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Stephen Elop has finally put in writing what the market has said about Nokia ever since the iPhone came out. Props to him for finally initiating this interventi

by avner 16y ago

Stephen Elop has finally put in writing what the market has said about Nokia ever since the iPhone came out. Props to him for finally initiating this intervention at Nokia; it has been long overdue. Someone has finally said "we have fucked up, its now time to get back on the horse and make it right" to the Nokia management. Less than a decade ago, nobody could touch Nokia in the mobile handset market, Nokia defined quality... and then they got complacent and instead of innovating, they stuck to old principles. Its like Nokia witnessed the age old fable of the tortoise and the hare firsthand.

lamby 16y ago
Your comment and Engadget's article seem to imply that Nokia failing in the smartphone market means that Nokia is failing generally. But wouldn't Nokia still be making a lovely profit even if they stuck to the more vanilla phones? Don't forget that only a fraction of people can afford these >= £500 devices and only a fraction of those buy them without financing.
- kenjackson 16y ago
  Nokia used to be up around 60% of the mobile phone market (in terms of profit). Now they're around ~20%, while Apple is more than 50% (on less than 5% marketshare). Nokia is still making money, but pretty much all new profit is going to everyone else (especially Apple). http://www.freerepublic.com/focus/f-chat/2666565/posts http://www.freerepublic.com/focus/f-chat/2666565/posts
  - ergo98 16y ago
    Do you think there is a fixed "profit" out there for the taking? Apple's profit margin is an extreme aberration, and it isn't sustainable. Any comparison that relies upon profit numbers is...disturbed.
    - kenjackson 16y ago
      Do you think there is a fixed "profit" out there for the taking? Definitely not. But I do think that there's been incredible growth in Nokia's core business, and they haven't seen any of the growth. Apple has been able to do this in four markets now: 1) iPhone -- a carrier subsisized market. 2) iPad -- see (3) 3) iPod -- Large margins based on industry leading large volume. 4) Computers -- Expensive niche product with huge margins. I believe the are the single most profitable computer company (if you look just at their computer division). Why is a comparison based on profit disturbed? In business that's pretty much the only thing that matters. Profit yesterday, today, and tomorrow.
    - chc 16y ago
      Apple has been making similar margins on all of its products for the past 10 years. How can you say it isn't sustainable?
      - ergo98 16y ago
        10 years ago Apple had 5 billion in revenue. Now they're pushing 100 billion in revenue. They butting in on competitors who operate in the 5% margin range, and who are all desperately starting to claw back at Apple's gains. No, it isn't sustainable. History will prove me out, and in 3 years I would bet that Apple has seen a significant margin haircut. Quote me on a 50% decline. As a comparison, by the way, look at Sony (which was the Apple before Apple). Once a purveyor of high margin audio equipment, they saturated that market and started moving to high markup mobile audio equipment...and then TVs...and then lower markup mobile equipment, etc, and then everyone started fighting back. Apple is exactly following the Sony curve. EDIT: Arrowed down. This is one of those seminal moments that speak volumes about a community, and I think HN is done (just furthering an observation that has grown). Account and site abandoned.
        evgen 16y ago
        EDIT: Arrowed down. This is one of those seminal moments that speak volumes about a community, and I think HN is done (just furthering an observation that has grown). Account and site abandoned. I would say please don't let the door hit you in this ass on your way out, but you are a bog-standard troll and will be back again next week whining about Apple.
        gsk 16y ago
        that was not necessary.
        kenjackson 16y ago
