A piece in All Things D covers Nokia and their current commitment to Windows Phone. Apparently, Nokia has decided that it’s Windows Phone or nothing. The piece tries to cast a favourable light, quoting another article that shows Nokia shipping 1 million Windows Phone devices in 2011 (actually, this appears to be for just Q4, when the Lumia started shipping) . Between that and the positive reception that the Lumia appears to be receiving, some are trying to say this is “good news” and that it could bode well for Nokia. But I’m not convinced that means anything.
Here’s the problem I have: 1 million devices is nothing. It’s not even a drop in the bucket. It’s a few molecules in a drop. Apple sold 93 million iPhones in 2011. There were about 150 million Android phones sold. Apple and the Android manufacturers sold more phones in any given 48 hour period last year than Nokia sold Windows Phone devices in about 12 weeks. Statistically, the Nokia sales are noise. To say that these numbers are encouraging is going beyond optimistic. Playbook sold about as many devices in 2 quarters, and it is on its way out the door. Unless there is a tremendous surge in Lumia sales specifically, and Windows Phone sales generally, I don’t see that this matters.
The reality is, Nokia is in trouble, perhaps even more trouble than RIM. RIM at least has infrastructure technology that could be useful for other platforms. Nokia’s bread-and-butter is feature phones, and they were once the king of smartphones globally. They have committed to Windows Phone, and that is a platform that has shown virtually no growth from their peak volume achieved by the end 2010. Nokia’s foray doesn’t seem to have moved the needle. They were forecasting a home run, tried for a bunt single and didn’t even manage to get a guy on base. Sure, the new Nokia phones are very nice. They are beautifully designed works of industrial design. But people are buying Android phones in droves that aren’t anywhere near as good looking. Design helps, but at some point, it isn’t the most compelling feature for a phone.
As Symbian continues to plummet to the bottom of the sales charts, and as smartphone sales increase overall at the expense of feature phones, Nokia will continue to suffer. Windows Phone has been out for nearly a year and a half. It hasn’t gone anywhere. It isn’t like the first Android sales, which started off slowly. The first Android sales numbers didn’t look much different than the Q4 2010 numbers for Windows Phone. But Android numbers kept rising. Windows Phone jumped from nothing to 5% (basically taking over the old Windows Mobile space), and have been stuck there ever since. The presence of Nokia isn’t going to make much of a difference. Why? Well, in North America they had no presence in smartphones to begin with. They held less than 1% of the North American market in smartphones. Globally, Symbian was the big dog, but there has been such a tremendous gap between when Nokia announced they were moving to Windows Phone until the first devices actually came out that I think people just forgot about them. Now, Nokia is dealing with trying to convince customers to move from Apple, Samsung, HTC, Motorola, etc.
Nokia is already in financial trouble. They make almost nothing in terms of profit on feature phones, and their margins on smartphones is razor thin. They have almost nothing in software sales. Hardware is all they have to offer. They don’t have a BBM or BES/BIS like RIM has, and that could be sold and integrated with Android or iOS. They don’t offer value-add on Windows Phone. Their feature phone sales are dropping, and at some point, there won’t be a market for feature phones. We’re a few years away from that, but the day is coming. Feature phones will eventually be a rarity in stores, and in people’s pockets. I’m sure that Microsoft has given Nokia a lot of incentives to commit to Windows Phone, but Nokia owes it to themselves to develop a Plan B that isn’t their current Plan A, and that likely means Android. Put a small team together, and get Android working on the Lumia devices now. Have it ready. Because if (or more likely when) Windows Phone clearly loses out, Nokia needs to have a ready answer. They can’t afford to wait another year before releasing a new device.