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Spillikins є129. Nokia Loses The Crown and A Billion Euro

A few days in Moscow and I'm hitting the road again for a week during which I try working on the go but I am not sure whether the Internet connection will allow me to. Then I will have to pile up articles and bring an avalanche of them on your heads later. Despite summer time there is a lot going on Ц just to mention: Apple iPhone record sales and Nokia's decline.

Contents:

  1. Nokia Quarterly Results Ц It's Even Worse than We Imagined
  2. A Fake Chinese Е Apple Store
  3. Bada 2.0 is Here
  4. No Good for Playbook

Nokia Quarterly Results Ц It's Even Worse than We Imagined

When Nokia warned us that their quarterly results will be lower than previously forecasted everyone got ready to hear the bad news. But what we learned was that Stephen Elop is destroying the company ahead the schedule and makes every effort to eliminate it from the market Ц I can see no other explanation from the news I get. Today we are observing Nokia getting rid of its management and quite successfully, I might add, the billion euro losses speak for themselves.

Have a look at this table to understand what is going on with the company.

Reported and Non-IFRS second quarter 2011 results1,2
EUR million Q2/2011 Q2/2010 YoY
 Change
Q1/2011 QoQ
 Change
Nokia          
 Net sales 9 275 10 003 -7% 10 399 -11%
 Operating profit -487 295   439  
 Operating profit (non-IFRS) 391 660 -41% 704 -44%
 EPS, EUR diluted -0.10 0.06   0.09  
 EPS, EUR diluted (non-IFRS)3 0.06  0.11 -45%  0.13 -54%
 Net cash from operating activities -176  944   -173  
 Net cash and other liquid assets4 3 891  4 088 -5%  6 372 -39%
Devices & Services5          
 Net sales 5 467 6 799 -20% 7 087 -23%
 Smart Devices net sales 2 368  3 503 -32% 3 528 -33%
 Mobile Phones net sales 2 551  3 190 -20%  3 407 -25%
 Mobile device volume (million units) 88.5 111.0 -20% 108.5 -18%
 Smart Devices volume (million units) 16.7 25.2 -34% 24.2 -31%
 Mobile Phones volume (million units) 71.8 85.8 -16%  84.3 -15%
 Mobile device ASP6  62 61 2%  65 -5%
 Smart Devices ASP6  142 139 2%  146 -3%
 Mobile Phones ASP6  36 37 -3%  40 -10%
 Operating profit  -247 643   690  
 Operating profit (non-IFRS)  369 647 -43% 694 -47%
 Operating margin % -4.5% 9.5%   9.7%  
 Operating margin % (non-IFRS) 6.7% 9.5%   9.8%  
NAVTEQ          
 Net sales 245 252 -3% 232 6%
 Operating profit -58 -81   -62  
 Operating profit (non-IFRS) 53 50 6% 54 -2%
 Operating margin %  -23.7%  -32.1%    -26.7%  
 Operating margin % (non-IFRS) 21.5% 19.8%   23.3%  
Nokia Siemens Networks7          
 Net sales  3 642 3 039 20% 3 171 15%
 Operating profit  -111  -179    -142  
 Operating profit (non-IFRS) 40 51 -22% 3  1233%
 Operating margin %  -3.0%  -5.9%    -4.5%   
 Operating margin % (non-IFRS) 1.1% 1.7%   0.1%  

In Q2 2010 the company made И295 million profit while this year it has lost И487 million. The losses could have gotten up to a billion euro but for Apple which bought out a number of Nokia patents and previous Apple iPhone sales which contributed almost half a billion euro to Nokia's bank accounts. Nokia cannot expect such miracles to happen in the future.

The mobile phone department which has always been making profits is singing the blues Ц it lost И247 million. The reason for this reversal is mister Elop who deliberately knocked down Symbian sales which subsequently resulted in just 16.7 million supplied handsets. The fifteen year old supremacy of Nokia on the smartphone market is now over. It was Nokia that created this type of devices and mister Elop has become the end of it for Nokia.

Compare these results to the 20.3 million sold iPhones in Q2 Ц the difference is dramatic. And we still don't have the Q2 results of Samsung which, apparently, has sold more than Nokia. It was next to impossible to lose sales that fast. Even if Nokia did nothing to promote their phones they would have sill sold more than they did Ц the company has been deliberately destroying their sales. Back in the beginning of 2011 Nokia was selling 24 million handsets quarterly but mister Elop declared them to be insufficient and many people believed him. While in Q1 the Nokia's share of the smartphone market was 24%, in Q2 it will go down to 15% (forecast Ц we still don't have the results of other major players). The fall amounts to 7 million handsets. Is there still anyone who does not believe that Nokia has serious issues on the smartphone market? I expect the company's market share to go as low as 5-6% in 12-14 months and I don't see any predispositions for its growth. Moreover, the company does not have any competitive products. The Windows Phone 7 smartphones coming in Q4 is a phony. Nokia will not be able to sell these even at Q2 2011 rates. And with major carriers cutting on their Nokia orders I cannot see the sales to go up anytime soon.

