Communities Dominate Brands Blog

pI have recently heard several times the number that the future of mobile/cellular connected devices will leap ten-fold from today, when we have 5 Billion mobile phone subscriptions to 50 Billion, usually expected to happen during this decade.br /br /First, lets be very clear, in the past decade we did grow 10-fold in mobile (vs only 3-fold growth in the internet for example). And yes, I do believe in dramatic growth to come in mobile, so I am all for the expectations to be big. We will easily double from today#39;s 5 Billion during this next decade, easily! We may be growing 3-fold or even more than that. But 10-fold in one decade? That does beg the question: is this feasible.br /br /The planet has only 6.8 Billion people. So the 50 Billion number has to include lots of devices per person, as well as a lot of non-human connections, whether devices, household gadgets, cars, etc; as well as other living beings like pets, farmyard animals and even connecting other things like plants.br /br /LETS START WITH HUMANSbr /br /Yes, so the biggest usable number we can start with, is the human population. 6.8 Billion people. In a very rough term, we can expect that the mobile phone subscription penetration rate globally will pass about 120% human population per capita during this decade (at least). That means that the world would match roughly what is normal in Europe today.#0160; But that gets us only 8.2 Billion subscriptions. Nowhere near enough.br /br /Ok, lets take the UAE example (this is Abu Dhabi, Dubai etc the oil-rich Emirates on the Arabian Peninsula). The UAE became the first country to pass 200% mobile phone subscriptions per capita. If we assume that to happen for the whole planet, that would get us to 13.6 Billion.br /br /This is our biggest number and we do need to pump it as much as possible to get us to the 50 Billion. So 2 phones per person are not enough. Lets add in a laptop per person. Whether its a netbook or iPad or Kindle or a notebook, lets say the planet gets a laptop for every person - and by the end of the decade that will of course have a 3G or faster connection. 3 mobile subscriptions per person (not inconceivable, I for example walk around daily with 3 subscriptions, have done so since 2003). If we multiply the planet#39;s population with 3 subscriptions we pass the 20 Billion mark, and arrive at 20.4 Billion. Thats a good start. Now lets turn to our car.br /br /GROWTH RATEbr /br /What of the growth rate? The population of the planet keeps growing. Yes, thats true. But the population of the planet today is 6.8 Billion people in 2010. By definition, all new born humans between 2010 and 2020 will still be pre-teens by the end of the decade. All will be less than 10 years old, half will be 5 years old or younger. This is not the target market for new mobile phone subscriptions. A few of the 7-8-9 year olds perhaps, but thats not enough to push us far above current 6.8 Billion level, in particular that for those few of the eldest in this group, we then have to balance out those elderly people who will be dying in this decade. In terms of a viable #39;mobile phone age#39; population, what is the total population of 6.8 Billion people today, can be seen to be the viable mobile phone aged population a decade from now.br /br /CARSbr /br /So the car. We#39;ve heard the internet people like Google and Yahoo say that the next internet is mobile; and in the countries where the internet is already fully mobile (South Korea, Japan etc) they say the next internet is in the car. That will give us a nice boost to our count. Imagine one day when every car is connected. Roughly a quarter of all cars in South Korea are already connected to the internet.br /br /Or will it? The world has under 1 Billion automobiles! If we assume one car-related subscription that comes with the new car when we buy it, to connect to the maps and security systems and self-diagnostics and on-board games etc - we only add 1 Billion mobile subscriptions to the planet. Thats not much when we consider our ambitious 50 Billion target. Funny to say that, one billion is not much...#0160; But yes, adding cars, we#39;re at 21.4 Billion so far.br /br /Note, the car may have multiple subscriptions, as we may for example use our normal phone service, take out the SIM card from the phone and insert it into the car#39;s SIM card slot. That would give the car 2 subscriptions (for a short duration) but then upon our person we#39;d go down from 3 subscriptions to 2, as one was temporarily assigned to the car. It would not add to the total. And for the car makers, it makes no sense to split their data traffic to many mobile operators, rather to accumulate their total traffic load and negotiate with all carriers/mobile operators to get the best bulk deal for the whole fleet of cars, on one network. So only one new SIM card per car.br /br /CAMERA, PSPbr /br /So then we have the other stand-alone digital gadgets, like the advanced digital cameras by Canon, Nikon etc; or the portable gaming systems like the Nintendos and Playstatoin Portables. Lets connect these all to 3G networks. Sounds very plausible.br /br /Except the numbers are trivially small, compared to mobile. The mobile industry sells 1.3 Billion new mobile phones every year (with a replacement cycle of 17 months). Stand-alone digital cameras sell 103 million per year (says Morgan Stanley in 2009). Similarly pocketable stand-alone gaming devices sell 48 million units. Portable multimedia players including DVD players sell 130 million. Pocket music players including the iPod sell about 127 million units (same source for all). These numbers are very very small. Even if we add them all together, we arrive at 408 million devices per year. Even if every one of them was now suddenly made 3G compatible with a mobile data subscription, in ten years of sales we#39;d only hit 4 Billion more connected devices. But we should assume growth, so lets double that number and we arrive at 8 Billion connected personal stand-alone (non mobile phone based) digital gadgets. Now our cumulative number hits 29.4 Billion. We are starting to get there..br /br /WHAT OF THE HOME?br /br /Ah, then the homes.. We can have our washing machine connected to the web (there are some that are sold already that offer internet connectivity). And the coffee maker. What else? The microwave oven? The fridge definitely. And the (intelligent) vacuum cleaner? The problem here is that we only have 1.7 Billion households on the planet. So while yes, we can probably imagine 4 or 5 household gadgets today that could easily imagine being connected, and another couple likely to come - most obviously the home robot (South Korea already has consumer-oriented household robot stores in major shopping malls). If we say 6 connected gadgets in the home, we#39;d arrive at 10.2 Billion more to add to our total. This is good, now we are at 39.6 Billion.br /br /HOME METERINGbr /br /We actually have another issue with the homes too. That is metering of our utilities. Water, electricity and gas metering. The modern way to do utilities metering is with a digital meter, connected wirelessly to the network. Lets say 2 utilities meters per household, and we add another 3.4 Billion connections and arrive at 43.0 Billion. We#39;re almost there...br /br /PETSbr /br /So next lets connect our pets. We have intelligent dog collars for hunting dogs for example, and the dogs-to-humans translator (Bowlingual) which translates dog sounds to SMS messages for humans of what the dog is trying to say. I have no idea how many household pets there are, but I think its safe to say, the proportion of pets is far less than the total number of households, even as some households may have more than one pet.br /br /What number is reasonable, I don#39;t know. Lets work on the upside and say, on average there is a pet in one third of all households (my guess is that the number is smaller but no doubt someone among our readers will know it). That gives us 560 million connected pets. With a bit of rounding off, we are now at 43.6 Billion.br /br /FARMYARD ANIMALSbr /br /Then it starts to get difficult. What of farmyard animals? Yes, there are cows that are called to milk via an old mobile phone or beeper hanging on their neck, and when the cow hears the arrival of SMS (or the ringing of a phone call - no danger, the cow won#39;t answer so there won#39;t be billable calling traffic to the farmer) the cow knows to come home to be milked. Except that where cow herds can be big, cows are herding animals, so all the farmer needs to do, is connect the lead cow, and the others will follow. No, cows won#39;t get us there. We may get some millions of connections, but this math won#39;t even start to work until we look at billions, or at least major fractions of billions.br /br /I am sure there are plenty of uses for near field connections for all sorts of sensors to enable something like digital farming, to identify animals, but those don#39;t need cellular network connectivity. So I don#39;t foresee SIM cards in chicken or pigs or sheep..br /br /TREESbr /br /So then lets move from animals to plants. I#39;ve told the story of modern forestry management, where trees are tagged with devices containing GPS-GSM chips, for intelligent digital forest management. They can actually tag trees in forests of a million trees. But these gadgets are relatively expensive, and there is no point in paying for their cellular connectivity for the 20 to 30 year life that the tree spends growing to full size before it is felled. Again I am not a lumberjack but to me the clever way to use this technology is for some forest #39;manager#39; to go tagging trees that need to be felled, with the intelligent GSM-GPS devices. But not to tag all trees, only those scheduled for the next round of cuts in the forest. And for the tagging devices to be recovered at the saw mill, and re-used. So for a forest of a million trees that has been managed well, so it has an even balance of trees of all ages, then about 5% of the trees reach maturity any one year. Thats only 50,000 trees to fell per year. If we split that by weeks, its 1,000 trees cut per week. I don#39;t need 1 million SIM cards, I need 1,000. Maybe 2 or 3 thousand just to have some spare capacity, but not a million per forest.. Trees won#39;t get us there either.br /br /What of our plants at home? Yes, we have the clever plants-to-humans communications by AgriHouse of Japan who offer the humidity sensors to plants that send SMS messages to the owner saying when the plants need to be watered. If you have 20 plants in your home, and really want this level of technology to monitor each plant, yes, we could quickly pass 50 Billion subscriptions. But I do not foresee most homes having this technology. Yes, some will love it, but most not. And even those who will use it, will probably not need it for all plants. And the technology need not have a cellular connection, the more logical way of doing this is to coordinate with the home connectivity center (a home WiFi connection center and/or femtocell for example).br /br /OK LETS TOSS IN MONEYbr /br /We are still about 6 Billion short of the magic 50 Billion number. Ok. Then lets go radical and say mobile banking. I am a firm believer in mobile banking and mobile money and payments. I am however, very well aware that the banking and money industry moves very slowly, is very conservative. It is not rushing to mobile. And there are many technical ways to do mobile payments and mobile banking and mobile wallets, which do not all require a separate subscription and/or additional SIM card.br /br /But one of the preferred solutions is what for example was deployed in South Korea, where on the phone you have one SIM card for your telecoms needs, and a banking-specific SIM card for all your money needs including banking, payments, credit cards, loyalty cards etc. The one SIM cards is compatible with all South Korean banks and credit cards etc, so its just a question of a given bank or provider enabling their account onto your banking SIM card. And then if you need to move your banking services to a newer phone, you can do so simply by inserting the SIM card to your new phone.br /br /So far so good. If we now assume all 6.8 Billion people on the planet get a mobile wallet/mobile banking service that adds yet one more SIM card, we do reach the 50 Billion number. But in all honesty, this won#39;t happen to all people on the planet (kids for example) and definitely won#39;t happen in one decade.br /br /NUMBER CAN BE SEEN AS FEASIBLEbr /br /But is it plausible? We had some very severe assumptions there in that quick analysis. Assumptions that are quite deadly to the target number.br /br /Lets start with the human 3 SIM card target. That could be seen to be reasonable for adult and employed populations. But teenagers and retired people? 3 SIM cards? Teenagers, Maybe. But the elderly? One mobile phone subscription, certainly. Two, maybe. Three? Unlikely for all of the elderly. In many cases a retired couple could get one iPad style device perhaps - to share among the pair. I think the 3 mobile subscriptions per person concept is not really viable for the whole global population. Not in this decade (yet)br /br /Next lets go to the households. We thought that each household would have 6 connected gadgets. Well, actually that number is implausible because of the lack of electricity. 1.6 Billion people live without electricity according to CNN in 2008, so if we take the average household size of 4 people per household globally, thats 400 million households without electricity. No electricity, no clever digital household gadgets either. We just lost 2.4 Billion connections and a further 800 million metering connections.br /br /Of the portable digital gadgets, with the 8 Billion number. That was a lot of smoke-and-mirrors. A cheap MP3 player won#39;t gain from a 3G data connection - it would be a very sad rival to a musicphone but would add the monthly connection fee, while not offering telecoms connectivity (not being a phone). Not plausible. If the consumer wants to buy a stand-alone MP3 player, that will then have very particular music needs, and that person will definitely own a smartphone also, towards the second half of this decade. No, the MP3 players will not be networked on the cellular network (mostly. Some premium iPods probably will offer the connectivity but even those, mostly will not connect to the cellular, and will rather connect via WiFi).br /br /The worse assumption is that all 8 Billion sold gadgets are still used by the end of 2020. While the replacement cycle for non-phone portable gadgets is longer than the replacement cycle for phones, certainly a significant fraction of the total cumulative sales of that number were replacement units, of better capability, sold to the same consumer. So we need to cut the 8 Billion number down by several billion..br /br /Then we have issues with poverty, with illiteracy (800 million people of reading age are illiterate worldwide - illiterates will not need a laptop surely, and probably won#39;t have much need of more than one phone in most cases), with wars, famines, and refugees. The victims of natural and man-made disasters will not be accumulating multiple IT devices..br /br /50 BILLION IS NOT PLAUSIBLEbr /br /I do like visions of big growth numbers in mobile. I do like the bold predictions to suggest big growth, to counter those who peddle the tired myth that we are somehow at saturation or near saturation in mobile. I also like the guidance by the mobilists and futurists, who look at the past decade, observe that mobile grew 10-fold in that decade, faster than any other technology of significant size - and then to argue that the same rate of growth would continue this decade, another full decade of growth of 10-fold. And that kind of provocative argument does suggest those considering the market opportunity to also focus on who and what is to be connected, to understand we will run out of humans to connect, very soon, and the growth will need to be made from other devices and gadgets and pets and so forth.br /br /But to me, the plausible number of mobile phone subscriptions for the end of this decade is somewhere in the 15 Billion to 30 Billion range, not in the 50 Billion range. I will be most happy to be proven wrong, but just please do take some sanity checks on the assumptions. Some of the fantasies and science fiction views are dramatic yes, but the numbers do not add up. Lets try to be realistic when giving guidance about the near future./p

pVacations are good for fresh thinking. I started today#39;s morning preparing to come back to work and my mind was buzzing with thoughts of the truly big picture. Last spring and summer I often got caught up with the minutiae of the percentage in market share or the next user number in text messages or the latest added consumers to mobile, etc. But there is a big picture to it all. The Contest for Convergence for the 5 Trillion Dollar Trophy.br /br /To understand how enormous number we are looking at, its more than ten times bigger than the global computer industry including all PC hardware from desktops to laptops and netbooks and tablet PCs like the Kindle and iPad... plus the applications and software industry enabled by the PC industry. Take all that, and multiply that by ten! Or take television and radio, the total broadcast industry - and multiply it by 15. Or take the global internet and all its revenues out of Google adwords and broadband fees etc, all of the internet revenues - and multiply that by 20. We are looking at the biggest economic prize of our lifetimes, and it is #39;in play#39; as we speak, with Fortune 500 giants like Nokia, Apple, Google, Hewlett-Packard, Vodafone, Microsoft, Sony, Samsung etc all angling to be one of the winners in this ultimate race of the decade, perhaps even the race of the century. So a quick review of where we stand.br /br /I have been preaching the convergence story in each of my 9 books and was personally involved in the early stages of the digital convergence, from creating the world#39;s first computer company advertisement to the internet (media and internet convergence) to leading the team that created the world#39;s first fixed-mobile converged solution (fixed and mobile telecoms convergence) to authoring early documents on the future of convergence (at Nokia#39;s Telephony Gateways digital convergence unit, I authored the first White Paper for the industry to discuss how to do the internet on mobile). That was all more than a decade ago when I was actively involved in #39;doing it#39; rather than a consultant #39;preaching it#39; haha...#0160; But I do know quite a lot about the realities of digital convergence not only from studying the matter, but from doing it myself.br /br /So its no surprise to my readers and fans, and readers at this blog, that I believe passionately in digital convergence. So lets not review my view. Lets see what some others have said about digital convergence #39;recently#39; - say past few years.br /br /COMPUTERS, MEDIAbr /br /The computer industry is headed to mobile. After Apple introduced the iPhone in 2007, and changed its name from Apple Computer to Apple, and now calls itself a mobile company, the bigger computer maker rivals have all joined the chorus. Now Dell, HP, Lenovo, Acer etc all sing of the same hymn book. The future of the computer industry is mobile. Maybe that is not a big surprise, they have been predicting the pocket computer for two decades already..br /br /The media industries are more interesting. The (former) Director General of the BBC said that all broadcast content will be available on mobile (and BBC#39;s successful iPlayer is a perfect example of how a broadcaster can take a big slice out of the digital convergence into mobile). The CEOs of the major media giants from Publicis to Warner Music to EMI have all started to sing #39;future of media is mobile#39; stories. Publicis CEO Maurice Levy said that within a few years quot;most of the musicquot;, quot;most of the informationquot; and quot;most of the advertisingquot; will quot;transit through your cell phone.quot;br /br /WEB AND ADVERTISINGbr /br /What of the internet? Good question. A few years ago there was a big battle of will the internet win or the mobile? Now it seems to be clear, it will be that the internet will converge onto the mobile. In fact, the future of the internet is mobile. Google CEO Eric Schmidt has been saying that for years already, and the new Google strategy, a href=http://communities-dominate.blogs.com/brands/2010/02/what-does-it-mean-to-you-when-google-says-mobile-first-.html target=_self#39;Mobile First#39;/a#0160;is a clear indication of how seriously they are taking it. And Google are not alone among internet giants believing in a mobile future. From 2007, Yahoo has been saying the same. So if you thought that perhaps the internet was threatening your business, that may be a short-lived threat, say for industries already feeling the full threat like bookstores or video rentals or music stores or travel agencies etc. If the internet itself is headed to mobile, the salvation for a bookseller or video or music or travel company is not to go online, it is to #39;leapfrog#39; the technology gap and go directly to mobile. Like the book publishing industry is doing in Japan for example where mobile books outsell ebooks already.br /br /Advertising goes where the media audiences go. Advertising has been on mobile phones for a decade already but in mostly small numbers and niche campaigns hidden in the digital ad budgets. That changed last year when the advertising industry woke up seriously to mobile. When the global ad budget declined, and all other forms of advertising shrunk in revenues, mobile advertising spending doubled worldwide. As I witnessed when I delivered my keynote to the Mobile Marketing Association global event in the meccha of advertising, Manhattan of the Mad Men of Madison Avenue haha, the big global ad agencies are all ramping up their competences in mobile, and I am witnessing it myself with far greater interest now in my mobile marketing workshops and seminars, such as delivering a keynote to the big MMA event in Sao Paulo this week. The global ad industry top management may be late to the mobile party, but they are dead serious about it now. As we learned from Universal McCann the advertising giant, one in seven media minutes is spent with mobile already today, as mobile is often the digital response channel for legacy media like television, radio, print etc. Voting for American Idol, that kind of experiences.br /br /WHAT OF MONEYbr /br /So the telecoms industry itself is migrating to mobile, no surprise anymore this late in the game. The computer industry is going mobile. The internet is going mobile too. And the major media industries and advertising are headed to a pocket near you too. But thats not the full picture. I have said for many years now, that we have yet another #39;dimension#39; in this race, of a major economic sector headed to mobile: Money. In practise, its banking and credit cards when considering the classic major financial industries, or digital money in a technical sense (insurance is also going to join the mobile revolution a bit later). The first two SMS-enabled vending machines were installed in Finland twelve years ago, and soon thereafter the first SMS-enabled parking was launched in Norway. We#39;ve had full mobile payment solutions in the Philippines for a decade already. Mobile credit cards are nearly as old. But the migration of money is very slow. We hear of some great successes - more than half of Helsinki area public transportation single tickes are sold via mobile, and all of parking in Estonia is mobile, and now more than half of all banking accounts in Kenya are mobile banking accounts. But its still tiny bits in small countries. Yes, about half of South Koreans and the Japanese have mobile digital money enabled phones and services, but its nowhere near yet where half of their economy would transit the phone, and they are the most advanced digitally converged nations.br /br /In m-money it is very early going. Gartner told us that in 2009 there were 73 million people who used a mobile phone to make a payment. Informa counted that the world had#0160; 67 million people with a mobile banking account. Contrast that with the 2.1 Billion people with a banking account as reported by the BBC last year. If we want to measure the #39;migration rate#39; then currently one third of one percent of all banking accounts have migrated to mobile. That is a very tiny fraction. But that was exactly how it was with smartphones vs personal computers in 2000, or how it was with the mobile internet users out of all internet users in 2002, or what it was with advetising in 2006. Less than one percent. Its easy for many in banking and credit cards to be fooled into thinking this tsunami wave of convergence will not hit their shores.br /br /Yet in South Africa it is normal to get your paycheck paid directly to your mobile account. Norway was the first country to let you submit your tax return by mobile. South Korea was the first country to make #39;cards#39; out of Credit Cards optional - all credit card services are automatically enabled onto your mobile phone (instantly when the credit is approved), and if you want, a free plastic traditional credit card can be mailed in a few days also to your home address - if you so desire. There is no need for plastic cards in South Korea, but you may travel to a less advanced country like say Germany or USA or Australia or France where they #39;still use plastic credit cards#39; haha... In Japan the mobile wallet is the most advanced where it not just includes your banking and credit and payment and loyalty cards. It adds your keys to your home and car, the pass-keys to your office, your identity card, and now as the phone collects your payment behavior, they have launched the mobile consierge to the phone, to help manage your life. The users absolutely love it, suggesting the phone seems to read your mind..#0160; And taking those lessons, Nokia launched Nokia Money in India and is enabling near field to all its new smartphones. br /br /While the big banking execs are mostly blissfully ignorant, thinking that launching an iPhone App is tantamount to a mobile strategy, haha, the tsunami wave is well under way. So the migration has started. Sweden started this summer the first parliamentary discussions about when is the right time to abandon printing cash, and moving to a mobile money only digital money economy! They aren#39;t about to do it any time soon, but they have started the serious discussion about the end of money as we knew it.br /br /That covers the giant industries I want to mention in this blog today. Telecoms, broadcast and print media, advertising, computers, the internet, banking, credit cards. These are all industries whose size is above 200 Billion dollars annually - ie each is bigger than the total global handset business including smartphones and dumbphones and all phone based accessories like spare batteries and phone covers and memory cards etc (combined, is worth about 160 billion dollars in total - a small fraction of the 1.1 Trillion dollar mobile telecoms industry where the majority of the revenues come from mobile services like voice, SMS and premium mobile data services).br /br /OTHER INDUSTRIESbr /br /There are many more industries, more small ones, that also are impacted by mobile, like cameras, music, videogaming, the watches and clocks industry etc, but those are so small (all under 100 billion dollars in size) that I won#39;t spend much time on them now. They were involved in the first mobile battle of convergence, what I called the #39;Battle for the Pocket#39; in my second book M-Profits in 2002.br /br /There also are many other industries that are seeing impact from mobile, but who are unlikely to be totally cannibalized by mobile. So take air travel. Finnair launched the world#39;s first mobile check-in in 2001 and today half of their passengers use the service. But mobile will not enable our air travel. We can#39;t fly on the phone. We can book our seat and pay for the ticket and get a boarding pass to the phone, but we still need an airplane to burn jet fuel to fly from one airport to another. That isn#39;t changing by mobile. So mobile can only influence a small part of the travel experience, whether in airplanes or hotels or trains etc. But in music, mobile can cannibalize all digital music. Same in the newsmedia or gaming or advertising or indeed money and banking and credit cards.br /br /So yes, the automobile industry is eager to get into mobile too, many new cars feature SIM card slots for example and the next internet (after the internet has gone mobile) will be in cars. But again, if we need a car to get us from point A to point B, until they invent teleportation, we will keep needing that car (or some rival like a bicycle or bus etc). Mobile cannot cannibalize the whole car market like it can#39;t cannibalize the air travel market or the hotel industry etc.br /br /So this blog is about those industries that can expect far more than half of their total value, possibly the whole industry, to migrate to mobile in the coming years and decades. And that, if we take the dozen industries mentioned in this blog (excluding travel, cars, hotels etc) is worth a cool 5 Trillion dollars or about 9% of the total global economic spending of all economies on the planet.br /br /HOW FAR HAVE WE COME?br /br /So lets look a bit at how far we#39;ve migrated into mobile.br /br /The telecoms industry is far along the way. 81% of the total telecoms industry has migrated from fixed landlines (0% in 1978) to mobile when counting total subscribers.br /br /The internet had 0% mobile users in 1996. At the end of last year we reached mid-point, where half of all internet users accessed the web at least part of the time using a mobile phone (which includes the simple WAP type of mobile internet usage common in many parts of the Emerging World markets). So the internet has migrated 50% in 13 years.br /br /Meanwhile there was no mobile phone that was a computer prior to 1997. There were stand-alone PDAs yes, but no advanced #39;smartphone#39; to give computer like performance. Today all major PC makers have entered the smartphones battle and all say the future of the computer is the smartphone (something I have been saying for many years now). I counted on this blog that if we add both the traditional PCs including desktops and portable computers, and the smartphones, we get a a href=http://communities-dominate.blogs.com/brands/2010/04/worlds-biggest-computer-makers-if-we-include-smartphones-nokia-hp-apple.html target=_selftotal market size of 465 million units /afor 2009. Smartphone accounted for 37% of that amount last year. So we can say that in 13 years, mobile has already cannibalized over a third of the computer market.br /br /Music was the first mobile content type in 1998 and today about 38% of all consumer music spending is mobile (when we include ringing tones). Videogaming followed and today a quarter of videogaming service revenues is generated on mobile. It would be an interesting market analysis to count all gaming-oriented smartphones (like the iPhone, most downloaded apps are games after all, the iPhone can be said to be the first globally successful gaming phone platform to rival the Nintendo and Playstation Portable..) and their value into the videogaming software value, the proportion would be bigger still.br /br /I don#39;t have a good measure for wristwatches and alarm clocks. But sufficient to say that clearly more than half of consumer uses of telling time - and of the wake-up alarm - is now from the mobile phone.br /br /Of the big media industries like print, broadcast and the related advertising industries, their migration into mobile has only started and is in the low single digits in percent of total revenues or total content delivered. So these are all very early in the game.br /br /And like I said, Banking and Credit Cards are at far under one percent of total users (and far far less than that in total value of the transactions going through mobile).br /br /A LESSONbr /br /But I want to end on the #39;lesson#39; for this blog. Cameras. The camera industry boldly and bravely (and foolishly) thought mobile phone based cameraphones would never catch on, and never rival their industry. That was a short-lived battle that was over in only 3 years. Sharp and J-Phone of Japan launched the world#39;s first cameraphone in 2000. By 2003, more cameraphones were sold globally than all stand-alone digital cameras. By the next year, cameraphones alone outsold all types of stand-alone cameras (digital and film-based). Today cameraphones outsell stand-alone cameras by 10 to 1.br /br /The camera industry correctly forecasted a dramatic growth in consumer adoption of digital cameras for this past decade. The growth was even better than they expected. But the growth was shifted from stand-alone digital cameras to cameraphones and the sales of stand-alone digital cameras stalled and stagnated. This is a common pattern in the #39;Battle for the Pocket#39; as I have chronicled from the PDA vs Smartphone battle to the musicphone vs iPod battle, etc. Same pattern always. So what happened to the big four camera brands? In 2000 when the cameraphone was launched the world#39;s biggest camera brands were#0160; Canon, Konica, Minolta and Nikon, all out of Japan. Today only two of them continue making cameras, Canon and Nikon - which both quickly shifted their focus from consumer snapshot cameras to premium professional and semi-pro camera systems. Minolta and Konica have quit the camera business altogether. This is the decade of the biggest growth of consumer camera use ever, where the annual market for new digital camera purchases grew by more than 10 fold. It was the golden age of cameras, yet two of the big 4 failed to survive this enormous opportunity.br /br /Same is true of the various other cameras-oriented industries like Kodak and Polaroid. The world#39;s most sold camera brand is Nokia. The world#39;s most sold branded camera optics are not Nikon or Canon branded lenses, they are Carl Zeiss optics, on many premium Nokia cameraphones. Of the total population on the planet, out of any person who has ever used any type of camera, for 9 out of 10 such users, the only type of camera they have ever used, is on some cameraphone. It may be difficult for older readers in the Western industrialized countries who see the long lines of cameras and accessories sold at the electronics stores, yet the numbers are perfectly clear.br /br /So lessons. The cameraphone did not kill the stand-alone camera. It just took 90% of the market. For the mobile industry that was far more than #39;enough#39;. The big phone makers like Nokia, Samsung, SonyEricsson and LG are not in the business of creating professional cameras. They can happily leave the small #39;pro market#39; to the specialists like Nikon and Canon. But as the mass market vanished, the mass market business also shifted. Kodak, Minolta, Polaroid, Konica and so many other major camera industry players had to abandon the camera related business and shift to something else like professional imaging or scientific instrumentation or photocopiers or whatever, or else go bankrupt - like Polaroid has done, twice already.br /br /If they had aggressively pursued the mobile market, either through a premium cameraphone or a specialist role in the ecosystem or in partnership - any of the big giants of cameras could have a major role in the mobile industry today. Look at Apple, a computer maker, who decided to do its music player (iPod) on a phone as the original featurephone iPhone 2G, and then decided to make it a full #39;pocket computer#39; by the second release of the iPhone 3G as a real smartphone in 2008. They only sell 2% of the world#39;s total mobile phone handset market today, but its such a huge market, that it powers the majority of Apple#39;s revenues and the majority of Apple#39;s profits.br /br /That is what Lenovo wants now, as they launched their LePhone and sold 100,000 units in the first quarter. Its not as good as Apple did in 2007 but Lenovo is at least taking a stab at this market, rather than how the cameramakers hid their heads in the sand and tried to avoid the truth.br /br /I counted that in 2006 there were 7 of the Fortune Global 500 biggest companies on the plant, who made a smartphone. These were essentially the big phone makers like Nokia, Motorola, etc. At the start of 2010, there were 23 companies that had either launched or were launching a smartphone, out of the Fortune Global 500. That made the smartphone space one of the most competitive of any industries on the planet, with probably more global giant rivals than any other industry ever in the same space. (At least when it comes to banking, most banks tend to operate regionally or nationally, with only a few global banking brands).br /br /Note this growth was not that smaller #39;newcomers#39; making smartphones had #39;grown#39; into the Global 500. It meant that previous global giants of other industries had decided to enter the mobile space, like computer makers such as Apple and Dell, like internet giants like Google and Yahoo, like mobile operators/carriers like Vodafone and Hutchison, and softwre maker giant Microsoft etc. Obviously the year has not been kind in the over-competitive smartphones bloodbath (Google and Microsoft very visibly quit the smartphone handset business already, but both are increasing their software and services focus on mobile, so they have not abandoned the opportunity in digital convergence).br /br /WHAT DOES CONVERGENCE ENABLEbr /br /Remember that converence gives us new opportunities of better experiences and as an industry, vast new opportunities. When you take a bookstore and put it online like Amazon, yes you can have some #39;distribution#39; and #39;warehousing#39; benefits and you can sell a larger catalog of book titles than the bricks-and-mortar bookstore down the street. But what of the reviews. What of my shopping history. What of others who liked that book. And personalized recommendations. Such abilities are impossible in traditional bookstores. In a small #39;mom and pop#39; bookstore, if you were a loyal customer, you could perhaps gain the familiarity with the bookstore owner, to be able to get some recommendations. But that is rare and would take years of competence to develop by the bookstore owners, and still would not be nearly as powerful as the Amazon recommendation engine, in pinpointing exactly what kind of books I may like.br /br /Look at Google. Before search engines, it was not practical to try to find #39;all available information#39; on a given topic, unless you lived next door to a major library like the US Library of Congress and were a wiz at using the library#39;s card catalog system - and then spend hours digging through book indexes and tables of content. It would still not be as thorough as any Google search today, and it would take years to learn the skills and days of research in the library. Yet a child of 6 can do the same within a fraction of a second on Google today.br /br /The digital convergence enables fantastic new services and abilites we never could have imagined. Take airline seats today. What travel agent could have specialized in Hong Kong to Sao Paulo travel for me today. What price ticket would I have gotten, on what airline combination, and what miserable layaways on the travel connections? Yet we can go to Expedia or Travelocity or Opodo whatever travel site you want to use, and get to see dozens of flight options - and their prices - and their routes - and the actual aircraft used. Then we have seat guru, which will tell me what in-flight electricity options are on that class of seat on that specific aircraft type on that particular airline. A paper based traditional travel agent would never ever have that capacity, except perhaps for the few #39;domestic#39; airlines that serve their home town. But I see that instantly for all airlines. We get vastly superior services for consumers when we seek opportunties out of digital services. And this is all before we start to enable my flight itself with mobile check-in, or the hotel does a mobile phone enabled locks to my hotel room etc.br /br /WILL DISRUPT MORE THAN ENABLEbr /br /But it also often means cannibalization of the legacy services and their eco-systems. So take music. At the end of the previous decade, the majority of music sales was through the sale of music CDs. Artists would compile #39;albums#39; of about 15 songs, sold at a price far greater than the one hit that currently made the artist popular on the charts. A huge support system was in the recording industry to produce the sound of the music, to produce the CDs, to ship them to music retail stores, and to use the radio stations, music video TV stations like MTV, and promotional concert tours to help promote the album sales.br /br /Then came the internet, Napster, social networking, MySpace and YouTube. Almost all music became available on the net for free. The market changed drastically. The big music store chains started to fail and go out of business. The CD market shrunk sales year after year. But music didn#39;t end. The market adjusted in two ways. The internet and digital enabled new ways for fans to discover their music and artists (MySpace, YouTube, social networking). Artists could still sell tickets at concerts, so they shifted more of their income from selling albums to concerts. And new digital formats emerged like the ringing tone and ringback tones, which now deliver a third of the total global consumer spending on music worldwide. The music industry was slow to get into this opportunity and there were many problems along the way - witness Crazy Frog. But consumers have not abandoned music. They still spend about 30 Billion dollars on it annually, only the traditional music publishing industry is getting an ever smaller slice of that.br /br /So some skills are changed. The digital convergence brought powerful authoring and editing tools to any musician on their PC (and eventually increasingly also on their smartphone). That diminished - but did not eliminate - the role of the traditional music studio for creating music. Digital convergence changed music creation - the sampling of instruments popularized by the early #39;synthesizer#39; music of the 1970s and 1980s has made it easier for an artist to #39;master#39; multiple instruments. The mechanics of expert handling of a guitar or violin or piano is no longer as critical for the creation of music. It did not end the need for #39;real musicians#39; ie playing at symphony orchestras etc, but it helped popularize music creation, by the masses, for the masses. Digital editing of sound has enabled errors in sound quality to be #39;fixed#39; - ie some boy bands and girl bands may have members who don#39;t have good singing voices (perhaps are better dancers or just pretty on stage ) that can be increasingly #39;fixed#39; electronically. Again, that does not end the need for pure excellence in real singing - witness UK singing sensation Susan Boylebr /br /What the digital convergence did, most of all, it dis-intermediated some players, and re-intermediated others. The #39;talent scout#39; at recording companies (The Big Labels) is a job that is disappearing. That is nothing new, once there was a huge need of typing skills at major offices, typing pools, before the word processor and email made most of their typing work redundant. There was once a need for staffs of receptionists to answer phones, but voice mail took most of those jobs. Etc etc etcbr /br /We still have a need for real music and real musicians and real creative arists. The digital convergence may be making the difference between the average musician and superstar even greater - a Madonna or Rolling Stones can command astronomical fees, but the average starting rock band probably earns about the same per #39;gig#39; per night, adjusted for inflation, as rock bands did in the time of the Beatles and Elvis 50 years ago.br /br /HOW BIG WILL IT BEbr /br /I think we have enough evidence from early digital convergence to make some preliminary hypotheses.#0160; We can assume that the legacy businesses, that do not embrace the digital convergence, to survive as a premium professional services industry but eventually fail the mass market. Thus they cannot sustain the number of players they have today. But that likely digital convergence will not kill most industries. These will be tiny niche industries, but can be profitable and sell to very passionate specialist customers, and those who specialize within the remaining industry but manage to capture the premium end of that market, can make a nice living in it. These would by definition become very stagnant mature markets sustaining only a few players.br /br /A new converged economic opportunity emerges within the digital convergence which will not be as big, as the separate industries would be separately. So the cannibalization will eat into the size of the #39;total pie#39; of the industries prior to convergence. But balanced against that shrinking of one pie, is the simultaneous growth of the total pie. So far up to now, the converged opportunity has always ended up far bigger than the initial industries that got into it.br /br /When the battle for the pocket started a decade ago, the total value of all pocketable digital gadgets was about 100 Billion dollars in very rough terms. By the time the mobile phone had beaten the major rivals, PDAs, stand-alone cameras and musicphones, by 2006, the total pocketable gadget market had doubled to more than 200 Billion dollars in value, of which mobile had about three quarters. But most of what makes a modern mobile phone valuable to consumers is not the PDA or camera or music abilities of it. There are far more abilies and functions and services that game as additional growth areas, like mobile internet or MMS picture messaging or mobile payments and banking, etc. Our phone today is far more than #39;just#39; a PDA-camera-music-phone.br /br /The same happened in fixed-mobile convergence. The mobile did cannibalize some of the fixed telecoms revenues (and Skype probably took more of the fixed telecoms revenues than mobile) but today, the resulting combined telecoms industry is far bigger, about twice in size. Yet the opportunities did not come from just fixed telecoms services like local and long distance calls and voicemail, or those enabled on mobile. The mobile opportunity developed new abilities beyond convergence, starting from SMS and ringing tones more than a decade ago to augmented reality today.br /br /THE BIG PRIZE 5 TRILLION DOLLARSbr /br /So that is what we are fighting for. The value of the different industries today headed for major cannibalization by mobile, where the majority of their business will end in mobile - is worth 5 Trillion dollars. Mobile alone is worth a bit more than one fifth of that, so there is far more from #39;outsiders#39; to #39;contribute#39; to this journey, than for the legacy mobile giants to dobr /br /It will be a big battle for this decade and for the banking and credit cards, that will last well into the next decade, but the convergence is inevitable. And do remember, this is not just about smartphone apps, or even about smartphones. Its about #39;mobile#39; as the industry which is the ultimate convergence point and end-state for all digital convergence. That is what we are monitoring here on the Communities Dominate blog.. br /br /PS - if you#39;d like to read more, I have a few thoughts on the lessons of digital convergence up to now here, after the link/p p(article continues..)br /br /Before digital convergence, we had consumer mass market product convergence in the analog electronics world, and there are a few good lessons out of that. Let me briefly go through a few and then go to digital convergence lessons.br /br /BOOM BOXbr /br /The first consumer gadget to experience convergence is what we#39;d now know as the Ghetto Blaster or Boom Box. Originally invented by Philips around 1969, then the world#39;s biggest consumer electronics giant, who had previously invented the C-Cassette, originally for dictation machines. The Philips engineers and marketers felt that a consumer gadget combining the portable radio and the cassette recorder into one portable device was a possible market hit product. How right they were. The original #39;Radiorecorder#39; ie Radio and Cassette Recorder was the first consumer gadget to reach mass markets that made C-Cassettes popular for recording music off the air, off FM radio. br /br /The device was a compromise, it was not stereo and the functionality of the cassette recorder part was modest for the time, and the device was far more expensive than a stand-alone radio of similar specs, or of a cassette recorder. But it gave a #39;magical#39; ability that most mass market consumers were not familiar with: it allowed consumers to record music #39;for free#39; off the FM radio. The other cassette recorders back then were meant to be operated with recording via a microphone (itself an external, cabled#0160;and usually very crude device). While the quality of the music recording was very modest - this was before chromium tapes, Dolby noise suppression and other abilities that helped make cassette based music of #39;HiFi#39; quality later in the next decade. This was the beginning only. Yet before the radiorecorder, if you had a tape recorder, it was either an open reel #39;semi professional#39; and very complex device, or if you had a cassette recorder, it meant you needed to use an external microphone, bring that near the loudspeaker of a radio, to try to record music that played on radio. And obviously you hoped the dog did not bark, your family did not make noise, the telephone did not ring, a fire truck did not screech by etc making noises that the microphone would pick up..br /br /But the success of the radio-recorder, very rapidly copied by all major home electronics makers - who eventually would add ever more features and abilities, and at some point found the cassette recorder ability was no longer needed, and only included the radio and CD player, etc. But the portable radio market had peaked and was flat at the time of the launch of the radiorecorder. And the home use of c-cassettes was very modest. It was the Philips radiorecorder which ignited huge growth. And our lesson? A converged solution can create a whole new market that the independent non-converged devices prior to it was not possible.br /br /CAMCORDERbr /br /Another gadget from the pre-digital age was the home video camera. The early video cameras were professional units (with video tape based open tape systems). Then Sony made the first portable shoulder-held video cassette recorder unit for its Betamax system, with a handheld videocamera - both connected by cable. It helped expand the serious amateour market for video recording but was not a mass market product. This was not converged. Then - I don#39;t know who as this was part of that race between VHS and Beta, but in very short succession both sides released their first #39;camcorders#39; which integrated the bulky video recording unit into the portable video camera unit. I recall that the VHS version at the time used a smaller VHS cassette specially designed to fit the shoulder-held videocamera+recorder. Nonetheless, the concept of a #39;wired pair#39; of a shoulder-mounted video recording unit, and the shoulder-mounted camera - was dead and by around 1985 the camcorder was the preferred solution for video camera users. The lesson here? Convergence can help move professional and semi-pro technologies to the mass market (look at GPS based mapping and navigation today on smartphones..)br /br /VCR-TVbr /br /And around that time in the mid 1980s another #39;obvious#39; convergence product appeared also related to video. It was the combination of video recorder and TV set. Every video recorder (VCR) owner had a TV set, and the VCR market was exploding globally at the time, so it seemed like a natural pairing. It should have succeeded as well as the radiorecorder a decade earlier. But it didn#39;t. There were some TV-VCR combos from many manufacturers, but very few ended up selling. There were some sold to hotels etc, but mostly the VCRs were modest - often did not record and only played tapes. Even with those that could record, they usually had only one TV tuner for both the TV set and the VCR, so the utility of being able to watch one channel on TV while recording the other was lost - something anyone with a separate TV and VCR could do. And the TV was very expensive, people if they wanted a new TV set would prefer a big one. The in-built VCRs tended to be offered on smaller TV sets only. Meanwhile the VCR technology evolved very fast while the TV set did not, so there was a need to replace the VCR much more often than the TV set. Still at the end of the VCR and today with DVD, most TV sets and most DVD players are sold separately, not as a converged device. Lesson? Just because it is possible to converge, doesn#39;t mean everything will converge.br /br /LAPTOPbr /br /The first major digital industry converged product was the laptop, invented by Toshiba in 1985. Before the first laptop, a personal computer system involved typically at least three separate units, often sold separately. There was the CPU (Central processing unit) unit with the processor, the main computer motherboard with its memory chips and storage devices, etc. That was one box. The second device was the input, usually a keyboard. And the third device was the output, usually a monitor. The laptop was the first fully integrated computer device (sold to a mass market) where all these functions were in one laptop size device. The laptop was a serious compromise in every way, but that was the beginning. It took the PC industry 24 years for laptops finally to sell more than desktop PCs (happened last year globally). The lesson, our convergence may take a very long time to happen.br /br /MESSAGINGbr /br /So then a lesson about rival solutions. We have had email on a computer since the start of the internet (then called the Arpanet) and messaging didn#39;t come to mobile phones until GSM enabled it, and was first launched commerically in Finland in 1993. Every mobile phone message costs soemthing while every PC internet based message is free. And in most Western countries almost everyone who uses SMS text messaging has relatively easy access to PC based internet and thus the email on a PC. If not at home, then at the office or school, or the public library etc. Free vs paid. You#39;d think SMS has no chance. Yet when we merged messaging with mobile, we gained something to messaging which is very powerful (#39;reachability#39; that I#39;ve chronicled in my books since 2002). That means that even though trying to type messages on a clumsy T9 based keypad on a phone and squinting at the small screen of the phone to read the messages - today all heavy users of messaging prefer SMS to email. Young users are abandoning email in droves. Lesson here, conventional wisdom and established consumer behavior can be radically altered when digital convergence introduces new options.br /br /BATTLE FOR THE POCKETbr /br /My big contribution to the understanding of digital convergence came when I left Nokia and started my own career as an independent consultant. One of the issues I had been monitoring was the sudden and very strong performance of the new powerful featurephones and the few early smartphones, against big legacy industries. And into my second book, M-Profits, I included my early thoughts on the theory that became the Battle for the Pocket.br /br /The war was short, it started in 2000 and ended in 2006. The first rival to mobile phones was the PDA. In 2000, stand-alone PDA makers laughed at the early smartphones and said that they were no contest. The smartphones had tiny screens, no stylus or touch screen entry, very few apps, tiny amounts of memory and the user experience was horrid compared to the pocket computer metaphor of the time, the PDA. In 2000, PDA#39;s outsold smartphones by a wide margin. By 2002 the world had reversed and the smartphone ran away with the #39;PDA market#39;. PDA sales had stalled and stagnated while smartphones grew at about 50% more unit sales every year for the whole decade! Yes, there was a promise of a pocket computer but that was not fulfilled by the stand-alone PDA, it was fulfilled by the smartphone. And the first battle for the pocket was#0160;won decisively. Today smartphones outsell stand-alone PDAs by 20 to 1. The PDA was the best at that one function (being a PDA), but smartphones were good enough.br /br /The second battle was the digital camera that I mentioned earlier. The real battle was joined around the year 2002 and by 2004 the war was over, the cameraphone had won, decisively. Today cameraphones outsell stand-alone cameras by 10 to 1. I need to point out that the camera giants gave the exact same arguments, that photographs and cameras on stand-alone branded cameras were far better than the simple compromise devices on the phones. That there were better optics, better resolutions, that produced better pictures, they had better accessories, better memory blah-blah-blah just like the PDA makers said a few years earlier. Yet cameraphones won without breaking a sweat.. They were good enough.br /br /The third battle was that of the iPod and all other#0160;pocketable MP3 players vs the musicphones which got started in 2004. This was a battle I predicted would come and mobile would replicate its success. When I predicted in 2005 on this blog that the iPod#39;s reign was about to be over, I was crucified by Apple loyalists. Yet I was#0160;vindicated when#0160;Apple itself has admitted it was actively developing their iPod-phone (the iPhone) at that time in 2005 - and the Apple reasoning#0160;at the time was the threat they felt out of the new music phones like#0160;the SonyEricsson Walkman musicphones. Apple admitted this#0160;a year ago, that in 2005 they witnessed the threat of the musicphones, so Apple loyalists, don#39;t kill me as the messenger. I was only reporting the facts at the time. br /br /Anyway, the point is that by 2006 the battle was over, the musicphone had#0160;defeated the stand-alone MP3 players like#0160;the iPod - which have seen their dramatic growth stop, been stagnant for a few years and now are in gradual sales decline - all while musicphones now outsell stand-alone MP3 players by 6 to 1 (and growing).#0160;Oh, and please do not write #39;but people don#39;t use their phones to listen to music#39; - yes they do!#0160;You might not. But increasingly, globally#0160;the musicphones are the primary music device - in many poorer families its even the only music device! Not the only music player by the snobbish rich dudes who can afford tons of gadgets including a new iPod every few years, but normal people, in studies from all markets including#0160;the USA,#0160;find that#0160;far more consumers today listen to music on a phone than any kind of stand-alone MP3 player. Not every musicphone needs to be used for music - not every iPod is used to listen to music either.. (some are used as media players to watch videos, others used as recording devices by students to listen to lectures by their professors, so don#39;t get picky with me, haha..)br /br /Again please remember, in 2004 and 2005 the music fanatics were adamant that the music experience on an iPod was so much superior to lousy early musicphones, that the musicphone could not challenge for that market. Same arguments as with PDAs and cameras. So the iPod (and Creative Labs and Microsoft Zune and whatever other MP3 players) had bigger music storage, better music management, better quality earphones better user interface, better better blah-blah-blah..#0160; But musicphones won. They were good enough.br /br /So by 2006 the mobile phone had taken on three giant industries and in very short time had demolished their markets. The phone did this effortlessly, while at the same time taking on many more industries, like messaging, telling time, the calendar, phone book, alarm clock etc. And emerged the victor in every one of those. Yet, in almost every case, the mobile solution was not #39;the best#39; technically. A cameraphone is a far inferior camera to a contemporary stand-alone mid-price digital camera. But you don#39;t need to be best in digital convergence to win. You need to be good enough. That was the lesson out of the Battle for the Pocket, and as a corollary, we now have the theory that Mobile phone + X = Mobile Phone. Whatever you bring to the race, the phone wins. Take GPS and navigation now. In two years again, GPS enabled mobile phones totally took the mass market away from the stand-alone GPS device providers like TomTom. Good enough wins it for mobile in the digital convergence wars..br /br /Ok, I think thats enough for this blog. If you want to read more, my particular convergence book is my 5th book, obviously, Digital Korea, written with Jim O#39;Reilly, where we discuss the world#39;s most advanced digital convergence case study, the country of South Korea, where it all already comes together.. What happens when government is digital, schools digital, our personas become digital - half of South Koreans have created an avatar of themselves - have you? Has your wife or husband? Your mother or grandmom? The country where money is digital and hospitals have intelligent floors and bridges and parking places have digital sensors and the internet already is in cars and the major shopping malls have shops for selling household robots.. That is an interesting future and it exists already in South Korea. So if you want to#0160;learn more about how your life or business or career will be shaped by digital convergence, fly to Seoul and spend a week there, or pick up a copy of Digital Korea./p