        Apple and Sony do share some similarities, but at least one big difference exists... Sony focused on licensing technology, from CD to BetaMax. Whereas Apple is creating a walled garden to lock in customers. Sony eventually got commodotized in the very technology they created. This won't happen with Apple. At worst they get undercut in their industry, but Apple has a rich ecosystem that has to stay with Apple to reap the benefits. And just for the record, no downvotes from me.
    - tesseract 16y ago
      > Apple's profit margin is an extreme aberration, and it isn't sustainable. Any comparison that relies upon profit numbers is...disturbed. So the goal of a phone maker should be to sell as many devices as possible regardless of whether they're profitable? That sounds a lot like, say, Motorola before they adopted Android - not exactly a picture of a healthy business.
  - whatusername 16y ago
    While I got schooled on some apple market share figures earlier today -- the IDC report that ZeroGravitas links to here: http://news.ycombinator.com/item?id=2192345 http://news.ycombinator.com/item?id=2192345 points out that Apple have 21.6% of the Australian market. (That's total market, not just smart-phone and not just profit)
- rm445 16y ago
  The memo directly addresses how Nokia no longer owns the medium or low-end of the market either. They're being squeezed by smartphone tech making its way down towards mid-range 'featurephones' (i.e. a cheap Android handset easily beats a mid-range Symbian featurephone), while the low-end stuff is becoming a commodity churned out by Chinese OEMs.
  - griftah 16y ago
    There is no such thing as "Symbian feature phone". Every Symbian phone is a smartphone.
- danilocampos 16y ago
  > But wouldn't Nokia still be making a lovely profit even if they stuck to the more vanilla phones? Maybe. Until the smartphone market mostly cannibalizes the dumbphone market. Then where are they?
- zmmmmm 16y ago
  > Don't forget that only a fraction of people can afford these >= £500 device No - fairly good Android devices are already available for US$150 unlocked (see Huawei Ideos). In the next year they'll fall below $100 and after that they'll be coming free with your breakfast cereal. Elop is absolutely right with his analogy of a burning platform - there's a very real prospect that within 2 years Nokia could be entirely wiped out from the low end market - down to single digit market share and making very little profit on those. It's nothing short of an existential crisis for them.
  - PaulHoll 16y ago
    I know very little about the smartphone market, but in the console market, Sony were happy to sell the Playstation at a loss to get the hardware out there. Is this what you are predicting for the smartphone arena? Having the hardware at increasingly lower prices in order to make money on the app sales? Surely, this is the only logical conclusion if Nokia move into an app store-like closed marketplace?
    - deleted 16y ago
      [deleted]
    - wtracy 16y ago
      That only works as long as the console makers mostly lock out unlicensed applications from their platforms. Only AT&T and Apple seem to be willing to take this route. Now, we have tons of carrier-subsidized phones that come with a service contract. (You get a cheap phone, but you have to pay $80/month for the next couple years.) That seems to be where the money is in phones.
- ZeroGravitas 16y ago
  Although you'll not hear about it on Engadget (as it's not interesting to high-end gadget hounds, they barely mention the low-end Androids, which are high-end by world standards), Nokia got demolished at the low end by a bunch of companies you've never heard of. It was basically coincidental that at the same time they missed the bus on the new portable computer (with phone capabilities) market that Apple invented. Pretty bad luck for a company that was raking in billions selling lots of different low-cost phones to developing nations (which you wouldn't even believe is possible if you went to the John Gruber School of Business). Unfortunately those billions insulated them from the shocks, much like Microsoft happily ignored the internet for years. But the perfect storm of Apple, Android and low-end commodity competitors hit them hard from multiple directions (nice hardware, open ecosystem, low prices were all previous Nokia advantages). Elop mentions it though, so at least Nokia is aware of the problem: "Let's not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally - taking share from us in emerging markets."