To put it short Ц Nokia has made a bad bet.

Some people forget that the mobile phone market is much more than smartphones and no one could compete with Nokia as far as regular phones were concerned. But in 2011 lesser manufacturers are making their way so swiftly that they leave no chance for Nokia to recover. For the first time in many years the sales of regular Nokia phones plummeted. As compared to Q2 2010 the smartphone sales fell by 34% while regular phones sales "only" by 20%. These figures are astounding and they mean that Nokia is not just experiencing problems Ц it is going down for good.

Nokia is following the path of Siemens Mobile swiftly followed by Motorola and Sony Ericsson. At first, the companies fix their prices and try to get maximum profits (Nokia did not alter prices for 5-6 months), then they sharply cut prices (in July Nokia decreased prices worldwide by 10-15%). Lower prices in this scenario do not produce bigger sales and even have an opposite effect. After this, companies try for a couple of quarters to go against the market only to lower prices even more eventually. Nokia will do exactly the same as the second half-year is probably going to demonstrate the utter incompetence of the company's management to get things straight.

Why am I so sure that Nokia is beyond saving? The reason is simple Ц the company focused on Windows Phone 7 smartphones which are not popular in Europe and in the US, where WP7 phones are somewhat popular, the market is dominated by Samsung, LG, HTC and other manufacturers and they are not willing to part with their market shares. Nokia is also laying off its developers and has ditched MeeGo and Symbian. The company has cut expenses for ads manifold while Apple, Samsung and other companies only increase them. Nokia has got no chances of making it whatsoever. But the main problem is that Nokia is not developing any new products that could change the game Ц they simply continue with what they have today and that is not enough.

I could go on with what's wrong with Nokia but the facts are: Symbian^3 sales have failed regular phones sales are failing and there is no good news that could give any hope. The company is sinking. This picture conveys the message perfectly.

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A Fake Chinese Е Apple Store

The Chinese are so ingenious that they don't stop at just counterfeiting Apple productsЕ now they also counterfeit Apple stores! A blogger has reported a fake Apple store in China.

Source: http://birdabroad.wordpress.com.

I recommend reading the source article Ц lots of good humor. The most amusing fact that the author learnt about this store in a small for China town is that the staff think that they work for Apple. It is a brilliant fake but a fake nonetheless. It is a very interesting story and I have never seen anything like that in the electronics domain. I have come across fake Louis Vuitton and Burberry stores in small Chinese towns that, naturally, traded counterfeit.

But I have never seen a fake store that sells authentic products. It is hardly fathomable Ц it costs more to build such a store than to sell same products anywhere else. Even creating your own retail chain is cheaper. But as we can see in China things are a little different Ц the Chinese now want only the real deal spawning these quasi authentic stores. At first, I could not believe this store is real but eyewitnesses say there are more stores like this one in China. What a fascinating country!

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Bada 2.0 is Here

An unofficial Samsung Wave firmware is now also available on the web.

The Bada 2.0 firmware brings lots of new features but, alas, it is only available in English so far. If you have already tried this updated version I invite you to share your experience, your likes and dislikes with us. If you have not than have a look at the interface and new features screenshots and the video on what's new

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No Good for Playbook

I have said many times that Blackberry Playbook is weird. The enthusiasm of the company reps did not find a market response. And I must say that my Playbook is still lying in a drawer of my table Ц I have not touched it since Blackberry World. The Playbook sales are far lower than the company expected or hoped and they admit it now. RIM is ceasing the production of the Wi-Fi version of the tablet that will be replaced by the 3G version. I remind you that so far you can only buy the Wi-Fi version of Playbook. The production halt is apparently caused by full warehouses of this tablet.

Another blow for RIM is the resignation of Ryan Bidan, the guy who was in charge of Playbook development, and who found a new job in Samsung. This has become the second significant employee loss for the company in recent times.

P.S.P.S. Have a nice week and many smiles!

Do you want to talk about this? Please, go to our Forum and let your opinion be known to the author and everybody else.

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Related links

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Spillikins No 127. How to save the water damaged handset

Spillikins No 128. The Performance of Sony Ericsson and Nokia

Eldar Murtazin (eldar@mobile-review.com)
Twitter    Livejournal
Translated by Robert Mugattarov (mugattarov@gmail.com)

Published — 26 July 2011

Have something to add?! Write us... eldar@mobile-review.com

 

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