pI promised to give the final numbers for the smartphone market shares for Q2 of 2010. As I was on vacation we received the final official numbers from each of the big 4 analyst houses - IDC, Gartner, Strategy Analytics and Canalys who all report smartphone global sales per quarter. I use the average of their reported total number for my total for the market - ie 61.7 million is now the #39;official#39; number for Q2 that I will use, and is the average of those four. I then#0160;use the best available number for Q2 unit sales to determine market shares. To get the best unit count, I use the official numbers from the major manufacturers where they actually report the number, or else the next best sources (usually one of the above) to give the unit count per manufacturer. For the operating system level market shares it then takes some more analysis.br /br /I do have to say that I am not happy with these numbers from a mathematical point of view. My numbers #39;do not add up#39; properly. My gut says, the average Q2 smartphone sales was actually bigger than what these 4 major analyst houses reported (the numbers would work out at about 64 million, but even IDC which reported the biggest number of the four, only said the count was 63 million). But I can#39;t change the facts just because my gut feels so, I have to wait for others to come up with any revised numbers (if my gut is proven to have been right haha), which means that perhaps in the coming months a few of those 4 will upgrade their numbers, so for the full year we get perhaps a bit bigger number.br /br /Anyway, with that all said, here is the final Q2 market share picture for the big 6 smartphone handset makers and the big 5 operating systems:br /br /SMARTPHONE MAKERSbr /br /1 - Nokia, Finland#0160;24.0 million for 39%br /2 - RIM, Canada 11.2 million for 18%br /3 - Apple, USA 8.4 million for 14%br /4 - HTC, Taiwan 4.5 million for 7%br /5 - Samsung, South Korea 3.0 million for 5%br /6 - Motorola, USA 2.7 million for 4%br /Rest of smartphone makers 7.9 millionbr /TOTAL smartphones in Q2 61.7 millionbr /br /For those interested, the rest of Top 10 are in order SonyEricsson, Fujitsu, Sharp and LG. The others beyond these#0160;have less than 1% each. Nokia is still more than twice as big as its nearest rival and almost as big as numbers 2, 3 and 4 combined.br /br /SMARTPHONE OPERATING SYSTEMSbr /br /1 - Symbian (Nokia) 27.0 million for 44%br /2#0160;- Android (Google) 11.4 million for 18%br /3#0160;- Blackberry (RIM) 11.2 million for 18%br /4 - iOS/iPhone (Apple) 8.4 million for 14%br /5 - Windows Mobile (Microsoft) 1.6 million for 3%br /Rest of Operating systems 2.1 millionbr /TOTAL smartphone OS devices in Q2 61.7 millionbr /br /For those interested the next biggest are Linux Mobile and Bada. Rest beyond these 7 have far less than 1% of the global smartphone OS market. Symbian is for the first time ever no longer bigger than rivals number 2, 3 and 4 combined. It is still safely far more than twice as big as its nearest rival.br /br /Feel free to quote these numbers, source is TomiAhonen Consulting./p

pA few announcements as I am on vacation during Augustbr /br /Please mark your calendar for two excellent events in October in Oxfordbr /br /JOIN DAVID CUSHMAN, ALAN MOORE AND TOMI FOR 2 DAYS IN OXFORD 12-13 OCTbr /br /On Oct 12-13 you get the rare chance of a two day short course with both of us. a href=http://smlxtralarge.com/Alan Moore/a and I#0160;are returning to#0160;run our a href=http://cpd.conted.ox.ac.uk/electronics/courses/7th_mass_media.asp7th Mass Medium course at Oxford University/a with our dear friend and fellow author David Cushman probably best known to readers of this blog via his very good blog a href=http://fasterfuture.blogspot.com/Faster Future/a. The course is the definitive #39;media for mobile#39; and mobile content and services course, based loosely on my sixth book (a href=http://www.amazon.com/Mobile-7th-Mass-Media-cameraphone/dp/0955606950/Mobile as 7th of the Mass Media/a, all course attendees receive an autographed copy of the hardcover book) so we look at the mobile consumers, the mobile eco-system, then the various media types and content including music, gaming, news, etc - as well as advertising and marketing of course, and including the signature themes of this blog, social networking on mobile as well. We examine the overlaps, cannibalization threats and market opportunities in mobile for other media brands and players from print to broadcast to the internet etc, and we discuss the 8 unique aspects of mobile. For regular readers of this blog, its perhaps familiar territory, but this is THE course you want to send your new hires and team members, or the business development boss for mobile if you are a media brand etc.. The course is not technical, and you do not need previous courses to be able to attend.br /br /As a short course run by the Oxford University Department of Continuing Education, the course is a very reasonably priced opportunity to learn about the media and mobile opportunities, from me representing the mobile side, from David representing the classic media side, and Alan the guy who coined the term#0160;Engagement Marketing, representing the advertising and marketing side of the convergence in the 7th mass media space. And yes, of course, all who attend get the Oxford University certificate of attendance for completing the course too.#0160;Here is the a href=http://cpd.conted.ox.ac.uk/electronics/courses/7th_mass_media.asppage describing#0160;our 7th Mass Medium course including the full agenda/a.br /br /NEXT, THE strongFORUM OXFORD/strong TECHNOLOGY FUTURE strongCONFERENCE /strongIS 15 OCTOBERbr /br /Then the other big Oxford event for our readers is on the same week! On 15 October, we have#0160;already our#0160;4th annual Forum Oxford#0160;Conference. Always, after each of the first 3 conferences, we#39;ve had so many people who said, #39;I should have been there#39; or #39;I wish I had the chance to be there#39; and almost universally those who attended, are eager to be back and#0160;to recommend it to others. So here is plenty of time to warn you, please put this on your calendar.br /br /This conference focuses on the#0160;future of mobile and technology convergence and#0160;attracts an unbelievably senior level of attendees, and we have truly exceptional class of speakers. The biggest brands have all been heard or seen there as you might expect from Vodafone to Nokia to Samsung to the more innovative specialists in mobile such as MTV and Three etc. Perhaps more impressive is the lineup of just about #39;the who#39;s who#39; of the top thought leaders in mobile, including authors like Tony Fish, William Webb, Martin Sauter, Russell Buckley, Christian Lindholm,#0160;Jonathan MacDonald, Mark Curtis#0160;(and Ajit Jaokar, and Alan and me..) .Consider that in the past 3 years we#39;ve heard from just about all the biggest names you talk about in mobile today, including Admob, Flirtomatic, Xtract, Blyk, Fjord,#0160;and the most relevant topics you might think of today, such as mobile money in Africa or the Digital Footprint or Data mining and even such things as art in the mobile media age. To get a feeling of what its like, here is my a href=http://communities-dominate.blogs.com/brands/2007/04/communities_dom.htmlreview of our first Conference/a.br /br /For this year#39;s 2010 Forum Oxford Conference again we have those people and companies and topics you really want to hear and see. We have among confirmed speakers Layar talking about Augmented Reality, Movidius showing#0160;the latest in video tech for mobile phones,#0160;the former Guardian mobilist-journalist extraordinaire and now#0160;also famed publisher of#0160;Location-Based Poetry Vic Keegan; the multiple bestselling mobile author and guru#0160;Chetan Sharma; and the topics you want like#0160;Android, mobile in the the emerging world, mobile learning,#0160;the Internet of Things, and so many more. As always, the Forum Oxford Conference is co-chaired with my very dear friend and multiple bestselling mobile author Ajit Jaokar. br /br /Two specific points. One, this is #39;the#39; only and I mean only - true thought-leader conference for where our industry is going in the next years. Like in the past, this is the collection of the very best minds for one day, about the future of mobile and we have always an unparalleled level of world most senior speakers, authors and top industry decision-makers. The conference attendees are extremely senior level, for this very fact. Yes, we are at Oxford, so of course the attendance tends to be more UK based, but for a UK conference we get regularly visitors from very far on all continents. The venue is cozy and very friendly. We have exceptoinal level of interaction between all who attend. As everyone remarks at each of the first 3 annual events, the Forum Oxford event is exceptionally interactive where you get to talk with everybody. And yes, many will bring some books to get them signed by the authors too who are speaking haha. But yes, this is one very rare event, where almost nobody leaves the event before the end of the day, even as it is Friday. But after the event, we have the free drinks reception and the discussions and meetings are so productive, that people really don#39;t want to leave.br /br /Secondly, it is at the pictoresque Oxford University campus. For an event that costs only 205 UK Pounds for the full day including lunch and the drinks reception, that is truly a bargain. Oxford is near Heathrow Airport so its an easy connection from the airport and you might consider spending the weekend in Oxforfd if you have not visited that part of England before. The actual Conference is always a one-day event on Friday in Oxford, but we always start informally the night before, Thursday evening, at the same pub just outside the venue, and the informal chat with all of us will last into the wee hours. So if you do attend, please plan on arriving in the early afternoon of the Thursday, and check in at your hotel, so you have time to join us at the pub. Many who live in England will not drive up in the morning of the Friday, but prefer to arrive at Oxford on Thursday afternoon so they can join us at the pub informal part and meet up with us etc. So please also remember to plan on being there from Thursday evening onto the very end of Friday. So this is one of those rare events where I really go on record saying, this is worth flying into. For more including confirmed speakers and all info about the Forum Oxford Future Technologies Conference 2010, a href=http://cpd.conted.ox.ac.uk/electronics/courses/future_technologies10.aspplease see the Conference website/a.br /br /(Obviously, please consider taking both the course and joining the conference)br /br /AND REMEMBER TOMI PODCAST AT M-SEARCH GROOVEbr /br /And one more thing. We#39;ve started the a href=http://www.msearchgroove.com/2010/08/10/podcast-tomi-ahonen-forecasts-mobile-platform-war-will-apple-be-on-the-losing-side/podcast series/a with Peggy Ann Salz (best known probably for editing the wonderful annnual Netsize Guide. Peggy#39;s website is a href=http://www.msearchgroove.com/M-Search Groove/a, obviously dealing with mobilist matters and search related things, and mobile search haha.. And she has a series of very good podcasts with many influential leaders - including our Alan Moore yes of course - and we started a monthly short about 5 minute chat about the numbers and stats of mobile. Its in an interview format, where Peggy picks some of her fave stories of recent mobile numbers and then asks me to comment and give background. I also add a flavor bit to it, where we end it always with something a bit more wild and weird in the research into mobile consumers.. Please take a listen to the a href=http://www.msearchgroove.com/2010/08/10/podcast-tomi-ahonen-forecasts-mobile-platform-war-will-apple-be-on-the-losing-side/Podcast with Tomi Ahonen on Mobile Stats/a.br /br /I am only briefly online during August, but from September will start to be seen again very actively globally, am at big conference events in Sao Paulo, Canberra, Toronto, Hong Kong, and countless private workshops and seminars as well. So if you have a need. please drop me an email and lets book the date before we have timing conflicts./p

p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWe heard#0160;three weeks ago,#0160;that the a href=http://communities-dominate.blogs.com/brands/2010/07/big-milestone-world-now-has-5-billion-active-mobile-phone-subscriptions.htmlworld now has 5 Billion mobile phone subscriptions/a (for a planet with a total population of 6.8 Billion). I have recently been obsessing about smartphones a lot at this blog as we#39;ve had the numerous big phone maker quarterly results coming out for the half-year. Today I want to stay away from the phone wars, and talk about the mobile consumer. So lets dig into some consumer numbers and facts, to explore the users of mobile.br /br /So lets start with the 5 Billion. It is measured per-capita. As we approach the 6.8 Billion subscription level - the planet is likely to reach 100% mobile phone subscriptions for every person on the planet, by about 2013-2014 - thats almost any day now haha - I find an interesting metric to use is the #39;mobile phone subscription for everybody older than#39; metric. Lets count down the age, assuming every subscription is divided to every adult starting from the eldest, and going down in age (obviously that is not reality, but its a cool count-down). Today the 5 billion mobile phone subscriptions would cover one active paid mobile phone account, for every adult person and every teenager down to age 15... (by the end of the year 2010, that will be down to age 13 haha.. you see what I mean, this will be a funky way to count down to age zero over the next four years)br /br /5 Billion mobile phone subscriptions means the equivalent of a mobile phone for every single person on the planet age 15 or older, across every continent, beyond illiteracy, beyond electricity, beyond poverty etc. Wow. Now, obviously that is a totally artificial metric and does not reflect the reality - African mobile phone penetration rate is currently barely over 50%, but its an interesting way to consider the growing susbcription number. But regular readers know a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Consulting provides industry stats /aoften that nobody else does, about the industry users, services, revenues, traffic etc. So lets dig into that 5 Billion subscriber number a bit. The real insights.br /br /HOW MANY IS MANYbr /br /Not every one of the 5 Billion mobile phone subscriptions is a #39;unique user#39; because some people have 2 phones, some have 2 accounts or more - and some of those with multiple accounts do not have 2 phones..span style=mso-spacerun: yes#0160;#0160; /spanSo how does it break down? I explained the break-down in the TomiAhonen Almanac in 2010 for end-of-year 2009 numbers. Here is the updated breakdown:br /br /5.0 Billion total active mobile phone subscriptions on the planeto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt4.1 Billion actual actively used mobile phones carried by mobile phone usersbr /3.6 Billion unique mobile phone subscribers with at least one active account and phonebr /br /But then there is the phenomenon of users with more than one account. So we can#39;t just subtract 3.6 Billion from 5.0 Billion to find how many are those customers with 2 accounts. I have been tracking those details too and here is the update.br /br /Of 3.6 Billion unique mobile phone subscribers, 2.5 Billion have only 1 account. 1.1 Billion have two or more accounts, and already 300 million people have 3 or more active mobile phone accounts. Of those 1.1 Billion people with more than one account, 500 million have also 2 phones that they carry around regularly. Yes, one in seven of the mobile phone owners on the planet, already walks around with 2 phones in their pockets. In Western Europe that is well past half of all mobile phone users.br /br /DISCUSSING THE DIGITAL DIVIDEbr /br /So while we are no that topic of Europeans, lets go across the Digital Divide, from the #39;Industrial World#39; where 1.2 Billion relatively affluent humans live, to the other side of the Digital Divide, to Africa, Latin America and less wealthy parts of Asia, where 5.6 Billion people live. That is the part we call the #39;Emerging World#39; (previously known as the Developing World and earlier called the #39;Third World#39;) A few words about their lives with mobile.br /br /The penetration rate of mobile subscriptions in the Emerging World is 59% today. While we in the #39;Rich World#39; see now over half of all phones and subscriptions migrated to 3G (Japan became the first country where all phones are now 3G or faster), in the Emerging World only 4% have a fast data connection for their mobile phones using a 3G network. That means most of their #39;mobile web#39; surfing is basic WAP style browsing on very modest phones and on quite slow networks with typically GPRS speeds. Here in the #39;West#39; we are just at the point where a third of all phones are smartphones. Across the Digital Divide, smartphones account only for 8% of all phones - and a significant portion of those are second-hand (mostly Nokia GSM based) smartphones.. This is no market for the iPhone 4 haha..br /br /Talking about second hand phones - well over 300 million of all mobile phones in use in the Emerging World are second hand phones - accounting for 14% of all mobile phones in use in that part of the world. Yes, they want to have cases for their phones but not to prevent a #39;Death Grip#39; haha, its to #39;preserve#39; the phone is pristine condition, as the phone will be probably resold later, and it needs to be in good condition to preserve as much of its original purchase price as possible. Its a very different world, the Emerging World, when we consider how many old abandoned smartphones we have in our desk drawers, that were very modern a couple of years ago.. Perhaps time to recycle some of your old phones?br /br /LETS GET SOME CONTEXTbr /br /Now these Billions are confusing numbers. I have to give a bit of context. At the end of 2009 the world had just under 1 Billion automobiles registered and in use. There were a little over 1.1 Billion fixed landline telephones. There were 1.2 Billion personal computers of any kind in use (including desktops, laptops, netbooks and tablet PCs). The world had 1.6 Billion television sets and 2.2 Billion banking account holders. But 3.6 unique humans on the planet has at least one mobile phone and account. They walk around with 4.1 Billion currently used mobile phone handsets, and they support a total of 5 Billion mobile phone accounts that generate telecoms traffic and revenues. This is a gigantic industry that towers over most others.br /br /And that puts the multiple subscription number into vivid context. 1.1 Billion people are not just in love with mobile, they are so addicted or dependent on it, that they already support two separate active mobile phone accounts for themselves, or more. Its not that there are more mobile phone accounts than fixed landline phones by a ratio of more than 4 to 1, its that for every still-active fixed landline phone, there is a person on the planet so in love with mobile, that the person has 2 or more mobile phone accounts. No wonder the fixed landline business is in terminal decline..span style=mso-spacerun: yes#0160; /spanAnd yes, this is the 1B number out of the title. Lets see what else we find in the Big as in Billions numbers.br /br /WHAT DO WE DO WITH MOBILE? OUR THUMBS KNOWbr /br /The numbers get far more interesting when we start to examine mobile subscribers and what we do with our favorite gadget. Many call it the #39;mobile telephone#39; ie mostly older users think of mobile as a voice calling gadget. Well that is changing fast. For most users worldwide, the primary need of the mobile phone is a href=http://communities-dominate.blogs.com/brands/2010/03/faster-than-a-locomotive-leap-over-giant-buildings-yes-sms-text-messaging-twice-the-users-of-email-t.htmlSMS text messaging/a. But what of total use, any time. The statistic of voice call use is astounding. Already today, we are at the point where one in ten mobile phone accounts is never used to initiate voice calls at all! Yes, among all mobile phone subscriptions, the use of voice calls is steadily declining, and is now down to 90%.br /br /Meanwhile how is SMS doing? Not everyone is using it (we are now hitting barriers like illiterate people who are getting mobile phones, so its likely SMS will never reach quite 100% adoption rate) but as the laggard North Americans are finally also getting onboard with SMS use, the world active user base of SMS is past 79% of mobile users. We are at 4 Billion active users of SMS (as Clickatell already reported earlier this year). Think about that for a moment. Email, the most used form of messaging (or in fact most used form of any kind of communication) on a personal computer has only 1.4 Billion users (says Radicati, also confirmed by Netcraft) and 400 million of those were corporate email accounts, 1 Billion were consumer email accounts. But SMS text messaging today reaches an active users base of almost 3 times bigger than email globally. Wow. That is big. Email is 39 years old (the first internet email was sent in the USA in 1971). The mobile phone based SMS text messaging is half that age at 17 years of age (the first person-to-person SMS message from a phone to a phone was sent in Finland in 1993). Email grew 7% in users in 2009. SMS text messaging grew 19% in users in the same year. SMS is younger, is three times bigger, is growing twice as fast (and is a young person#39;s communication medium). The world#39;s most popular data application by far, is SMS. And now we have the mystery of the 4 Billion number, revealed.br /br /Hey, while we are on messaging. So email has 1.4 Billion active users? So its gotta be the second most-used messaging platform on the planet, eh? Not anymore it isn#39;t. A little over a year ago, a href=http://communities-dominate.blogs.com/brands/2010/06/an-inconceivable-truth-mms-is-a-global-success-at-30b-dollars.htmlMMS messaging (multimedia messaging/a, what we more commonly often think of as #39;picture messaging#39;) on mobile shot past email. MMS is only 8 years old, and already has 1.9 Billion active users now in the summer of 2010. MMS grew active user numbers even faster than SMS, at 21% per year. So think about that number. There is #39;multimedia#39; content on a personal computer, our YouTube videos and music etc. The global population of PCs is 1.2 Billion. There is #39;multimedia#39; content on television too. And the total installed base of television sets is 1.6 Billion worldwide. But MMS is also multimedia - can do simple short videos, as well as sounds, pictures and longer messages than SMS - and MMS is used by 1.9 Billion people on the planet! No wonder media brands are eager to learn about MMS in use from newspaper content to mobile advertising. Wow. By the end of the year MMS will pass the 2 Billion active user level. That is huge. But its not my 2 Billion number from the title as it hasn#39;t passed 2 Billion yet. That is coming in this blog.br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSNAP SNAP SNAPbr /br /So yes, early cameraphones were pretty puny and most #39;serious#39; camera freaks considered them jokes. Now we are getting ever better cameraphones, even the iPhone is up to 5 megapixels (and LED flash, finally) and Nokia#39;s new N8 features 12 megapixels, on real, serious, Carl Zeiss optics, and a #39;real#39; Xenon flash. Cameraphones are growing up. And we consumers are loving them. Not every phone is a cameraphone yet, and not every cameraphone has its camera used - but worldwide the active users base of the camera feature has now passed 3 Billion consumers. Wow. The stand-alone camera business is stagnant, selling about 100 million digital cameras per year. The cumulative shipments of all digital cameras ever made, is about 700 million to now, the active installed base is perhaps half that number. And some of the active digital cameras are with the serious professionals and semi-pro#39;s who easily have several digital cameras (and perhaps even a classic film-based camera too). br /br /So we are now at the point, where when counting active users on the planet, the number people using the camera on a cameraphone, outnumbers the users of any other type of camera, digital cameras and film-based cameras - by 10 to 1. Wow. By far, for most people on the planet, the only camera they have ever used, is one on a phone. And those pictures are not printed, by the way. And most are not sent via email or saved on a PC (remember, the world has only 1.2 Billion personal computers, not all of those are connected to the internet, and many are PCs with people who use more than one, so the actual user base of PCs is far smaller still). Most of those pictures are not sent by MMS either. The most of the pictures snapped on cameraphones, are never removed from the cameraphone, they are only consumed by the person who took the photo, and perhaps shared by showing the phone itself to another person. The second most common way to share pictures is #39;side-loading#39; ie via bluetooth or via microSD memory cards, shared with friends. 4 out of 10 mobile phones in use today has a memory card slot, and 6 out of 10 has bluetooth. That is how pictures move, if they are moved. Most are never moved from the cameraphone which took the snaps..br /br /The world#39;s biggest camera brand is Nokia, which has now over a Billion users. Wow. Canon, Nikon, Minolta, Konica, etc had never even 100 million active users of their camera brands. And Nokia#39;s first cameraphone came 8 years ago. Double-wow. And all stand-alone digital cameras, and all film-based cameras ever made over more than 150 years - has not reached a billion cumulative shipments. Yet Nokia has that in active users. No wonder Nokia obsesses about Carl Zeiss optics and megapixels and real Xenon zooms and even offers cameraphone tripod mounts..br /br /And do remember, even for very modest #39;Africa#39; models of very cheap cameraphones with modest VGA or 1 megapixel basic cameras - a cameraphone will have a color screen. So we have an active users base of 3 Billion people who use a mobile phone for non-voice, non-messaging - but picture/screen related uses. Yes, almost twice the number of people look at the color screen in their pocket, as the total number of television sets on the planet. That was our 3 Billion number.br /br /LETS GO MADbr /br /So I have told you what are the numbers 5 Billion, 4 Billion, 3 Billion and 1 Billion. It leaves us with the 2 Billion number. What might that be? Its a pretty awesome fact too. The world has now passed the point, where two Billion of us have received an a href=http://communities-dominate.blogs.com/brands/2010/06/whats-latest-in-mobile-advertising-from-mma-global-event-in-new-york-city.htmladvertisement on our mobile phone/a. (So #39;mAd#39; is mobile advertising obviously). Yes, out of all mobile phone subscribers its #39;only#39; 40% but the gigantic numbers in mobile hide enormous scale. Remember those television sets? 1.6 Billion. And not all TV channels worldwide broadcast advertisements. Yes, 1.2 Billion PCs exist but less than that are connected to the internet, so less than 1.2 Billion personal computers will be able to receive ads via the internet. But 2 Billion of us have received ads on our phones, essentially twice as many as have seen an ad on a PC. br /br /How#39;s that with newspapers? The worldwide circulation of newspapers, free and paid, was under 480 million last year (and newspapers are dropping dead left and right, in the tough economic conditions worldwide). So 4 times more people receive ads delivered into their pockets, than onto their daily newspapers. Wow. Are you impressed with the hot new Apple iPad? It sold 3 million units in its first quarter. Lets assume Apple does that rate for a year, and the world would have about 12 million iPads in use next year at this time. How much bigger is #39;real#39; mobile advertising, delivered to #39;real#39; mobile phones? Try 167 times bigger - this a year from now, if we assume awesome iPad growth rates (mobile advertising reach is 650 times bigger than total installed base of iPads today haha)br /br /Two Billion people on the planet receive ads onto their phones. Thats 40% of all mobile phone subscribers. Its 3 out of every 10 people alive on the planet! So if you thought it was impressive that mobile advertising was the only form of advertising to actually grow revenues in the economic crash when all other advertising forms declined; and last year that mobile advertising grew by 70% in revenues - you ain#39;t seen nothing yet. The world#39;s most personal gadget, the world#39;s most pervasive technology and the world#39;s most beloved device - our mobile phone - is now also a powerful advertising and marketing platform, reaching far further than the PC based internet, or television or newspapers. Like I say, the mobile is the last thing we see before we fall asleep, and the first thing we see when we wake up. Just this past week we learned that in the UK, the youth who sleep with their Blackberries under their pillows, have started to call the BB, the Blackberry, as their #39;Baby#39;. Sleeping with the Baby. Yes. BB. Baby. Blackberry. Pretty cool.br /br /For anyone wanting to refence the numbers. All numbers, facts and stats mentioned in this blog, that was not separately credited, is based on the a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Almanac 2010/a, where obviously some stats have been now updated for August 2010 levels. So please feel free to reference any of the numbers mentioned here and provide a link to this blog if you want. You do not need to ask permission to republish any of the stats or facts in this blog.br /br /A COUPLE OF PLUGSbr /br /First, I want to mention the podcast we do monthly with Peggy Ann Salz at the M-Search Groove blogsite. My monthly podcast is about the latest stories related to the statistics of the mobile industry. Its a short nice peppy chat with Peggy about whats hot in mobile, so if you want more on the numbers of the industry (and its free) a href=http://www.msearchgroove.com/2010/07/12/podcast-tomi-ahonen-warns-app-store-model-doesnt-pay-is-the-blockbuster-app-model-bankrupt/this is a good place to visit monthly/a.br /br /Then we have our 7th Mass Media course at Oxford University again coming up in mid October, in Oxford, England. The course is only 2 days in length, an #39;executive#39; course with the media and mobile focus, looking a lot at the consumers, the media, the advertising etc plus obviously 7th Mass Media special issues, like the myths in mobile, and the unique benefits we have in mobile to deliver services that even other digital platforms like the PC based internet, digital TV, DVDs etc cannot deliver. The course lecturers are David Cushman, Alan Moore and me, and the course runs Oct 12-13. If you wanted to #39;really#39; know this industry, this is the ultimate course with us, the three authors who have together published probably more on these topics than anyone else haha. Please a href=http://cpd.conted.ox.ac.uk/electronics/courses/7th_mass_media.aspsee the Oxford University website for course outline and more info including booking info/a.br /br /For those who want a 2 page handy guide guide on the main numbers for the mobile industry, please remember my free #39;Cheat Sheet#39; is always available. To get the pdf file emailed to you, just send me an email to tomi (at) tomiahonen (dot) com.br /br /And for those who want a more thorough set of stats and numbers and charts and facts on the mobile industry, the TomiAhonen Almanac 2010 is the best value at only 9.99 Euros, giving you 184 pages with 84 charts and tables, with all the facts you ever wanted to know about mobile today, from handsets to networks to consumers to services to apps to revenues to profits to the digital divide. Best of all, the pdf format eBook/mBook is formatted for the small screen, so you can carry all the industry numbers in your pocket anywhere, right on your smartphone (or laptop, Kindle, iPad etc). To see sample pages including several of the actual tables and charts, see the a href=http://www.tomiahonen.com/ebook/almanac.htmlordering pages for the TomiAhonen Almanac 2010/a (this Almanac is not sold anywhere else, not on Amazon or any other bookseller)o:p/o:p/span/p

