A quick comment on Nokia’s dismal results for the first quarter of 2012. Sales are down 26% quarter on quarter; Smartphone sales down 38% despite the introduction of the Lumia Windows Phone in Europe. Negative operating margin, heavy losses.
The reasons given?
- competitive industry dynamics continuing to negatively affect the Smart Devices and Mobile
Phones business units;
- timing, ramp-up, and consumer demand related to new products; and
- the macroeconomic environment.
Translation: the new Lumias are failing to compete effectively against Apple iPhone and Google Android devices.
I have a Lumia 800 and like it increasingly. It is elegant and nice to hold, it works well, and Nokia Drive makes an excellent SatNav, to mention three good things.
Nevertheless, I am not surprised by the poor sales. When I first got the Lumia its battery life was poor; it is still not great, but was much improved by the last firmware update I installed (1600.2487.8107.12070), for which I had to use a manual process.
There was also an aggravating problem where if the phone ran out of power completely, it could not easily be charged. In other words, it was nearly a brick, though I managed to coax it back to life by repeatedly reconnecting the charger. The problem seems to be fixed with the latest update.
I do not think my experience is untypical, and can see that while in one sense it is a great phone, from another perspective it qualifies as buggy and problematic; I expect returns were above average.
The problems are fixable, but with hindsight Nokia should have worked that bit harder to ensure a trouble-free launch. The US launch of the Lumia 900 may be better since the company has had a little more time to improve quality, though there was a data connection bug.
Everything to prove
The bigger problem is that Windows Phone has everything to prove; iPhone and Android dominate the market, so the Lumia has to be sufficiently better to win customers over to a braver choice.
App availability is another factor. Windows Phone is not on the radar for most app vendors – because its market share is too small.
Despite a few lapses, I have been impressed with what I have seen of Nokia’s Windows Phone efforts. Nokia’s marketing and developer evangelism has been far better than Microsoft’s. At Mobile World Congress in February Microsoft had a large stand but was mainly doing silly “smoked by Windows Phone” demos, while Nokia’s stand was humming with activity.
Microsoft more to blame than Nokia
I also incline to the view that Microsoft is more to blame than Nokia – except insofar as Nokia could have made a different choice of partner.
Windows Phone 7 was nicely designed but badly launched, more than a year before the Lumia appeared. The launch hardware was uninteresting and Microsoft failed to line up strong operator or retail support for its devices. Microsoft focused on quantity rather than quality in the Windows Phone app store, resulting in a mountain of rubbish there.
The pace of development in the Windows Phone 7 operating system has also been rather slow, but the issues are more to do with marketing and partner support than with the OS itself.
Nokia has gone some way towards fixing the issues. Its devices are better, and so is its marketing. It is unlikely though that Nokia can succeed unless Microsoft also ups its smartphone game.
Microsoft’s strategy for Windows Phone and Windows 8, as far as I am aware, does make some sense. We will see convergence of the operating system, improved tool support with an option for native code development, and a coherent cloud story.
This will take time to unfold though. It also seems likely that Windows 8 will have a rocky launch, with desktop users disliking the Metro-style elements imposed for the sake of tablet support. Nokia has indicated that it will be producing Windows 8 tablets as well as phones, but whether this will be an instant hit is at the moment uncertain.
Who knows, perhaps it will be Windows 9 before Microsoft really makes its tablet strategy work.
The problem is that Nokia does not have time to wait while Microsoft sorts out its mobile phone and tablet strategy. It needs quick success.
Two final thoughts.
First, Microsoft can hardly afford to see Nokia fail, so some sort of acquisition would not surprise me.
Second, how difficult would it be for Nokia to bring out some Android smartphones alongside its Windows range? Currently we are told that there is no plan B, but perhaps there should be.