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Summary:

Helsinki…you have a problem! (Actually it’s Espoo which has a problem, but Helsinki sounded better.) If you want to know why Nokia is in trouble, you need to look no further than its market share declines during the second quarter of 2009 in the company’s home […]

Helsinki…you have a problem! (Actually it’s Espoo which has a problem, but Helsinki sounded better.)

europeanhandsetsales.gif If you want to know why Nokia is in trouble, you need to look no further than its market share declines during the second quarter of 2009 in the company’s home market of Western Europe. This region accounts for a majority of its high-end phone sales. During the quarter, Nokia handset sales were down 19 percent (year-over-year), according to market research firm IDC, to about 15.3 million units. Overall handset sales for the quarter were down 6 percent and will be down a total of 10 percent for 2009, IDC says.

This data exposes Nokia’s Achilles heel. The reason why Nokia is suffering is because it doesn’t have a hit device to address the fast-growing smartphone market. Smartphone sales were up 25 percent to 8.8 million units compared to a year ago, IDC says. That’s about 1.75 million smartphones for the quarter. Guess who’s winning sales in the smartphone category? Apple, which sold about 1.4 million iPhones, and RIM, which sold 1.2 million BlackBerrys during the quarter.

Updated: I asked  IDC to share shed some more light on the sales of the smartphone sector for the second quarter of 2009 and they emailed with this nugget of information:

Nokia 57.5%
Apple 15.5%
Research in Motion 13.2%
HTC 8.1%
Samsung 3.0%

What we’re seeing is a complete upheaval in the handset market. We’re seeing two traditional powerhouses — Nokia and Sony Ericsson — be upended by North American and Asian competitors, some of them newcomers to the market. These two companies will continue to lose market share for a couple of reasons: Carriers like Vodafone are launching their own smartphone devices and most importantly, Google’s Android-based devices made by companies such as Motorola and HTC are about to hit the market in large numbers in 2010.

Nokia is particularly vulnerable because it doesn’t quite have a presence in the U.S. market. Let’s see how it does in Asia and rest of the world.

  1. WinMo-using cellphones are really disappearing at an alarming rate. Apple’s growth rate is high, but they still don’t have very much market share, as usual. I think the only way for any company to get market share is to flood the market with the cheapest cellphones possible. Not a wise choice, but that’s about the only way to get quick results.

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    1. I think that is why Android-based phones are going to have a major impact in 2010. HTC and Huawei are two companies with lots of cheaper smartphones on tap. Interesting times though…

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      1. Don’t look for HTC for cheap smartphone. They simply don’t do that. At Borqs, we work with all the OEMs in the world on Android smartphones. You assessment is correct. 2010 is the year when Android will make a major impact on the market. In not too distant future, you will see game changing smartphones from major OEMs. I know since we work closely with some of them.

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      2. OM, I agree about Android…2010 is it’s year, simply by the numbers.

        Android is being released on all major US carriers in late 09 and through 2010 and similiaring portfolio mixed as RIMM devices (meaning same mix amount).

        So, iPhone set aside, access to Android will be for the “masses” across multiple channels driving device prices lower and customer adoption.

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    2. “WinMo-using cellphones are really disappearing at an alarming rate.”

      That’s a *good* thing!

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  2. As you may recall Sony used to completely own the portable audio market with a brand called Walkman. Everyone used to have them. Bright shiny objects you carried around with you that played music brilliantly all over the world. Then one day Sony woke up and discovered that a computer company in California had created a portable digital music player called the iPod that integrated with a services and software platform called iTunes and Sony lost all of its customers. Sony is still in denial.

    Nokia is now on the same downward path as Sony. Apple is taking away all of Nokia’s customers in the smart phone market and Nokia has only itself to blame. Where the iPhone is sexy, Nokia’s phones are drab and functional. Where the iPhone is easy to use, Nokia’s phones are difficult. Where the iPhone integrates well with a great online store experience, Nokia’s phones rely on poorly built service platforms and stores that baffle customers. As the iPhone storms through the US market, Nokia retreats in disbelief.

    But if you want to truly know how bad it is talk off the record with Nokia employees and to a man and a woman they will tell you that the iPhone and its store is a superior product and Nokia can not focus in order to make a successful challenge to it. And just like Sony, senior management at Nokia is in very deep denial. A once proud company is stumbling very badly and it is sad to watch.