This blog article is not about Apple strategy, or the iOS strategy, which are both brilliant. This article is not about death grip, which obviously is not strategy, that was a rare execution stumble, unnecessarily made worse by a poor execution at an Apple PR event. br /br /This blog article is one in a series of strategic viewpoints to the major players in the smartphone bloodbath, at the a href=http://communities-dominate.blogs.com/brands/2010/08/smartphone-bloodbath-report-card-at-half-point-of-year-2010-for-all-major-brands.htmlhalf-point of this pivotal year 2010/a, the bloodiest year of the a href=http://communities-dominate.blogs.com/brands/2010/07/understanding-smartphone-market-share-battle-not-for-phones-is-for-platform.htmlbattle for the control of the future of smartphones and mobile phones/a, and by extension the future of personal computers, the internet, media, advertising and even money. All of those are seen to be headed to a mobile phone near you - and many mobile industry analysts expect most, some say all - mobile phones will become smartphones before this decade comes to an end. What we are witnessing is the first year of the big race for all the spoils of digital convergence. All the big names of the tech space are already in it from HP to Apple to Lenovo to Dell to Intel to Microsoft to Google to Nokia to Sony to Ericsson to Motorola to Samsung and LG and many more. So this is #39;part 1#39; of the big strategy blog articles, building on a href=http://communities-dominate.blogs.com/brands/2010/08/smartphone-bloodbath-report-card-at-half-point-of-year-2010-for-all-major-brands.htmlmy blog from yesterday, where I gave the grades to the major players at this half-way point of 2010/a. br /br /The top line for Apple today. The iPhone made the best-ever launch into smartphones in 2007. For the next two years, Apple grew at breathtaking speeds, capturing a huge slice of the enormous smartphone market - reaching a 17% market share in Q3 of 2009. Then the strategy imploded. Since Q3 the iPhone has lost market share and is now down to 13% according to Canalys (14% according to Strategy Analytics). By Canalys numbers, Apple has lost almost one quarter of its market share - in nine months! Worse yet, this year Apple is seeing a decline in unit sales - a decline which happens when the smartphone market is exploding. Since Apple#39;s peak moment in Q3 of 2009, the smartphone market has grown 49% according to Canalys. Just in the past 3 months, the market grew 12%. All of Apple#39;s big smartphone rivals grew unit sales and maintained or grew market share. br /br /Apple not just lost market share, it actually saw unit sales decline. This even as Apple released the world#39;s best, most-anticipated iPhone upgrade, the iPhone 4, that sold 1.7 million units in 3 days. This was before anyone was even buzzing about any Antennagate. Apple has the world#39;s most desirable smartphone. It has the world#39;s best customer loyalty of any smartphone. The smartphone market is exploding. There was no viable #39;iPhone killer#39; on the market in Q1 or Q2 of this year and superphones like Google#39;s Nexus One failed spectacularly and Apple#39;s rivals like Palm folded and went bankrupt. br /br /If Apple had the best phone, the most desirable phone and the most loyal customers, and it launched its best phone yet, why is Apple not able to turn that affection into market share growth? Why for nine quarters already has Apple been bleeding market share - growing more slowly than the rivals. Why is Apple actually seeing a decline in unit sales - the only one of the big 6 smartphone makers to see a decline in unit sales in any of the past four quarters? Something is wrong. br /br /Its not that the iPhone is failing or the customers are deserting the iPhone (and this happened all before Antennagate). Something is wrong in Cupertino. This is the analysis of what happened and what has to happen to fix the problem. Its a matter of smartphone emstrongstrategy/strong/em. br /br /This article isstrong not a criticism of the iPhone itself/strong. The iPhone is the world#39;s most desirable mobile phone. The original iPhone in 2007 was the most successful new phone launch ever in this industry and each subsequent iPhone has been significantly better, strongemachieving ever greater sales/em/strong. Even with Antennagate, the iPhone 4 is a roaring launch success and iPhone retail outlets around the world cannot keep the iPhone in stock. The iPhone is selling literally better quot;than hot cakesquot;. br /br /This article is strongemnot a criticism of Apple the company/em/strong. Apple is the world#39;s most profitable mobile phone maker growing its profits in an industry where almost all rivals are struggling with declining profits like RIM and Nokia or making losses like LG or failing spectacularly out of the phone market like Palm, Google and Microsoft. This blog article is an analysis of the iPhone strategy today. br /br /I am not saying Apple overall strategy is flawed. I admire Apple for the great products that it does very profitably, with enormous customer loyalty. But the strategy for the iPhone - that had been excellent in the first 3 years - is strongemnow wrong/em/strong. The old iPhone strategy that was right for 2007 (and I said so many times back then) is now wrong in 2010. Its time for Apple to change its iPhone strategy. This blog is a long article of over 10,000 words - it will take you half an hour to read, but it is deep analysis of where Apple is today, how we got here, why it worked in the past, and why the current iPhone strategy is no longer working today. Go grab a cup of coffee as you digest this article. I think it will make many people think of the iPhone in a new light. br /br /So who am I to say? My competence is in the mobile industry, specifically its strategy. Not just a random blogger, I am the world#39;s most published author in mobile and my thoughts, as discussed in my nine bestselling books - including the first strategy book (strongemM-Profits/em/strong)#0160;for the mobile industry - so far have been referenced in over 90 books by other authors in the industry. I am held in considerable respect by my peers. And I am saying not that the iPhone has failed - far from it - but that the iPhone strategy is wrong. The iPhone strategy is severely #39;sub optimized#39; and delivering a stunning victory in the wrong battle, while abandoning any chance of winning the main war it is in, where the big rewards would be. And therefore, the strategic guidance from Cupertino is faulty, steering the company to repeat the painful decades of the Macintosh prior to Apple#39;s revival roughly timed with the the launch of the original iPod and iTunes. How many Apple loyalists can still remember all those years in the 1990s that Apple made losses while it had the Macintosh as the world#39;s best PC and that slow death it was doing losing in the platform war to the Windows compatible army of PCs? br /br /iPHONE THE TRANSFORMATIONAL PHONE br /br /The original Apple iPhone (2G model) changed the whole industry a href=http://communities-dominate.blogs.com/brands/2007/05/entering_iphone.htmlas I predicted it would/a. No other phone before or since, not the Motorola Razr, not the RIM Blackberry, not the SonyEricsson Walkman or any other phone ever, had achieved that. And the iPhone went even beyond the mobile handset business which it revolutionized. It changed the larger mobile telecoms industry, and the adjacent IT/PC and internet industries. It changed the media industries and it woke up the mostly USA based giant advertising and banking giants to the potential of the mobile phone. There is a reason a href=http://communities-dominate.blogs.com/brands/2007/05/entering_iphone.htmlwe consider the mobile industry in two eras, the time before the iPhone and the time after the iPhone (as I predicted we would/a). br /br /This is similar to the Macintosh. In 1984 when the original Apple Mac launched, it did change the whole PC industry forever. We were introduced to the first user interface so simple, you didn#39;t have to take a computer class to operate the computer. The screen had menus and icons that you could point to with a mouse. By one fell swoop a whole row of keys on the PC keyboard became obsolete (the 12 quot;Functionquot; keys above the numbers on a typical PC keyboard). Today obviously all personal computers have a pointing interface in some form of mouse. br /br /The Macintosh ushered in a new era in computing. In that process, personal computer sales exploded and the PC was embraced by all businesses and more importantly, the strongemfar bigger market of home consumers/em/strong. Today grandparents can use a PC and even 5 and 6 year old kids who don#39;t know how to read can already play videogames on their parents#39; PC. Note this is very similar to today, with the explosion of the smartphone as it moves from the business users to the consumers - in the past 12 months the smartphone market grew 69% - an unprecedented growth rate in human economic history for a gadget that was already selling over 100 million units annually at that time (the smartphones sold about 175 million units last year). br /br /So all PCs in use can trace a clear lineage to the first Mac. So why are the world#39;s biggest personal computer makers named HP and Dell and Acer and Lenovo...but not Apple? Because the Apple management failed to see many #39;obvious#39; trends in the PC industry that abandoned massive market segments to its rivals, most obviously the whole laptop era. Again modern young tech analysts might not remember that Apple stubbornly refused to release a laptop version of the Mac until long after all its PC maker rivals had carved up that new high-priced and faster-growing (and more profitable) laptop market segment. Yes, today Apple offers Macbooks but they were very late to the party. Too late to help Mac back into the Top 5 (which they just now in Q2 finally managed, with the help of the iPad). Twenty six years in the wilderness, for the company that changed the industry. And why? Because of wrong strategy, as many long time Apple followers know fully well. br /br /I do not hate the iPhone or Apple. I emstronglove the company/strong/em and strongemadmire the product/em/strong and have pleaded for Apple to join the mobile industry for many years before the iPhone was launched and I strongemhave cherished/em/strong Apple#39;s contributions since it did. But I am a mobile industry analyst, not a Wall Street analyst nor a PC industry analyst or a blindly loyal Apple fanatic. I try to be as honest and truthful as I can be. And it is clear to me that Apple#39;s excellent launch of its iconic iPhone from 2007 has run its course, and the phenomenal market share growth by leaps and bounds through 2009 had strongemscreeched to a halt/em/strong. The facts are in. Now its high time for Apple to make a major change in its strategy. That is what this blog is about. br /br /THE APPLE LOYALISTS br /br /From the iPod to the iPhone to the iPad, the modern Apple products are simple, elegant and have revitalized and re-invented their older industries (portable music players, mobile phones and tablet PCs). The Apple loyal user base has every reason to love the Apple products. They are by far the best-designed devices and technologies in the market. The Apple user base is familiar with this and willing to pay the extra for the premium of having an Apple product compared to any rivals.br /#0160;br /This is the engine to the current profitability of Apple. American Express told us that a good experience is worth an extra 9% that consumers are willing to pay for. Apple has learned to live in that space, making their products (and the iTunes and App Store etc, even their consumer experience like in the Apple stores) better - for which Apple then is able to charge a premium. Then Apple has expanded from being just a computer maker. br /br /Apple users are incredibly loyal, coming back to buy more Apple products. A survey of early iPad buyers by Piper Jaffray found that 92% owned an iPod, 74% owned a Mac and 66% owned an iPhone. The Apple army is loyal. In surveys from market after market, the current iPhone owner is incredibly likely to buy another iPhone, while even most other expensive rival smartphone owners like those with a Blackberry are more likely to buy #39;any other brand#39; than another Blackberry, as we saw in Nielsen#39;s survey of US consumers this week. A crushing advantage to Apple, as Nielsen found the propensity to be that 90% of current iPhone owners want their next mobile phone to be an iPhone. Meanwhile in the UK its gotten so bad for Nokia that even for those of current Nokia owners who are willing to make their next purchase also a Nokia, those Nokia owners are not willing to recommend Nokia to their friends! They are clearly ashamed of owning a Nokia. br /br /This brings me to the true power of the Apple army of fanatics. Its not that they are loyal to a fault. The are much better than that. Apple loyalists are the most active strongembrand ambassadors/em/strong of any tech brand. Think about how many times you#39;ve been somewhere with your Windows compatible laptop and some Mac owner has said #39;isn#39;t it time you changed to the Mac?#39; And the same with the iPods and iPads. They are constantly peddling their gadgets at those who aren#39;t part of the Apple army (yet). br /br /MAGNIFICENT SCREEN br /br /So why the iPhone? It came at the perfect time, with the perfect paradigm change, in the perfect market, for the perfect audience. The magnificent screen. Yes, there had been 3 inch screens prior to the iPhone and even bigger screens. But the iPhone made the 3.5 inch size touch screen interface strongemwork/em/strong. The first truly strongemfunctional /em/strongtouch screen phone. Compared to its contemporaries - the Nokia N95 had a screen size of only 2.5 inches. As screen size is measured diagonally, in reality the iPhone had almost twice as big a screen as the similarly-priced Nokia N95. If you wanted to look at something, at that hand-held distance, the size difference is gigantic, in favor of the iPhone. Gigantic. br /br /What do we show on the mobile phone? The first mobile phone service is the voice call. We don#39;t #39;show#39; our calls. Then came SMS text messages. Yes, we look at our messages on the screen on the phone - but we do not #39;show#39; our messages. In fact most people are very possessive and secretive about their messages on the phones. br /br /WE SHOW OUR PICTURES br /br /So what is it that we do show? Its the pictures! The cameraphone was invented by Sharp and J-Phone (now Softbank) of Japan in 2000. The early cameraphones had very poor resolution cameras of very poor quality optics and limited storage. That evolved with Moore#39;s Law and by 2005 we had megapixel cameraphones and by 2007 the first 5 megapixel cameras were appearing on the market. Today we see 12 megapixel cameras on mobile phones. No wonder the cameraphone completely shattered the stand-alone camera industry and today cameraphones outsell stand-alone cameras by about 9 to 1 and two of the #39;big four#39; traditional camera makers - Konica and Minolta - have gone out of the camera business altogether. br /br /The iPhone came at a perfect time, in that transition, when for the first time the mass market consumer was seriously transitioning camera use from stand-alone digital cameras to the cameraphone. And now where the phone might be #39;lesser#39; as a #39;camera#39; for casual snap-shot pictures, the iPhone style touch screen cameraphone #39;trumped#39; the existing digital cameras - with its giant screen! br /br /Think about it. What other digital pocket-sized cameras existed in 2007 that had a 3.5 inch screen? None. They also all had tiny 2.5 inch screens.. The iPhone 2G came at the optimal time to capitalize on this shift already happening globally. This was the perfect marriage of a modest camera but a superb screen. Most cameraphone pictures are not printed, they are shown on the phone. And for the average consumer, suddenly the cameraphone meant that everybody had a camera always in their pocket. And thus the new photo sharing opportunity - show it around the table. br /br /MAGICAL MULTI-TOUCH br /br /And here Apple ruled the world. The screen was not just gigantic in size - but there was Apple#39;s #39;magical#39; technologies of the accelerometers - just turn the phone sideways for the next picture if one was in portrait form and the next was in landscape. Can you still remember how you felt the first time you saw that? Wow, this is magical. You just turn the phone, and the picture changes #39;magically#39; as if reading our minds. Why aren#39;t all phones like this? br /br /And then the icing on the cake, the effortless multitouch capacitive screen, just swoosh the pictures along, from this picture to the next. This was utterly amazing. Apple seemed to be lightyears ahead of any other phones. br /br /Note that the iPhone 2G was a severely compromised phone. It was technically not even classified a smartphone by the purists, it was categorized as a featurephone. Its camera was very modest. It didn#39;t do 3G. It didn#39;t have GPS. It didn#39;t support major industry standards like MMS. Its camera didn#39;t record video. It didn#39;t do multitasking, it didn#39;t allow for users to install apps, and on and on and on. Those who had a few years of experience with #39;real#39; 3G smartphones from the major global rivals, in the more advanced markets like Asia and Europe - were not impressed by the specs of the iPhone. br /br /But that did not matter, because in bars and coffee shops and pubs all around the world, regular consumers were showing their pictures - on iPhones. And then when they compared to any pictures shown on any other technically #39;better#39; cameraphone like a SonyEricsson Cybershot or some advanced Samsung or Nokia N-Series, that phone owner would always have to #39;teach#39; the user - what button to press to zoom the picture, or how do you move to the next picture, or #39;now it vanished, how do I get the picture back#39; etc. When we compared looking at pictures snapped now at the same childrens#39; birthday party, the parents would all be amazed at how #39;intuitive#39; and simple that iPhone was. It was clearly the best cameraphone.. Not because of better optics or more megapixels - it was because the screen was so good. br /br /TELE-VISUAL TELE-PHONEbr /br /Which brings me to the cherry on the top. The free media publicity. You want your technology on TV. The iPhone was by far the most TV-friendly mobile phone, ever. Its screen was magnificent in any close-up shots, the TV camera could zoom into the hand of the reporter, who could show the iPhone and what was on it. That became the ultimate phone to show on TV. The media darling. br /br /We have the perfect storm. The iPhone 2G came at just the right time, when consumers were willing to accept cameraphones as replacements for the simple point-and-shoot digital cameras. The first of a new type of mobile phone experiences was being born, that was prone to sharing via the phone screen being passed around. The mobile phone user experience up to 2007 had been almost totally private. In 2007, we started to share the screen of our phone - and most of all it was those pictures on our phones. br /br /The Apple loyalists were the perfect army to unleash to go convert the world. The iPhone was #39;visibly#39; better than any other phone. This was manna to the Apple army. It was undeniable visual #39;proof#39; that Apple made the world#39;s best phone. For Apple loyalists, the evidence seemed obvious, that the iPhone was so much ahead of all others, and clearly, the other phone makers would have to #39;learn from Apple to do this right#39;. Also it was an ego trip as clearly the Apple loyalist was #39;clever#39; for having bought the expensive iPhone when it first appeared, and the friend should be smart too, to switch from the old-fashioned rival phone to the magnificent new iPhone... The evidence was before our eyes, and from 2007 to 2009, no other phone could touch the iPhone for sharing pictures as effortlessly by passing the iPhone around. (And after 2008 the App Store added games and apps and ebooks and other reasons to pass the iPhone around as well). br /br /The visual evidence of the enormous growing popularity was further supplemented by the similar form factor of the iPod Touch - which to casual viewers in any bar, coffee shop or pub, would seem like #39;yet another iPhone#39;. This added the perceived penetration rate of the iPhone by as much as 60% to 75%. And as the iPhone was so cool and sexy, many owners of expensive rival phones - that did not have big touch screens - were hiding their phones at Starbucks, not putting the Nokia N96 or SonyEricsson Walkman or Blackberry on the table, almost ashamed that it was not as cool as the new iPhones were. So while iPhones (and visually near-identical iPod Touch#39;es) were over-exposed and their users boldly showing the world how great the iPhone was, the rival phones were often hidden from view. And again, with WiFi both the iPhone and Touch were often used at considerable length at various Starbucks and other public places with WiFi coverage, so iPhones were very much #39;out in the open#39; and visible. So the iPhone seemed to be everywhere. br /br /It was the perfect storm and far more perception than reality, it was easy to believe that the iPhone was the world#39;s most popular mobile phone as well as its most desirable one. In reality in 2008 only 1% of all phones were iPhones and in 2009 that was up to 2%. But anyone who lives in any city can attest that in the past two years, there have been far more iPhones about town, than one out of every 50 mobile phones. It often seems like iPhones are almost 1 out of every 2. That is the power of perception. br /br /GAP IS CLOSING br /br /The iPhone has not been sitting still since 2007. We have had the camera improved from 2 megapixels to 3 megapixels and now 5 megapixels. The iPhone camera now shoots also video and has added a LED flash for the iPhone 4. Meanwhile the wonderful 3.5 inch screen remains the same size but this summer Apple gave us #39;retina display#39; resolution, of so high pixel density, that it rivals the ability for the human eye to discriminate sharpnesses that would be greater. That increase in sharpness is visible to the naked eye, when comparing any two phones side-by-side, to Apple#39;s advantage. br /br /But in January of 2007 when the iPhone was announced, the 3.5 inch screen was almost unprecedented to most consumers in most countries. The gap from the iPhone 2G to the rival phones by Nokia, Samsung, Motorola, SonyEricsson, LG, Blackberry etc - was enormous. If you took the most common phone sharing situation - the picture sharing as I mentioned in the above, the early iPhone models were very visibly quot;in a different classquot;. All other phones seemed to be obsolete. The multitouch capacitive screen with the accelerometers was a huge leap forward in the summer of 2007 and its taken Apple rivals many failed attempts to finally do all of that. br /br /But now in 2010 we have a slew of touch screen smartphones that do capacitive multitouch and have accelerometers. So that user interface gap is diminishing. I am strongemnot saying it is closing/em/strong, Apple is still innovating but the rivals are strongemdiminishing the gap/em/strong to a large degree. br /br /This is strongemexactly like the Mac vs the IBM compatible computers in the 1980s/em/strong. The first user interfaces that tried to mimick Apple#39;s Mac were very bad - Windows 1.0 was truly horrible. So in 1986 to 1989, there was almost no contest, where the Mac was far and away better than early Windows PCs. But Microsoft kept working at it, and by 1990 there was Windows 3.0 which took over the world and became the first mass market adopted user interface on a PC that outsold the Macs by a big margin. And important to remember, Windows 3.0 was not #39;as good as#39; the Mac. But by 3.0, Windows was strongem#39;good enough#39;/em/strong. For the purist, like a professional in the graphic design arts, there was only the Mac. But for the strongemmass market/em/strong, the Windows at 3.0 was #39;good enough#39; where the average consumer no longer was willing to pay the premium Apple wanted. When the mass market came, it went to the Windows version and very rapidly all PCs and apps and services (and revenues and profits) followed. This, while Windows was never able to catch the Mac #39;technically#39;, in any subsequent editions either. br /br /We are seeing that story now repeating with Google Android already outselling the iPhone - most normal consumers now think the latest edition of the Android OS is #39;good enough#39; to be viable as a true rival to the Apple. Now the two bigger rivals to Apple, both Symbian and RIM have upgraded their OS to advanced touch screen systems that incorporate multitouch. I am not saying the rivals will catch or pass Apple in making the best smartphone OS for user interface. But the gap is diminishing to the point where today in 2010 a Samsung Galaxy or Nokia N8 can be a very viable multitouch rival to the iPhone. br /br /Remember, Apple cannot win by being #39;the best#39; in this race, after the rivals become #39;good enough#39;. That was the lesson of the Mac (and incidentially, also the lesson of the Betamax vs VHS - Sony#39;s Betamax was far superior technically with better video, audio etc but VHS won the race for market share with lower costs). Then all Apple can do, is hope to hold onto its current customer base, which in the big scheme of things in mobile, is tiny. Apple holds only 2% of the global phone market today, thats strongemsmaller than what the Macintosh has traditionally held in the PC market/em/strong. Macs have been recently having about 4% of the global PC market. So understand, this is the wrong strategy for the iPhone, for Apple to #39;be satisfied#39; with this tiny sliver of 2%, half that#0160;of what the#0160;Mac achieved. br /br /THIS IS JUST LIKE AN iPHONE BUT BETTER br /br /Then we have the #39;other#39; advantages. Imagine the average non-technically informed mass market consumer, walking into an average phone shop somewhere on the planet. Lets say that consumer has already decided that the next phone has to be a touch screen about 3.5 inch smartphone and has seen a friend use an iPhone and wants to consider the iPhone. br /br /If that consumer truly wants the slimmest most minimalist smartphone today, the iPhone 4 is definitely it. Best screen resolution and meets all the basic expectations. But then its up to the sales guy to see what the consumer quot;really wantsquot;. br /br /Now, what if that normal consumer likes the iPhone, but also wants something more? What if the consumer wants an even larger screen than the 3.5 inch screen? Then the salesguy will pull the Motorola Droid X with its 4.3 inch screen and let the customer compare to the iPhone. The iPhone 4 has a #39;sharper#39; screen but the Droid X has the bigger screen. My gut says many will end up liking bigger more than sharper.. br /br /Or if the consumer is ok with any 3.5 inch screen, but is heavily addicted to mobile messaging (remember 78% of all mobile phone users worldwide are already active users of SMS text messaging, as I report in the a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Almanac 2010/a, and 30% of all smartphone buyer will not consider a phone that does not have a dedicated separate QWERTY or T9 keyboard for their messaging needs, according to to Motorola). If the customer wants a full QWERTY keyboard - then for about the same price as the iPhone, but a bulkier smartphone, you can have your big touch screen with the slider QWERTY and get the Blackberry Torch. The salesguy will put these two phones into the hands of the customer. If QWERTY is what the customer would like, the customer will walk out of the store with the Torch, not the iPhone 4. br /br /Or if the random customer wants the same experience as the iPhone, but rather than the 5 megapixel camera with LED flash, is more into photography and likes a 12 megapixel camera with #39;real#39; Xenon flash. That customer will walk out of the store with the Nokia N8, not the iPhone 4. br /br /Or if the customer want the same form factor of the iPhone but wants also to have a pico projector in their pocket, now there is a touch screen smartphone with the pico projector - still in the same price range as the iPhone - the Samsung Galaxy Beam. br /br /These are not more expensive phones. All do the large screen multitouch 3G cameraphone internet enabled 3G smartphone concept very well (they are #39;good enough#39; compared to the iPhone, for any non-iPhone user today). But like in cars we don#39;t all buy the Ford Model T in black. Different consumers have different needs. Some like the fast sporty - but minimalist car like a Ferrari (no back seat, almost no space for luggage, very low ground clearance so speed bumps and potholes can be problems, etc) while others want a big tall roomy vehicle with tons of storage space and ground clearance like a Cadilllac Escallade or Range Rover SUV, while others want an eco-friendly hybrid car like the Toyota Prius, or yet someone else lives in the city and size and parking are a premium needs, so a small city car like the Mini or Smart Car is what they want, etc. br /br /We are humans, we have differing needs. In 2007, one iPhone 2G was the only thing out there - quite literally the only choice - if you liked the large touch screen concept. Today for the same price you have many varieties of large touch screens in the high end of the price point. At this richness of choice, one model iPhone 4 can no longer hold the fort for holding market share. The rivals will run past it, as they already are like we see with Android. Google has just today announced it is activating 200,000 Android phones every day - that means Androids outsell the iPhone by 2.2 to 1 already. It was even just a few months ago.br /br /Yes, the iPhone App Store has a quarter of a million apps and gets several billion downloads - but there are now many rival App Stores getting up to speed as well. The Nokia Ovi Store is already doing more than half a billion downloads and several dozen other app stores are out there supporting most platforms and phone brands. Android is getting more mobile web use, all of the #39;but the use of the iPhone is different#39; arguments are proving false. If you give consumers a similar form factor phone, on a similar price plan, the Androids and Symbians and others will all generate similar usage as the iPhone. That is not a sustainable advantage for Apple either. br /br /PROFIT VS MARKET br /br /So we come to what is wrong with the iPhone strategy. I apologize for the long article, but I had to establish that this is not in any way being critical of the excellence of the iPhone itself, or of its loyal fans, or its true competitive advantages. And that I acknowledge the iPhone#39;s launch and first years have been executed with excellence, far beyond what any other brand has ever achieved (compare the iPhone to say the failed launches of rival tech giants with the Google Nexus One or Microsoft Kin). But now its time for the emstrongsecond stage of the iPhone/strong/em, and Apple is in danger ofstrongem missing its opportunity/em/strong. The current strategy - continuing the early awesome launch - is emstrongwrong for 2010/strong/em. Wrong for this time. It was right in 2007 to 2009 but no longer. It is wrong for a market where the rivals are snapping at the heels of Apple. br /br /In a stable mature industry like the PC industry for example or the music player industry, its great to be the biggest at making profits. But in a new industry that is experiencing rapid growth, where markets are still being made - that is where the management has to strongembalance/em/strong profit strongemto market share growth/em/strong. This is a difficult balance. If you have a good product and you price it too highly, you generate great profits - your investors will love you this quarter - but you abandon market share to a long-term investor revenge when their visions are crushed as the rivals take the market. But if you price too low, you risk buying market share now while making losses, which is an unsustainable market situation, suicidal to long term - and you go bankrupt with supremely happy customers, witness Palm. br /br /In a time when an industry is in hypergrowth stage - like smartphones are today - the price is not the primary purchase criterion. In times of strong market growth, it is possible to have a desirable product, to gain market share, strongemand grow profits - simultaneously/em/strong. Once the market matures, and everybody offers similar products, the competition is far more strongemdriven by price/em/strong. When price is the primary criterion, Apple is suffering and cannot easily grow market share. Apple is too dependent on its design edge, which means it will always be a premium price product. Now is the #39;best#39; time ever, for Apple to achieve market share growth in smartphones. Apple can always rely on #39;loyalty#39; ie return customers. That is strongemnot growth/em/strong. But Apple has a rare chance, a once-in-a-decade chance, now. Once the big growth era is over, and price is far more important to buyers of smartphones, then Apple will have the hardest time to try to match the low cost providers from Asia. br /br /What the tricky management conundrum is, is to gain market share while making profits. You cannot maximize one or the other. You have to balance the needs of the two. Please understand what I am saying. I am not saying Apple is wrong to make profits (that is great). I am saying, that if Apple has set strategic targets which generate excessive profits - at the cost of market share - that is a dumb strategy. If Apple can grow its market share while making some profits (as it did in 2007, 2008 and 2009) - that is the correct strategy. br /br /But somewhere in late 2009 or early 2010, Apple strategy went off the rails. While still making profits, Apple#39;s market share turned into decline (as a href=http://communities-dominate.blogs.com/brands/2010/04/iphone-in-memoriam-a-history-from-its-peak-moment-who-copied-whom.htmlfirst explained by me on this blog/a, but now retold regularly by the major mobile industry analysts, such as in a href=http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0710.gifthis graph of global smartphone market shares by Strategy Analytics/a). There is no excuse for Apple to own the most desirable smartphone on the planet, and not be able to turn that into market share growth. That is simply incompetent management, clearly focusing on the wrong priorities. Apple should maximize its profits in the mature industries of Macs and iPods, but only optimize profit/market share mix in the smarphones space, to gain maximum obtainable market share for long term viability and profits measured in years and even decades, not a couple of quarters. br /br /DRUG DEALER STRATEGY br /br /We know that Apple#39;s loyalty is beyond any rivals. 90% of existing iPhone owners want another iPhone. And we know that Apple is able to expand that loyalty across the other Apple products. Get the consumer to buy an iPhone today, it will consider the iPod, the Mac and the iPad in the near future. And most of all - still today in 2010, what has been true the past 3 years, the current owners of iPhones will try to convert their friends to try the iPhone, most of all by sharing pictures. No other phone brand in mobile has this power. So no other phone brand has this strategic option. Apple should take the #39;drug dealer#39; strategy, to get Apple iPhones into the hands of the widest possible reach of consumers - and rely on Apple love, loyalty, bordering on addiction - to build its future base. Because still today in 2010, there is that very rare #39;spreading factor#39;, where not only does that user return to buy another iPhone but that iPhone user will try to convert friends to become new iPhone users. br /br /This is rare in any technology. But it means there is a magnificent opportunity for Apple (today). What Apple should be doing right now, is to strongemget every conceivable customer on the planet to #39;try#39; an iPhone/em/strong - to get addicted now, and to teach all friends and colleagues to try Apple now, before every smartphone is a total iPhone clone. And most wonderfully for Apple#39;s long term achievement - their brand loyalty is so strong, they can do this profitably, without #39;giving away iPhones for free#39; haha. No, they can maintain the same profitability of the iPhone line as today, while dramatically expanding their market share. br /br /PRICE PYRAMID OF PHONES br /br /Morgan Stanley told us last year that you can divide the global mobile phone handset market into three price tiers. There are superphones costing about 600 dollars (like the iPhone, or Motorola Droid or Samsung Galaxy or Blackberry Bold or Nokia N8 etc). Their total market according to Morgan Stanley last year, was 2% of the global handset market in 2009. There is a cheaper smartphone (and premium feature phone) market of about 350 dollar phones that comprises of 11% of the global phone market. And then there is the remaining 87% of the global market where the basic phones exist with an average price of 100 dollars. Please note these prices are #39;street prices#39; ie without contract, so yes, the real price of the iPhone 4 is not the 199 dollars you pay at ATamp;T, its real price hidden in the 2 year contract is 600 dollars. br /br /Where do we stand today? Apple has a global market share of all phones sold worldwide (in Q2)... of 2%. It has taken most of that super premium phone market that is available according to Morgan Stanley. In reality, because of those confusing handset subsidies, the iPhone is also competing in the mid-price phones segment in many markets of handset subsidies like the USA, UK and Japan - where the price is not as clear to the end user. But still, its obvious that the current iPhone 4 is a super luxury phone at the top of the price pyramid. That also is reflected in statistics on iPhone users. The average household income of iPhone owners was the highest of any smartphones, at 100,000 dollars according to Yankee Group. The iPhone is disproportionately a rich person#39;s tech toy. It is an expensive luxury good. br /br /CURRENT SALES PATTERN br /br /The current iPhone 4 is selling so well that it is on waiting lists in most stores. But that demand is an illusion that only applies in the beginning of the sales cycle. The iPhone cannot sustain its initial appeal for two reasons. The launch cycle of only 1 new iPhone model per year creates an anticipation factor to the iPhone, so in the Spring, owners of existing iPhones will delay their upgrade/replacement purchase decision while they await the newer greater iPhone due in June. br /br /Note that this is a bad trend for Apple, as it prolongs the natural rate of replacement cycle. The replacement cycle for phones globally is only 18 months according to the Semiconductor Industry Association (vs 3.5 years for personal computers by the way). So if someone bought a nice shiny new iPhone 3G in October of 2008, then by February 2010 that same customer is edgy to get a new phone. If Apple had a new iPhone for that consumer in Q1 of 2010, Apple would make a sale in February and then be ready to sell another new iPhone for Christmas 2011. But as that Apple fan knows the new iPhones come in June, the purchase is unnecessarily delayed. And because the #39;newer#39; iPhone is bought only in the summer, the #39;next#39; iPhone is also delayed by a further 6 months, so the delay effect is cumulative. br /br /The math is devastating. For every customer that would have upgraded at one and a half years (the world average rate), but prolongs to two years - Apple annual sales of replacement phones are depressed by a third. Apple is voluntarily abandoning a huge slice of the #39;natural#39; market it #39;owns#39; due to unnecessary delay in the upgrade cycle. Apple didn#39;t understand this, coming from the PC industry where replacement cycles are more than twice as long. br /br /The second effect is the rivals releasing new phones. This industry moves very fast. Most major rival giant mobile phone makers release new smartphones monthly (Nokia, Samsung, LG, SonyEricsson etc) and even the smaller #39;pure#39; smartphone makers like RIM and HTC release more than a single new smartphone model ever quarter. Only Apple does only one new model per year. This means that in the Spring of any year, the rivals can pick prospective iPhone new users with alluring new phones. Apple is unnecessarily abandoning this market to rivals. br /br /ITS TIME FOR THE iPHONE NANO br /br /So this is what I think is inevitable. Apple has tostrongem expand its product range/em/strong. Why? First, because it is too crowded in the top of the pyramid. All rival makers are offering new phones to go against the iPhone. The battle is getting brutal in the superphone category - only more bloody towards the end of this year with the newer models coming. Apple has to come down in price to where a bigger market exists. This is what Apple already does with the iPod and the Macintosh. Apple has no problem designing and managing a portfolio of premium luxury products with iPods and Macs, of exceptional design, that users love. Apple have no problem maintaining the competitive design aspects and Apple#39;s brand loyalty as it has split those product ranges into multiple products. Why would Apple have any problem in doing so with the iPhone? br /br /MY IDEA OF WHAT THE NANO iPHONE SHOULD BE br /br /My suggestion is at roughly half the current price of the iPhone 4. Do a new iPhone Nano at a street price of about 300 dollars without contract, or about 99 dollars for the US market on ATamp;T with 2 year contract. That kind of price. And not to repeat the iPhone 3GS. Make this genuinely quot;a new iPhonequot;. Give it a couple of #39;new#39; abilities that the 3GS did not have. This is easy to take from the iPhone 4. Add LED flash to the 3 megapixel camera of the 3GS. Add the iOS version 4 that has multitasking etc. Add a faster CPU and memory than 3GS, so the iOS version 4 will run well. And give it the #39;revised look#39; of the new iPhone 4 (obviously also fix the Death Grip haha). The rest of the guts would be essentially the 3GS. br /br /Then VERY importantly, make this a nano model, ie strongemmake it physically smaller/em/strong. Most of all, give it a modestly smaller screen than the iPhone 4, ie 3.2 inches. This gives Apple the chance to make the Nano #39;noticeably#39; smaller physically than the traditional iPhone Classic size phones - something like 10% physically smaller in length and width (while retaining about the same thickness). There is the #39;intuitive#39; reason why the Nano is cheaper and the full price iPhone 4 more expensive, because the Nano itself is smaller with the 3.2 inch screen, and the iPhone 4 bigger with its 3.5 inch screen. Like in cars, compare the BMW 3 series vs 5 Series etc. The Nano needs to be carefully designed to not significantly cannibalize iPhone 4 sales. br /br /By using the same screen resolution as the current 3GS, there is no significant market fragmentation with a new screen resolution to manage. And by using Moore#39;s Law, if Apple was able to make the 3GS profitably in June of 2009 with a street price of 600 dollars, it can do a Nano iPhone with almost the same specs but smaller screen, at half the cost it was for the 3GS in 2009. So the Nano in late 2010 will have the identically excellent profit margin. br /br /This strategy does not harm Apple#39;s profitability at all. Do not give the Nano the retina display. So this is clearly the #39;entry level#39; model. Design the Nano to be #39;not good enough#39; for current iPhone 2G or iPhone 3G users to consider in an upgrade/replacement - they don#39;t want a smaller screen and they will love the Retina Display and 5 megapixels of the iPhone 4 - Apple has to make sure existing iPhone owners will all want the iPhone 4, and if the users were able to pay for the iPhone 3G (or 2G) then they can afford the iPhone 4 today. So in synch with the launch of the Nano, make a modest upgrade to the internal parts of the iPhone 4, to give it a bit of a #39;supercharge#39; so upgrade the memory for example, to further illustrate the concrete value of the iPhone 4 being significantly more than the Nano, to secure the loyalty of existing iPhone owners. br /br /DRUG DEALER WANTS NEW ADDICTS br /br /The Nano strategy is to capture NEW customers to Apple#39;s iPhone. Why? One, we know that worldwide, the big growth is at the lower end of the smartphone market. Two, we know the iPhone has the best desirability today, so there is a huge pool of love of iPhones that are deterred by the current high price. Three, we know that all new Apple product owners fall in love with Apple. This will mean that probably 90% of iPhone Nano first owners will continue as iPhone owners. Fourth, the iPhone Nano would be an entry level Apple product to get new buyers to Apple other products like the iPad or Mac or iPod (and future iOS devices). And fifth, because all iPhone users become fanatical brand ambassadors - who will show their friends how cool the iPhone is and try to get them to buy iPhones too. And sixth, this Nano offers increased unit sales, increased revenues at the same excellent profit margin as the 3GS did last year. br /br /With the lower cost of the Nano, the iPhone will probably increase total global iPhone shipments by at least 50%, maybe even double it. Because its seen as a new iPhone with some honestly new features, there is no stigma that the 3GS currently has, of being #39;the obsolete iPhone#39;. There will be very little of any cannibalization of the full price iPhone 4, because the 4 is the #39;replacement version#39; for existing iPhone owners with clearly superior tech specs, specifically the Retina Screen and the 5 MP camera. The Nano is the new first-time iPhone #39;entry#39; model for new buyers. The Apple loyalists are very knowledgable and peculiar about their devices, so it will be clear to all existing iPhone owners, that they really do want the iPhone 4, not to replace an iPhone 2G with the Nano today. And Nano buyers of today will eventually be then migrated to premium iPhones over time. br /br /Coming for Christmas, the iPhone Nano would be the perfect Christmas gift for every dad to buy whose wife has been using quot;the family iPhonequot; before. The Nano would be the perfect gift for grandparents - here is the perfect smartphone for the elderly (the elderly are loving the iPhones). It is also a far more practical gift, pricing wise, for teenagers than the real iPhone 4 (teenagers break and lose phones far more than adults do). And obviously the iPhone 5 of June 2011 would then be another #39;superphone#39; with the big leap forward for the flagship iPhone. br /br /IS READY TO GO br /br /I am nowhere near the first to suggest now that Apple should introduce a cheaper Nano iPhone. Those rumors have been on Apple forums and blogs since the iPhone 2G was launched in 2007. So Apple HQ has heard this story many times. I am sure there has been a feasibility study and there has been a #39;rolling plan#39; of a Nano version, updated every few quarters as the tech specs change. I am sure Foxconn has had proposals for Apple on expanding Foxconn#39;s business with Apple to do the larger market, larger volume iPhone Nano, totally in Foxconn#39;s interests. And some poor Apple internal manager has been trying desperately to convince Steve Jobs to approve the Nano project but been ruled against, time and again. Early in 2007 and 2008 I said that it was not the time for the Nano. But since 2009 it became plausible. Now it is needed. This is the time for the Nano variant to the iPhone. br /br /FULLY SUPPORTS APPLE PRODUCTS br /br /There is no compromise in this strategy. I am not asking for a QWERTY version (which I have argued separately, would double the iPhone#39;s market share, but thats another story. I a not convinced Apple will ever see this, and may be stubborn about it like it was for a decade with refusing to give us Macbook laptops, or even today, refusing to issue a 2 button mouse for the Mac). And it would not eat into the sales of the iPhone 4. In fact, there would be some, who would start to carry two iPhones. So for some existing iPhone users with one iPhone, now there is a reason to get a second. The main phone as the iPhone 4, and the second #39;partying#39; iPhone for the evenings, as the Nano. br /br /Note also the iOS family of products. Many of the developers have been fooled into thinking that Apple#39;s iPhone (and/or iOS) reach is somehow the biggest smartphone platform on the planet. Apple has not particularly pushed this view, but have not bothered to correct it either. It has most of all been fuelled by faulty analysis of mostly US based analysts and reporters. br /br /Meanwhile the tech bubble that started to form around iPhone apps somehow #39;being the new gold rush#39;, has subsided as many analysts are now pointing out that the iPhone App Store (and all other app stores too for smartphones) economy is not a digital eldorado. So the App Store myth is now breaking, and the truth is coming out about the iPhone not being somehow the world#39;s most used internet surfing phone either. These facts have been knows to the real experts of the global industry and a href=http://communities-dominate.blogs.com/brands/2010/06/full-analysis-of-iphone-economics-its-bad-news-and-then-it-gets-worse.htmlI#39;ve been among the many/a trying to inject some reason to the discussion over the years. br /br /So there is still a strongly held myth, that somehow the iPhone is #39;taking over the world#39; and the emerging truth that the iPhone only accounts for 2% of all mobile phones and even its peak market share in smartphones was a year ago in Q3 of 2009, when Apple had 17% of smartphones, and that market share has been in perilous decline ever since, now down to 13% or 14% - while the smartphone market itself is experiencing the biggest boom ever. The iOS developers will start to ask for answers and demand solutions. br /br /What Apple needs is now a big boost to the iOS market and again, an iPhone Nano would instantly sell more than the iPad, and could well sell more than the iPhone 4 itself. The faulty but widely held view of most US based analysts and Apple loyalists is that the iPhone is the world#39;s most used, or perhaps second most used smartphone. So most who #39;believe in Apple#39; including many investors, think that the iPhone has achieved number 1 or number 2 status. br /br /The truth is also out there. It is now being spread, that number one by a wide margin is Nokia on Symbian. The new number 2 is Android. RIM is number 3 and all three of these grew unit sales and kept or grew market share in 2010. The only big smartphone maker and platform that lost unit sales and is seeing big declines in market share is the iPhone, now at number 4. As this reality sinks in, many will be stunned and worried. What Apple really strongemneeds now is a good #39;second act#39;/em/strong to the iPhone story. The Nano iPhone is the story all Apple fans and followers (and investors) want to hear, now. br /br /INEVITABLE, BUT WHEN? br /br /Can Apple do this? I am certain that Foxconn can do this smaller #39;updated#39; version of the 3GS very easily by Christmas. This is not the cutting edge technology like the iPhone 4 was with retina display. Some day Apple will do this. It is strongeminevitabl/em/stronge. They will split the iPhone into a range and my gut says the Nano will come before any premium super duper iPhones. By next year some analysts expect half of new phones sold in the USA to be smartphones and in Europe in some countries to be more than six out of every ten new phones. China is now rapidly falling in love with smartphones, after the 3G networks went live last year and China has become the second biggest country for smartphone sales where 1 in 8 smartphones are currently sold worldwide. In China, Apple#39;s rivals like Lenovo sell iPhone clones. Will Apple release the Nano now soon, or will it come years too late, like so many other Apple changes (eg Macbooks)?br /br /The iPhone 4 is a great smartphone. But it is expensive. The Nano would be the perfect China iPhone too. Apple can profitably do a far cheaper Nano model of the iPhone and reverse its decline in market share. The time to do that is now, when the smartphone market is still in hypergrowth stage and market shares are relatively easy to capture profitably, than a few years from now when the smartphone market has become more mature strongemand price is the main way to compete/em/strong. And because of Apple#39;s big investment in design, Apple can never win the price war. The time to capture market share is now while the market is still growign strongly and price is not the main issue. br /br /GREAT QUARTER NOW IN Q3 br /br /Do not be fooled by the numbers of Q3 in 2010. The iPhone is the world#39;s most desirable smartphone. All major markets have now been opened to the iPhone as China and South Korea were added to the iPhone family last year. The Antennagate Death Grip did not have time to suppress Q2 sales because only 3 days of iPhone 4 sales were registered in the previous quarter. But Apple was fast enough to issue its apology and the #39;band aid#39; solution of the free cases, that today the demand for new iPhone 4 smartphones is still far bigger than the supply. br /br /The iPhone will have its best-ever quarter in unit sales and revenues and profits in Q3 of 2010, which together with strong demain for the iPad will no doubt produce a magnificent quarterly revenue and profit statement for Apple to report for the Calendar Q3 with Apple results out in October. The iPhone is definite to break its own unit sales record and I am confident they will far exceed 10 million iPhones sold in this quarter. br /br /That all is good and well, but they arestrongem winning the wrong war/em/strong. Apple could sell 50% more - even maybe twice the number of iPhones, if it had a Nano model in its lineup. And that Nano model as I defined in the above, would be exactly as profitable as the 3GS was. Today Apple is the most profitable mobile phone maker on the planet. It makes the most desirable phone and has the best loyalty of any phone maker in the market. It has been so for the past year. br /br /WHY iPHONE FAILING THE MARKET?br /br /Why is it that Apple saw a peak of market share in Q3 of 2009, and even as it releases the best iPhone ever, the iPhone 4, Apple#39;s total unit sales went down from the previous quarter? Why has Apple#39;s market share crumbled from a peak of 17% of all smartphones in Q3 of 2009, to 13% today. It is not because customers don#39;t love the iPhone. Its because Apple has the wrong strategy now. They are abandoning the long term sustainable profits of major market share gains now, for the short term maximising of profit at the cost of market share, now. br /br /Does this mean that Apple management is brilliant, or is perhaps a senior executive like Steve Jobs planning for retirement and maximising market evaluation now (to dump shares perhaps at a peak price?) at the expense of long term shareholder value? I am certain Apple has a ready strategy to launch an iPhone Nano type of cheaper iPhone and could do so within half a year. Why is it not doing so now? Apple has the wrong strategy for its iPhone. br /br /strongFinally/strong - This is the first in a series of analysis articles about the major rivals in the a href=http://communities-dominate.blogs.com/brands/2010/07/understanding-smartphone-market-share-battle-not-for-phones-is-for-platform.htmlsmartphone bloodbath wars/a and what I think of their current strategies. For those who want to see the #39;grades#39; I gave at the half-year point of 2010, a href=http://communities-dominate.blogs.com/brands/2010/08/smartphone-bloodbath-report-card-at-half-point-of-year-2010-for-all-major-brands.htmlmy first half review of all major brands is here/a. And if you want to get the stats and numbers for the mobile industry, please take a look at the a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Almanac 2010/a (available as immediate download as an ebook/mbook for your smartphone or PC or Kindle or iPad) br /br /PS - TOMI DOESN#39;T KNOW WHAT HE TALKS ABOUT br /br /quot;Tomi doesn#39;t know what he talks aboutquot; Oh, do I not? When the US tech press was all gaga over the unveiling of the original iPhone 2G, in the Spring of 2007, before the iPhone had launched, this is what your humble mobile 3G consultant wrote on this blog: br /br /On January 10 just days after the first prototype was shown by Steve Jobs on stage,a href=http://communities-dominate.blogs.com/brands/2007/01/handicapping_th.htmlI wrote my first major analysis of the iPhone/a - that the iPhone will reach its 10 million target for first year (not unusual forecast but clearly I was not one who said it will fail - as many did - nor did I fall all over the iPhone suggesting it will sell 20 million as others did). But I was the first analyst anywhere to give a mix of US vs World sales of the iPhone, and called that US/World split of sales for the first full year almost exactly, five months before the iPhone had even launched. br /br /I said the iPhone 2G would fail advanced Asian markets until a 3G version was released (who else said this by January 10 of 2007?). I also said Apple#39;s particular strengths were its marketing and PR spin machine, its loyal fans, and its exceptional skills in UI design. Which of the mobilists raised these issues when oogling over the first pictures of the large screen slim sexy iPhone. And I called it that there will be a touch screen iPhone clone by one of the major 5 before the summer - as LG did launch the Chocolate in Europe that spring. Not bad, two days after anyone saw the iPhone. br /br /Then a month before the iPhone launched, on May 18, 2007, I wrote my definitive prediction about the relevance of the iPhone, in a href=http://communities-dominate.blogs.com/brands/2007/05/entering_iphone.html#39;Entering the iPhone Era#39;/a - the blog that also is credited with inventing the term #39;jesusphone#39; (something I never said, but was later mistakenly assigned to me and that blog). I said that from that point, the yardstick to measure any premium phones would be the iPhone (good call). I called it that there will be a migration from laptop use to pure iPhone use (correct). I said the use of the mobile internet will be (mistakenly) attributed to the iPhone (good call, even better that this was done mistakenly, but that the myth would prevail that the iPhone brought the internet to mobile). I called it that the media industries based in North America will wake up to mobile (correct call again and nobody made this call in May of 2007). I said that USA based advertising execs of Madison Avenue would also wake up to the cellphone, thanks to the iPhone (correct again). I said the iPhone would be a regular on latenight TV comedians and on 24 hour news (right). And I said that silicon valley, the PC and internet industries would discover mobile after the iPhone. When we look at Dell, HP, etc - that was clearly also the right call. br /br /In that blog I predicted that in its first year the Nokia N-Series would outsell the iPhone (correct). This again, more than a month before the first ever iPhone 2G had launched, and nobody was yet testing the iPhone or reporting on it. Most analysts were still mesmerized by the outwardly slickness and sexiness. I was very deep into analyzing how the iPhone would change our industry and other industries. br /br /And a few days before the iPhone 2G finally launched, on June 24 of 2007 a href=http://communities-dominate.blogs.com/brands/2007/06/crunching-numbe.htmlI wrote my last analysis of the potential of the iPhone/a and pointed out that while excellent as a first attempt by Apple, the iPhone 2G was flawed with some of its biggest faults being no 3G, a puny 2MP camera, no ability to record video and no flash for the camera - all factors that Apple has since fixed in updates to the iPhone line. And on 24 June I wrote that strongemwhat will end up being the biggest change in mobile/em/strong - where Apple changes the whole game - strongemis the user interface/em/strong. This was again written before any press or tech reviewers had a chance to play with Apple#39;s amazing multitouch iPhone. br /br /And what of the #39;seasonal#39; sales cycle for the iPhone that we now know exists, where it sells better in the second half of the year up to Christmas, than the first half of the new year, while waiting for the newer model? Who told you first there will be this seasonal pattern? I called it on June 24, before the first iPhone was sold! I do know my #39;sh*t#39;.. And while many were suggesting an iPhone Nano within the first year, I said that was not possible because the next iPhone would need so many costly upgrades, it would end up costing more than the original - again 100% accurate as we see from the iPhone 3G vs 2G. br /br /And do I understand the market that the iPhone was invading. I made an emphatic point that the iPhone would not impact the Blackberry (and that pundits would think it would) - both proven to be true. Of all smartphone brands, the Blackberry has been most isolated from any iPhone impacts, and grown by a healthy rate ever since. I did call it that the two brands most hurt by the iPhone would be Motorola and SonyEricsson (wow, that was a good call - both profit-making growing premium phone makers went into a tail spin, lost customers to Apple and lost market share and started to make losses). I called it in June 2007 that LG would gain more from the iPhone launch, selling its Chocolate touch screen phones (LG sold more Chocolates for two years after the iPhone#39;s launch). And I called it that Nokia#39;s N-series, in particular N-95 would gain from the launch of the iPhone - as it did also outselling the iPhone. And I called it that an Asian beneficiary for all those networks who won#39;t carry the iPhone will be HTC. br /br /I also called the problem of launching with multiple carriers in Europe and Asia, the need of 3G to make any meaningful sales in Europe and Asia and the need of multiple carriers in the same market(s). And I predicted that most European carriers would reject the revenue-sharing deals that Apple got out of ATamp;T. Of the Asian market I also pointed out that much of Asia is very price sensitive (witness iPhone#39;s poor performance in China). And I called the clones to appear in Asia. And finally, that while the US market would love the iPhone 2G, the rest of the world would be underwhelmed by that near-obsolete device but that when Apple did its first full upgrade, with 3G, in the summer of 2008 - that would be the first true Apple world-winner smartphone (all turned out to be true). All this was written still before the iPhone had sold one unit in June of 2007. br /br /Obviously I am not infallible, I have made many bad calls in the industry too, like anyone who is professionally involved in forecasts. So a href=http://communities-dominate.blogs.com/brands/2010/04/apple-quarterly-numbers-for-iphone-stunning-far-above-expectations.htmlwith the iPhone, I did get the Q1 quarter of 2010 (Jan-Mar calendar quarter) very wrong/a. I had forecasted a decline in the unit sales compared to the Christmas Q4 quarter as had been the seasonality pattern in previous years. The reality was that the iPhone actually grew unit sales from Q4 of 2009 to Q1 of 2010. br /br /Yes, I was clearly wrong - but that time, forecasts for iPhone unit sales prior to Q1 Apple quarterly results - every single published analyst (over 30 of them) had all forecasted a decline in sales, and my error in my forecast was one of the smallest of the forecasters. Even when I am wrong, I tend to have less error than most of the other analysts. In this forecast the average error in the forecasts was about twice the size of my error. And not one forecaster correctly predicted that iPhone would grow sales from the Christmas Quarter to Q1 of 2010, every one thought the sales would decline. And in Apple#39;s biggest country market, the USA, that pattern did hold. ATamp;T sales declined by 13% from the Christmas period. How did most of the analysts react to Apple#39;s surprising numbers? I did not see many of them acknowldeging that just days or weeks before, the analysts had been wrong. br /br /I was on Twitter within minutes of the number being released, telling my followers that my forecast was seriously off, and I came onto this blog within hours with a blog article explaining that my forecast had been significantly off. I didn#39;t see that by the other forecasters. And then, I did what I always do if I find my forecast did not meet with reality - I take it upon myself to research what went wrong and why my forecast did not happen (as I have done with such famous forecasts of mine in the past as the video calls, MMS picture messaging, 3G adoption rate etc). I think that is the professional responsibility of anyone who makes a living with forecasting. br /br /I went digging for the facts and details, to discover where that unanticipated error was. a href=http://communities-dominate.blogs.com/brands/2010/04/apple-to-thank-year-of-tiger-for-china-surprise-in-iphone-strong-quarterly-sales.htmlI discovered it too/a, I believe I was the first analyst to point out that China had delivered a surprising one million extra sales for Apple for Q1, which accounted for the surprising up-swing in the unit sales compared to the expected decline. The China quarterly sales of iPhones in the Christmas period were about 300,000 units (according to China Unicom), the level that seems the standard for China, as that is the level of iPhone sales that Apple also had for this past Q2 of 2010 (under 280,000 units actually, according to Canalys). Then in Q1 of 2010 the China iPhone sales surged to about 1.3 million. A sudden, never-before-seen major surge in sales, four times bigger than normal level of iPhone sales. I found the missing number that caused all the forecasts to be wrong, but this was still not the reason why China happened in the first quarter of 2010. br /br /I dug further and found that this was due to the Chinese holiday of the Lunar New Year (Chinese New Year) which falls in late January or early February of any year depending on the lunar cycle. The Chinese exchange gifts on Lunar New Year, which is the big gift-giving season similar to how people in the West give gifts on Christmas. Most Chinese gifts are #39;red envelopes#39; of cash, but increasingly affluent middle class and wealthy younger Chinese also gift major gifts of #39;goods#39; ie products, to close relatives including smartphones. This was why there was a huge surge in Q1 in China and I was definitely the first analyst to explain this. Since I did so, many other analysts and even other phone makers like Nokia have attributed Q1 strong smartphone sales to the Lunar New Year gift-giving in China. The reason we analysts missed this pattern, is that China only in 2009 started 3G operations and smartphone sales have only become significant in China since then. Today China is the world#39;s second largest country for smartphone sales accounting for 12% of the total sales of smartphones worldwide (according to Canalys). br /br /So I am only human, all of us forecasters make errors. But find me another mobile analyst who comes to his blog immediately when one of his forecasts is found to be in error - and who then also takes the effort to discover why it was wrong - and reports that finding too. That is Tomi Ahonen. I have gone through every major forecast error I have ever made in my career, and accounted for myself, in public, in my books and this blog, explaining where I had gone wrong. Most of the time, luckily, I have been quite accurate. And on iPhone related forecasts and predictions, I have been exceptionally accurate over the past three and a half years since the first prototype was shown by Steve Jobs in January of 2007. br /br /Of the most important mobile phone of all time, and the most successful new phone maker launch of all time, I have been making correct calls most of the time, by far more correct calls than any other Apple follower or tech analyst or mobile specialist. I do understand the iPhone impact to the mobile industry and how the mobile industry is reacting to the iPhone. br /br /And I am telling you the reader now, that Apple had a great launch strategy for the iPhone, but its follow-up strategy is now flawed. Apple has to split its product range and introduce a cheaper iPhone model alongside the main iPhone model soon. The longer they wait, the worse it will be for Apple in mobile in the long run. What do you think? Is it not time for the iPhone Nano? br /br /ABOUT COMMENTS TO THIS ARTICLEbr /br /We find often with Apple related commentary, that some flood our blog to post pointless comments by visitors who clearly had not read the full article. If anyone leaves comments that clearly had not read the article, I will be eliminating those comments without mercy. I am happy to take any critical comments including those accusing me of being an idiot, as long as the person leaving the comment has clearly read the article.br /br /This is the first in a series of analysis articles about the major rivals in the smartphone bloodbath wars and what I think of their current strategies. For those who want to see the #39;grades#39; I gave at the half-year point of 2010, a href=http://communities-dominate.blogs.com/brands/2010/08/smartphone-bloodbath-report-card-at-half-point-of-year-2010-for-all-major-brands.htmlmy first half review of all major brands is here/a. And if you want to get the stats and numbers for the mobile industry, please take a look at the a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Almanac 2010/a (available as immediate download as an ebook/mbook for your smartphone or PC or Kindle or iPad)

