and Intel combined were for the PC era. They control the dominant software platform and reap the majority of the profits from hardware. When people argue that Apple has somehow already grown as big as it can get, they’re not seeing the size of the opportunity that remains ahead. Imagine how big a combined Microsoft and Intel would have been 20 years ago. Then consider that the post-PC/mobile market is going to be bigger than the PC market.

RE: Apple v. Everyone
By troysavary on 7/22/2011 1:00:23 AM , Rating: 2
How is Nokia dead? So they are no longer number one? I guess that means iOS is dead too, by that estimation, since Android has passed it. Heck, Samsung alone may have slipped past Apple in phone sales. Nokia still selld tens of millions of phones and their WP7 products are right around the corner.

I really don't understand where you get that MS is in trouble. They just had their most profitable year ever. So Windows sales are down? Of course they are, most people who were going to buy Win7 as an upgrade already have, and many new PCs were bought at the launch of Win7. People tend not to buy a new PC every year like they do phones, so it will be another year or so when Win8 launches before we see Windows sales pick up again.

Added to this is the fact that companies are still relling from the economic crises and are not buying new hardware. When things finally pick up again, a lot of companies will be looking to replace their aging XP boxes.

Win8 also has a great chance to make large inroads into the tablet market. Do not underestimate the value of being able to run your desktop applications. The netbook market showed that once Windows is available, other OS fall by the wayside. x86 has advanced to the point where x86 tablets are viable, and far more powerful than ARM devices will be. Even if it didn't, there will be ARM Win8 devices as well.

Apple has a far better chance of falling down than MS. Apple has already falling out of the lead in their biggest cash cow, phones, and are quickly losing tablet market share too. Microsoft has never been out of the OS lead since, well, since MS existed pretty much, and no one is close to removing them from top spot in Office software too, as well as back-end business stuff like servers and Exchange. MS is very well entrenched in their major markets, Apple is not. The consumer smartphone and consumer tablet market are young, and consumers are fickle, especially with entertainment devices.

RE: Apple v. Everyone
By Tony Swash on 7/22/2011 5:11:42 AM , Rating: 2
How is Nokia dead? So they are no longer number one? I guess that means iOS is dead too, by that estimation, since Android has passed it. Heck, Samsung alone may have slipped past Apple in phone sales. Nokia still selld tens of millions of phones and their WP7 products are right around the corner.

Nokia just made (discounting the one-off patent payment from Apple) nearly a billion dollar loss in a single quarter in a booming and rapidly growing market. That's not exactly healthy.

Apple has a far better chance of falling down than MS. Apple has already falling out of the lead in their biggest cash cow, phones, and are quickly losing tablet market share too.

Depends how you look at it. Apple doubled its phone sales in the last year, it makes more profit than anyone else in the business, it's probably the worlds largest hand set maker or damm close and growth of iPhone sales is accelerating with a one year old model and a product refresh looming. Sounds pretty good to me :)

As for tablets don't believe the hyped up headlines, when the dust settles it will be clear that the iPad is crushing all other tablets makers in the market. The tablet market is more likely to be like the iPod market than the handset market.

This article is informative on this point.

Did you notice that Microsoft didn't give any figures (again) for WP7 phone sales? They must be truly awful.

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