by avner 16y ago

lamby 16y ago

Your comment and Engadget's article seem to imply that Nokia failing in the smartphone market means that Nokia is failing generally. But wouldn't Nokia still be making a lovely profit even if they stuck to the more vanilla phones? Don't forget that only a fraction of people can afford these >= £500 devices and only a fraction of those buy them without financing.

kenjackson 16y ago
Nokia used to be up around 60% of the mobile phone market (in terms of profit). Now they're around ~20%, while Apple is more than 50% (on less than 5% marketshare). Nokia is still making money, but pretty much all new profit is going to everyone else (especially Apple). http://www.freerepublic.com/focus/f-chat/2666565/posts http://www.freerepublic.com/focus/f-chat/2666565/posts
- ergo98 16y ago
  Do you think there is a fixed "profit" out there for the taking? Apple's profit margin is an extreme aberration, and it isn't sustainable. Any comparison that relies upon profit numbers is...disturbed.
  - kenjackson 16y ago
    Do you think there is a fixed "profit" out there for the taking? Definitely not. But I do think that there's been incredible growth in Nokia's core business, and they haven't seen any of the growth. Apple has been able to do this in four markets now: 1) iPhone -- a carrier subsisized market. 2) iPad -- see (3) 3) iPod -- Large margins based on industry leading large volume. 4) Computers -- Expensive niche product with huge margins. I believe the are the single most profitable computer company (if you look just at their computer division). Why is a comparison based on profit disturbed? In business that's pretty much the only thing that matters. Profit yesterday, today, and tomorrow.
  - chc 16y ago
    Apple has been making similar margins on all of its products for the past 10 years. How can you say it isn't sustainable?
    - ergo98 16y ago
      10 years ago Apple had 5 billion in revenue. Now they're pushing 100 billion in revenue. They butting in on competitors who operate in the 5% margin range, and who are all desperately starting to claw back at Apple's gains. No, it isn't sustainable. History will prove me out, and in 3 years I would bet that Apple has seen a significant margin haircut. Quote me on a 50% decline. As a comparison, by the way, look at Sony (which was the Apple before Apple). Once a purveyor of high margin audio equipment, they saturated that market and started moving to high markup mobile audio equipment...and then TVs...and then lower markup mobile equipment, etc, and then everyone started fighting back. Apple is exactly following the Sony curve. EDIT: Arrowed down. This is one of those seminal moments that speak volumes about a community, and I think HN is done (just furthering an observation that has grown). Account and site abandoned.
      - evgen 16y ago
        EDIT: Arrowed down. This is one of those seminal moments that speak volumes about a community, and I think HN is done (just furthering an observation that has grown). Account and site abandoned. I would say please don't let the door hit you in this ass on your way out, but you are a bog-standard troll and will be back again next week whining about Apple.
        gsk 16y ago
        that was not necessary.
      - kenjackson 16y ago
        Apple and Sony do share some similarities, but at least one big difference exists... Sony focused on licensing technology, from CD to BetaMax. Whereas Apple is creating a walled garden to lock in customers. Sony eventually got commodotized in the very technology they created. This won't happen with Apple. At worst they get undercut in their industry, but Apple has a rich ecosystem that has to stay with Apple to reap the benefits. And just for the record, no downvotes from me.
  - tesseract 16y ago
    > Apple's profit margin is an extreme aberration, and it isn't sustainable. Any comparison that relies upon profit numbers is...disturbed. So the goal of a phone maker should be to sell as many devices as possible regardless of whether they're profitable? That sounds a lot like, say, Motorola before they adopted Android - not exactly a picture of a healthy business.
- whatusername 16y ago
  While I got schooled on some apple market share figures earlier today -- the IDC report that ZeroGravitas links to here: http://news.ycombinator.com/item?id=2192345 http://news.ycombinator.com/item?id=2192345 points out that Apple have 21.6% of the Australian market. (That's total market, not just smart-phone and not just profit)
rm445 16y ago
The memo directly addresses how Nokia no longer owns the medium or low-end of the market either. They're being squeezed by smartphone tech making its way down towards mid-range 'featurephones' (i.e. a cheap Android handset easily beats a mid-range Symbian featurephone), while the low-end stuff is becoming a commodity churned out by Chinese OEMs.
- griftah 16y ago
  There is no such thing as "Symbian feature phone". Every Symbian phone is a smartphone.
danilocampos 16y ago
> But wouldn't Nokia still be making a lovely profit even if they stuck to the more vanilla phones? Maybe. Until the smartphone market mostly cannibalizes the dumbphone market. Then where are they?
zmmmmm 16y ago
> Don't forget that only a fraction of people can afford these >= £500 device No - fairly good Android devices are already available for US$150 unlocked (see Huawei Ideos). In the next year they'll fall below $100 and after that they'll be coming free with your breakfast cereal. Elop is absolutely right with his analogy of a burning platform - there's a very real prospect that within 2 years Nokia could be entirely wiped out from the low end market - down to single digit market share and making very little profit on those. It's nothing short of an existential crisis for them.
- PaulHoll 16y ago
  I know very little about the smartphone market, but in the console market, Sony were happy to sell the Playstation at a loss to get the hardware out there. Is this what you are predicting for the smartphone arena? Having the hardware at increasingly lower prices in order to make money on the app sales? Surely, this is the only logical conclusion if Nokia move into an app store-like closed marketplace?
  - deleted 16y ago
    [deleted]
  - wtracy 16y ago
    That only works as long as the console makers mostly lock out unlicensed applications from their platforms. Only AT&T and Apple seem to be willing to take this route. Now, we have tons of carrier-subsidized phones that come with a service contract. (You get a cheap phone, but you have to pay $80/month for the next couple years.) That seems to be where the money is in phones.
ZeroGravitas 16y ago
Although you'll not hear about it on Engadget (as it's not interesting to high-end gadget hounds, they barely mention the low-end Androids, which are high-end by world standards), Nokia got demolished at the low end by a bunch of companies you've never heard of. It was basically coincidental that at the same time they missed the bus on the new portable computer (with phone capabilities) market that Apple invented. Pretty bad luck for a company that was raking in billions selling lots of different low-cost phones to developing nations (which you wouldn't even believe is possible if you went to the John Gruber School of Business). Unfortunately those billions insulated them from the shocks, much like Microsoft happily ignored the internet for years. But the perfect storm of Apple, Android and low-end commodity competitors hit them hard from multiple directions (nice hardware, open ecosystem, low prices were all previous Nokia advantages). Elop mentions it though, so at least Nokia is aware of the problem: "Let's not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally - taking share from us in emerging markets."