pSo we are at the half point. Here is my #39;report card#39; of the major brands, both in smartphone phone makers, and more importantly the smartphone operating systems for the mid-way of 2010. For those who do not know the US grading system, A is excellent, B is good, C is passing, D is poor and F is failing. The grades can be adjusted up or down a bit with a + (better) or - (worse). This blog is part of my bloodbath analysis of smartpone wars of 2010 and I am adding a series of strategy analysis for the major brands, in upcoming days.br /br /MARKET IN GENERIC SENSEbr /br /The generic smartphone market grew 10% over the six months from the end of 2009. For any smartphone maker or operating system, just to keep up with the market growth, they had to grow 10%. The global market experienced very severe price wars in the Bloodbath in 2010. So for any smartphone makers that were able to remain profitable in that time, that shows they were managing their growth in line with the industry, during very hard competitive times. For dumbphone makers, the world#39;s total phone market had migrated 15% of all phones to smartphone by Q4 of 2009. That is now 19%, so any dumbphone maker should have more than 19% of its total phone business migrated to smartphones to indicate being ahead of the market.br /br /HANDSET MAKERS BY ORDER OF CURRENT MARKET SHAREbr /br /THE BIG 6 SMARTPHONE MAKERSbr /br /Nokia = Bbr /Grew 15%br /Market share 41%br /Was profitable both quartersbr /Has migrated 22%br /br /Nokia grew smartphone unit sales faster than the market and picked up market share. They did that being profitable both quarters. This is textbook good performance. Their migration percentage is consistently above the industry. Nokia has been pushing smartphones into lower cost price brackets, where most rivals can#39;t offer competition, with a 100 dollar 3G smartphone for India for example. In China Nokia offers several 3G smartphones on the Chinese proprietary 3G standard (TD-SCDMA)#0160;used by China Mobile, which helps keep#0160;Nokia the bestselling smartphone in the world#39;s second biggest smartphone market with over 70% market share according to the latest numbers by Canalys. What hurt Nokia was the premium segment, where the N97 has suffered and now the N8 is delayed. Nokia is the bestselling smartphone in Europe, Asia, Latin America, Australia and Africa. Its only failing market continues to be the USA where carriers refuse to subsidise Nokia#39;s premium phones and Nokia suffers the image of a bargain price brand.br /br /RIM = B+br /Grew 11%br /Market share 19%br /Was profitable both quartersbr /(is pure smartphone maker)br /br /RIM has grown Blackberry sales slightly ahead of the industry and its market share has been flat. RIM has generated profits both quarters. It is essentially keeping pace with the industry, but considering how many newcomers have joined the industry, this is good performance. RIM#39;s grade is better because they have found a large range of new country markets in the youth segment where they have little compeition, mostly in the wealthier countries of the Emerging Markets. This isolates RIM from immediate heavy competition much like its enterprise solution isolates Blackberry from direct competition in the corporate space. RIM continues to be bestselling smartphone of the USA and has some isolated Latin American, African and Asian markets where it is also the leader.br /br /Apple =#0160;Cbr /Shrank 4%br /Market share 14%br /Was profitable both quartersbr /(is pure smartphone maker)br /br /Apple is the only major smartphone maker to see decline in smartphone unit sales and thus severe drop in market share. As Apple made by far the best profits in the industry, they are now making the wrong choice, strategically for smartphone dominance, preferring short term profit maximization strategy vs reasonable profits but holding or growing market share. Apple has abandoned market share for the sake of profit. It is a suicidal strategy for the long term. Apple#39;s#0160;release cycle of only#0160;one#0160;new iPhone model#0160;annually exposed its biggest weakness in July as the Death Grip antennagate hit the new iPhone 4. Now Apple#39;s #39;all eggs in one basket#39; strategy is suffering from one country to the next, as the US consumer watchdog Consumer Reports rated iPhone 4 as not recommended, and that has since been followed by similar condemnation by French and German consumer watchdogs. The iPhone 4 is selling well but Apple is under-performing now when it needs to make the best possible sales before the rivals bring newer phones to the market. Apple is not the leading smartphone in any#0160;country but is doing very well as a strong number 2 in the US, UK, French#0160;and Australian markets.br /br /UPDATE AUGUST 5 2010 - I have added a thorough a href=http://communities-dominate.blogs.com/brands/2010/08/why-iphone-strategy-is-wrong-and-has-to-change-soon.htmlstrategy analysis of Apple#39;s iPhone/a.br /br /HTC = Abr /Grew 36%br /Market share 8%br /Was profitable both quartersbr /(is pure smartphone maker)br /br /HTC has executed perfectly. It grew unit sales far ahead of the market and major rivals, captured a lot of market share and made good profits both quarters. This is text book execution. HTC grade is boosted by excellent expansion of reach - adding China Mobile for example - and expanding the product range, with 6 new HTC models coming still during 2010. HTC has a strong presence in the North American and European markets.br /br /Samsung = A-br /Grew 22%br /Market share 5%br /Was profitable both quartersbr /Has migrated 4%br /br /Samsung has also executed excellently. Samsung grew unit sales at twice the rate of the industry and grabbed market share. It launched the low cost Wave smartphone on the Bada operating system and the Galaxy premium smartphone on Android. Bada passed 1 million sales in one month, the best new OS based launch of a smartphone since the iPhone 2G in 2007, far better than more visible new brand launches by major brands like Google, Microsoft and Lenovo. Meanwhile Galaxy has sold a million units in just three weeks across 30 markets. Now Galaxy is scheduled for massive global launches. Samsung#39;s migration proportion is far below Nokia and Motorola, but this is mostly a matter of late focus on smartphones and Samsung is clearly addressing the matter now.br /br /Motorola = C+br /Grew 35%br /Market share 5%br /Made loss Q1, made profit Q2br /Has migrated 32%br /br /Motorola grew unit sales at a very high rate and gained market share. But Motorola did this at the expense of profits, losing money in Q1, and except for a one-time payment, would have made a loss also in Q2. Motorola has burned most of its dumbphone market share, falling from 2nd biggest dumbphone maker in 2007 to 8th in 2010 but with that great cut in customers, its remaining customers see a migration rate of 32% to smartphones. This somewhat misleading statistic hides the fact that in the latest quarter, for every 1 customer moved to smartphones, Motorola lost 10 dumbphone customers. And even so, at that fire sale, Motorola has not been able to make its handsets profitably. Motorola has been retreating from the global markets and now only focuses on the North American, Latin American#0160;and Chinese markets. It is#0160;only barely the#0160;number 2 smartphone maker in China but nowhere else, not even its home market of the USA.br /br /THE SMALL SMARTPHONE MAKERSbr /br /(I do not have accurate smartphone sales per maker per quarter, so we cannot give breadown by performance cateogry)br /br /SonyEricsson = Bbr /Made profit both quartersbr /br /SonyEricsson is moving along, under the radar of the biggest smartphone makers but continuing its smaller involvement in smartphones, and has been launching some Android handsets. That SonyEricsson returned to profits in Q1 and continued in profits in Q2 is a healthy sign. Now we#39;d need an added emphasis for the second half of 2010 to start to pull ahead of the rivals like LG, Lenovo etc. A rumored Playstation Portable compatible smartphone would be a big splash for the second half but recently those rumors have not been that strong as they were early in the year.br /br /LG = C-br /Made profit Q1, made loss Q2br /br /LG seemed to be following in the footsteps of Samsung but after making a series of impressive Android announcements early in the year, LG has been underperforming in its smartphones launches. The big reason why the low grading, is that in Q1 LG was still making a profit in its handsets unit, but that went into losses in Q2. Now LG is deeply in trouble and has to sort its own phones business out.br /br /Lenovo = Cbr /br /Lenovo took a strong stand on the future of smartphones and the CEO has even said that in a few years, 80% of all Lenovo products will be smartphones. It launched the LePhone and Android based#0160;iPhone clone smartphone in China, but Lenovo has been struggling with higher than expected marketing costs, which hurt its profitability. Lenovo#39;s LePhone goals seem modest for 2010, where they want to reach 1 million LePhones sold. Even so, as we hear no numbers after more than a quarter of sales, and as Lenovo complains of profitability issues with the handset unit, this is not an excellent entry into smartphones.br /br /ZTE#0160;= Cbr /br /ZTE is rolling out modestly priced Android based smartphones including some for the US and European markets. ZTE#39;s home market is China where it is a strong dumbphone brand and has several smartphones. It is also expected to introduce low cost smartphones to several emerging market countries like in India, various African countries etc. So far ZTE has not been telling us much, which to me signals they are not yet performing well enough to discuss their numbers. br /br /Toshiba = Dbr /br /Toshiba has been in the process of merging with Fujitsu. We expected a push of the Toshiba-Fujitsu partnership to expand abroad, which has not happened (yet, at least to any meaningful degree). The Japanese market is too small for the two brands to achieve significant performance just in the Japanese smartphone sector. br /br /Sharp = D+br /br /Sharp was another Japanese company we expected to make a bigger splash into the global phone market. They have made some tentative moves but the big step for the Spring was Microsoft#39;s Kin phones (that were manufactured by Sharp) but as Microsoft ended that project, it killed a lot of projected Sharp sales outside of Japan. Like Toshiba, Sharp cannot get enough smartphone sales only out of Japan to be a meaningful player in the market and will soon be overtaken by HTC that has a bigger global strategy. But Sharp has announced it will be releasing the world#39;s first smartphone that offers 3D video without custom glasses, to be launched before the end of the year. So Sharp#39;s near future looks a bit better.br /br /HP = D+br /br /Hewlett Packard bought Palm. It started right off the bat with very confusing statements from the CEO about why they wanted Palm. So far HP has been very ineffective in turning what many thought was one of the best smartphone handsets, and one of the best operating systems, into any significant market gains. HP may be taking a long time to evaluate its acquisition, but this market is moving very fast and HP is abandoning very significant quarterly sales now, while their phone is still competitive. Soon it will be outdated so HP needs to move in the second half.br /br /Google = Fbr /br /Google pulled the plug on Nexus One. It clearly failed in the market (even though many analysts think this is good for Google, so as not to have a rival smartphone against its handset partners). The strategy to end the Nexus One is a good one, but as a phone, it failed the market. Hence the failure earns them an F for the smartphone (see also below for Android grading).br /br /Microsoft = Fbr /br /Microsoft also ended its smartphone project. I would say Microsoft earns an F- grade, (F Minus) if that was possible, because this was spectacularly badly handled as a short-lived phone project and totally bumbled launch and sudden termination. Many analysts (including me) felt that the Kin was a good prospect for the youth segment if priced correctly, ie Microsoft should have given it a second chance with renewed pricing, and its prospects in Europe looked good, but Microsoft simply pulled the plug. Microsoft has failed in the phone market (see also Windows Mobile and Phone 7 in operating systems grades below).br /br /Palm = Fbr /br /Palm ended existing as a phone maker after mroe than a decade and#0160;the last#0160;3 years of consistently loss-making quarters. It was mercifully sold to HP and we may yet see the true merits of the work by the Palm engineers, now that HP owns the company.br /br /SMARTPHONE OPERATING SYSTEMS BY ORDER OF MARKET SHAREbr /br /TOP 5 BIG OPERATING SYSTEMSbr /br /Symbian = Bbr /Grew 11%br /br /Symbian is now the oldest remaining smartphone OS (its roots are more than a decade old) and it is showing its age. There is a lot of fragmentation and the system is hard to learn and takes long to master and development times are long and many of the Symbian partners have been abandoning the platform. Yet the system is being updated and new smartphones are released on it regularly. The Symbian partnership was disolved and now Symbian is run by a Foundation and the system is fully open source. Symbian is Nokia#39;s main OS, also supported by SonyEricsson, Samsung and mainly through the interests of NTT DoCoMo in Japan, most Japanese smartphone makers like Sharp are making Symbian devices. Symbian keeps plugging away as the biggest OS and has passed the 300,000 smartphones produced per day level (27 million per Q2). So for the full half-year,#0160;Symbian grew at the same#0160;rate as the#0160;market#0160;maintaining market share.br /br /Android = A+br /Grew 409%br /br /Google#39;s Android had a perfect half year. It now has all of its main handset partners already with Android phones in the market including HTC, Motorola, Samsung, SonyEricsson, LG and ZTE among the big handset makers, and many other tech companies like Lenovo. Android is a fully open source Linux based cutting edge OS. Yet inspite of its freshness, the Android OS is also going through rapid evolutions and upgrades, at the fastest pace of any OS out there. Android passed the iPhone globally in market share in Q1 and passed RIM in Q2 becoming the second biggest smartphone OS on the planet and the one growing by far the fastest. Its still less than half the size of Symbian but has risen to become the primary challenger for Symbian. Google experienced considerable resistance from handset partners and from carriers/operators when it launched its Nexus One phone, which Google has since terminated.br /br /RIM = Bbr /Grew 11%br /br /RIM#39;s Blackberry OS grow at the rate of the market roughly speaking, so its a B level performance. The platform suffers in that no other makers are providing Blackberry handsets. But at least RIM is keeping up wtih the heated pace of the smartphone industry growth, by expanding from enterprise customers to the consumer market. The OS is proprieatry and controlled by RIM. There OS needs are quite differernt in business and consumer,#0160;so RIM has been working hard on its multitouch touch screen interrface that is now being released.#0160;RIM has been gaining the favors of many carriers/operators for the lowest data loads for equivalent mobile web browsing of any smartphones, but its integrated and encrypted data handling has then been having some turbulence#0160;with some national#0160;regulators#0160;like in the UAE and India, where the local#0160;governments want to have access to Blackberry user messages and data traffic.#0160;br /br /Apple iOS = Cbr /Shrank 4%br /br /Apple#39;s iPhone iOS suffers from the same problems as the Blackberry in that only one handset maker makes its smartphones but Apple clearly has also lost unit sales and market share in the past half year, so that is why the grade is a C. The OS is proprietary, tightly controlled by Apple and is the least compatible with the rest of the industry, to the degree of carrying on a public fight with Adobe Flash, which powers most videos on YouTube (ie the iPhone is the only major smartphone today that cannot show Flash based videos). The operating system itself, and the iOS supporting familly of devices by Apple help to build its reach beyond just the iPhone, as does its App Store but this is still a poor grade for achieving market decline with what after all is technically the best OS and related eco-system out there.br /br /Windows Mobile = Dbr /Shrank 36%br /br /The major smartphone OS that has suffered catastrophic losses in this half year is Microsoft#39;s Windows Mobile which shrunk by a third while the industry grew by a tenth. The partners were abandoning WinMo most visibly HTC which last year said they won#39;t even bother to release any smartphones on the final WinMo version (6.5) - bearing in mind HTC has sold more than half of all Windows Mobile smartphones ever made - and similarly Motorola already shifted away from WinMo to Android. The partners and developers were further confused by the Kin phones announcements by Microsoft and then their rapid end (which were not strictly compatible with WinMo either). The OS is being wound down and replaced by Phone 7.br /br /SMALLER OPERATING SYSTEMSbr /br /(for these again I don#39;t have regular quarterly numbers, so we cannot give more details on performance)br /br /Linux Mobile = Dbr /br /Part of what was the Linux family has morphed into Android and MeeGo, so what is left tends to be proprietary Japanese smartphones/feature phones. The family is shrinking in size and importance.br /br /Bada = A-br /br /Samsung#39;s Bada did a remarkable launch, reporting more than a million Samsung Wave phones sold using hte Bada OS, in Q2. This is the most impressive new OS launch since the iPhone in 2007. The growth is strong and Samsung is rapidly rolling Bada out to all major markets as its low cost offer with Android based Galaxy smartphones as Samsung#39;s premium product. The big problem Bada has is that it does not have other phone makers signed up to support the platform, but there is time for Samsung to recruit some. The OS is literally one quarter old so far. The start has been most impressive.br /br /Palm WebOS = D-br /br /HP bought Palm but didn#39;t then do anything significant with it. What was once cutting edge, is becoming duller by the day and HP seems very confused what it wants out of Palm. Is it a business solution or a consumer offering. So far HP#39;s stewardship of Palm has been bordering on#0160;failure. And this is the hottest time in smartphones, there is no time to waste now.br /br /Phone 7 = B-br /br /Microsoft#39;s Phone 7 transition from Windows Mobile was clumsy and left many developers out in the cold. Meanwhile the brief Kin project confused matters. And in the migration of the family from the outdated Windows Mobile platform to the modern Phone 7, has lost Microsoft at least one of its biggest traditional supporters, Motorola. So the Phone 7 family is surprisingly weak, led by Samsung (who has clearly bigger interests in its own OS of Bada), HTC#0160;and LG, and then non-phone makers like PC vendor Dell. We have not seen any Phone 7 smartphones yet, but the first will be launched before the end of the year.br /br /MeeGo (and ex Maemo) = Bbr /br /Nokia#39;s transition project from the old Symbian platform to the cutting edge Linux based open source MeeGo, developed together with Intel (and based in part on Nokia#39;s previous Linux based OS project Maemo) is still in n development.#0160;A long#0160;set of developer partners was announced but none were major phone makers (apart from Nokia) and included for example some car manufacturers who want to use MeeGo for their in-car IT/entertainment systems.#0160;The first MeeGo phones are not expected until in 2011.br /br /Thats it, my grades for the major brands in the smartphones bloodbath of 2010, at the half-year mark. I will return with a few strategy blogs about a few of our main players.br /br /UPDATE AUGUST 5, 2010 - I have now added the a href=http://communities-dominate.blogs.com/brands/2010/08/why-iphone-strategy-is-wrong-and-has-to-change-soon.htmlfirst strategy analysis: Apple iPhone/a./p