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  3. ” The reason why Nokia is suffering is because it doesn’t have a hit device to address the fast growing smartphone market.”

    Ow! That must sting, considering Nokia invented it.

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    1. @Zigurd…. I know it must hurt. Till two years ago, I couldn’t use any other device but Nokia. Two years later, they are still selling pretty much the same thing. Sorry but inventing the market doesn’t mean they will own it forever. I wish there was a better option at Nokia.

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      1. Om,

        I think this is a story that requires more than a look at the overall numbers, on the one hand and press releases and bland corporate statements from Nokia, on the other. I think the numbers tell a real story, but why is Nokia unable to effectively combat its market erosion in a market (of smartphones) that it created. Someone, hopefully you, should be able to penetrate the cloud around Nokia to truly understand why Nokia is failing so completely. I wish you good luck in uncovering the truth. Please keep at it.

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      2. Chris,

        I think it simply has to do with the ecosystem and tools. Developing for a common profile helps a lot! The question isn’t how does Nokia compete now, it’s how it does so in two years. I believe that this has to do with mobile web rather than applications per se. But, I also believe that these applications will be more widget/application like than on the desktop. Outside of games, WebKit can accomplish most of what is necessary.

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  4. Without seeing the actual numbers for the previous year, the table shown is of limited relevance. I mean, even with a 19% loss year-over-year, Nokia still shipped *15 times* as many smartphones as either Apple or RIM was able to. Personally, I think that’s rather impressive.

    Also, the ‘Others’ category dropped a whopping 57% year-over-year.

    I’m not trying to say that Nokia doesn’t need to pay attention – you’d be hard pressed to find any sane person in this industry who would claim they don’t. However, the data presented does not really condemn Nokia in the slightest, imo.

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    1. “Without seeing the actual numbers for the previous year, the table shown is of limited relevance. I mean, even with a 19% loss year-over-year, Nokia still shipped *15 times* as many smartphones as either Apple or RIM was able to.”

      Wrong. APPLE is killing NOKIA.

      Nokia sold 15 million phones (not smart-phones) total world-wide which includes the cheap throw-a-way phones. According to IDC Nokia sold about 1.7 million smart-phones to Apple’s 1.4 million. But Apple now rakes in 32% of all smart-phone profit with about 20% smart-phone market-share.

      Report: iPhone grabs 32 percent of smartphone profit
      http://news.cnet.com/8301-13579_3-10303733-37.html

      I’d say Nokia is getting killed in the market that matters most to profit. Because theirs not much money in selling cheap throw-a-way phones at pennies a pieces. All of the big profit margins are in smart-phones.

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  5. Synapse Syndrome Thursday, September 24, 2009

    The soon-to-be-released Linux powered Nokia N900 pisses all over the iPhone in ability. I think it is a niche phone though, for power users. The Maemo OS is a lot more appealing to me than sandboxed phones like iPhone and Android to me, but as it is not going to be slick and easy to use as the iPhone (and not as sexy), I think it will get a worse reputation than it will deserve once it comes out, as I really cannot imagine people like my iPhone loving friends (and sister) being able to appreciate its strengths.

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    1. I am looking forward to it and hoping that they pull off a great device because the market does need competition.

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  6. A 19% market share drop is indeed alarming but they still sold over 15M units. They need more than a single smartphone hit, they need an ecosystem. They need to do a much better job than they did with the Nokia N97, the product was horrible! It felt cheap like it would easily break, not the quality I would have expected for the high price and a Nokia. Heck, I even felt sorry for Robert Scoble who flew over to Barcelona to be the first to cover it. Their app store was pathetic and seemed like a last minute thought. They need more touchscreen smartphones and If I were Nokia I’d write an iPhone to symbian (and their new Maemo linux based OS) port tool and give it to iPhone developers to get their app on Nokia appstore.

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    1. Robb… and Ricky Cadden.

      This is the relevant problem as of now for Nokia:

      Smartphone sales were up 25 percent to 8.8 million units compared to a year ago, IDC says. That’s about 1.75 million smart phones for the quarter. Guess who is winning the sales in the smart phone category? Apple which sold about 1.4 million iPhones and RIM sold 1.2 million Blackberrys during the quarter.

