The New Nokia

Ged Carrollrenaissancechambara.jp

The New NokiaFebruary 9, 2011 – Stephen Elop’s burning platform memo goes public. Nokia’s smartphone steps off a cliff. Carrier relationships are burned as they were committed to Maemo operating system to replace Symbian. Windows is used instead, built-in Skype alienates carrier relationships. A brief flirtation with Android showed up the poor sales performance of its Windows handsets. Rounds of cuts and market share losses forced Nokia to sell its handset business to Microsoft. May 19, 2016 – Nokia feature phones and smartphone business is sold to a combined Chinese / Finnish business consortium. The market is now very different. What chance do they have?

Why Microsoft got rid of ‘Nokia’

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Microsoft OS % of smartphone market

Microsoft OS % of smartphone market

Data: TomiAhonen Consulting (May 2016)

The latent value of the Nokia brand

Nokia brandUsing Google as a proxy • Decline in brand interest over

past 12 months within mobile phone category 37%• Nokia still has comparable

brand equity to the likes of Motorola and BlackBerry• It’s level of brand equity looks

competitive with value-oriented Chinese brands

• It would be difficult to move Nokia into the premium Android sector without significant brand investment• Which would negate the primary

reason for purchase

Google searches as a proxy for residual brand equity

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Relative interest over past 12 months (mobile phone category, Google Trends)

Nokia Huawei Honor Lenovo OnePlus Oppo Motorola BlackBerry HTC

Nokia still has similar brand equity to other legacy brands

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Relative interest over past 12 months (mobile phone category, Google Trends)

Nokia Motorola BlackBerry

Brand equity is comparable to ‘value’ smartphone brands

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Relative interest over past 12 months (mobile phone category, Google Trends)

Nokia Honor OnePlus

Doesn’t stack up so well against Greater China premium smartphone brands

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g 2

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9Au

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v 1

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3Ja

n 10

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Relative interest over past 12 months (mobile phone category, Google Trends)

Nokia Huawei Lenovo Oppo HTC

Smartphone market data

The new Nokia will be forged a brutal crucible• Saturation and lengthening

replacement times in developed markets• Steep decline in growth of

smartphones• Move towards customers who

can require lower price points• On top of hyper-competition

driving razor thin margins and little chance of differentiation in the Android eco-system

• At first glance, the New Nokia has little different to offer

Global smartphone ownership

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Data from Pew Research Spring 2015 Global Attitudes survey Q71 & Q72

% of survey respondents who claim to own a smartphone

Global mobile device units – moving from growth to mature market status

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2010 2011 2012 2013 2014 2015 2016

Sales units (millions)

units (millions) tablets units (millions) smartphones

Data: GfK/CTA Digital World via Consumer Technology Association ‘Technology World Tour’ by Steve Koenig January 2016

Global mobile device units – declining growth

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2011 2012 2013 2014 2015 2016

Sales units (YoY % change)

units (YoY % change) tablets units (YoY % change) smartphones

Data: GfK/CTA Digital World via Consumer Technology Association ‘Technology World Tour’ by Steve Koenig January 2016

Global smartphone units by geography – lower margins available in emerging markets

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2010 2011 2012 2013 2014 2015 2016

Sales units (YoY % change)

Developed market (% units) Emerging markets (% units)

Data: GfK/CTA Digital World via Consumer Technology Association ‘Technology World Tour’ by Steve Koenig January 2016

Global mobile device ASP (USD) – steady decline in progress

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2010 2011 2012 2013 2014 2015 2016

Average selling price

Tablet USD Smartphone USD

Data: GfK/CTA Digital World via Consumer Technology Association ‘Technology World Tour’ by Steve Koenig January 2016

Global technology sales (revenue) geographic split – markets where the Nokia name still has brand equity

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Revenue USD (% split)

Developed markets Developing markets

Data: GfK/CTA Digital World via Consumer Technology Association ‘Technology World Tour’ by Steve Koenig January 2016

The best days of smartphone growth are over

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Smartphone and tablet % growth

Smartphones Tablets

Smartphone market opportunityThe smartphone eco-system is showing declines in handset price, profit margins and hyper-competition from Chinese brands. Market pressures have already driven some component manufacturers to the wall. Looking at the PC industry as an analogue, the next stage of innovation will be around process innovation – increasing profits by making phones more cost effective to manufacture. In the case of the PC it was globalisation, moving manufacturing to the Far East. For smartphones there are three opportunities: • Automate more of the manufacturing – slim phones are hand-assembled• Cut the channel out to deliver more of the profits to the manufacturer• Change the business model to the ‘Gillette model’ – sell ancillary services for

margin to the user, or sell audiences to companies through advertising

About me

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