span style=FONT-FAMILY: Arialfont size=3o:p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWhy care about market share of #39;smartphones#39;? This is the ultimate platform war!br /br /I was stunned last week to see how many readers on this blog site were insisting to bring the profits and revenues discussion of Apple vs Nokia, into the #39;market share#39; analysis. And I was puzzled why something that seemed #39;obvious#39; to me, would bring so heated arguments. I have thought about it hard, and I believe we have a misunderstanding. Most who thought profits were a valid argument, were thinking of Apple or Nokia smartphone sales as a strongembrand of phones/em/strong, against strongemother brands of phones/em/strong. Similar to cars (Ford vs Toyota), or TV sets (Sony vs Samsung), or soft drinks (Pepsi vs Coke). Yes, if that was the #39;race#39; that you considered, yes, profit is a very valid consideration. But that was not what I meant. I was talking of something else.br /br /PROFIT AND MARKET SHARE INVERSE PROPORTIONbr /br /So yes, if you think of a handset strongemmanufacturer/em/strong brand, like Blackberry or iPhone or Nokia or HTC or Samsung or Motorola or whoever, and you consider #39;only#39; the race against other similar strongembrands of devices/em/strong, then yes, profits and market share tend to have an inverse relationship.br /br /What do I mean? I mean that #39;ceteris paribus#39; ie #39;all other things being the same#39; if you and only you lower your price in the market (rivals do not change their prices) then under normal economic laws, you gain sales. In other words, your market share grows. But also, ceteris paribus, if nothing else changes in your company and you just lowered your prices, then you have cut your profits. So yes, economic theory suggests that if nothing else changes, then lowering prices should increase market share but reduce profits; and conversely, if you raise your prices, you also raise your profits but it will hurt your market share. We saw both of these in this past quarter. LG gained market share in all mobile phones but went from generating profits to making losses. And Apple lost market share but grew profits. If we consider an individual mobile phone handset maker, then yes, increasing market share usually eats into profits and decreasing market share usually increases profits.br /br /This is all fine and well and I agree with all those who wanted to make that argument. Yes, I agree with you. strongemBut that is not what I was talking about/em/strong. I am not talking about strongemindividual handset maker market shares/em/strong, in the quot;Smartphones Bloodbathquot; of 2010. Yes, I follow all major smartphone brands yes, but the race that I am interested is not between individual phone makers. There is a strongemmega-race/em/strong going on. It is about the strongemplatforms/em/strong. I have been trying to say that time and again, and some of my less-frequent readers seem to be missing it. I strongemam focusing on the platform battle/em/strong. What makes it confusing, is that Apple is strongemboth/em/strong a smartphone maker strongemand/em/strong a smartphone operating system maker. RIM is both as well. So is Nokia. So is now also Samsung. But not every smartphone maker has an operating system (like HTC, Motorola and LG for example) and now that Google and Microsoft have ended their short-lived smartphone projects, Google and Microsoft provide smartphone operating systems, while not being handset manufacturers anymore. So its easy for an occasional reader to be confused about what I mean, when Tomi is talking about Apple iPhone #39;smartphone#39; market share vs Nokia #39;smartphone#39; market share, and to think that Tomi is talking of phone market share. I am not, I am analysing the bigger pircture of the platform market share battle - and the phone makers play little part sin the big war.br /br /PLATFORM RACES ARE RAREbr /br /In cars, for a hundred years we#39;ve seen major car manufacturers compete for market share against each other. There was no #39;platform#39; war in cars. Rarely do we see a major battle of rival new technology platforms aiming to serve the same need. But every now and then we witness a #39;megabattle#39; that determines winners and losers for that given technology strongemplatform/em/strong for decades to come. We had a platform war in the Video Cassette Recorder (VCR) wars in the 1970s and 1980s. VHS won that and Betamax was defeated. We had a platform war on PC operating systems that Microsoft Won and Apple#39;s Macintosh lost. We had a short-lived platform war in the BlueRay vs HD DVD standards that has gone and BlueRay won. br /br /These are far more relevant as a strongemtechnology race/em/strong, as the platform decides a whole #39;family of winners#39; and a #39;family of losers#39;. If your tech brand supported a losing side, no matter how great your product (and how profitable your company), you end up disappointing your customers and abandoning the long term gains to your rivals. The worst humiliation comes when (or if) you are forced to join the rival standard - like when Sony started to sell VHS based VCRs (or, arguably, when Apple joined the Intel CPU based computers and made Macs 100% Windows Compatible). br /br /PHONE RACE IS THE ULTIMATE RACEbr /br /So lets understand this platform war. The smartphone race is not a race to win the current smartphone market. In 2009 the smartphone market was about 175 million handsets. What makes this battle an enormous one is far exceeding the current market size of #39;smartphone sales#39; and their immediate projections of sales over the next few years, into the 250 million - 500 million range. The smartphone is strongemnot the start of the mobile phone industry/em/strong. The mobile phone business is the most dynamic, most competitive race for the soul of the future of the most widely spread consumer technology ever. Televisions sell 300 million units per year. DVD players sell about 250 million units per year. Personal computers including laptops, netbooks, tablets like the iPad and desktops - sell about 300 million per year. Videogame consoles sell far less than 100 million per year. Mobile phones sell more than all of those - combined! a href=http://communities-dominate.blogs.com/brands/2010/02/the-big-picture-stats-view-to-mobile-industry-2010-edition.htmlMobile phones sell 1.3 Billion units this year/a. To put it another way, more new mobile phones sell this year, than the total worldwide strongeminstalled base/em/strong of strongemall personal computers in use/em/strong worldwide.br /br /There are a href=http://communities-dominate.blogs.com/brands/2010/02/the-big-picture-stats-view-to-mobile-industry-2010-edition.html5 Billion mobile phone subscriptions in use on a planet of 6.8 Billion people/a. No other technology comes close to its penetration rate, not wristwatches, not FM radios, not cars, not TVs, not PCs, not even the #39;plastic#39; we have in our wallets - even the total user base of all forms of plastic money, credit cards and all banking cards, is far smaller than the spread of mobile phones.br /br /And even that is not the full story. Mobile phones are now the focal point of all forms of digital convergence. You remember reading #39;the internet changed everyhing#39;? It didn#39;t. The biggest internet giants like Google and Yahoo are now saying the future of the internet is on mobile phones. The PC industry giants like HP and Dell say the future of the computer is on mobile phones. The media giants from TV (BBC) to music (Warner) to videogaming (EA) etc are saying all future media content will be available on mobile phones. The future of the digital car is on phones. The future of digital money - is on mobile phones (Kenya became the first country where more than half of all bank accounts are now mobile, that happened earlier in 2010; meanwhile Sweden has started the debate of when should they get rid of cash money and use only mobile payments). And thats before we add all that is coming in mobile advertising and marketing too - yet another industry that is running to get into our pockets. Its time to smell the cellphone.br /br /If you think digital convergence is a major trend in your business, whatever that business is, then strongemmobile is at the center of that convergence/em/strong. While smartphones today form only 19% of all phones sold, most major analysts of mobile believe that the majority of all mobile phones will become smartphones before the end of this decade. Many think that all mobile phones will be smartphones by then. And the relentless advance of Moore#39;s Law certainly suggests its likely that most #39;dumbphones#39; will turn into smartphones by the end of the decade.br /br /FIRST BIG PLATFORM WARbr /br /So lets take a few lessons from history#39;s most famous platform war, the so-called Betamax vs VHS war in VCR#39;s. Sony#39;s Betamax was actually not the world#39;s first home video cassette recording system. Two years before Betamax launched, in 1973, the world#39;s then-biggest home electronics giant, Philips of the Netherlands had launched their VCR 1500 system. This early monster home gadget (it was the size of a small suitcase and weighed as if it was made of bricks) had a monster price - in Britain the cheapest new car cost the same as Philips#39;s brand new N1500 home video recorder. The first video cassettes had recording lengths of either 30 minutes or 45 minutes. But home video recording had arrived, to Europeans.br /br /In Japan Sony designed a far more advanced system, based on the professional U-Matic video recorders, and launched it as a consumer VCR system branded Betamax in 1975. Right from the start, Betamax tapes lasted the full hour. The devices were smaller and far more reliable than the clunky huge Philips units. And Sony was not alone making Betamax recorders. They had a #39;family#39; of vendors who made Betamax recorders, led by Japanese electronics giant rival, Sanyo. Smaller Japanese electronics makers Toshiba and NEC were among the other Betamax manufacturers. Where Philips mainly sold only in Europe, Sony brought the Betamax to all continents.br /br /But then in 1977, the Victor Company of Japan (we know it as JVC) launched an even more modern system, VHS, where the design was optimized for lower costs. The tape mechanism allowed longer tapes. VHS introduced 2 hours recording time. And JVC had signed up a whole army of home electronics makers including Matsushita (ie Panasonic), Sharp, Hitachi, RCA, Zenith, Magnavox etc etc etc. The VHS family of VCR makers was by far the biggest. The VHS system was also brought to all continents.br /br /While all makers would release upgraded devices that used the same cassettes to record longer times in #39;LP#39; Long Play versions (with a clear loss in picture quality), Philips#39;s VCR 1500 system was soon outclassed and they discontinued that system. But Philips was not done, they came back with European partner Grundig to launch the V2000 system that offered 8 hours of recording time. The V2000 system was launched in 1979 but by then the Japanese had built such a strong presence worldwide, that the V2000 system only sold modestly in Europe and Latin America and was eventually withdrawn. Both Philips and Grundig would then join the VHS family making VCRs on that standard.br /br /After the two Philips led systems were eliminated, the final battle, or the title bout for world dominance, ended up being between VHS and Betamax. And without any doubt, Sony made the better devices. For every generation, the Sony led Betamax family had better quality video, better quality audio, better quality still image, better quality editing etc. The Sony machines were simply better. They were also more expensive. The Betamax recorders were more expensive, the Betamax tapes were more expensive. Movie rentals were more expensive on Betamax tapes (and had less variety). And eventually even Betamax repairs and spare parts were more expensive.br /br /Meanwhile due to mostly its lower prices and longer tapes, VHS rapidly took the market lead. By 1981 in the world#39;s biggest VCR market, the USA, VHS had taken 75% and the battle was clearly being won by VHS. The video rental stores offered more movie titles on VHS than Betamax, soon rental stores stopped carrying Betamax titles altogether, and then rare Betamax rental stores were left. In 1988 even Sony admitted the loss, by starting to make Sony branded VCRs using the VHS system.br /br /The race was not won by the best technology. Both Philips V2000 and Sony Betamax were far better technologies than JVS#39;s system, VHS. The race was not won by the most profitable maker of VCRs. Due to its high quality products and superior features, Sony had the highest prices and could command the highest mark-ups and made the best profits. But while it won the profitability battle, Sony lost the platform war. Then JVC as the license owner collected billions of dollars of royalties in the next two decades of VHS video recorder devices made, VHS tapes sold, VHS camcorders produced, and various follow ups of special variants to VHS like VHS-C and Super VHS.br /br /What do we learn from this? o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt1 - That it is strongemonly scale which will win a platform war/em/strong. o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt2 - Having the strongembest technology is not in any way relevant to winning/em/strong. You have to bestrongem good enough/em/strong, you don#39;t have to be best.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt3 - #0160;strongemPrice is a major key/em/strong to scale so your technology has to reach low price points to win the platform war. Being the most expensive is a guarantee you cannot win the platform race. And..o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt4 - You strongemneed partners on your platform/em/strong to get scale. And with those partners, again their scale is the relevant point. One Panasonic or RCA as a partner to JVC in VHS was worth much more than several Toshibas or NECs for Sony (or Grundigs for Philips).br /br /SMARTPHONE TECH WARSbr /br /And in mobile phones we now have the smartphone OS tech war, that has been running for a decade and in the past few years has seen more new OS platforms emerge, not less. Today we have ten global contenders and pretenders in the smartphone OS battles of 2010. They are (#39;Nokia#39;s#39;) Symbian (actually Symbian Foundation nowadays), Google Android, RIM/Blackberry, Apple iPhone iOS, Microsoft with its older Windows Mobile and its newer but incompatible Phone 7, Samsung Bada, HP#39;s newly acquired Palm WebOs, and Linux Mobile. There is a new OS coming from Nokia and Intel called MeeGo (and it supercedes Nokia#39;s short-lived Maemo). Thats it, Ten Little Operating Systems.br /br /Currently their markets shares (Q2) are as follows:br /Symbian ................43%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptAndroid .................19%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptRIM .......................19%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptApple .....................14%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWindows Mobile .....2%br /Linux Mobile ...........1%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBada .........................0%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptPalm .........................0%o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptPhone 7 ..................(not launched yet, expected Q4 2010)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptMeeGo ...................(not launched yet, expected Q1 2011)br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /IS RACE TO CAPTURE DUMBPHONE MARKETbr /br /And then this tech platform war is significantly different from the VCR battles in one crucial way. We have a huge existing market of dumbphones, which is in the process of migrating to smartphones. So the winner of the smartphone bloodbath won#39;t just capture a 250 million annual sales unit market of smartphones, towards the end of this decade, the winner of the smartphone wars will capture the dumbphones market of 1.3 Billion handsets sold annually. THAT is what we are fighting for. This is the biggest technology prize of any consumer electronics, ever. The grand race for the grand prize.br /br /Consider the Top 10 handset makers and their market shares, and what platforms they support:br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptNokia................ 33% ........(Symbian, MeeGo)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSamsung .......... 19% ........(Symbian, Android, Windows Mobile, Bada, Phone 7)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptLG ...................... 9% ........(Android, Windows Mobile, Phone 7)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptZTE .................... 4% ........(Android)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptRIM .................... 3% ........(RIM)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSonyEricsson ..... 3% .........(Symbian, Android, Windows Mobile)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptApple .................. 2% .........(Apple)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptMotorola ............. 2% .........(Android, Windows Mobile)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptHuawei ............... 2% ..........(Android)o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSharp .................. 2% ..........(Symbian, Linux Mobile)br /br /That is why it is so important to compare current smartphone performance to the dumbphone market. That is why the smartphone market share is not enough, we have to also consider that brand#39;s presence in the dumbphone side of the business. And I have done a href=http://communities-dominate.blogs.com/brands/2010/07/the-potential-for-smartphone-platforms-if-all-phones-become-smartphones.htmlsome preliminary projections of how that future market share might look like, if all dumbphone makers manage to migrate all their customers to smartphones/a (not in any way a certainty, Nokia has been doing it well, Motorola very poorly)br /br /And for those who think the cheap #39;Africa phones#39; market is not worth pursuing, or has so cheap basic phones, it cannot be converted to dumbphones, please consider this. Moore#39;s Law tells us that the integrated circuits will double in capacity in every 18 months, or to put it another way, we get the same performance for half the price every 18 months. So take the awesome iPhone 4 of today. It has a real #39;street price#39; without subsidy of 2 year contract, of about 600 dollars. That is what ATamp;T acually pays Apple for every iPhone they #39;sell for 199 dollars (plus 2 year contract)#39; haha. So its price is pretty much the same as a Samsung Galaxy or Nokia N8 or other #39;superphones#39; at the high end of the smartphone price points.br /br /Now take Moore#39;s Law for this decade. By 2019, that exact same iPhone 4, its exact specs and parts, retina display, 5 megapixel camera, 3G and GPS etc - in end-user #39;street price#39; would have fallen to... 10 dollars. Note I am not saying selling a used 2010 phone in 2019. I mean to manufacture and sell that iPhone 4 nine years from now, means its price has fallen from 600 dollars to 10 dollars.#0160; /spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut that is Moore#39;s Law. So today if they sell 25 dollar basic phones in Africa, then yes, by the end of the decade, igh performance touch screen 3G #39;superphones#39; that match the iPhone 4 today, can be sold for 10 dollars. Yes there will be a cheap computer even for every child in Africa, but it won#39;t be a Negroponte 100 dollar laptop. It will be a cheap smartphone.br /br /We are now fighting for the control of that market, where all digital convergence is headed. Where the internet is headed, where media is headed, where computers are headed, where digital money is headed, etc. The mobile phone of the future will be a smartphone, and then, towards the end of the decade, there will not be 10 operating systems. It may not be down to 1 or 2, but it will be only a handful at best. And that fight is the megawar. The #39;smartphones wars#39; of our times.br /br /WHEN EVERY APP STORE SEEMS THE SAMEbr //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Today the Apple iPhone App Store is clearly the best of the several dozen app stores that have launched. Apple has most apps, it has most downloads, it generates the most revenues. It has a good system for discovering apps for consumers and a good system for paying the partners who deploy the apps. By almost any measure, the App Store is the best store out there for smartphones. br /br /But nothing that Apple does with the App Store is unique to Apple. Meanwhile the other app stores keep getting better. They are adding apps. And in the digital world its easy to copy what works on one rival and bring it to the other. Its like almost anything in the digital space. Yes, Amazon is the leading bookseller online, but if you go to another major bookseller, it seems very similar to Amazon and carries most of the same titles too, at about the same prices, and the shopping experience is similar, to the point of reader reviews, ratings etc.br /br /In a few years all app stores will be cookie-cutter copies of each other with 90% overlap of content and apps. Just like almost any supermarket today will sell you both Pepsi and Coca Cola. br /br /Today there is a heated argument on the tech review sites about which app store is best and who has the most of what. Soon that is irrelevant. Soon the app store is not the deciding factor, but strongemthe overall reach of the platform is/em/strong. And the reach of the platform will also ever more guide the development decisions in the future. Think about the PC vs Mac environment. Few PC software app developers #39;start#39; with the Mac version - unless its for an industry where Macs are the predominant PC, like in advertising or multimedia. Most app developers on the PC will of course make their new app first for the Windows PCs, because of the reach of the platform.br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptDATA PLANS SOON FOR EVERYONEbr /br /And we have the amazing adoption of data services by iPhone users. Then there is the #39;surprising finding#39; now, that Android users actually produce very similar usage numbers (Motorola Android phone users generate more data traffic on Verizon and HTC Android phones more data traffic on Sprint, than iPhone users on ATamp;T, by latest Q2 numbers of 2010). br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWhy is that? Because the iPhone in most markets on most mobile operators/carriers was sold with an #39;all you can eat#39; data plan. These are typical for very high cost smartphones (like iPhones and early Android smartphones). Then there is the migration of those data plans to cheaper phones. In Japan where the all-you-can-eat data plan was invented, today more than half of all mobile phone users are on such plans which includes a lot of #39;feature phone#39; users too on all-you-can-eat data plans. Soon that is true of Europeans and Americans too. The concept that an iPhone user is somehow exceptionally heavy user of the mobile internet (or apps) will soon be forgottten. Its not the strongemphone/em/strong that is the key, it is strongemfar more the data plan/em/strong.br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptTHE ONLY THING THAT MATTERS IS SCALEbr /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptIn the tech platforms you have to be biggest. As long as you are viable you can hang on. The longer a losing platform fights it, the more it creates resentment among its users to the brand, and long term bleeds support. The biggest platform always wins.br /br /In mobile it is far too early to decide who ends up winning, because smartphones are still such a small part of all phones. But this year we#39;ll sell about 250 million smartphones. Thats nearing the level of total global PC sales including the new netbooks and tablet PCs like the iPad. By next year smartphones will sell more than all PCs made and about a quarter of all phones sold will be smarpthones. Even as the #39;end-game#39; for smartphones cannot even be seen, early strong contenders are emerging.br /br /THE iOS FAMILY WITH iPAD AND iPOD TOUCHo:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThen many Apple loyalists are sure to remind us that with the iPhone we also have the full family of iOS devices. For every 3 iPhones sold, there are a further 2 iPod Touch devices. And now there is the new hot must-have tech gadget, the iPad. o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptHere we have a #39;different#39; story. I am not dismissing the iOS platform. It is very important to Apple, and is driving its profits now. It is a very clever strategy of synergy. And yes, it expands the total reach of developers from just considering iPhones to typically launch their apps also for the Touch and iPad (and perhaps in the future, even more iOS devices). But a Playstation Portable, with a WiFi connection - is not a mobile phone. Neither is an iPod Touch. Even if you use Skype on WiFi, it is not a mobile phone. br /br /Similarly a Kindle is not a mobile phone, and neither is the iPad. There are many synergies that Apple and its developers can find from expanding their iOS family - but a Touch or iPad is not a smartphone - just like Honda makes cars and motorcycles (as does BMW). But when we count the global market for cars, we only count those Honda motor vehicles that are #39;automobiles#39; and we do not count Honda motorcycles.br /br /The iPod Touch is part of the portable stand-alone media player market, like other iPods (and the Playstation Portable and Creative Labs and other media players) which has a total global market size of 195 million units sold annually. So if you want to debate how relevant the iPod is to that portable media player market (where Apple#39;s iPods have a combined 28% market share globally) - feel free. But don#39;t do that related to this blog article. The most used service on mobile phones is the voice call. The second most used service on mobile phones is SMS text messaging. Together these account for 90% of all services consumed and all revenues generated by the mobile industry in 2010. Your stand-alone Touch or iPad won#39;t accept traditional voice calls and SMS text messages (#39;everywhere#39; ie beyond a WiFi hotspot). So they are not viable substitutes. Just because they can do Skype or instant messaging or email - means that they are capable of cannibalizing strongemfixed telecoms services/em/strong - not mobile services.br /br /But yes, each major platform is likely to support some other devices, not just phones. Android has for example already been installed on some premium TV sets. So while the iOS is interesting to Apple as a company and its partners, only iPhone devices from Apple are relevant in this smartphones bloodbath, not the other iOS devices, just as I will not be counting Android TV sets either. But to be really clear - even if we added the total installed base of iOS, then Apple#39;s global market share of #39;mobile phones#39; would go from 2% to 3%. It is not in any way enough to #39;win#39; the platform race. Yes, it extends very powerfully the reach of iPhone developers, but in the big picture, going from 2% to 3% when the market leaders have 19% or 43%, that is simply not enough.br /br /IS WORTH $10B DOLLARS ANNUALLY BY DECADE-ENDbr //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /This is not a race to earn millions. This is the strongembig war for the billions/em/strong. Google yestereday valued its potential out of the Android platform to be worth a cool $10 Billion dollars annually towards the end of the decade when they hope to have 1 Billion users of Android devices (not just on phones, but also on other devices like TV sets etc). Ten Billion dollars annually, if you have a platform that has a Billion users. Note that even Microsoft has not achieved that level yet in the installed base of Windows operating system on personal computers (but are slowly approaching the level). And Microsoft has been able to turn its global platform lead in PCs into Microsoft being the most profitable tech company for more than two decades now. br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Google#39;s Android is taking its first tiny steps today, having less than 20 million active users of Android devices. Nokia does have a little over a Billion active users of various Nokia phones worldwide, but most of those are basic dumbphones. The whole Symbian family has a little over 300 million active users today. br /br /But the billion smartphone user vision is not that crazy. Take the #39;worst case#39; for the Nokia vision and the Symbian family. If Nokia loses all its Symbian partners, and only converts its own Nokia branded dumbphones to smartphones during this decade, and again, under worst case scenario, if we take the lower number, that of Nokia#39;s total phone market share, not its better smartphone market share - even in this case, Nokia will sell roughly 450 million smartphones per year and have an installed base of about 1.2 Billion smartphone users worldwide, by the end of the decade. Bear in mind that so far, Nokia is doing far better - it is gaining market share as it migrates users from dumbphones to smartphones.br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Or if things go well for Nokia, and they maintain the current level of Symbian partnership adoption in the migration to smartphones - and assuming they manage to migrate Symbian users to MeeGo, then Symbian/Meego would sell more than 600 million smartphones annually and have an installed base of over 1.5 Billion users worldwide.br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /And Google tells us a Billion smartphone users will be worth a bonus 10 Billion dollars of premium and related services that they will deploy during this decade. Whatever Google does on Android, Nokia can rather easily copy onto Symbian/MeeGo.br /br /I hope you now understand what we are talking about in the smartphones bloodbath. This is the race #39;for all the marbles#39;. The ultimate contest for the biggest prize.br /br /IS NOT SAME AS IN PC WARbr //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Its easy to look at past platform battles and think this will be the same. The smartphone OS battle has similarities to the PC wars, but there are a few dramatic differences. First of all, in the PC world, the OS market grew from zero as the PC market grew grew from zero. In the mobile phone market, its not a question of smartphones growing from zero to 250 million today, but rather of the existing #39;dumbphones#39; migrating to smartphones. And only 19% of those dumbphones have migrated to smartphones so far.br /br /What is also important to understand, is that while #39;pure#39; smartphone makers like RIM, Apple and HTC are indeed relevant in this early stage of the smartphone market, of all smartphones sold in Q2 of 2010, they have been pushed to the periphery. Already 65% of all smartphones sold worldwide, are sold by the big traditional #39;dumbphone#39; makers like Nokia, Samsung, LG, Motorola and SonyEricsson. That is rapidly shifting - as their market share is rapidly growing - and will soon be more than 80% of all smartphones sold. br /br /HAVING THE BEST PHONE DOES NOT MATTERbr /br /The second very important factor to bear in mind, is that in the PC market and the VCR market, and most other consumer goods, more or less #39;normal#39; rules of free market economics applied. If you made a good product, on a good brand, sold at a good price, available on a wide distribution network, you could expect a #39;fair#39; performance in the market. That applies in most technology space once they are mass market goods, like in cars, television sets, videogaming consoles etc. Most markets are #39;fair#39; in that the best product/price value proposition will win in the market.br /br /But that is strongemnot/em/strong how the mobile phone market works. In mobile phones, the market is strongemseverely distorted/em/strong by a href=http://communities-dominate.blogs.com/brands/2009/07/smartphone-realism-part-2-what-is-biggest-factor-to-global-market-success.html#39;carrier relations#39;/a - what a mobile operator/carrier like ATamp;T or Vodafone or T-Mobile or Telefonica or China Mobile will decide for its market, that is what happens to phones. So for example, Google#39;s Nexus One was rated by many analysts as a viable contender to the iPhone and should have sold well. But the early US carriers decided not to carry the Google branded smartphone - and within a few weeks of that announcement, Google had to discontinue its product.br /br /So in selling any kind of phones, but even more so the most expensive kind, the smartphones - it is strongemabsolutely vital/em/strong to have the strongemfull support/em/strong of the carriers/mobile operators. This is an expensive lesson that Lenovo, Dell and Acer are going through right now. And the pricing decision of the carriers, in countries where there are handset subsidies like in the USA for example - will pretty well make or break a given phone model. When Microsoft#39;s Kin phones were not priced competitively under their contracts in the USA, the whole Kin smartphone strategy was destroyed.br /br /Good evidence of the carrier relationships come from Apple, who only offers the iPhone through ATamp;T, and whenever a rumor emerges that Apple might end the exclusive deal with ATamp;T and offer a Verizon version of the iPhone - Apple#39;s evaluation on Wall Street jumps. In Asia, Blackberry is the most popular smartphone of Indonesia and a big hit in Thailand and India and many other markets, but it is not successful in China. Why? Because the Chinese carriers hadn#39;t supported the Blackberry there (until now). And Nokia, the world#39;s most successful smartphone is an utter failure in the US market. Not because Nokia has bad phones (and it has recently had some bad phones yes) but because the US carriers haven#39;t offered Nokia phones with the kind of subsidised prices that they sell the iPhone, Blackberry, Motorola Droid, etc.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThe world has about 600 mobile operators/carriers and roughly speaking about 70 mobile operators of the world have about 10 million subscribers or more and these 70 will pretty well decide which phones are going to be a success or not. The majority of the 600 carriers/mobile operators tend to fit into families of carrier groups, where the top 20 carrier groups account for about 75% of all mobile phone subscribers on the planet. The smallest of the top 20 carrier groups has 75 million subscribers. When we consider ATamp;T (the 16th biggest carrier group and largest based in the USA), the US exclusive carrier of the iPhone having 85 million mobile subscribers at the end of last year, and it accounted for a third of all iPhone sales worldwide, we can start to understand why these carrier relationships are so vital. China Unicom had 140 million subscribers but its rival China Mobile had 510 million subscribers. When the iPhone is only offered on China Unicom#39;s network, and mean while Nokia branded smartphones are sold on both networks - its clear to see why Nokia outsells the iPhone in China, by a big margin too.br /br /There are three finer elements of the smartphone market as it relates to the carrier relationships. I have a href=http://communities-dominate.blogs.com/brands/2009/07/smartphone-realism-part-2-what-is-biggest-factor-to-global-market-success.htmlwritten a long blog explaining it in detail/a so I will not repeat it heer. The main point for readers of this article is to get it in their heads, that you will not win only by having the best phone. It is pretty much meaningless (the Palm Pre was highly praised as the first true #39;iPhone killer#39; with very competitive design and with competitive pricing, but it didn#39;t have the carrier relationships to get the sales). The global race strongemgoes to the phone maker with the best carrier relationships/em/strong - not to the phone maker with the best phones or the biggest app stores or the best customer loyalty - which is why Nokia and Samsung are doing so much better than LG, Motorola, SonyEricsson (or RIM or Apple or HTC). If you want to read how you win globally in smartphones, here is a href=http://communities-dominate.blogs.com/brands/2009/07/smartphone-realism-part-2-what-is-biggest-factor-to-global-market-success.htmlmy long article with all the facts/a.br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptRemember strongemthis is not a fair fight/em/strong. It is not a question of who has the best phone or the best OS or the best app store or the best usage. Apple iPhone is by far the best smartphone today. It is the most desirable phone and has by far the best customer loyalty. It is seen as very advanced and gets press accolades daily (excepting now the temporary bad press about the Death Grip). br /br /Yet the world#39;s favorite smartphone by far, the iPhone strongemlost unit sales while the smartphone market was exploding/em/strong. Apple#39;s world-beating smartphone strongemhas been losing market share from its peak in Q3/em/strong - thats now four quarters and counting. Apple lost market share while it was undisputedly the world#39;s best smartphone. Having the best phone is good for profits in the short run, but having the best and most expensive phone will not win you the platform war. Sony had the best VCR in its Betamax in every single generation. Apple#39;s Mac has been the best PC in every single generation. Being best will not get you the market. Being best if you do it well, may make you the most profitable company yes, but then you limit yourself to a niche, just like the Mac has been a niche PC for its whole life.br /br /There is nothing wrong with having a niche market, if you are very profitable at it. BMW has done that successfully for decades in the car market. Nothing wrong with it. But this is not about one company making profits out of phones in 2010. This race is for control of the ultimate tech platform of strongemthis decade - and the next/em/strong. o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /PROFIT IS ABOUT TODAY. THE OS IS ABOUT THE NEXT DECADEbr /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptProfit is about today. Profit is a very valid consideration and a good company has to deliver profits. But the smartphone market space is treacherous. Some can#39;t cut it and are unable to get a fair price for their phones (Motorola, Palm, LG). Others are barely profitable and struggling to hold onto market share (SonyEricsson). Others explore the market, get burned, and run away (Google, Microsoft). Others think they understand the technology, release phones that have a Death Grip problem (Apple). Still others come at the phone market from an adjacent industry like the PC market, think a smartphone is a tiny pocket PC and attempt to get into it, to devastatingly bad profits (Lenovo). Others have learned how to fight in this market, make smartphones that keep growing unit sales and market share - while making profits (Nokia, Samsung, HTC). br //spanstrongemspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Market share in a platform is all about the future/span/em/strongspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt. There are 10 major smartphone operating systems supported today. That is far too much fragmentation. Today when there is astronomical growth rates in mobile (the smartphone market is growing at 45% annual growth rates currently), we are seeing several OS platforms continuing. Over time it becomes impossible to support all. The costs of maintaining a proprietary smartphone OS will become prohibitively expensive over time, as ever newer features are added to phones but trying to maintain backwards compatibility with older phones, and providing support to the developer community. Microsoft already took a severe hit when it decided not to make Phone 7 compatible with Windows Mobile. In that transition Microsoft lost a vital soldier in its army - the second biggest handset maker supporting the Microsoft platform - Motorola.br /br //spanspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThe very big phone makers like Nokia and Samsung can afford to maintain their own operating systems (Symbian and MeeGo for Nokia, Bada for Samsung). Nokia sells more than a million phones every day and Samsung sells three quarters of a million daily. Recognise that the total global shipment number of Windows-compatible personal computers never shipped a million computers per day for any quarter. This is the scale we need. Compare that with the likes of SonyEricsson, Motorola and Apple who sell about 90,000 new phones daily. At those levels the development costs associated with an operating system are very steep. Yes it can be done, if you are very profitable, with a very desirable superphone - like Apple with the iPhone or perhaps like RIM with the Blackberry - but for how long. br /br /SO WHO WINS?br /br /I am not saying we#39;ll know the winners in this year or the next. But I do suggest that the battle for the smartphone OS today, is a battle for this decade and the next, not just for this quarter and the next. There will be winners, and the power of an Android or Symbian (and Nokia#39;s evolution path to MeeGo) or Bada is far far more than that with Palm/HP or RIM or Apple iOS or even Microsoft Phone 7. This battle did not start in 2007 when the iPhone launched, nor in 2009 when Android launched. The battle started a decade ago. The iPhone is a blip on the radar and is meaningless in the long war for the OS. We have recently seen newcomers join the battle, but there was a time when Microsoft#39;s Windows Mobile powered 3 out of every 10 smartphones. There was a time when Palm was the world#39;s second bestselling smartphone. There are new rivals today, but the smartphone was invented by Nokia. The giant of smartphones, when Palm challenged it was Nokia. Palm died in that contest. The giant when Microsoft challenged for the smartphone market was Nokia. Microsoft lost its 2nd place and is today lingering in 5th place. The giant when RIM challenged for it, was Nokia. RIM growth has stalled and is now on a plateau or even declining. The giant when Apple challenged it, was Nokia. Apple#39;s iPhone reached its peak market share in 2009 and is now in decline. Now the newest challenger is Android.br /br /Differing from Palm, RIM and Apple, Google has built an army to challenge Nokia#39;s Symbian army. Android has a far better chance than Palm or RIM or Apple did, when taking on Nokia and the Symbian army, by themselves. Android has a legitimate chance and is showing its muscle today. And Microsoft is trying desperately to make a return to the battle - the first Xbox was not a big global success but Micrsoft stayed in the game and the second generation Xbox did a lot better. Microsoft Phone 7 also has an army of manufacturers supporting it. Don#39;t count Microsoft out of it.br /br /The world undefeated heavyweight champion of the smartphones market share world battle is Nokia with Symbian. They are the champion who has to be defeated if you want to take the heavyweight #39;belt#39; of the champion. You have to knock them out to take it. Apple, RIM, HP/Palm and the Japanese Linux Mobile platforms don#39;t have any chance of the scale to even step into the title bout (and Microsoft#39;s Windows Mobile has bowed out of the contest). Sooner or later some of these proprietary platforms will be terminated as too costly to maintain and develop. These makers will sooner or later join one of the major platforms.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThe three real contenders to Nokia/Symbian/MeeGo throne are Google Android, Samsung Bada and Microsoft Phone 7. The size of the mobile phone market is so huge and growing so fast, that its quite possible to be viable for several years with just a fraction of the global market. But the phone makers will also make their bets and are likely to reduce the number of platforms they support, rather than increase the number. Motorola has already cut its support away from Microsoft (and focus on Android). SonyEricsson is said to consider a similar cut (to quit either Microsoft or Symbian or both, and focus on Android). Samsung will probably put most of its efforts to support Bada (and try to recruit some partners to the platform). Meanwhile Nokia will struggle with a complex dance of migrating Symbian smartphones to MeeGo, similar to how Microsoft shifted from DOS to Windows in the late 1980s and early 1990s. This transition will be costly and Nokia will be vulnerable in that transition which will take half a decade in time, probably.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /The key point to remember is that we are examining a strongembattle royale among smartphone platforms, not among individual phones/em/strong. It matters not one iota who makes the best single strongemphone/em/strong at any one point in time. Profit matters only to the degree that the platform supporters are able to generate profits to some degree to remain in the race - the question of who makes the biggest profits is irrelevant. Remember the Sony Betamax lessons with being best and being most profitable.br /br /What matters is strongemscale/em/strong. Scale driven by low price. Scale driven by an army of partners and suppliers. If you have an installed base of dumbphones - you have to be successful in converting dumbphone owners to buy your smartphones. And as this is not an open contest with #39;fair rules#39; where the best value to the consumer will win the market success - this is an #39;unfair#39; contest where carrier relationships will determine disproportionately who wins and who losesstrongem. In this race the handset makers have to cater not to consumers, but to the carriers/em/strong. They are very few, they have all the power, and they will punish you for years, if you anger them now.br /br /That is why I am following the smartphones bloodbath with such interest this year. This is the most dynamic time in smartphones, when for the first time ever we have 10 platforms for smartphones and at one point in this year we had 24 Global Fortune 500 -sized companies committed to offering smartphones. I said the the competition would be too intense, that the blood would run and we would see many twists and turns in the wars this year. So far Palm went bust, and so far Google, Microsoft and Vodafone have quit the smartphone manufacturing business. But the platform war continues. I will keep you posted.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0pt/p/o:p/font/span#0160;

pI did suggest this would be a bloody year for smartphones but honestly I didn#39;t expect this many casualties. Its only July and we#39;ve seen 4 deaths already. Palm (but re-birth via HP), Google Nexus One, Microsoft Kin and now Vodafone. br /br /Vodafone had earlier launched some cheap featurephones for emerging world markets like India. Then they announced Android based smartphones for their Vodafone 360 service environment. Now this week we heard that there won#39;t be any Android smartphones on the Vodafone brand. Thats the 4th major Smartphone player, and the third of Fortune Global 500 rivals to quit the smartphones race.br /br /Also this highlights how incredibly rare that success by Apple was with the launch of the iPhone and how exceptional - truly excellent - their entry was into the smartphones space. Notice that after #39;learning Apple lessons#39; giants like Google, Microsoft and Vodafone - have not been able to crack their way into this market. br /br /Its very very bloody in the smartphone wars. LG made losses with its phones business. Motorola reported a surprise profit in its handset division, but that was a one-time gain out of a lawsuit settlement with RIM. Without that money, Moto would have lost money again in its phones business. The competition is so tight that competitors are dropping like flies. And managements at very big global corporations do make investment decisions and product commitment decisions based on some very serious calculations. Google, Microsoft and now Vodafone have decided that the phones race is too costly to join (or to remain in). I think this suggests the times are so bad, that we will still see more casualties this year. Whose next to quit? Yahoo?/p