      The new sales are not coming to Nokia and instead going elsewhere. I see it as a problem, you might see it other way.

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  7. Robb, that’s not a 19% market share drop, it’s a 19% sales drop. The text has it correct but the chart is deceptive.

    As for: “Let’s see how they do in Asia and rest of the world”… well, I think we saw some indications… http://mobonoid.com/2009/02/the-nokia-5800-sets-a-new-sales-record-in-india/

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  8. The Android devices are not the ones that will make a difference. Their sales are noise compared to Apple, RIM, and others. Android is still a very rough OS with lots of work needed on both the UI and the API. They are making many of the same mistakes that Palm made with Palm OS that lost them leadership.

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    1. Maurice

      Interesting comment. Care to expand Palm pre vs Google Android. Love to hear what you have to say.

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  9. As a rather neutral observer (I love Apple stuff, I use Nokia phones because they are better PHONES, I am a long-time Palm fan), I call foul:

    Statistics, and other lies, are easily manipulated to show a distorted, convenient picture. In this case, I would say that others have made gains, but there is NO evidence at all that it is at Nokia’s cost. Instead, the smartphone market is GROWING, there are MORE PLAYERS, there is MORE CHOICE, and MORE PEOPLE ARE BUYING smartphones. Things are re-aligning, but to everyone’s benefit, and at no one’s cost.

    I am, however, a bit concerned by this stream of constant product-negative posts I read here. They read like a negative marketing campaign, and not balanced at all, and while they may address the “greatest market of all” (the USA), I need to remind everyone that things are VERY different in the rest of the world.

    For example, in Asia (which accounts for more customers than there are people living in the USA), Nokia rules, and for good reasons: Apple, Palm and others have completely dropped the ball in these regions when it comes to marketing or getting mindshare. But also because many devices (like the Nokia E71) simply made it to the USA much later than to Europe/Asia.

    There is world beyond the economic borders of North America. So maybe we could look at unbiased numbers from the rest of the world and have them interpreted honestly?

    Thanks.

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    1. Atul

      We have said in the past that Nokia’s future is in the developing world.
      http://gigaom.com/2009/08/11/can-ovi-boost-nokias-fortunes-in-the-developing-world/

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  10. In addition, that chart is clearly biased to provide a negative picture.

    How about a chart that shows actual numbers sold? That would paint a completely different picture!

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    1. Atul

      Read the chart… it shows actual units sold. it shows actual unit declines. It shows actual problems…. read this little bit about smartphone sales growth going to competitors such as Apple and RIM. The sales are diving for Nokia. The way I see it, Nokia is losing traction. As to Asia, I would love to know Nokia’s ARPU in Asia. Not as high as Western Europe.

      And what you thinking as negative posts; well I am keeping it real. Too bad you see differently, but I respect your point of view.

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      1. OK, What I meant was “show actual units sold over the past couple of years”. Nokia didn’t sell 19% LESS units over the past year, did they?

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      2. Again: the chart is misleading. Note how people in this conversation misunderstood the last column.

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    2. Atul,

      I do indeed read it to say that they sold 19% Less units than last year. How else will you read the line below? IMO – Om is keeping it real and identifying real issues. Yes – Nokia is a leader by far in Asia and owns 40% +/- market share globally. But that is also a cause for worry – a hungry pack of smartpone makers are gunning to change that market share negatively. Its so successful in Asia because it had the right price-feature device. Now that the mobile internert tsunami is in full swing, others have the goods AND the hunger. So lets see how it pans out.

      During the quarter, Nokia handset sales were down 19 percent (year-over-year), according to market research firm, IDC to about 15.3 million units.

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    3. Dude, that’s what the chart says…. annual change. I know you don’t like to see this, but these are actual numbers…

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    4. A-Tool – wake up brother. Nokia doesn’t get it – the mobile web that is. they made terrific phones, but you don’t see Western Electric dominating telecom hardware. Nokia will still post big#’s in developing countries, but even kidz in Mumbai want an iPhone…not an N900 Communicator that “Comes With Music” and or some N-Gage rehash.

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