pLets talk about inputs, touch screens and QWERTYs and T9s and hybrids.br /br /We heard earlier this week that Motorola has found 30% of consumers are not willing to consider a phone that is a pure touch screen phone. This number is growing. A few years ago it was mostly only older teenagers and young adults, of whom about half (in the USA, 42%) were so addicted to mobile messaging, that they could send messages #39;blindly#39; ie with the phone hidden in their pocket or behind their back or under the table. That portion (heavily SMS-addicted, tactile text input obsesed) was only about 13% of the total population a few years ago by my measurements worldwide - ie roughly half of the 16-30 year old segment of the total population. But the #39;I must have my physical text input#39; customer segment is growing, and it is now 30% according to Motorola.br /br /SO TO#0160;START WITH NUMBERSbr /br /Yet statistics also tell us that the sales of touch screen phones are growing faster than QWERTY keypads, and in the top price ranges, in the smartphones - touch screens now outnumber QWERTY inputs according to Canalys. Their numbers tell us that of#0160;the #39;primary input#39; of smartphones now Touch Screens#0160;are twice the size of QWERTY, while QWERTY#0160;are twice the number of basic T9 among smartphones. Both QWERTY and Touch screen keep growing, but in this price range, touch screens grow much faster. I wish Canalys would include the hybrid number (how many have strongemboth/em/strong QWERTY strongemand/em/strong Touch, because obviously that is a significant number and we don#39;t know where they allocate those. In 2009 NPD told us that 20% of all phones with advanced inputs had both Touch Screen and keyboard. It seems to me, that this form of input is becoming more popular, not less).br /br /But that is the top range of phones. Among all phones, QWERTY is still the primary form of advanced input. I have not seen public domain numbers recently for both, but NPD gave US numbers for 2009, where 26% of all phones had a touch screen input and 35% had a QWERTY input. My company, TomiAhonen Consulting has been tracking these numbers globally,#0160;of course, and#0160;I#39;m happy to provide to you my company#39;s#0160;current breakdown for end of 2009 is as follows:br /br /All mobile phones sold in 2009 by input methodbr /Touch screen input#0160;only ..................11%br /QWERTY input only .......................13%br /Combo input Touch and keypad .........3%br /Basic T9 keypad only .....................73%br /Source: TomiAhonen Consulting 2010br /br /(As people have been asking for that number, I will be adding it to next year#39;s TomiAhonen Almanac. The current 2010 Almanac did not have the number as the total number was still so small in 2009 compared to other features of phones that have far larger numbers like color screen,#0160;camera, media player, bluetooth, memory card, etc, which I report in the a href=http://www.tomiahonen.com/ebook/almanac.htmlTomiAhonen Almanac 2010/a) br /br /These numbers are fairly consistent with the tidbits that are coming out like Gartner telling us 184 million phones sold in 2009 were touch screen, and the Indian government saying#0160;they have 9#0160;million #39;chatphones#39; ie locally made cheap QWERTY texting phones, LG reporting they sold#0160;18 million QWERTY phones in 2009#0160;etc. Those proportions (13% pure QWERTY, 11% pure touch, 3% combo) are very similar to NPD numbers and also are in line with how Blackberries outsell iPhones; and how Nokia#39;s E-Series (ie mostly QWERTY) now outsells N-Series (ie mostly touch screens)). RIM is the world#39;s bestselling QWERTY phone maker with the Blackerry selling 17% of all QWERTY based phones worldwide in 2009. Samsung is the world#39;s bestselling touch screen phone brand, selling 21% of all touch screen phones. Apple#39;s iPhone took 13% of all touch screens last year.br /br /Touch screens are the hot story now. They also #39;seem#39; more #39;modern#39; and touch screens allow bigger screens in classic candybar phone form-factors (remember, the iPhone is also considered candybar form factor, ie it is not a #39;flip phone#39; or a slider..). So any web browsing and screen-intensive experiences like watching pictures, videos and playing videogames are all experiences more vividly with larger screens. So lets explore this a bit deeper.br /br /We had basic T9 keypads from 1979. It was the only way to control our phones and early mobile web surfing was even driven by the numeric keypad, the numbers on the keypad offered shortcuts to various links on the WAP page. We got the first full QWERTY keypad#0160;in 1996 with the Nokia 9000 Communicator. A cheaper and simpler QWERTY layout was introduced by Blackberry and most QWERTY keypads today are of the #39;Blackberry style#39; including many Nokia E-Series phones. Then we had the touch screens. There were modest attempts to introduce touch screens before the iPhone, but we can say that it was not until the iPhone in 2007, that touch screens became commercially viable and popular among users. If it took QWERTY 14 years to reach 16% of all phones sold, and only 3 years for touch screens to reach 14% of all phones sold, it is clear to see the hottest idea in phone inputs today is touch screen.br /br /AGAIN I THINK ITS SIMILAR TO CARSbr /br /I do think we have a good analogy from cars, and from PCs. Cars analogy first. The earlier, simpler and more #39;labor intensive#39; way to control the speeds of a car, was a manual transmission. And then#0160;a newer, more user-friendly, simpler-to-use, but more expensive way to manage the gears of the car, was the automatic transmission. And a kind of hybrid solution is now the high end automatic transmissions which allow the driver to select the gears, most typified by premium sports cars like Ferraris and Aston Martins having the #39;Formula 1quot; style #39;flappy paddle#39; automatic gearbox operated while holding onto the steering wheel, like a racecar driver...br /br /So which is better? If you #39;hate to drive#39; or are not very well coordinated, then definitely the simple use of an automatic gearbox is far better than attempting to learn to coordinate the clutch pedal and gear lever movements to change gears dozens of times in typical driving situations. If you are a #39;real driving enthusiast#39; like say the reviewers of the Top Gear car program, then they will always prefer a #39;real#39; manual gearbox for real driving pleasure, and most sports-oriented luxury cars tend to offer the manual transmission as an option for this reason. But globally there is a clear gradual decades-long trend where cars are shifting from manual gearboxes to automatics. In the USA most cars sold are automatics and Europe is well on that path too. In cars the automatic option tends to be the more expensive way to do the gear selection (vs manual gear shift) and thus cheap basic cars tend to be sold with manual gearboxes, which is of course the majority of cars sold worldwide, where many of the emerging world markets are the big market opportunities for cars, like China, Brazil, India, Russia etc.br /br /Meanwhile we have another similar#0160;shift in the PC world. Originally the PC was controlled by the alphabetic keyboard layout taken from the typewriter (that is where we get our QWERTY style of layout for the keys). The PC added a numeric keypad to the side#0160;- early PCs were very heavily used in the accounting and business uses where numeric entry was very important, and the keyboard added the function keys (on top of the alphabetic keys, F1 through F12) which were an early way to offer advanced controls to complex computer programs like WordPerfect. That resulted in the #39;classic#39; 101 key#0160;keyboard of the#0160;IBM PC and its compatible siblings. Our current laptop computers have keyboards that#0160;attempt to#0160;mimick that 101 key layout with some size-related compromises (the numeric keypad being #39;embedded#39; into the alphabet keys of UIO, JKL, Mlt;gt; for example.br /br /Imagine how cumbersome internet surfing would be today if we didn#39;t have the mouse, and had to surf the web using the keyboard only. Or worse, try to edit photographs without a mouse, only using a keyboard. It would be hopeless.br /br /So in 1984 it was Apple who brought us the Macintosh which did change everything about the PC, in terms of how it was used. Among its many innovations, the Mac introduced us to the mouse as an alternate input method. And today all PCs have some kind of mouse input.br /br /But the mouse didn#39;t kill off the keyboard. The mouse and ever more clever on-screen navigation, and context-sensitive menus with programs, did make the function keys almost obsolete but even though the mouse is a great way to navigate websites (or edit photographs), we still use the alphabetic keys of our PC keyboard very happily to do our emails, our blogs, our Twitter comments etc.br /br /Now we are witnessing another dawn of perhaps another era, with the iPad. It has no physical keyboard at all, but offers a virtual keyboard. I am not convinced this will replace all keyboards but it may well become one major alternate way to control our computers.br /br /PHONE INPUTS COMPAREDbr /br /The three major types of inputs for mobile phones have their own merits each. The T9 form is very simple and cheap. If the user really does not need internet use or any major uses beyond voice and basic text entry, a T9 keypad is perfectly fine. Remember that 74% of all mobile phone subscribers on the planet do NOT use the internet on their phone in any way. If they have a camera on the phone, they won#39;t do significant editing of the pictures, and basic navigation of an image (ie #39;zoom#39; etc) can be done very comfortably with the T9 keys. It would be foolish to attempt to force these customers to accept very expensive touch screen phones to replace their basic phones, before they express an interest and willingness to migrate their phone behavior to more advanced features.br /br /T9 has another benefit, it is very easy to learn. If you have never learned the bizarre order of keys on a QWERTY keyboard - remembering the keys are not in an alphabetic order, so new users have to #39;learn#39; where the given alphabetic keys are - and early use of such a keyboard can be slow - the T9 is very quick to learn. All keys are in alphabetic order and you only have to memorize the location of 8 keys to have the full alphabet. There are many teenagers who are faster at typing on a T9 keypad than they can on a full PC keyboard with its full-size #39;comfortable#39; and dedicated QWERTY keys. This may seem odd, but remember, these are the same kids who can master a videogame with the simpler controls of a Playstation keypad than using the same game on a PC keyboard or for example a #39;real steering wheel#39; for a driving game etc. Simple has its benefits.br /br /QWERTY FOR THE HEAVY SMS CROWDbr /br /So then came QWERTY. The early heavy users of QWERTY were wireless email users, as the early QWERTY phones were almost all smartphones, and tended to be very expensive ones. These were used often for email. That then migrated to SMS use and now also for various social networks like Twitter and Facebook, and of course instant messaging users, in particular those using Blackberry messenger. This is what that Motorola finding is all about. Roughly speaking half of older teenagers and young adults are so addicted to mobile phone messaging, that they send over 50 messages per day (a third send more than 100 per day from the USA to UK to South Korea) and at that level, users become so powerful and fast messaging users on their phones, that they learn to send messages blindly, almost without thinking. Many heavy users are able to carry on two separate SMS conversations on two phones using both hands, simultaneously.br /br /These are the seriously heavy users of mobile, and I would say these are similar to the #39;serious#39; drivers of cars, who insist on a manual gearbox even on their premium BMW or Audi. They want to be in full control of their driving experience. So understand this point. QWERTY is not demanded by wireless email users, or of corporate/enterprise business phone users. They could very well adapt to virtual keyboards on touch screen phones. But the current QWERTY addiction is directly related to SMS and mobile instant messaging addiciton of the youth and young adults. While the input method is #39;older#39; than touch screen, and is not as versatile as touch screens can be, for the use of messaging, QWERTY is far better. Like a racing car driver, who wants to be in control of shifting the gears. And then, consider the magic of mobile messaging. Mobile messaging is powerful not only because it is fast, it is powerful even more, because it is so secretive. You can send messages secretly in class. You can send messages secretly from the dinner table, with your hand hidden in your pocket. If you are a teenager and make a call, your mom or dad, or your brother or sister, might be listening to what you are talking about. But with SMS and mobile instant messaging, nobody gets to #39;eavesdrop#39; of to #39;snoop#39; in your communications. This is FAR MORE important than the #39;optimal#39; internet surfing experience.br /br /TOUCH SCREENbr /br /The touch screen, as finally solved by Apple iPhone with the multitouch capacitive screen technology, has now enabled convenient internet surfing on a small screen phone, without a stylus, without a mouse, and without cumbersome keypad navigation tricks. The #39;mobile web#39; use has experienced steady growth since NTT DoCoMo of Japan launched the first full intenet service on mobile in 1999, but the usage was never explosive. Not until the iPhone came along. Today touch screen smartphones, usually combined with all-you-can-eat data plans - are driving internet adoption and use among mobile phone owners. The phenomenon of the App Store and billions of downloads is related to this.#0160;It would have been far more subdued if there was no touch screen interface to the iPhone. While the touch screen alone is not as good as the traditional PC with both the full 101 key keyboard and a mouse, the touch screen alone is far better for internet surfing than a keypad or even QWERTY keyboard alone, on a phone.br /br /As we see the mobile internet adoption increasing, that will help drive the demand and appreciation of the touch screen interface.br /br /The touch screen also became the easy way to look at photographs on a phone. Remember again, that for 90% of the population of the planet, who have ever used any kind of camera, the only type of camera they have ever used has been a cameraphone. Don#39;t think of yourself and your luxurious lifestyle who also own a stand-alone digital camera (or if you#39;re older like me, you#39;ve also owned many film based cameras). That is a tiny minority of all the camera owners on the planet. The world has now over 2.5 billion cameraphones in use, vs under 250 million stand-alone digital or film based cameras. Touch interfaces are better also for manipulating photos, so as the basic picture editing applications on the cameraphones get better, then here too the users will appreciate the touch screen interfaces to adjust and alter#0160;their photos.br /br /The touch screen definitely offers#0160;better ways to explore existing pictures but the touch screen is also cumbersome as a camera operation interface. Most touch screen cameraphones offer at least some controls on separate #39;dedicated camera buttons#39; on the side of the case, like the shutter button. But for things like zoom and flash setting and lighting control etc, touch screen controls are a severe compromise when compared to dedicated camera buttons. This is where #39;general purpose#39; cameraphones will be hurt and #39;serious#39; cameraphones will offer more dedicated buttons and controls. Its one reason why #39;slider#39; form factors for advanced cameraphones with touch screens are very viable.br /br /So with cameras its#0160;a mixed bag. A pure touch screen is not optimal for taking pictures, but large screens are better for watching pictures and pure touch screens can be excellent for the sharing and definitely touch screens better for exiting photos than non-touch screnes.br /br /The virtual keyboard on the touch screen is also good enough for most users. Remember that even the heavy SMS addicted part of the population is only 30% of all consumers, so we have 70% of the population who are not that bothered. If they need to send a message, the virtual keyboard is definitely #39;good enough#39;. For many who have learned to type of a PC, when #39;upgrading#39; from basic T9 to a good touch screen virtual keyboard like that on the iPhone - they experience a significant increase in typing speed. The virtual keyboard is better than basic T9, and that is most definitely good enough for most typical users.br /br /But the virtual keyboard obivously consumes a large part of the available visible display. That means that the available display is limited, so the users see far less of the messages or twitter feeds or emails or blogs etc that they are reading about and writing to respond to. It is a compromise. The more severe problem comes from #39;single handed#39; operation. Most users of touch screen#0160;virtual keypads are not dexterious enough, with#0160;very fine-tuned muscle memory, to be able#0160;to type on the virtual keypad#0160;single-handed. The virtual keypad is designed to be used on a stable surface (like the table at a Starbucks) and#0160;with the typing done with both hands. T9 and most QWERTY physical keyboards#0160;can easily be operated single-handedly.br /br /This is not a big factor if you are using your phone primarily in a seated situation, like in meetings at the office or in yes, coffee shops and the airport lounge. These are typically not the young addicted users (called #39;digital natives#39;), they are typically the older #39;digital immigrant#39; type of users who are trying to shift their experiences from the PC and internet world into the mobile world. For those who are fully addicted to the phone, they use the phone continuously - young adults will look at their phone more than once every 5 minutees of every waking hour of every day - and will be using the phone while walking. So the user will have other things in the other hand, like the bag with the school books, or a brief case, or an umbrella, or the grocery shopping bag, or perhaps holding the hand of the child on the way back from kindergarden, etc. These users keep using the phone in one hand while they move about in their day, and they will want the ability to fully control the phone single-handedly. A pure touch screen phone will be cumbersome, and at times impossible to use this way.br /br /BOTH INPUTSbr /br /Like the flappy paddle #39;professional racing driver#39; control of modern top sports cars, that allow both an automatic transmission and the control by the driver, a phone input where both touch screen and keyboard entry are used, is the ultimate top-of-the-line that answers both needs. It allows totally dedicated keys for keyboard-intensive uses like text entry or camera operation; while including touch screen use for internet surfing and picture viewing. This is the most expensive solution obviously, it means the phone software has to understand both forms and most applications on the phone have to recognize both types of inputs (logically, consistently, intuitively). The input methods will have a lot of overlap, so there is redundancy here that is perhaps even unncessary costs for some users, and the technical solution means the phone will be far larger physically than one with only one or the other.br /br /The form factor means either a severe compromise on the screen size (to maintain candybar form factor) or else a more expensive and bulky design with a flip or slider configuration. A physical keyboard added to a touch screen means that your phone will not be as slim as the current iPhone model for example, and for many that bulkiness is a sign of being old-fashionied. It also adds weight and cost. But inspite of this, I am confident this category will grow to take a far bigger part of the total handset space, because many SMS addicted users will want to #39;also#39; have a big touch screen, and then, perhaps less so, some existing touch screen users will develop a desire to have a dedicated QWERTY keypad as well.br /br /WHAT OF SWYPEbr /br /And yes, just like we had the predictive text innovation to try to solve the #39;problem#39; of T9 text input (heavy users tend to turn predictive text off, so its a typical crutch for those who were not born into the digital world), we now have the great idea of Swype, as a solution to allow #39;lazy#39; touch screen text entry, swiping, with approximately the right characters, and Swype will use its intelligence to guess what word you meant. This is another very intelligent solution to solve a problem using automation. Some will like it, others will hate it, just like predictive text. The problem with Swype is that you have to learn how to use it. It doesn#39;t take long to learn but you have to go through that process. Many who have gone through it, say their text entry is lightning-fast and accurate on the touch screens. Fine. My gut says, we won#39;t get everybody to bother to learn a new way. It is a nice crutch, but my guess is that for the heavily addicted texting users, they won#39;t bother. They use so much of the cryptic shorthand of SMS communication culture (and the ever-changing jargon of the youth and pop culture), that they#39;d need to be constantly updating and correcting the library for Swype. Maybe I am wrong, but we have to see, I am not expecting#0160;the world to start to use#0160;Swype, but I do see it as a good solution for many who do have a touch-only#0160;smartphone and want to get faster typing on it.#0160;#0160;br /br /WHAT OF VOICE INPUTS?br /br /Yeah. That old story yeah.. I do think that in the long run we#39;ll get to major voice inputs of all of our digital devices. The intelligence of voice recognition is getting better, but its slow going. Note that for most uses of our phones, voice input is actually not optimal. If you are sitting in the Starbucks, how quickly will your neigbors get annoyed if you try to navigate your mobile phone activities (or your laptop or your iPad) using voice inputs. How many times would you get errors of inputs in loud places like the airport or train station. How many times do you want to control your phone quietly - sending a discrete message to your wife from the meeting, that you are running late.. So even if voice inputs were to be perfected (they are nowhere near there yet), then voice inputs are going to be only a partial solution. So think of the user in the car. If you commute to work every day in your car - alone - then it doesn#39;t matter at all to you, if you speak to the phone and it speaks back to you - reading your messages to you etc. But if you are car-pooling and there are 4 colleagues in the same car, it would be pretty impossible for all 4 professionals to use speech controls on their phones in the same confined space of the car. Or consider the train or bus, even more of a hassle.br /br /I do believe we will get ever more clever uses from voice controls - and from text-to-voice reverse uses, of voice as the output (great when driving a car, when you can#39;t take your eyes off the road to read messages, but you can listen to messages if they are read to you). But at least for the near future, next several years, I do not see voice inputs or outputs as the main inputs and outputs of your phone behavior. A growing area yes, but a minor solution to inputs (and outputs), not the #39;ultimate#39; solution. Just look at Star Trek, with their clever talking computers haha, even there the crew regularly had to input commands using the touch screen keyboard entries, where a voice communication would be far more complex than simply touching with your fingers..br /br /THE CASE FOR THE CASE#0160;br /br /We do also have the curious case of the case. The iPhone Death Grip antennagate brought to light the issue that many iPhone owners buy their smartphone with a case (and now the official Apple solution to iPhone 4 Death Grip is to give away a free case with a new purchase). This to me was something I never appreciated, as I have never particularly liked cases with my phone(s). I carry my phone in my pocket. But it occurred to me a couple of days ago, that since I use my Nokia E90 Communicator as my primary phone - and it is a #39;palmtop#39; style flip phone (ie wide flip) - that is not suited for most basic cases. A case is most suited for a candybar form factor like on the iPhone. The same is true of many of my past phones like the N93 contortionist phone or the N80 slider, and obviously all my previous Communicators too.br /br /MANY FORM FACTORS TO CONTINUEbr /br /In the laptop PC world, the original Toshiba T1000 laptop from 1985 is very clearly the forefather of modern laptops, notebooks and netbooks. There was never a major rival form factor (until now, with the iPad and tablet PCs). Fro 25 years the laptop has held a very standard flip laptop form factor, the big screen on the lid and the full QWERTY keyboard on the bottom part of the flip construction.br /br /In mobile phones we sell numerous popular form factors today. We sell the basic candybars, sliders and flip phones, with T9 inputs, QWERTY inputs and touch screen inputs, or a combination of the#0160;above. This reflects the different major types of customers of phones, and the major #39;primary uses#39; of phones today. For some it is primarily an internet access device. For others its primarily a messaging device. For others still it is primarily a camera. And for many older users it is still primarily a (voice) telephone.#0160;How you use the phone - and your previous history with other inputs like using a PC or using a Playstation - determines what kinds of inputs you will#0160;prefer.#0160;There won#39;t be one overriding form factor for phones. Not for many years to come. But expect touch screens to grow the fastest right now, as the phone makers learn from Apple on how to do touch screens well.br /br /Thats my thinking about Touch versus QWERTY today. I am interested in your views and this is obviously an area that is evolving./p

I have been waiting for the confirmation and CNBC just said that the total cumulative sales of iPhones on China Unicom has passed 2 million. It was 400,000 by the end of 2009.#0160;As regular readers know, all analysts who#0160;offered a forecast number of iPhone sales going from Christmas Quarter Q4 sales of 2009 to the#0160;Jan-Mar quarter of 2010 (a href=http://communities-dominate.blogs.com/brands/2010/04/apple-quarterly-numbers-for-iphone-stunning-far-above-expectations.htmlincluding me/a) had forecasted a decline in sales. Absolutely every analyst expected a#0160;decline (because previous years there was a#0160;clear decline after Christmas). And even the USA sales of ATamp;T showed that exact pattern again in 2010, so it was#0160;a #39;reasonable#39; expectation. But there was a mystery #39;missing million#39; iPhone sales in Q1 which was obviously international#0160;sales.br /br /I took it to task to study where it was and did some math on Apple#39;s#0160;results and its published#0160;China numbers. I concluded that a href=http://communities-dominate.blogs.com/brands/2010/04/apple-to-thank-year-of-tiger-for-china-surprise-in-iphone-strong-quarterly-sales.htmlmissing million was China sales related to Lunar New Year / Chinese New Year sales/a. I also then found that Nokia reported a Q1 #39;Chinese New Year#39; related gift-giving period bonus sales (Nokia Q1 China sales were strongly up, and now in Q2 it was China which is strongly down, also showing a big seasonal#0160;jump). The reason we haven#39;t#0160;seen this before in China in smartphones, is that it was only in 2009 that China started its 3G networks and the iPhone was introduced late in 2009 for China.br /br /So I promised I#39;d track the industry and wait for the numbers. Now today CNBC has just said China Unicom cumulative#0160;sales of iPhones has passed 2 milliion.#0160;As the international sales of iPhones are down 14% from Q1 to Q2, its fair to assume the majority of the new Chinese sales of 1.6 million iPhones were in the first quarter, not the second quarter of 2010. The #39;missing million#39; has been found and now verified. br /br /So now we know there is a #39;new#39; pattern of iPhone sales. Big growth Q3 when the new iPhone has been introduced. Roughly similar level sales in Q4 for Christmas (Western country gift-giving season) and perhaps similar level sales in Q1 of the next year for Chinese New Year gift-giving season. And then a decline of sales in Q2 before the new iPhone model is released..#0160; br /br /And who told you first haha.. (yet once again, they again ridiculed me..)#0160;

pWe had the quarterly results from a href=http://communities-dominate.blogs.com/brands/2010/07/iphone-second-quarter-2010-in-bloodbath-market-share-is-declining-where-all-big-rivals-picking-up.htmlApple/a and a href=http://communities-dominate.blogs.com/brands/2010/07/midyear-point-for-nokia-next-in-bloodbath-update-and-they-did-grow-smartphone-market-share-again.htmlNokia/a which were the big news in the Smartphones bloodbath for last week. Both companies had further bad press, Apple around a href=http://communities-dominate.blogs.com/brands/2010/07/the-son-of-death-grip-antennagate-the-sequel-the-iphone-4b-and-the-3-month-loaner-iphone-4a.htmlAntennagate/a on which I did some math about the a href=http://communities-dominate.blogs.com/brands/2010/07/so-the-reality-check-on-apples-iphone-complaints-numbers.htmlreal scale of Apple#39;s numbers/a, and Nokia around a href=http://communities-dominate.blogs.com/brands/2010/07/obituary-for-opk-wall-street-is-a-cruel-mistress-nokia-searching-for-ceo.htmlrumors that the CEO may be replaced/a. But there was more news in the 2010 smartphones bloodbath./p pATamp;Tbr /br /ATamp;T reported numbers that for Q2 there were 3.2M iPhones activated (which is up 19%) leaves only 5.2M for rest of world (which is down 14%). The big reason why the rest of the world is down in Q2 is that the new iPhone 4 was only launched in 5 countries, so the ATamp;T proportion will be more than normal. This is not a sign of problems for the iPhone abroad.br /br /We also learned from Yankee Group that the average household income of iPhone owners is 100,000 dollar household vs 85,000 dollars for other smartphone owners (the US median household income is 52,000 dollars according to US Census Bureau). No big surprise that the iPhone has highest earners, but note that the Blackberry is by far the most common US employee phone smartphone, for mostly mid and senior management. They are well paid. So with that in mind, yes the iPhone is in a very high price bracket as a luxury good, and far from a mass market consumer device.br /br /Death grip - Switzerland becomes second country to delay iPhone 4 launch until Antennagate is fixed. And IDC survey from Friday of Apple#39;s Antennagate press conference reported that 2/3 of existing iPhone owners will delay iPhone 4 purchases until antenna is fixed. Bad news for Apple as most iPhone 4 sales were to existing customers. They still say all phones they can manufacture are sold, and there are week-long waiting periods, but that is temporary and now diminished. They might have had 3 week waiting periods through to October haha, now the waiting periods will soon subside as Apple ships its next batches to stores, if existing iPhone owners stay away. Meanwhile Apple continues to keep the Death Grip Antennagate in the news. After its press conference Apple added a Nokia and a Motorola smartphone to its video collection, which to me seems like a bad strategy of remining users of Antennagate and keeping it in the press.br /br /(Personally I think Apple will bring a new variant of the iPhone 4 which will be called something clearly different, to try to move away from the Death Grip problem very soon and bring those customers back who are waiting).br /br /Microsoftbr /br /Microsoft revealed the launch partner phone makers for its new#0160;OS,#0160;Phone 7. The phone makers are#0160;Samsung, LG, Dell, Acer and#0160;HTC. Only two of the five are major handset makers, as Samsung and LG are numbers 2 amp; 3 among#0160;the world#39;s top 10 biggest dumbphone makers.#0160;The maker conspicuous in its absence is Motorola, which did provide Windows Mobile smartphones but has apparently abandoned the Microsoft family. Samsung, LG and HTC all provide Android phones already so it remains to be seen how eager they are to provide major support to Phone 7. As Samsung has its own Bada OS, don#39;t expect huge effort by Samsung to support Phone 7. And HTC is the bestselling Android maker so it would seem they would put most their effort to retaining the lead on the fastest-growing smartphone OS platform. But it is also possible especially for LG to do a differentiation strategy against SonyEricsson, Motorola and ZTE, by focusing on Phone 7. We have to see and monitor the developments.br /br /In other MS news, it#0160;was revealed (but not confirmed) that ATamp;T has committed to selling 8 million#0160;Phone 7 smartphones from Microsoft. But while that number may seem big, remember that ATamp;T sells more than 12 million iPhones annually, so it does not yet spell awesome success for Phone 7.#0160;/p pHTCbr /br /HTC has said they will launch 6 more smartphones before the end of 2010.br /br /RIMbr /br /Blackberry maker RIM Admitted it didn#39;t see the kids coming.. That it took RIM by surprise to find all the youth around the world falling in love with the Blackberry.br /br /That is the rest of the news in the smartphones space. We will keep monitoring the Bloodbath wars here at the Communities Dominate blog/p

pNow that Microsoft has released the supporters of its Phone 7 platform for smartphones, we can do a bit of mapping of how the different smartphone operating systems might fare, if all of the current mobile phone makers, migrate all of their customers to smartphones. While Nokia has taken an aggressive path to migrating all of its users to smartphones, most of its traditional big 5 phone maker rivals had been slow to do so, and only got energized recently with Google#39;s Android platform. br /br /Note that there is an increasing body of opinions and forecasts, that in the mid to long term view, like towards the end of this decade, all phones would be smartphones. I think that is a very plausible view, considering the relentless pace of Moore#39;s Law. But if so, which platform is strong and which is weak. Even if not all phones go to smartphones, its very likely that most phones in Europe, North America and the wealthy countries of Asia-Pacific will soon be smartphones. So this analysis is an early indicator of what platforms would emerge as major players.br /br /Lets examine the Top 10 phone makers globally, and calculate what is the maximum potential of the platform, if all phone vendors of the Top 10 that have picked it, decide to support fully only#0160;that given platform. In some cases this is obvious, like RIM only supports Blackberry its own phone and no other providers support the Blackberry OS. Same for Apple. But in the case of Samsung its a bit of everything. Samsung has its own Bada operating system, but Samsung also supports Symbian, Android and the old MIcrosoft platform, Windows Mobile. So lets plug in the numbers and see what is the potential. Remember because I am assigning maximum support to each OS, that means our totals are far more than 100% - so in reality someone like SonyEricsson will probably continue to support a couple of platforms like Android and Symbian, so then these maximums will need to be adjusted downwards. But I think this is indicative of the #39;upside potential#39; of each platform. I am ranking them in order of their currently stated support.br /br /strongSymbian Foundation (closely linked to Nokia): 58%/strong (currently 49% of smartphones)br /from Top 10 supported by Nokia, Samsung, SonyEricsson, Sharpbr /Biggest current manufacturer: Nokiabr /Note strongSymbian without Samsung: 38%br //strongbr /strongAndroid (Google): 40%/strong (currently 22% of smartphones)br /from top 10 supported bt Samsung, LG, ZTE, SonyEricsson, Motorola, Huaweibr /Biggest current manufacturer HTC (not a Top 10 sized manufacturer)br /Note strongAndroid without Samsung: 20%/strongbr /br /strongOld Windows Mobile (Microsoft, discontinued): 34%/strong (currently 12% of smartphones)br /From top 10 supported by Samsung, LG, SonyEricsson, Motorola)br /Biggest current manufacturer HTC (not a Top 10 sized manufacturer)br /Note strongWinMo without Samsung: 14%br /br /MeeGo (Nokia + Intel): 33%/strong (not launched yet ie 0% of smartphones)br /from Top 10 supported by Nokiabr /br /strongPhone 7 (Microsoft) 28%/strong (not launched yet ie 0% of smartphones)br /from Top 10 supported by Samsung, LGbr /Note strongPhone 7 without Samsung: 8%br /br /Bada (Samsung): 20%/strong (currently 2% of smartphones)br /from Top 10 supported by Samsungbr /br /strongBlackberry (RIM): 3%/strong (currently 20% of smartphones)br /from Top 10 supported by RIMbr /br /strongiPhone iOS (Apple): 2% (/strongcurrently 14% of smartphones)br /from Top 10 supported by Applebr /br /strongLinux Mobile (LiMo Foundation) 2%/strong (currently 6% of smartphones)br /from top 10 supported by Sharpbr /Biggest current manufacturer Fujitsu (not in Top 10)br /br /I think the above shows clearly why Samsung decided to go with Bada and why Nokia would be foolish to abandon Symbian or its MeeGo platform to go Android. br /br /Also note how big part of Android footprint is Samsung (also for Microsoft#0160;Phone 7), once Samsung#0160;shifts full attention to Bada, Android will be far weaker (as will Phone 7)br /br /I think if you examine the full potentials of Symbian and Android, they are clearly the big players. Samsung will battle with Microsoft for runner-up role. RIM and Apple are far too small to have a chance once the transition is in full swing./p

So next in line we have Nokia#39;s quarterly results out today. And how did Nokia do? As always with this series of the #39;Bloodbath#39; series of articles - remember we are looking at smartphone market shares in this discussion, not revenues or profits...#0160; br /br /Nokia reported 111 Million total phones sold (up 5% sequentially from Q1) giving Nokia a market share of all phones of 33%. This is down from Q1. The average price was flat at 39 Euros.br /br /So is Nokia still shifting more of its customers to smarpthones? Sure it is. Once again, Nokia#39;s market share in smartphones is better than its market share in dumbphones. Nokia sold 24 million smartphones in Q2, up 12% from Q1 and giving Nokia once again also growth in market share, pushing it to 41%br /br /I do have to make a mention of this point, as so many clueless tech and business press reporters keep saying that #39;Nokia is losing market share to Apple#39; or that #39;Apple has been taking market share from Nokia#39;. Now lets examine the past 12 months. Here are the four quarters from Apple#39;s peak market share in Q3 of 2009 and please compare and then go listen to the press.br /br /Apple.....Q3strong 17%/strong...Q4 strong16%/strong...Q1strong 16%/strong...Q2 strong14%/strongbr /Nokia.....Q3 strong38%/strong...Q4 strong39%/strong...Q1 strong40%/strong...Q2strong 41%/strongbr /br /The popular myth for all of 2010 has been that somehow Nokia is losing smartphone market share to Apple. The truth is exactly the opposite. Apple is consistenly losing market share to Nokia. That is now four quarters and counting.|br /br /(and yes yes yes, Apple gets 600 dollars per iPhone sold, Nokia gets about 200 dollars. Apple posted huge profits, Nokia posted modest profits. I know.#0160;As a corporation, Apple is currently vastly more profitable than Nokia, but this blog is NOT a financial analysis blog.#0160;This analysis is about market share, And Apple is losing, Nokia is winning the battle.)br /br /Also Nokia is at the brink once again of so utterly dominating this field, that it is as big as the next 3 biggest smarpthone makers combined. Consider. Nokia#39;s Q2 smarrtphone sales = 24.0M units. Then RIM + Apple + HTC = 24.1M units. That is market dominance. Sadly the only market where this is not true is the North American market, so US analysts tend not to see this in their home market, and they have to just believe#0160; the reported numbers, that in Europe, Asia, Australia, Latin America and Africa - Nokia is the bestselling smartphone.br /br /Meanwhile Nokia#39;s Ovi store is up to 13,000 items of content and apps, and is generating 1.7 million downloads per day, which is a rate of about 620M per year.br /br /Nokia also announced that the N8 has started shipping.br /br /And two Nokia related news items. Motorola sold its networks division to NokiaSiemens Networks. And the financial press has been gossiping that Nokia CEO Olli-Pekka Kallasvuo may be replaced. But nothing confirmed.br /br /So my quick comment? I suggested at the start of the year that the Bloodbath would be bloody, many rivals would rush in, and the big incumbent smartphone makers would have to yield some space to the newcomers like the Android smartphone makers. Nokia has been incredibly resilient and feisty. Since the start of the year even as Android grew from 5% in December to 24% global market share today. You would expect that to hit all major smartphone brands. Yet in the same period - Nokia grew from 39% to 41%. I think that is very good performence in the smartphones bloodbath. And this was clearly not something I had expected..br /br /strongemUPDATE JULY 23/em/strong - The market share analysis I have in the above is now independently verified by Strategy Analytics and Reuters has a good graphic which a href=http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0710.gifshows the market shares/a.br /br /strongemCLARIFYING COMMENT/em/strong from Friday - I notice we have 32 commments added in one day, which is very much at this blog which is not a commercial blog (we have no advetising, I do this as a hobby only, purely out of my passion to share, and I do have a real-time job as a telecoms consultant that keeps me very busy). Many in those comments have been critical of me, that I don#39;t discuss the financial side. So. To be very clear. This is not a financial analysis blog. Inspite of that, I have made clear mention here at the Nokia quarterly sales blog comment, that Nokia#39;s profits are down; and I also mentioned in the corresponding Apple quarterly results blog that they had a phenomenally good quarter on their financial performance.br /br /Why does this blog #39;bother#39; with market share of smartphones? It is of interest to me, that is the only reason. I have been monitoring the smartphone market share for a decade - find any other published author or expert who has published such data in his books and blogs -#0160;as an individual analyst, not a market research analyst house like#0160;Gartner or IDC#0160;or Canalys whose job its to sell market analysis. I don#39;t sell any smartphone market analysis#0160;reports. This is a hobby for me, and along with my personal motto - in a connected age sharing information is power - I post my obsevations on this blog. The financial performance is not of interest to me. I have a#0160;Finance MBA from#0160;St John#39;s University in New York City, the second biggest private university in the USA and a huge MBA factory - and I worked on Wall Street early in my career. I couldn#39;t care less about financial performance metrics. I find it utterly boring and#0160;nobody can force me to waste my time doing that as a hobby. Something I hated doing as a job. I like the mobile telecoms industry and I analyze that industry for the industry platform metrics - how many subscribers, how many unique users, how many multiple SIM cards, how many mobile phones, how many strongemsmartphones/em/strong.br /br /If you find value in understanding whose smartphone platform has most market share - and this tends to#0160;be of interest to companies developing services and apps to smartphones, as well as to those component makers who provide components to smartphones - then there is no other blog currently that does this type of deep analysis of whose smartphone platform is performing how. Then you may find value on this blog. If you want to do financial analysis, this is not a financial analysis blog. Go somewhere else!#0160;br /br /I am not going to respond to any comments of any readers who mention financials as an issue. I#0160;was very clear in the original blog entry#0160;here, that strongemthis discussion is about market share, not about#0160;profits/em/strong. So I will delete every comment posted here that went into the financial discussion even if that comment had any other#0160;#39;valid#39; comments. I will - however - maintain all those comments and post them here, as a one extended history of what was#0160;said by others, so if you did post a comment, yours will not be #39;eliminated#39;. But I will not respond to them. Go to UBS or Deutsche Bank or Citibank or whoever financial analyst you want, and have your financial argument there. I am not wasting my time on strongemsomething - that I said openly this blog is not about./em/strong There are enough blog entries on this blog about the business of mobile telecoms - like just a day before my blog about Nokia CEO, where you can post about business performance including profits to your heart#39;s desire. We have over 1,400 postings here and most of them deal with business and money. We also have over 4,400 comments posted on this blog, and you will find that I respond to every comment, in detail. But this blog series - the #39;bloodbath#39; - has strongemnothing to do with profits/em/strong, andstrongem all to do with market share/em/strong. Its my blog, my rules, and no financial discussion about it, this is about market share -strongem to those who care/em/strong.br /br /Deleted comments are here after this link: br / p(Deleted comments will appear here shortly)/pbr / pComments July 22br /br /Mark:#0160;span id=comment-6a00e0097e337c88330134859c58aa970c-content /span/p pGood analysis, Tomi./p pSadly, even though you#39;ve explicitly stated the topic is share and unit sales, you#39;re going to be bombarded with posts about profits and revenue. Such is life./p pAnyway, it#39;s not bad - handset and services made $830 million profit - but it#39;s clear that they have nothing to offer at the consumer high end... which given the N97 is a year old isn#39;t really a surprise. The N8 may change this, we#39;ll see.br //p pOW:br /br /Nokia has never created one single smartphone before. Their decline in profit absolutely Retorte thatbr /br /br /Reda:br /br /span id=comment-6a00e0097e337c88330133f27a8fdc970b-content#0160;/span/p pWanted to comment on this post and the previous post (actually I was more compelled on the other one because I disagree on most of the points), but I’ll make a summary here as its newer although I appreciate there won’t be much “conversation” due to the number of comments and due to the fact that in past I noticed that if somebody disagree with your points you tend to show the apple-syndrome (one-way, highly directional communication). Anyway, most of the points I’m not making here have been said by others already.br /So, you often say that this “blog is NOT a financial analysis blog. This analysis is about market share, And Apple is losing, Nokia is winning the battle”. But then “Nokia doesn#39;t know how to sell itself to Wall Street. Not to match Apple#39;s amazing PR spin machine and Steve Jobs#39;s stage presense.”. I’m afraid you have to make up your mind, you either talk about it or don’t talk about it. You cannot just say when looking at nokia’s profits, “ah but here we are only talking about mobile market share” and then comment on wall street and their analysis when it suits you the most. I’m sure you know, wall street cares about profits not mobile market share. Companies issue profits warnings, as nokia did, not market share warning.br /Second point, we are comparing apple with nokia mobile market share but then in OPK’s post, you say we cannot compare apple with nokia because they are from different niches. Then ok, you must be wrong in one of the posts (either in OPK’s Obituary or this post). br /You say apple has changed the battleground and it’s winning with its new “marketing-hype” strategy but say it’s not OPK’s fault? Eh? If you start with the assumption that the marketing strategy is how you win nowadays, it’s only a logical conclusion that if you are not that kind of person you are in the wrong place and therefore should stand-down. Did OPK do that? br /Regarding symbian and nokia’s strategy, I wanted to write a counterargument to a lot of what you said but I think facts (the haemorrhage of developers from the ecosystem) are a better counterargument and shows the flaws in your analysis./p pHaving said all this, it#39;s your blog anyway and you write and say what you want ;-)/p pSorry, cannot end or share a positive note at the moment. Perhaps my mood will change when I’ll see some real change in nokiabr /br /br /July 23br /br /Leebasebr /span id=comment-6a00e0097e337c88330133f27cc72d970b-contentbr /I just don#39;t get it. Nokia#39;s profits fall -- and you think they are rocking the world because they have essentially flat market share? /span/p pNokia is supposed to have everything vastly superior to the iphone -- and have the features years in advance -- but they can#39;t sell their phones for good money while Apple can?/p pAnd not just in the US. All across the world people are buying Apple phones at premium prices. Are those folks just plain stupid? I though only American consumers are stupid? Why can#39;t Nokia sell it#39;s far superior phones at superior prices in the parts of the world where you don#39;t have stupid Americans?/p pHTC and Samsung have no problem selling phones in the US -- why can#39;t Nokia?/p pAnd by ANY measure you use -- it#39;s clear that Nokia quot;smart phonesquot; aren#39;t being used like quot;computers that happen to be phonesquot; in the way the iPhone and Android phones are being used. Not even CLOSE./p pClearly Nokia agrees with Tomi that the epitome of smartphone use is being able to text with the phone in your pocket. Texting -- THAT#39;S where the money is at. /p pCourse -- any old dumb phone with a keyboard can text...and the average dumb phone owner uses just about as many apps as Nokias smart phone users use./p pBlood bath. That#39;s the whole controversy. It#39;s not controversial to state that Apple will never sell the most phones of any type. But to paint the company that is the MOST PROFITABLE, is showing fantastic yoy growth -- sells every phone it can make -- is the most desired phone in the world -- sold at the highest price -- and claim that it#39;s days are over and it#39;s a victim of the 2010 bloodbath -- is ludicrous./p pTo paint Nokia with no answer for the last year to the iPhone or Android as king of smart phones? Ridiculous. /p pIf NOKIA thought they were doing well they wouldn#39;t be replacing their CEO./p pAndroid as a platform -- that#39;s the real story of the year. There#39;s no way that Apple selling a single model of phone is going to outsell Android which is made by 20 some phone companies./p pTruth to tell, though, in a year or so those manufacturers are going to look on Nokia with envy wondering how Nokia managed to make even the slim margins it does. Android is going to be the best thing ever to happen to companies that don#39;t want to make any money in phones. Me too. Me too. Buy my Android phone which is just like every body else#39;s -- I#39;ll make them cheaper. No -- I#39;ll make them cheaper. No me. No ME! /p pWhile Apple will blood bath itself all the way to the bank.br /br /br /HCEbr /br /span id=comment-6a00e0097e337c8833013485a21622970c-content/span/p p@wansai /p pWhat is so difficult to understand about quot;This is a marketshare blogquot;? Yes sometimes he mentions financials but they are miniscule br /to the focus which is marketshare. ...... The discussion is about losing and winning marketshare, and you guys are trying to change br /the subject for which the blog simply was never meant to be. get over it./p pWhy do I talk about financials? Because, in this case, it is intimately connected to market share. Any market share won by constantly dropping your prices and lowering your profits is not sustainable. If Nokia had somehow managed to find a niche where they were able to maintain a certain level of profitability while growing or maintaining market share, you could make a case that profits are irrelevant to this discussion. That, however, is not the case here. Nokia#39;s profits have been falling, the average selling price of its phones has been dropping. All that this strategy does for them is to buy them is time to get their mobile platform of the future finished up. They still have the task of making that platform a success. If they do not, their prices and profits will continue to drop and they#39;ll reach a point where they cannot drop them any further - at which point they will either lose market share or lose money or both./p pstrongemNOTE/em/strong - any of thse people are very welcome to post their #39;market share relevant#39; comments again and I will respond to those./p

p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWall Street is a Cruel Mistress. The business press are buzzing with the rumor that Nokia is searching for a replacement for Olli-Pekka Kallasvuo (OPK) their CEO who has only run the company for 4 years following Jorma Ollila who is now the Chairman.br /br /Nokia is the world#39;s bestselling mobile phone brand - selling more mobile phones as numbers 2 and 3 combined. Nokia is also the world#39;s largest smartphone maker - selling more smartphones than numbers 2 and 3 combined. Nokia is profitable where most rivals are struggling to make profits. None of Nokia#39;s big 5 global handset makers have managed to migrate customers to smartphones in meaningful ways, while Nokia#39;s market share in smartphones is better than its market share in dumbphones. By all measures Nokia is executing well. Why is Wall Street demanding his head on a plate? br /br /I think its a combination of 6 factors. There is Apple#39;s iPhone of course. Then there is the question of Nokia#39;s profits. There is one particular Nokia phone model, the N97. There is the smartphone operating system Symbian. There is OPK#39;s promise to investors that he would restore Nokia#39;s market share in the US market. And lastly - but very importantly - there is the relative lack of sophistication and knowledge of the US based analysts who are far more familiar with the easier and simpler PC industry than the complex mobile industry. This is another very long article, so please bookmark the page and read it when you have good time. Grab a cup of coffee to go with it.br /br /WHAT DID OPK INHERITbr /br /OPK took over from Ollila to run Nokia in the summer of 2006, four years ago. What was the mobile world like back then? Nokia was the world#39;s bestselling mobile phone maker. For the full year 2005 they had achieved 35% market share. Their big rival was Motorola who was nearing 20% market share with their surprise hit phone #39;Razr#39; and many analysts were accusing Nokia of having missed the boat on flip phone design - thinking the world would soon all have Razr look-alike phones (how quaint, isn#39;t it. Today most phones are still candybar phones - the Nokia staple - even Apple#39;s iPhone is a candybar form factor, not a flip phone, as are most Blackberries and most Androids..).br /br /In addition to Motorola#39;s Razr surge, the two big trends in mobile phones in 2006 were 3G phones and musicphones - and in both, Nokia was accused of having falled seriously behind. SonyEricsson was launching Walkman phones, Motorola its Rokr. And in 3G Nokia had only about 25% market share vs 35% in all phones where the South Koreans LG and Samsung had taken a surprising early lead. br /br /In 2006 the tech world was not very impressed by #39;smartphones#39; - the category of superphones that Nokia had invented exactly 10 years before - and most analysts felt that the very expensive smartphones would only sell to enterprise/corporate users with business-oriented smartphones like the Blackberry and various Palm, Windows Mobile etc devices. US analysts didn#39;t even believe in mobile data services in 2006, as the USA was the last country to discover SMS text messaging and didn#39;t really believe in SMS until the Obama Presidential campaign of 2008. And here was Nokia with its crazy notions of expanding the expensive smartphone market to consumers - the N-Series - with the cameras and music players and user-installed applications and video recording and forward-facing second cameras for 3G videocalls and internet surfing and picture messaging - all that was seen as a dangerous and costly gamble by many analysts.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut Nokia believed in its views. It had set up the Symbian partnership with its rivals (something we don#39;t see Apple or Microsoft or RIM even trying today) where all of Nokia#39;s biggest rivals - Motorola, SonyEricsson, Samsung, Panasonic etc were invited to join as part of the Symbian family - as co-owners! By 2005 there were 60 different smartphones manufactured by ten major phone makers using the Symbian OS, which powered almost 7 out of 10 smartphones. Nokia was the biggest minority shareholder in Symbian - but only minority, it couldn#39;t dictate Symbian development. The OS was being developed to meet the varying demands of the partners, including Motorola asking for improvements based on the laggard USA market, to NTT DoCoMo asking for improvements based on the world-leading Japanese mobile market. Nokia was there in that mess, but determined to keep it a partnership that helps all, rather than having the mobile phone industry fall into an all-out war of a dozen duelling smartphone operating systems and immense fragmentation.br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSo when OPK took over, Symbian powered most smartphones in the world. Nokia#39;s market share in smartphones was a fraction of that, obviously, being 48% for the full year 2006. Microsoft Windows Mobile based smartphones were the second biggest platform behind Symbian with 14%. RIM#39;s Blackberry had 8% of the market and Motorola who made both Symbian and Windows Mobile smartphones had 6%. Previous global number 2 smartphone maker Palm had fallen to 5%. The total worldwide smartphone market in 2006 was only 80 million handsets, about 8% of all mobile phones sold. Of the world#39;s Global Fortune 500 brands, only 7 were involved in manufacturing or selling smartphones, so the competition was not very fierce.br /br /ENTER APPLEbr /br /The first thing that happened during OPK#39;s reign and changed #39;everything#39; in the phones market was Apple entering the phones space, with Steve Jobs demonstrating his prototype iPhone in January of 2007. OPK had only had half a year in control, when the whole mobile world changed forever. And all the rules changed too.br /br /Up to 2007, the best marketing machine in mobile telecoms had been Nokia, hands down. It was loved by the tech media and had the best customer loyalty in the world. But Apple is far better than Nokia in marketing. And Apple#39;s customer loyalty is legendary. A new kid was in town. Steve Jobs is the master showman even back home in the USA, where marketing and presentation is given far more relevance than in OPK#39;s home country of Finland, where you are expected to conform to the rules and stick to the facts. Not to brag, not to show off.br /br /The iPhone 2G was not the best phone in the world. Apple has since made 15 major technical improvements to the original, over the past 3 years, and Apple itself has celebrated those 15 changes as radical and important. Nokia#39;s flagship N95 which was being sold before the iPhone 2G even launched in 2007, had 14 of those 15 technical abilities as standard features. And the N95 had tons more features and abilities that even the latest iPhone 4 does not support. By every reasonable comparison, the N95 was the superior phone in 2007. Except for one very visible drawback - the N95 didn#39;t have a touch screen. And most head-to-head comparisons of smartphones by international reviewers in 2007 found that the N95 bested the iPhone 2G. br /br /But somehow with Apple, the facts no longer matter. The iPhone was the ultimate best phone ever - according to Steve Jobs - and because Steve Jobs says so, that started to become the storyline. The truth didn#39;t matter. That the iPhone 2G was not even a proper #39;smartphone#39; - it didn#39;t even offer users the ability to install apps (this ability came a year later) and didn#39;t support industry standards like MMS and even today doesn#39;t support Adobe Flash. The iPhone 2G was not a 3G device, making it instantly obsolete for example for the Japanese market and didn#39;t have such abilities as GPS and stereo bluetooth. But that didn#39;t matter. If your smartphone didn#39;t have the one cool thing the iPhone did - a touch screen - it seemed that your phone was old-fashioned.br /br /Nokia was manufacturing over 50 phone models when OPK took over. The iPhone was outrageously expensive and with that price point, it could #39;afford#39; to install a touch screen. Nokia sold a wide range from superphones more expensive than the iPhone (yes thats true) to far cheaper dumbphones with basic T9 keypads. It would have been prohibitively expensive to abandon the existing product lines of its existing 50 or so phone models at Nokia in 2007 and migrate them all with reckless abanbdon to touch screens (and a dumb move too - even today in 2010, more QWERTY based texting-oriented phones are sold than touch screen phones; and more basic T9 keypad based phones than all QWERTY and touch screen phones put together).br /br /But it was not only about the phone with Apple, ie the hardware. And no, I#39;m not talking about the UI or the apps or the App Store or the iOS eco-system. Something far more devastating changed with Apple#39;s entry to phones. For Nokia, someone changed the rules of the game in January 2007 and didn#39;t bother to tell Nokia. Because Apple was in the game, now anything Steve Jobs said was the word from god. And no matter how severely deficient the first iPhone models were, because they were Apple phones, that meant they were the world#39;s #39;leading#39; phones. And if you didn#39;t match the current iPhone model with a potential #39;iPhone killer#39; - then you were obsolete. Suddenly in 2007 Wall Street lost its respect for facts, and started to believe Apple#39;s version of the story, ignoring the truth. And most analysts who would study the iPhone would come from the PC side of the tech industry, far more familiar with the relatively simple and easy PC industry than the remarkably complex mobile telecoms industry. Those PC industry experts were very familiar with Apple#39;s accolades and could see in the iPhone the long-held promise of the pocket PC. Again it didn#39;t matter that Nokia was the first phone maker to boldly call its smartphone a #39;multimedia computer#39; - the truth no longer mattered in 2007, when all stories were now spun by Apple#39;s PR machine. Besides, with Apple#39;s touch screen, the #39;pocket PC#39; metaphor seemed far more compelling than with Nokia#39;s early smartphones with keypad based navigation.br /br /I do not mean this as a criticism of Apple, I mean it with admiration. Apple are masters at marketing. They know how to wow the investors and Wall Street. They know how to play THAT game. So for example, RIM has sold more Blackberries every single quarter since Apple launched. The past 3 quarters when Apple#39;s iPhone unit sales have been flat or declining, and the iPhone market share has shrunk from 17% to 14%, in the same time Blackberry#39;s unit sales have grown and its market share has grown. How does Wall Street report the story? They keep repeating the factually opposite from the truth story - they keep repeating the myth that RIM is losing market share to Apple#39;s iPhone. The exact opposite is the truth. Apple is losing market share to RIM! But with Apple, Wall Street is hypnotized. Facts no longer matter, it is what Apple says.br /br /So suddenly the rules of the game changed. Now its the ultimate game of hype and spin-the-story. And Nokia was Finnish to a fault, being the #39;stick to the truth#39; very honest and open story, any problems too, bring them into the open and volunteer as much truth as possible. This had been a good strategy back in the Era Before the iPhone - when the rivals were other very engineering oriented, facts oriented rivals like Motorola, SonyEricsson, Samsung etc. Now there was a new kid who seemed to play #39;unfair#39; and start to distort the market opinion with all sorts of bizarre claims and facts and #39;innovations#39; which certainly were not invented by Apple and often were simply established industry standards. Look how Apple handled the Death Grip problem. First, it denied the problem and told customers to hold the phone differently. Then Apple said there is no hardware problem, there was a software bug in the display of the phone. Only after Consumer Reports verified the problem, did Apple do a formal acknowledgement of the issue, but then, Apple blamed the press (for supposedlyspan style=mso-spacerun: yes#0160; /spanspreading a false story) and then took the child#39;s excuse - everybody else is doing it too (which turned out not to be true) and then finally said the problem is miniscule (again not true). This is the modern spin-doctor way to handle a crisis. That is the Apple Way. Fight the story, control the story, deny it all, change the story, blame the reporters, blame the rivals. Spin doctors that Donald Rumsfeld and Dick Cheney would be proud of.br /br /When facing a rival like Apple, what Nokia needed from a CEO, was a showman and a brawler. OPK is not that showman and its not in Nokia#39;s ethos to go out and fight. What Nokia needed was over-hype and super-celebration of its huge legacy of achievements and every possible new tidbit it was doing. Nokia has a trophy cabinet full of innovations and patents and true world leadership it could celebrate with every major phone launch, but Nokia doesn#39;t do that well. It is understated. It is the wrong rival to Apple, Nokia can#39;t win in a marketing-spin game. Not with OPK in charge. That is not his style (nor the style of previous CEO Ollila either). It is anathema to Finnish management style. They want to #39;do it#39; rather than #39;say it#39;. They want actions to speak rather than words. They believe in cooperation, not competition. They want to work with their rivals, not fight with them in public like Apple does with Adobe and Microsoft and now HTC and Samsung etc. And then Nokia are bewildered why is Apple getting all the accolades for deploying solutions and systems that are industry standards and Nokia has had on its smartphones for years already.br /br /This was a total change and it hit OPK and his team hard. There was an unreal aspect to the coverage of the phones market, in particular the smartphones market, after the iPhone launched. Nothing was the same, and still up till today, Nokia has not adjusted to the press relations and analyst relations and investor relations side of the new world order in the iPhone Era.br /br /Consider how unfair this issue is. Apple has today 2% of total phone market share. Nokia has 34%. Apple has 14% market share in smartphones - and has lost market share now for 3 straight quarters. Nokia has 41% market share in smartphones and has been growing market share in the same period. Of Apple#39;s flagship phone the iPhone 4 - with its 5 major improvements now in 2010 - Nokia has had 4 of those in its phones long before 2007. Why is Apple given any credit as the #39;leader#39; and Nokia accused as #39;having lost the lead#39;?br /br /But Nokia doesn#39;t know how to sell itself to Wall Street. Not to match Apple#39;s amazing PR spin machine and Steve Jobs#39;s stage presense.br /br /Apple yes is the most profitable phone maker (it is the most profitable tech company too) but it is 100% certain that Apple could not sustain that level of profits if it sold 20% of the world#39;s phones. That is classic #39;niche#39; luxury bracket market share profits - its what Porsche does in cars. Nokia is not a Porsche, its more like Toyota. Nokia#39;s motto is not #39;connecting rich people of the West#39;. Nokia is connecting people. Period. All people including the poor in Africa. Selling new phones as cheap as 25 dollars, unsubsidised. Selling 3G smartphones as cheap as 100 dollars, unsubsidised. Thats one sixth the price of an iPhone, yet its a 3G smartphone. And Nokia is still doing it profitably. It is patently unfair to do any financial comparisons of Apple#39;s niche smartphones-only luxury goods strategy to Nokia#39;s mass market strategy. o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptApple will never, ever, have 20% of the global mobile phone handset market. Never. It cannot hope to have it, why? Because Apple has a huge investment in its design and look and feel, which is expensive to maintain with its expensive California based designers. Apple#39;s price points are far above the industry average in anything it does. Look at the Mac line of PCs. The Macs have always been premium priced PCs. The Macintosh sells in the 3% or 4% market share globally. That is what Apple is good at. The Mac has never had even 15% of personal computers. Never, not one quarter in 26 years since launch. That is Apple. It is a luxury premium design brand. That is not a true rival to Nokia! And if Nokia abandoned its 35% market share in the mass market, and put all its effort to win some share in the small 4% luxury bracket where Apple currently is, I#39;d get a shotgun and go shoot the CEO myself. No, Nokia has been doing the right strategy (for a mass market brand). It has had to manage its global dumbphone market share (profitably) while migrating its customers to smartphones (profitably) and has been able to do that, where Motorola, Samsung, SonyEricsson and LG have been spectacularly unable to do that.br /br /But now that Apple is in the game, and as Apple is the master at stealing the spotlight, suddenly Nokia is being compared to Apple! How unfair is that? Its like comparing Toyota#39;s total range of cars and their average engine performance, to the performance of the Porsche! Giving no credit that some Toyotas have four doors or big cargo ability or diesel engines, etc. Just on Porsche#39;s particular one advantage! Come on, Toyota sells taxis and family sedans and rugged off-road vehicles and cheap city cars and luxury sedans and hybrid eco-cars and minivans - and some sports cars too. Porsche cannot offer anything in almost any of those other categories. Porsche is pure performance at luxury niche prices, profits and markets. Toyota cannot be compared to Porsche, not fairly. Compare Porsche to Ferrari or Aston Martin, and compare Toyota to Ford or VW or Nissan. But no, Nokia finds itself now constantly compared to Apple. br /br /And then that bizarre and cruel twist of the facts. While Nokia#39;s market share in smartphones is growing and Apple#39;s is declining, the storyline for nine months now and counting, has been from Wall Street - that Nokia is #39;losing market share to Apple#39;s iPhone#39;. This is absolutely categorically factually untrue! For the past year the exact opposite has been happening. Apple#39;s market share peaked in Q3 of 2009 and is in decline. Nokia has turned its market share decline back into growth. And with any other tech brand as Nokia#39;s rival, there would be sanity with the tech reporters and business press. But its Apple and their hypnotic way to change the perception of reality.br /br /PROFITSbr /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptWhich brings us to OPK and Nokia profits. When he took over, Nokia had 21% profit margins. Last quarter (Q1) Nokia reported 4% profit margins. During his tenure Nokia reported for the first time in more than a decade, a quarter of making losses (last year). And twice this year Nokia has already issued profit warnings. This is a very valid Nokia investor concern and the CEO has to take very strong leadership in profits.br /br /So again, the nemesis. Apple makes ever bigger profits one quarter after the next. But Nokia is in three businesses, in the #39;dumbphones#39; business, in the #39;smartphones#39; business and in the networks business. In the dumbphones business, since OPK took over, almost for the full 4 years Motorola has reported losses. SonyEricsson has reported losses about half the time. LG has reported losses several quarters and even Samsung reported losses a few times. Nokia#39;s handset business has never reported a loss! Does Nokia master its core business? Yes. Does it get credit for it? No, because a luxury niche smartphones-only maker called Apple makes tons of profits.br /br /In smartphones Nokia has been making profits too. Not all its rivals do that. Yes, Apple and RIM make profits, but HTC and Palm have been making many quarters of losses, Palm did them for three years straight until bought out by HP. The smartphones business is no guarantee to make money - witness how quickly Google pulled out of the market with its Nexus One #39;superphone#39; and even more astonishingly Microsoft, who pulled the plug on its own smartphone #39;Kin#39; project in only 6 weeks. Nokia keeps making profits in the smartphones space - a market it invented and it utterly dominates - selling more smartphones than Apple and RIM combined. But because Apple makes massive profits, and Nokia only modest profits - Nokia is punished. It is not compared to the other major handset makers like SonyEricsson, LG and Motorola who have struggled deeply in attempting to shift to smartphones.br /br /In networks the story is truly bleak. Ericsson has been barely profitable countless quarters and making lossses in many more. Alcatel has reported many quarters of losses. Canadian Nortel and American Lucent were making losses and were sold. Motorola#39;s networks division was deeply in the red until sold to NokiaSiemens Networks now. But Nokia#39;s networks division has been on the threshold, making mostly slim profits, but falling into losses several quarters. Is it fair to compare Nokia#39;s brave and mostly successful performance in this deeply unprofitable industry against Apple#39;s niche smartphones performance? I think not. But networks do about a third of Nokia#39;s total business and is a heavy drag on its profitability. To put it another way, the handsets business (dumbphones and smartphones) are far more profitable than Nokia#39;s corporate profitability. But the networks unit has hurt Nokia#39;s corporate performance.br /br /Is that the responsibility of the CEO? Yes, definitely. Is it something OPK could have done and fixed? Yes, he could have sold the unit or spun it off. Or he could have instituted severe staff cuts to reduce costs. Or he could have increased networks division prices trading NokiaSiemens Networks market share for better profits. Yes OPK could have been a more ruthless CEO and made painful cuts and forced the networks unit into better profitability, helping Nokia#39;s bottom line immensely. He didn#39;t do that. He was a more #39;Finnish#39; CEO respecting the individuals and giving the division time. Was he too soft? Its a tough call, but this is management difference very strongly between US and European managements. OPK is definitely a European manager.br /br /SYMBIANo:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThen we have the Symbian operating system. The analysts seem to hate Symbian. There are continued calls for Nokia to abandon Symbian and adopt Google#39;s Android. There were many who suggested Nokia should have bought Palm to get its operating system and replace Symbian with Palm.br /br /Here life is utterly cruel to OPK, to Nokia and to Symbian. A decade earlier, Nokia could have very easily developed its own OS for use with only Nokia branded smartphones. That would have been the better thing for Nokia but not for the industry. Nokia has believed in open systems, partnering and industry standards (where Apple, RIM, Microsoft and Palm have all been pursuing proprietary solutions that create industry fragmentation). So rather than create only its own OS, Nokia invited its rivals to join in the Symbian Partnership: Motorola, Sony, Ericsson, Panasonic, Samsung, etc. Who does this? Especially where Nokia had invented the smartphone and had a huge lead in smartphones, and Nokia very much in public said it believed that in the future the smartphone market would be enormous? Why #39;gift#39; this advantage to rivals? But that is the Nokia Way. They believe in cooperation with rivals, especially on standards. Nokia wanted a global standard OS. They had 10 handset manufacturers providing Symbian phones by the time OPK took over Nokia in 2006.br /br /So what did Nokia and Symbian do when the iPhone appeared? They first started to develop a touch-screen oriented Symbian evolution. Note that if you compare the #39;advanced#39; Apple OS/X or iOS of the iPhone 2G in 2007, Symbian was MILES ahead of it in 2007, in everything else except touch interface (and please please remember, even today in 2010, the majority of all phones do not use touch screens, not even smartphones). In 2007 Symbian supported apps (Apple added app support in 2008); cut-and-paste (Apple added in 2009); folders and multi-tasking (Apple added in 2010). Even today, Apple doesn#39;t support Adobe Flash, the internet industry standard which Symbian has supported for most of the decade. Why is Symbian #39;accused#39; of being old fashioned and Apple#39;s iPhone OS #39;celebrated#39; as being modern?br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut the Apple interface looked futuristic, and its touch interface was #39;intuitive#39; and definitely modern. Far more modern than keypad navigation. But this is only one aspect of the OS. By any other measures, Symbian was ahead in 2007. But this was now the Era of Apple#39;s iPhone, and nothing mattered except Apple. So no matter what else you had, if you didn#39;t have touch interface, you were obsolete. That was suddenly the new thinking in 2007. No matter how unfair, that is how the world reacted to Apple#39;s spin.br /br /Yet consider what Nokia did. Symbian was a partnership. Nokia spent a billion dollars to buy out its partners, and then Nokia would have owned Symbian to do anything with it. What did Nokia do? This is totally Nokia philosophy - the best thing for the industry, not just for Nokia#39;s short term interest? Nokia turned Symbian into a Foundation and made it fully open source. Apple#39;s iOS is not open source. Microsoft#39;s Phone 7 is not open source. Neither is RIM#39;s Blackberry OS or HP#39;s Palm. Who is #39;advanced#39; and who is retarded? Who is the true leader? But this is how Nokia does things. The Symbian OS is still used by leading smartphones made by Samsung, SonyEricsson, various Japanese phone makers - and of course Nokia. Apple, RIM and Palm do not license their OS to anyone else. Is this the #39;right thing#39; or the #39;wrong thing#39; for Nokia to do with its smartphone OS strategy?br /br /If you were Nokia with Symbian after Apple#39;s sudden success of its App Store in 2008, what would you do? You#39;d want an app store, wouldn#39;t you? The Apple iPhone App Store has received all the big press and attention. Did you know Nokia launched its first app store in 2003? Yes, five years before Apple#39;s App Store. And then while Nokia was carefully working with its carrier/operator partners - where Apple rudely bypassed the operators/carriers and deployed its App Store to bypass the carriers/operators - Nokia still was able to build an app store - with operators/carriers. Again that Nokia mindset of cooperation, not abuse. And how is Ovi doing? It was the world#39;s third most successful app store behind Apple#39;s and GetJar#39;s. Still, where is LG#39;s app store? Samsung#39;s app store? Motorola#39;s app store? SonyEricsson#39;s app store? Nokia has the world#39;s 3rd most used app store and gets no credit for that, while Nokia started before Apple and works through its partners, not against them. And Apple gets all the accolades as it thumbs its nose to the industry and bypasses the chain. Yeah I like Nokia#39;s approach more, even if it takes more time.br /br /And the first Symbian touch screen version was not very good. Nothing first generation usually is (remember all the missing #39;standard#39; parts in Apple#39;s iPhone OS in 2007). But what is Nokia and Symbian doing with it now? They do as they always do, keep improving. The touch interface is getting better. It need not be as good as Apple in the touch department, as long as it is good enough. Nokia is not trying to become a Porsche of supreme performance only in one type of vehicle; Nokia does the full line of phones to all market segments. So as long as its #39;sports car#39; is reasonably good, if that same platform (Symbian) also supports business phones and youth phones and cheap Africa smartphones, etc, then it is far more suited for Nokia#39;s vast market - and its partners who make smartphones for other markets! And you know what? Nokia is now selling more touch screen phones than Apple does. Yes.br /br /Then if you were Nokia, what is the perfect strategy? Seeing the new operating systems like Google#39;s Android and Samsung#39;s Bada and Microsoft#39;s Phone 7 - all operating systems developed after the iPhone - what would you want in an ideal world? You#39;d want Nokia to embark on its own super OS for #39;modern#39; touch-enabled smartphones. But not to do it like Apple or Microsoft with proprietary systems. And you#39;d want Nokia to license the new OS to rivals, not like Apple and Palm and Samsung, but more like Google#39;s Android and Microsoft#39;s Phone 7. And you#39;d want Nokia to use Linux as the basis of that new OS, like Google Android.br /br /Better than that, you#39;d want Nokia not to abandon its vast Symbian developer community. So you#39;d want the tools to be made compatible for Symbian developers also to be able to develop on the new OS,wouldn#39;t you? That is opposite of what Microsoft did, when it abandoned Windows Mobile developers when switching to Phone 7. And where there is a Linux heritage to Google Android and Japanese Linux Mobile phones and Nokia#39;s new OS, you#39;d want Nokia to pursue #39;compatibility#39; into the future, among all Linux OS platforms including Android, wouldn#39;t you?br /br /And if you could ask for one more thing, a partner, a global giant partner, so Nokia isn#39;t doing this alone. That theoretical smartphone OS strategy is #39;everything you have in Google#39;s Android#39; - but more and better and even more kind to Symbian partners and Nokia#39;s heritage. span style=mso-spacerun: yes#0160;/spanThat is not the quick solution and not the cheapest solution, but it is by far the best solution for Nokia, its developer partners, its handset manufacturing partners and Nokia#39;s future - as well as the industry. When Apple and RIM and Palm and Samsung all selfishly release smartphone operating systems only for their own platform, that only hurts the industry with unnecessary fragmentation. br /br /So now Nokia. This is exactly what Nokia is doing with MeeGo, the Linux based totally new smartphone OS, developed together with Intel. They have over 20 manufacturers already signed up to release devices using the MeeGo operating system. The development tools for Symbian will be harmonized with MeeGo to allow smooth migration. This is Nokia#39;s future smartphone OS. Isn#39;t this the #39;perfect#39; strategy for Nokia?o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /You didn#39;t know all that, did you? Isn#39;t this a very prudent, well thought out, strategic path for the brand whose smartphone OS (Symbian) in Q1 of 2010 still sold more than Apple and RIM and Android - combined! Give the developers a growth path into a cutting edge touch-oriented Linux OS, but along the way, don#39;t abandon the Symbian platform and the Symbian handset partners and developers.br /br /Because Nokia has a strategy already in place for MeeGo, there is utterly no point in even considering going Android. Buying Palm would have been idiotic in this environment. But then consider true Nokia rivals SonyEricsson, LG and Motorola - they do not control their destiny. They don#39;t even make a smartphone OS. They are utterly dependent on Google or Microsoft (or Symbian or MeeGo) for their smartphone future. Which is the right strategy? And what of Samsung? Nokia saw smartphones as a strategic direction in 1996. Samsung launched its own smartphone OS, Bada, now in 2010. Is Nokia not miles and years and yes, lightyears ahead of its real rivals, Samsung, LG, Motorola and SonyEricsson, when it comes to smartphones? But no, now there is an Apple in the market, suddenly Symbian is #39;obsolete#39; and Nokia is #39;lost#39; in its smartphone strategy? No, OPK, life is not fair. Wall Street is giving you no credit for the best strategy in smartphone OS#39;s and is rewarding Apple for very sub-optimal, proprietary, industry-dividing, hurtful, excluding smartphone OS strategies that even refuse basic internet standards like Adobe#39;s Flash being supported.br /br /With Symbian, Nokia has failed in communicating clearly its strategy. It didn#39;t defend Symbian#39;s reputation when it should have. It has ignored Apple#39;s #39;improvements#39; and let them enter into the folklore of Apple#39;s supposed leadership. This is as much OPK#39;s and Nokia#39;s PR failure as it is a failure of Wall Street in understanding Nokia, Symbian and MeeGo. If more QWERTY phones still are sold in 2010 than touch screen smartphones, then isn#39;t there at least some merit in saying that Symbian will allow excellent QWERTY use, for enterprise/business phones - where Apple utterly fails - and for the youth segment that is addicted to SMS. No, Nokia doesn#39;t know how to fight a PR war and with a better OS and a far superior OS strategy, they lost the perception war. Now all think that Symbian is a dinosaur in its death-struggles..br /br /US ANALYSTSbr /br /So then there is that aspect, that the country where there are more Nokia investors than any other, is the USA. It is Wall Street which decides what the majority of Nokia investors feel and think, not Helsinki or Stockholm. And American analysts are very knowledgable and have high standards of reporting and analysis. They have excellent tools and there is a huge resouce of various tech analysts who support Wall Street bankers. The USA tends to lead most industries of high technology so there is an abundance of competence to do deep analysis of computers and rocket science and nanotech and microbiology and home electronics and automobiles and the internet industries and almost any other, including the fixed landline telecoms industry. As it happens, the one technology area, where the US domestic market lags the world leaders by many years is also one that is evolving currently the fastest - and that is mobile telecoms.br /br /American domestic mobile industry analysts are very much behind the times, when it comes to mobile telecoms. This is due to no fault of their own - they are very competent and hungry for information and are doing a professional job. But it is the US domestic market which has stagnated, fallen years behind the world leaders, driven now by true industry dinosaurs like the carriers Sprint, ATamp;T, Verizon. Note that almost all traditional major mobile tech vendors from North America have gone bust including Palm, Lucent, Nortel and now Motorola which was in the process of splitting into two. American mobile telecoms is so far behind, it took outsiders like Apple and Google to come and revitalize it. The US domestic mobile industry is a corpse, rotting.br /br /Now understand, I am an ex Nokia executive and a Finn. You might forgive me for arguing that Finland leads the mobile world (and indeed there would be plenty of evidence to suggest that) but I do not claim that. The world#39;s leadership in mobile has shifted from Northern Europe to Northern Asia, where Japan leads closely followed by South Korea, Taiwan and Singapore. And note, I live in Hong Kong, so I am not somehow championing my new home country either.br /br /Very quick evidence. Those cool things you liked about the iPhone? GPS? 3G? WiFi? App Store? 5 megapixel cameraphone? Touch Screen? Games? HD video recording? Video calls? - those were all invented and done first on mobile phones in Japan, years and years before the iPhone (obviously all done in Japan before Nokia did it too).br /br /Or consider the carriers/mobile operators of America. That #39;all you can eat#39; data plan you like on the iPhone? Invented in Japan. The 70:30 revenue sharing that Apple#39;s iPhone App Store offers - was invented in Japan but they offer a far better deal: 90:10. Mobile wallet/mobile payments? Invented in Japan. 2D barcode based coupons you see now on Times Square? Invented in Japan. The mobile internet? Invented in Japan. Idle screen services. Invented in Japan.br /br /It is very clear that Japan is currently the world leader in mobile. And South Korea, Taiwan, Singapore come far ahead of Europeans, who come ahead of the USA. So take your #39;superphone#39;. The top Samsung Galaxy from South Korea that went on sale last week - offers a built-in pico projector! For the same price roughly as the iPhone 4. Think about that for a moment. Where was that first sold? In Singapore. And HTC? Based in Taiwan. Apple manages one new smartphone model per year, which it doesn#39;t have time to test well enough, that it fails the Death Grip test by Consumer Reports. HTC is releasing 6 new smartphone models mroe this year before Christmas of 2010. HTC does have time to rest its smartphones well enough, that it gets on average 2 complaint calls per day. Apple#39;s iPhone 4 generated 750 complaint calls per day in its first 3 weeks and growing.br /br /If you wanted the world#39;s best analysis of a rocket program, whether by a company or a country, you#39;d go to NASA or any US based aerospace analysts. While Iran also has a rocket program, the world#39;s best rocket science analysts are not in Iran today. So similarly, the USA is behind in mobile telecoms. Not all telecoms, but yes, in mobile telecoms. Years behind. And yet, Wall Street has tons of analysts who specialize in mobile telecoms (ie #39;wireless telecoms#39; haha). They do their best, but they are guided by what they know, and what they can see in their own market. They cannot know how outdated some of their views are, because those analysts don#39;t get to make pilgrimages to Japan or South Korea etc to study the most advanced mobile markets.br /br /Now, which was the Western smartphone maker who first put a camera on its smartphone? Not RIM, not Apple, not Palm, not Motorola - it was Nokia - based on studying Japan. What was the first Western smartphone maker who first put a 2D barcode reader on its smartphones? Nokia again. TV-out? Nokia. App store? Nokia. Touch screen? Nokia. Etc. Nokia has been tracking the most advanced markets and brought innovations to the smartphone space for the whole decade, but the US based tech press do not know this, and do not understand this.br /br /The problem is made worse, by the fact, that most US carriers/mobile operators do not carry Nokia#39;s top phones. They were seen as too expensive. It wasn#39;t until the iPhone came along, that US carriers were willing to accept that consumers would be willing to buy #39;expensive#39; smartphones. Up to then, the most expensive phone for consumers in America was the Razr. It was a mid-price phone in Europe and advanced Asia at the time. But an #39;expensive#39; phone in America.br /br /So in 2006 Nokia had a true superphone, the N93. By many features it was equal to the iPhone 4 of today and beats it with many features (but was not a touch screen phone obviously). In 2007 Nokia introduced the N95, far better than the iPhone 2G and in most tech specs matches or beats the iPhone 4 today (except not touch screen obviously). In 2008 Nokia brought us the E90 Communicator - the most awesome Nokia superphone ever, and the last Nokia phone to regularly defeat the iPhone of that time (the iPhone 3) in tech press comparisons (but the E90 was not touch screen). And fast forward to 2010, now we have the N900, again a master class of superphone design (which now is touch screen). But these smartphones are not carried by US carriers. The US carriers will not offer subsidies so that US consumers could pick one up for 199 dollars on a 2 year contract (European and Asian carriers/operators offer them!). So is it no surprise, that Nokia#39;s reputation in almost all of the rest of the world is one of a superphone maker of very high quality premium luxury phones, but in the USA, Nokia is thought of as a garbage brand of cheap phones?br /br /So the US analysts had no #39;heritage#39; of comparing Nokia#39;s best with those of the US domestic smartphone market like say the Blackberry Bold or Palm Pre or Motorola Droid or Apple iPhone. The Nokia flagship models were all missing from the US. So the US analysts were very easily convinced that the iPhone was the best phone on the planet. Also that as it looked like all phone makers were now ape#39;ing Apple (based on premium phones released in the US market recently) and as Nokia didn#39;t release an iPhone clone, clearly Nokia had #39;fallen behind#39;. And as the US analysts would read each others#39; thoughts (and not tend to read Japanese or Korean or Finnish or Swedish language analysis of the market haha) - some #39;group think#39; emerged, where if the other US analysts also thought so, then it must be true, that the iPhone is the world#39;s most advanced smartphone. This is for example the fallacy that follows RIM analysis time and again - even though Blackberries are growing unit sales and growing market share, while Apple is losing unit sales and losing market share - the madness of Wall Street thinking is that RIM should abandon its brilliant QWERTY oriented messaging phones, and try to copy Apple#39;s touch screen. Lunacy! RIM is not losing to Apple, RIM is pulling away from Apple! If Wall Street analysts got their heads out of their behinds, they#39;d look at the facts and insist Apple launch a QWERTY phone to reverse the Apple decline in market share and catch the big growth wave that propels Blackberry.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut no. The US press were hypnotized by Apple to obsess about the iPhone#39;s multitouch screen and if you didn#39;t have it, you were rubbish. Even though QWERTY outsells touch. No, if you#39;re not touch, you are #39;not modern#39;. But again, this is something OPK could not control. Nokia sells its shares on the DOW and therefore it has to live by US analysis. br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut this is something Nokia could have tried to influence at least. The N-Series HQ was moved from Espoo to New York. Anssi Vanjoki, Nokia#39;s most charismatic senior exec has been based out of New York for some time. Nokia should have been educating the US media and analysts. I do not know to what degree they have been doing that (and I am sure they have tried) but clearly they have failed, if today in 2010, the US tech press says #39;Nokia is falling behind Apple#39; (when facts show the opposite is true). Nokia have failed, not in the technology race, but in the perception race. And truth be told, they have been taking a black eye from the masters. Apple had been doing the same punching of Microsoft for decades now haha, and beating up Sony pretty badly for a decade now starting with the iPod. So small solace, but at least Nokia wasn#39;t losing to a marketing novice. They were beaten in the PR game by the best. With Apple laughing all the way to the bank.br /br /TAKE BACK US MARKETo:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSo if the US analysts were a fact Nokia HQ had to deal with, and suffer the consequences, there is one self-inflicted wound which hurt OPK dearly, and more quarter after quarter, as time went on in his stewardship. It was OPK#39;s promise to shareholders when he took office, that he would restore Nokia#39;s market share in the US market. This has been the most dismal failure of Nokia in what I really think has been a very solid run of management. There is no Apple effect here, there is no #39;reality distortion#39; here, and there are no mitigating factors. This is OPK#39;s fault on a personal level, and his very visible commitment. Utter failure.br /br /OPK promised that Nokia would regain its market share in the USA. The opposite has happened. Almost every quarter since he took office, the US market share of Nokia in mobile phones and in smartphones has declined. Think how bizarre this is. 93% of the world#39;s mobile phone accounts are outside of the USA. In that market, when OPK took office, Nokia had 35% market share in all phones, and about 50% in smartphones. Today outside of North America, Nokia has about 36% market share and about 52% in smartphones. It is only in North America where Nokia is a failure (apart from Japan and South Korea where domestic standards and domestic phone makers rule those small markets).br /br /In the US market Nokia has suffered continuous losses in market share. This to me is unacceptable and since the new CEO committed to regaining US market share, OPK should have achieved it. No matter how. If that meant creating CDMA phones for Verizon and Sprint, then be it. If that meant creating USA-only iPhone clones, then so be it. If that meant (remember the commitment was from 2006) creating Razr clones to match Motorola#39;s US success, then do it. And Nokia had huge profits back then - bankroll that US invasion. If it meant Nokia#39;s US sales had to be subsidised from other markets, no biggie, its only 8% of the world market. Nokia EASILY could have afforded to do this. br /br /But yes, change the leadership. OPK should have taken personal responsibility, and talked to the CEO#39;s of Sprint and ATamp;T and Verizon and T-Mobile USA, to find out why they are not selling more Nokia, and then appointed the type of manager to the US project, that gets the job done. Hire someone from one of the US carriers to do it, someone universally respected by the US industry. And keep meeting with those CEO#39;s every quarter, fly to their HQ#39;s and bring them every year to visit Nokia#39;s fantasyland, the special Nokia private lab and future showcase they used to call Generation Nokia (I think it was recently renamed, I forget what its called now, but this is like the Disneyland for telecoms engineers, where only 2 visits are arranged per day for VIP guests, to showcase Nokia#39;s view of the future; its a truly breathtaking place, I#39;ve seen it once..)br /br /There are reasons why US carriers do not support the world#39;s bestselling phone brand. There are reasons US carriers won#39;t support the world#39;s bestselling smartphone brand.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThere are reasons the US carriers don#39;t support the mass market phone brand that generates the most SMS text messages - where carriers make most of their profits. There are reasons of history and of politics and of personalities. Nokia know this, but OPK was a new CEO, and he was the boss, and he could have - and should have - made all the personnel changes (and policy and price and design changes), until these 4 US carriers were satisfied. Nokia needed the US market to experience Nokia#39;s best, not Nokia#39;s worst phones. And Nokia needed US carriers to promote its phones, so US consumers would adopt them.br /br /But instead of going the carrier route, humbly, and accepting the bizarre, often archaic ways of the US market, Nokia went defiantly its own way. For the N97 Nokia decided since US carriers would not sell its flagship phone of 2009, Nokia would sell it online, directly to consumers. If you recall, Google tried this trick too, in 2010 with the Nexus One. Both were marketing disasters. You can#39;t bypass the carriers. And Google can be forgiven for not knowing this. Nokia knew this, they were stupid to do this. That would not get them the US market and Nokia knew this. Yet they did it, including the flagship store on Manhattan#39;s Times Square etc. All blatantly fighting the US carriers, rather than humbly working with them.br /br /The US market recovery was botched totally by Nokia. And for that OPK has to take personal responsibility. He did promise this to shareholders and Nokia was unable to execute. This is his personal failure. And this point does surprise me, that OPK did not force this to happen. There is ample and intimate Nokia knowledge of the US market, Nokia has been there for decades already. But newcomers like South Koreans Samsung and LG are the ones who are now bestselling phone brands in the US market and Nokia is ranked something like 6th or 7th..br /br /THE ONE ROTTEN APPLE - N97br /br /Then we get to the straw that broke the camel#39;s back. High tech is difficult. All tech companies stumble at some point. Mercedes Benz once made a car unsafe at any speeds (remember the launch of the A-Series which tipped over when it turned around corners?). Toyota was making cars recently which didn#39;t seem to have any brakes. And even Apple failed in phones now with the first phone ever in history, that Consumer Reports tells us the iPhone 4 has such a bad Death Grip problem that it cannot be recommended. So yes, in tech there will be the occasional failure. And while Nokia has had a great hit parade of awesome flagship phones, during OPK#39;s short reign, there was one failed flagship, the N97. The N93 was superb in 2006. The N95 was a technology showcase in 2007. The E90 was so far ahead in 2008, it still today beats most smartphones. And the N900 of 2010 is highly praised and the early previews of the upcoming N8 are also highly positive. In that string of superb hits, comes one blemish - the N97.br /br /And the problem is, that the N95 and the E90 Communicator were never even suggested as #39;iPhone killers#39; and were not touch screen phones. They were in a different class, like comparing a Range Rover to a Ferrari. But the N97 was offered to the world as an iPhone beater, being Nokia#39;s first touch screen flagship phone (with a slider QWERTY as well). On paper compared to its contemporary iPhone 3G and the later iPhone 3GS, the N97 seems to tower and indeed #39;devour#39; its rivals (as from the LL Cool Jay rap lyrics). The specs sheet is impressive. But the N97 is not. It was a dud. A rare failure in Nokia#39;s long history of premium phones, but one of its worst. And Anssi Vanjoki even openly said so.br /br /When any analysts, not just US analysts, were offered the side-by-side comparison of the N97 vs the iPhone, the faults and shortcomings of the N97 become blatantly clear. Most of all, its touch screen (resistive and not multitouch) is slow and non-responsive. The touch screen Symbian OS seems slow and counter-intuitive. And then there were bunches of other technical faults and this flagship smartphone from Nokia#39;s N-Series was indeed a flop. Nokia did as it always does, it kept fixing it, better software and hardware, and the final N97 version is not bad, but even then, its no match to the iPhone 3GS.br /br /When Nokia finally did an #39;iPhone killer#39; - that project failed. And this falls onto the feet of OPK. The N97 was a rare disaster phone for Nokia and with hind-sight, its clear to see, Nokia would have been better served by delaying the N97 until it was more-or-less bug-free, than hurrying the phone to the market. The lessons from the N97 were very painful to Espoo and no doubt those lessons are why Anssi Vanjoki delayed the N8 launch now, knowing its not good enough yet, and wanted to refine it before releasing it.br /br /But for most US analysts, the #39;current#39; flagship smartphone from Nokia is still the N97 and the #39;next#39; flagship will be the N8 (they mostly have not taken notice of the N900 which obviously is not targeted nor sold to the US market but we have for example here in Hong Kong as the current flagship Nokia smartphone). So the more the iPhone gets amazing news stories from Apple#39;s PR machine (how many billion apps downloaded or how awesome is the iAd platform or the new version of the iOS operating system etc), the US press is reminded that Nokia#39;s entry in the touch screen smartphones is that expensive and failed N97 with the old Symbian OS and its lousy touch screen. If the N8 had been released for Q2 (and assuming it was not very flawed haha) probably OPK would have survived, by the skin of his teeth. But that the US market still thinks in July 2010 that the N97 is the best Nokia can do, that was too much. The straw that broke the camel#39;s back.br /br /WHAT IS FAIR?br /br /So we have 6 major faults that are assigned to Olli-Pekka Kallasvuo. Apple was one of those #39;once in a decade#39; types of events. Think about it. When Sharp introduced the cameraphone in 2000, it didn#39;t change everything. When RIM introduced the Blackberry in 2001, it did not change everything. When Motorola introduced the Razr in 2004, it did not change everything. When SonyEricsson introduced the Walkman phone in 2006, it did not change everything. When Google introduced the Nexus One in 2009 or Microsoft the Kin in 2010, these did not change the whole industry. But when Apple entered the phone industry, suddenly not just were phone expectations changed permanently and thoroughly - the way marketing and PR to the investors and shareholders changed permanently and thoroughly. br /br /But #39;unanticipated#39; changes like this are what nimble managers are needed for, and executive wisdom to see when such a strategic change happens, and to adjust. Yes, Nokia was hurt and this media/marketing/PR side of Apple#39;s influence has hurt OPK#39;s reign and reputation. They should have fought back like Adobe fights with Apple or Microsoft fights with Apple etc. Now you have to put on a show and you have to brag about your greatness, else you will lose. Its no longer a #39;lets build it together#39; world of cooperation, it is now a dog-eat-dog world of zero-sum: #39;for me to win, you have to lose#39;. That is the game Apple brought to town. And Nokia did not learn that lesson and did not adjust to it. The next CEO has to be far more brazen and bold - and vocal. o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptbr /Profits is a fair point but an unfair judgement. Yes, Nokia#39;s profits are down, drastically, from 2006. But the market is fiercely competitive, and against Nokia#39;s traditional rivals, those who sell mass market phones to the world - Motorola, SonyEricsson, Samsung and LG, during OPK#39;s rule, Nokia has far outperformed these true rivals. The unfair part in profits is that the analysts are comparing Nokia to Apple and nobody can touch Apple#39;s profits. Not in PCs, not in musicplayers, not in tablet PCs like the iPad, and also no, not in smartphones. Its an unfair comparison. Apple is an aspirational luxury brand. But profits are a valid concern even without Apple. Motorola made losses and replaced its CEO. Nokia made its first-ever quarterly loss last year, and since then its profits have been very slim. This is an honest shortcoming of OPK. I would argue that the market has been fierce - the worst economic downturn of our lifetimes - and Nokia weathered that storm far better than its traditional rivals. But yes, its profits are down, and unfortunately now for Nokia, it is compared to Apple who reports ever stronger profits.br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptSymbian is not a fair accusation of any failure of Nokia#39;s CEO. He did not design the OS, he inherited it. Symbian was in 2007 - now with hindsight - actually a far more potent and mobile phone-optimized OS than Apple#39;s iPhone OS - and Nokia has played its Symbian global market share leadership brilliantly with the upgrade evolution path to Symbian - including touch screen now - and the future OS of MeeGo with Intel. Ovi and Nokia#39;s software strategy was in place long before Apple#39;s and Nokia has been patiently building this too. Its the world#39;s third best-used application store, where again Nokia is miles and years ahead of its real rivals Motorola, Samsung, LG and SonyEricsson.br /br /And for the future of its OS, Apple#39;s iOS is proprietary, using its proprietary tools, tightly controlled by Apple and only working on Apple devices. Palm#39;s is exclusive as is RIM#39;s and Samsung#39;s Bada. Microsoft is licensed to others but is using Microsoft#39;s systems. Google#39;s Android is the most open using Linux. Nokia#39;s new MeeGo is also fully open source and using Linux and licensed to rivals, but it is developed with Intel. And Nokia went through the trouble of ensuring a migration path with common tools to support current Symbian developers into MeeGo, and also is working to bring harmonization among other Linux OS tools like Android. Isn#39;t this the best possible smartphone OS strategy. But its a #39;complex#39; story. Its #39;easier#39; just to hear that Symbian is old and fragmented and difficult to develop for and its touch screen interface is cumbersome. The lazy story is to take the superficial and just say, Symbian is dead. This is not a fair criticism of OPK#39;s rule. Nokia has by far the best smartphone OS strategy of any in the industry and in the past 4 years Nokia has executed brilliant and elegant migration decisions on its two operating systems.br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThen there is the issue of US analysts who live in the laggard US market and their views of advanced phones is very outdated. This is a #39;reality of life#39; and Nokia is fully aware of this. There is no excuse that Nokia couldn#39;t navigate in this environment, knowing the landscape. But yes, it means that if Nokia introduced widgets or near field or FM broadacast or some artifical intelligence elements into its new phones, Nokia has a far bigger job of educating to do with the US based analysts. Nokia knew this. There is no excuse. Nokia failed its PR efforts with US analysts and journalists.br /br /And finally the N97. OPK could not go personally test the phone. He should have been personally interested enough in its launch - as it was so critical also for the US market - to pay attention to final testing etc. He should have known as the N97 neared launch that there were problems and halted its launch. Or else, the moment the world started to complain, he should have stepped in, apologized for a bad phone, and fixed the issue. That N97 should not have remained long on the market as Nokia#39;s primary proof of leadership (ie lack thereof) as its #39;flagship#39;. Nokia could have taken an older world-winning superphone like the N93 or E90 or some other recent platform, slapped a few updated parts onto it, and launched that as the N98 and quietly discontinued the N97 - very quickly. This is what Apple will no doubt do very soon with the iPhone 4 - Apple cannot let the #39;Consumer Reports cannot recommend#39; iPhone 4 to remain as a stain on Apple#39;s reputation. It will be replaced by a newer iPhone long before June of 2011, mark my words. Probably still during 2010 haha..br /br /Similarly Nokia should have issued a new flagship quickly to replace the flawed N97. It didn#39;t and the N97 still today continues to stain Nokia#39;s leadership reputation, in particular in the US market.br /br /o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptIts a cruel world, Charlie Brown. OPK got to dance with Wall Street for four years as Nokia#39;s boss. He would have done fine were it not for the best dancer ever, Fred Astaire stepping on stage in the form of Apple. Now OPK is remembered for losing to Apple. This even as Nokia#39;s market share in smartphones grows and Apple#39;s share shrinks. Life#39;s not fair..br /br /Incidentially. Four years ago, Nokia#39;s global mobile phone market share was 35%. Since then the number of rival handset makers has doubled. The market shares of the other top 5 makers have shrunk from 48% to 40%. Did Nokia do well? Before OPK took charge, Nokia#39;s smartphone market share globally was 48%. Since then the number of smartphone manufacturers has more than tripled. Nokia#39;s market share is still 41%, bigger than numbers 2 and 3 combined. And Nokia#39;s smartphone market share is better than its dumbphones market share - as the only one of the Top 5 phone makers, Nokia is able to improve its market share, as it migrates customers from dumbphones to smartphones. And is doing it profitably. Of its major smartphone rivals just four years ago, Palm died and Motorola#39;s smartphone market share was cut in half, Microsoft#39;s Windows lost three quarters. Nokia weathered the influx of over 30 new rival smartphone makers by only losing a couple of market share points over a 4 year period. Did Nokia do well?br /br /Of the challenges he inherited, Nokia did not foolishly retool for all flip phones in the Razr craze and that was the right call. In the transition to 3G, Nokia#39;s market share in 3G is now the world#39;s best, so Nokia did not lose out in the migration from 2G to 3G. Nokia led the smartphone revolution, then the migration of smartphones from business phones to consumer phones - both initiatives Nokia started long before the iPhone. Nokia set up its app store with partners, and all along the way it is connecting people also for the very poor, and even manages to win consistently Greenpeace#39;s award as the greenest phone maker. While Apple uses Foxconn as its supplier, a manufacturer some accuse of being a sweatshop, Nokia set up the world#39;s largest handset factory into China so it can control the handset manufacturing process itself. Is this all good management? I think it is.o:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptBut OPK failed the US market, he presided over the launch of Nokia#39;s worst flagship phone. His rule coincided with the moment when Apple came to disrupt the phone market and his PR people didn#39;t adjust to this, nor to US analysts and their lack of understanding of the finer points of modern premium phones. And yes, Nokia#39;s profits have declined from the good old days. These are valid reasons why Nokia shareholders demand a change in management. The Symbian story is not fair, but it is not an easy issue to understand adequately either, so I can see why the lazy analysis says, Symbian is not good in touch screen, therefore Symbian is obsolete. Thats not true, but I can see why that argument is easy to make.br /br /Sorry OPK. I think you did do a competent job steering Nokia through very tough times, and in all other markets of dumbphones and smartphones - except the USA - Nokia has shined. Unfortunately the US based analysts, press and investors will not prioritize the rest-of-the-world performance ahead of that within the US market. I think its clear your management was far better than those at Palm or Motorola or SonyEricsson or LG.. But it was not perfect and now Wall Street is demanding your sacrifice. Its a cruel world out there..o:p/o:p/span/p

The Second Calendar Quarter ie April-June Quarter for Apple has been bad in the bloodbath. And this was before Antennagate. br /br /Apple has just reported its Quarterly numbers. iPhone unit sales were 8.4 million, which are#0160;down severely#0160;from Q1 (8.75M) and down from Q4 of 2009 (8.7M). Apple market share is down again, now to 14% - it is down from the peak from a year ago, in Q3 of 2009, when Apple#39;s smartphone market share peaked at 17%. Since then its clear that Google Android has picked up a lot of market share. But the really bad news is that all of Apple#39;s rivals have been growing since Apple#39;s peak#0160;last year.#0160;HTC has grown and now is starting to near Apple to rival for 3rd place among biggest#0160;smartphone manufacturers. RIM has grown unit sales and market share - ie RIM is pulling away - since Q3 of 2009, Apple has NOT been catching up to RIM. And Nokia is far-and-awawy the planet#39;s#0160;best-selling smartphone, which up to Q1 of 2010 had been growing unit sales and market share (and is likely to grow both again this Q2, but we have to wait#0160;now a couple of days until Nokia reports its quarterly numbers).br /br /The global smartphone market grew 10% over the past 6 months. Nokia and RIM have grown unit sales and each quarter been flat or grown market share. HTC, Samsung and Motorola each#0160;has grown unit sales and market share. Of the major manufacturers over the past 6 months, only Apple has lost unit sales and lost market share. Its peak was 17% a year ago, it is 14% now and falling. Lets see how many #39;analysts#39; report on this fact.br /br /While the gossip in America is that Apple is somehow#0160;#39;winning#39; in#0160;smartphones - it is gaining in the US market yes, but globally Apple is falling behind. Apple is indeed the most proftiable smartphone maker#0160;and its app store has most apps and there#0160;are a lot#0160;of web views reported by Admob etc. That is all smoke-and-mirrors. The big number that matters - is market share. And Apple#39;s market share peaked in Q3 of 2009 and has been in free-fall since. This is now really dangerous, as there is Apple#39;s Antennagate and Death Grip#0160; hurting this current Q3 (July-Sept) quarter, as IDC reported, two thirds of Apple current iPhone owners are delaying iPhone 4 purchases until Death Grip is fixed, and operators are starting to delay iPhone 4 launches -#0160;South Korea#39;s KT was first to do#0160;so,. The prognosis for Apple#39;s market share in 2010 is dire.#0160;#0160;br /br /Please all who comment - this blog is NOT a financial analysis blog. We don#39;t #39;care#39; about who makes the most profit - so yes, Apple is the most profitable tech company. And we don#39;t care in the #39;smartphone bloodbath#39; about iOS - yes, for Apple it is great news that they have iPod Touch and iPad, but when you consider #39;smartphone market share#39; then the only valid number is number of smartphones sold. That is not some #39;weird#39; Tomi Ahonen outrageous view - all major analyst houses who report on mobile phone market shares and smartphone market shares - that is IDC, Gartner Dataquest, Strategy Analytics and Canalys - they ALL count only iPhone, not the other iOS devices. So don#39;t write the comments here that I should include iOS market share. Yes, that is important to Apple investors but this is not a financial site, we report on the smartphone bloodbath for 2010, and in that race, we can only count real smartphones. Like in cars, Honda makes motorocycles too. If we measure market share of cars, we can#39;t suddenly include Honda motorcycles in counting market share of cars. br /br /And the unrefuted fact is, that with 8.4 million unit sales, down from 8.75 million in Q1, where the global smartphone market grew, Apple#39;s market share has been declining. That is a fact. Apple#39;s iPhone is losing market share. Down from its peak in Q3 of 2009 at 17%, it has been declining and is now at 14%. And this was before Antennagate. Now we start to wait how Death Grip hits Q3 unit sales and market share for Apple over the next 3 months.

pI really thought the iPhone Antennagate was over Friday. Now thanks to Apple#39;s dumb move to antagonize all rivals, already 5 handset manufacturers have had reason to jump in and point out they don#39;t build antennas outside the phone cases, they don#39;t need cases to fix antenna problems and they don#39;t have death grip problems. So Apple also said on Friday that the problems with the iPhone have been totally blown out of proportion. It certainly sounded reasonable, when Apple said only 0.55% of iPhone 4 users had called Apple to complain about the Death Grip.br /br /So Tomi, what is the truth about these Apple claims. Lets take those numbers apart and see what they mean.br /br /THE COMPLAINTS OF 0.55%br /br /Apple said 0.55 % of iPhone 4 users have called to complain about the antenna problems. Across 3 million sold iPhones, that is 16,500 people who have called Apple to complain. So my first immediate screaming observation is that this is perceived as a connection problem - the network connection was dropped, a call was dropped. Who do you call to complain about it? The first point of complaint will be the mobile operator (ATamp;T etc)br /br /But yeah, 16,500 people have called Apple to complain. Is that a big number or small? Remember a car maker called Toyota? They had this nasty problem earlier this year, called #39;unintended acceleration#39; which seemed to trouble several Toyota and Lexus models. It was really big in the news, as 52 people were killed in accidents involving those vehicles. How many total complaints have there been about Toyota and Lexus venicles in America in the full duration of that problem, from January to June? According to the US highways safety board, the NHTSA - the total number of complaints about Toyota and Lexus vehicles was 1,500. Thats it. Over six months, its an average of 8 per day.br /br /Now fast forward to July of 2010. Apple says that in 22 days, they have received 16,500 complaints about iPhone Death Grip! Thats 750 per day! This is nearly 100 times more complaints daily, than the most famous consumer product failure in recent memory! Is Apple#39;s problem #39;real#39; or is it #39;imagined#39;? Is it trivially small, or is it enormous? Obviously it is one of the biggest consumer product failures in recent memory. And by a mile, the worst phone launch. These 16,500 complaints were generated in the first 22 days, where it will easily take many days for a consumer to notice the problem - then to observe it is a #39;pattern#39; rather than a one-time random event - and then to go call ATamp;T first, and then after those moments to turn to Apple and call. The real problem is FAR bigger than this what Apple now kindly reports to us.br /br /How does that compare with the industry. HTC has provided its complaints level of the smartphone Apple mentioned in its press conference, the HTC Desire/Legend/Nexus One. How many complaints? Try 0.016%. Or one complaint per 6,250 phones. br /br /Meanwhile Apple who tries to say everybody has the same problem, also told us that 20% of iPhone 4 buyers had a case or band. These won#39;t be able to experience the problem. How bad is Apple#39;s problem. The 0.55% is not from 100 phones, you have to remove the 20% who have the case. So its from 80 phones. So Apple has one complaint call per 145 iPhone 4 models sold!br /br /Is this a fair comparison? As HTC says, Apple has 35 times more complaints than HTC. And HTC#39;s product has been on the market for 9 months, so there is plenty of time for buyers to examine the product and find out all possible problems - still only one complaint per 6,250 smartphones. If we assume HTC has sold 3 million of those devices (to keep the math the same as the iPhone, probably HTC has sold less than this number) - that would be 480 complaints in total over 9 months, or 2 complaints per day.br /br /In just 3 weeks of use, Apple owners have already found so much of a problem, 1 in 145 will call Apple to complain. And yeah, it is 750 complaints per day!. Apple problem is nearly 400 times worse than that of HTC#39;s smartphones.br /br /DROPPED CALLS 1#0160;OUT OF 100#0160;MORE THAN 3GSbr /br /Apple said its dropped call ratio is 1 per 100 calls #39;worse than 3GS#39; on ATamp;T#39;s network. We do not have the 3GS drop call ratio on ATamp;T, but from the FCC Report from this May, we know ATamp;T#39;s total dropped call percentage, which is 5 calls out of 100. The iPhone 3GS will be in that range, more or less around 5 calls per 100. And now we know iPhone 4 has 1 more dropped call per 100. br /br /So we#0160;have the number on a rough level, that 3GS drops 5 calls and iPhone 4 drops 6 calls per 100. So,#0160;first of all, we know the iPhone 4 has 20% more dropped calls than 3GS. Secondly we know that the iPhone drops one out of every 16.7 calls made on average, across all ATamp;T customers. That is a very large number. And then we also know, when we use CTIA average call minute volumes and average call length statistics, that the average US mobile phone owner makes 6.2 calls per day. So now we know that the average iPhone 4 owner will experience a dropped call every 2.5 days or almost 3 dropped calls per week.br /br /The problem of iPhone 4 dropped calls is VERY significant, and the typical ATamp;T customer will experience a dropped call with the iPhone 4 every few days on average. The problem is 20% worse than with the previous iPhone. This is very significant and will of course be noticed by many users.br /br /For Apple to suggest the problem is trivial, and to blame the press for sensationalizing this issue - is totally uncalled for. The problem is huge, it is 100 times worse than Toyota#39;s problems; is 400 times worse than HTC#39;s - where Apple very unprofessionally tried to deflect their own problem - and it is so much worse than previous iPhone owners, that typical iPhone ownes experience it several times per week - and loyal Apple owners find 20% more dropped calls with the iPhone 4 than with the 3GS.br /br /This is the truth of the iPhone complaints and dropped calls. Lets be honest about it, Steve Jobs. Don#39;t try to hide from the facts or blame other handset makers. No other handset maker has taken this crazy design option of putting the antenna around its casing. No other handset creates a Death Grip problem in usual ways to hold a handset - like Nokia said, they test their phones on both right-handed and left-handed users, and they tend to have 2 antennas, one on the top of the phone and another on the bottom - specifically to prevent dropped calls almost whatever way you try to hold the phone. And no other phone needs an optional case to prevent dropped calls.br /br /The problems are real. You admitted the problems are real and that you knew of them (and that you are trying to fix them). But you won#39;t get away with attempting to claim these are trivial numbers, or that the same problem infects other smartphones. As Consumer Reports clearly reported - the Death Grip is a problem unique to Apple, that stems from its unconventional antenna design.br /br /By the way the first serious casualty has already happened. The South Korean exclusive carrier of the iPhone - KT - which sold 1 million iPhones so far since November, has now said they will delay their iPhone 4 launch by up to 2 months, to give the device enough time to test it thoroughly.br /br /And the bad news is coming in also from the first consumer survey. IDC interviewed Americans on Friday, and found that two thirds of existing iPhone owners will delay their iPhone 4 purchase because of this problem.br /br /Those are the facts about the magnitude of the Death Grip problem. Antennagate could have been solved Friday. Now it has returned, and the story is getting worse by the hour./p

p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptI am thinking this Monday morning about what does the #39;rational customer#39; do about the iPhone 4. And a bit also about how much there are after-shocks from the Friday press conference. Lets first take a look at some types of customers and prospects, and what the Friday press conference brings to iPhone owners.br /br /THE UNSCRUPULOUS OWNERbr /br /So, first, there will be some iPhone 4 owners who, due to their own fault, have strongemcaused/em/strong some problem to their brand new iPhone 4, likely scratched the case or glass, or perhaps dropped the iPhone and caused some internal damage, etc. Normally they would know there is no chance to return it, as the problem was caused by the owner. But now they know that in late September, the last 2 or 3 days, there will be a flood of iPhone 4 owners returning their early iPhone 4#39;s for full refund. If the person is unscrupulous, then why not try to return that iPhone 4 with the scratch or fault, and hope that the store is in such a hurry to process returns, that the iPhone 4 will be taken in, and a full refund made. Then the unscrupulous owner can go to another store as soon as the new iPhone 4b is released, and get a new, fully functioning and clean iPhone, with the bonus, that it will also have no death grip problem.o:p/o:p/span/pspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pt p class=MsoNormal style=MARGIN: 0mm 0mm 0ptbr /This will not be a large number of users, there isn#39;t that much time to #39;damage#39; the new iPhone 4, but there will be thousands, probably tens of thousands of such iPhone 4#39;s, that normally would not have any chance of being returned. Now with likely a glut of returns in late September, there is a chance such #39;questionable#39; instances will slip through the cracks. And there is nothing stopping the same unscrupulous customer trying alternate Apple stores and retailers one after another, in attempt to get the damaged iPhone 4 returned. The main point is that there will be more #39;unjustified#39; returns with iPhone 4 than ever before for the iPhone and obviously for any to be refurbished and have their antennagate problems fixed, these additional problems will also be noticed and need to be fixed adding to Apple#39;s costs relating to the returns.br /br /THE PRUDENT OWNERbr /br /But then the honest and honorable current iPhone 4 owner. There are over 3 million iPhone 4 owners already. What does the prudent owner of an iPhone 4 do? It doesn#39;t matter what they think of their iPhone 4 and if they have never experienced the Death Grip. Apple has now admitted the problem, apologized for it, and promised a technical solution to the hardware, expecting it sometime in the Autumn, around the end of September. Especially as Consumer Reports still does not endorse the iPhone 4, the question will haunt the early iPhone 4 owners, wherever they go with the iPhone 4, there will be people who will ask them, emquot;have you experienced the Death Gripquot;/em - and then inevitably a discussion about Consumer Reports and about the latenight comedians and what so-and-so did to fix the Death Grip problem etc.br /br /So even if a totally loyal Apple fan has an iPhone 4 that exhibited no problems at all, the strongemprudent/em/strong thing to do, is to return the early #39;faulty#39; iPhone 4, and take the full refund, and return a couple of days later taking delivery of the new fixed iPhone 4b. Isn#39;t this the prudent thing to do? Apple#39;s CEO Steve Jobs has strongemadmitted/em/strong that the iPhone 4 has a grip problem (even if other phones have it too, even if it is miniscule as a problem) - and Apple is now fixing strongemthat/em/strong problem. Isn#39;t the prudent thing to do, if you love the iPhone 4, to take that free fixed model, and consider this first 3 months as a #39;free loaner#39; from Apple, of their #39;beta#39; version, with its tiny bug (or bugs) and expect that the iPhone 4b is 100% as good as the iPhone 4a, but has the death grip fixed - and comes with the new software, and likely has any other known problems fixed too? Best of all, their beloved Apple brand now gives away a free case (the preferred option to the rubber band solution, for anyone who wants to replace) which helps ensure the #39;test drive#39; iPhone 4a will remain pristine and scratchless until end of September.br /br /TEST TO SPOT DEATH GRIPbr /br /And the Death Grip won#39;t go away. In the next few months until a new iPhone 4b is released, there will be many opportunities to be reminded of the Death Grip. Any Apple customer who actually spots the problem - which is far more today than 0.55%, because most who experience a problem will not call to complain - and strongemmore will complain about dropped calls to the carrier/operator than to the handset manufacturer/em/strong - because it seems like a network problem, not a handset problem (until now, that Apple has admitted there is a problem). If the iPhone generates 1 in 100 more dropped calls than 3GS, that means the problem strongemis widespread/em/strong and will be spotted by many users. In reality I think its fair to say at least 1% of iPhone 4 owners have complained (as some who call Apple will also call ATamp;T haha). And I think its also fair to say, that if the actual complaining number is 1%, the reality is 10 times bigger (as a rough rule of thumb from marketing theory and complaining customers). So we can roughly expect that about 10% have already today experienced enough of the Death Grip to have strongemnoticed it/em/strong, while many will have thought itsstrongem too trivial a problem/em/strong (or too infrequent)strongem to bother to complain/em/strong.br /br /Of course most ownes will get a case or rubber band, which alleviates (but won#39;t eliminate) the problem of dropped calls. But now for every owner of an iPhone 4, whenever there strongemIS /em/stronga dropped call, they will think that is because of the iPhone 4 and its bad connectivity (rather than ATamp;T and its bad netwroks). About one third of iPhone owners have a second phone - so they will compare, how does the Blackberry connectivity do in this same spot. Remember one third of iPhones are sold in Europe, where half of consumers have a second phone. It will be strongemvery easy to see that the Death Grip is worse on the iPhone than on any other phone/em/strong.br /br /And then there is the occasional testing. Some friend has succeeded in replicating the iPhone Death Grip problem - well, obviously, emquot;where did that happenquot;/em - suddenly you are playing #39;connecting to the network#39; games with your friend, take your iPhone 4 out of its case, and see if you can replicate the problem in this spot - and if not, see if your friend can do it with your phone (and vice versa). There will be ample opportunities for most iPhone 4 owners, who didn#39;t observe the problem prior to Friday, to now find evidence of a Death Grip by September 30. Is that 10% of all iPhones sold or 20%, who knows. But it will be far more than 0.55%. It will definitely be more than 5% of all iPhone 4a models sold.br /br /VALUE LOSS OF iPHONE 4abr /br /Remember that in many countries there is a thriving second hand market for phones, in particular for premium smartphones. There will of course be a second hand market for the iPhone 4, but then, there will be a strongemsignificant price differential/em/strong for selling a used iPhone 4b, which has the death grip cured, or attempting to sell an early iPhone 4a - facing the inevitable question em#39;why didn#39;t you get the free upgrade to the new version when you had the chance?#39;/em and the price of the iPhone 4a will be significantly less than iPhone 4b. Again, what does the prudent iPhone 4 owner today do? Even if the owner who has never experienced a death grip problem, it will be the safe thing to do, to get the newer iPhone 4b, and therefore to return the early iPhone 4a, by September 30 (and then use the money to go buy the newer iPhone 4b). This will impact international owners far more than US owners, due to the stronger resale market in most international markets, and the wise decision by anyone with an early iPhone 4a, is to replace it #39;for free#39; with the iPhone 4b, as soon as possible. Why not, you get the exact phone with a problem fixed (whether the user has experienced the problem or not) but definitely acquiring an newer iPhone 4b model, that has a better resale value. This is the wise thing to do, and I would say far more than half of early international iPhone 4 buyers will end up doing this.br /br /THE UNCERTAIN OWNERbr /br /Now, lets consider next the owner who really believes in Consumer Reports, or who really thinks that if Apple CEO admits there is a technical problem (no matter that others may have it too, or no matter how tiny the problem may be) - that it doesn#39;t make sense to buy strongemthis faulty product/em/strong. Some of those will postpone their purchase until there is a new iPhone. But this promise now that Apple gives until Sept 30 for full refund without stocking fee, means that those uncertain owners can safely go and buy the iPhone 4 now - but these customers will definitely all replace theirs when the new iPhone 4b will come out, so they will all just use the next two and a half months for a free trial of the faulty iPhone 4, before taking delivery of that model of iPhone 4b, that they want. The fixed version.br /br /So its a mixed bag for Apple with these very cautious buyers. Yes, they will now not #39;wait#39; for the new iPhone 4b, but the problem is that for these customers, 100% of them will end up returning the iPhone 4a - and this will be a large number. It could be a million users by Sept 30. That is a huge number of returns, very costly for Apple and for the carriers supporting the iPhone. That also means that when the iPhone 4b will be sold (perhaps in early October) - then a large number of the early sales are strongemonly replacement sales/em/strong for returned iPhone 4a#39;s. This means a lot of sales and shipping effort which in effect results in no growth in Apple#39;s installed base, at all. For any cautious buyer today, yes they#39;ll go take the iPhone 4a, but these will need #39;two sales#39; to produce one iPhone 4 owner by late October...br /br /Still, while that hurts late September returns and early October sales, at least it does not #39;stall#39; the sales of iPhone 4 in late July and August. That would be devastating. So yes, this is costly for Apple and far from optimal, but it at least keeps the iPhone 4 sales (to this segment) continuing more or less as usual for the Summer.br /br /THE OPPORTUNISTIC OWNERbr /br /Then lets consider what this means to the opportunitistic consumer. If you are pretty sure you want some other brand smartphone, for example the Nokia N8 which won#39;t ship until a couple of months from now, but you are entitled to a phone upgrade now - why not go take the iPhone 4 for a 2 month #39;extended#39; test drive now. You know you won#39;t keep the iPhone but Apple promises total return including no restocking fee by September 30. And what you normally do NOT get - you get now a free case! So you can be sure your free loaner iPhone 4 will be pristine and scratch-free at the end of September when you return it, and replace it with your favorite smartphone brand, whenever that model happens to be out. Its a bit like the BMW fan, who gets to drive around in a brand new Jaguar for free for a couple of months, before the new BMW model is released..span style=mso-spacerun: yes#0160; /spanAlmost too good to be true?br /br /How many will do this? I don#39;t think its a large number but there will be those who will do it, for sure. Tens of thousands for sure, maybe even hundreds of thousands.. Also there will be some instances where a person who thought #39;I will never love the iPhone but I#39;ll take it for the free trial for 2 months#39; - will actually fall in love with it, and turn into an Apple loyalist. But - if for example you want a good camera, or you want a QWERTY keyboard, etc, then it doesn#39;t really matter, you will return the loaner iPhone 4 by late September and get that new smartphone you really wanted. There will be considerable further costs of returns that are this type of opportunitistic customer.br /br /IMPACT TO iPHONE SALESbr /br /So what? There will be some who will not buy an iPhone 4a, because of the admitted problems. That is human nature. So some of Apple#39;s demand in July-August, will remain unmet, until the new iPhone 4b is out in October or so. That is not #39;lost sales#39; for the most part, it is just delayed sales. But there is always the danger, that the customer who would have loved an iPhone in August, will fall for a rival smartphone in September and be a lost sale. That is natural, it is definite, that there will be some lost sales due to Antennagate, no matter what. That is what happens when you release a product that is flawed, but thankfully for Apple, there will never be a total factual knowledge of exactly how many iPhone 4 sales were lost due to Antennagate. I would say it is in the magnitude of under a million in this next quarter and like I said, its a number that can never accurately be quantified. Apple#39;s iPhone 4 sales will hit a record in Q3 the July-September quarter, no matter what. The only thing is, that there is what the economists call an #39;opportunity cost#39; - sales that could have been but that is now lost.br /br /The bigger effect is the free trial effect. There will be a #39;record#39; return of iPhone 4a models in September, around the last week. This will definitely be more returns in one quarter, than Apple has ever had for any full year, could well be more returns than Apple has had in its first 3 years. br /br /If Apple has sold 10 - 15 million iPhone 4 models by September 30, then I think its fair to guess at least 10% are returned (remember, it is what a prudent iPhone 4a owner should do, if he or she is #39;rational#39; about it), and in worst case could be as high as 30%. These returned iPhones will almost all be then replaced with iPhone 4b#39;s in October, which drains the new shipments of the new iPhone 4b causing its own set of delivery delays, and crowding out some random new buyers who may not like the delays that this will result (giving opportunities again to rivals).br /br /So from the accounting point of view, the iPhone 4a will mostly fulfill the demand that was there for the iPhone 4 prior to any problems. The unit sales impact is that at the end of September probably a couple of million iPhones will be returned and from the Q4 unit sales of iPhone 4b models - most of the early sales is replacements to returned iPhone 4a models. There may be some returned iPhone 4a models accounted out in the Q3 period, but mostly they will fall into the Christmas quarter period, damaging the total new sales of Q4. So the sales for iPhone 4 in Q3 (July-September quarter) will mostly not be severely hurt, but sales in Q4 will be significantly below the number of actual #39;shipments#39; where many #39;sales#39; of iPhone 4b will go as replacements of returned iPhone 4a models, which Apple has to account as returns.br /br /I can say the operators/carriers are not happy to handle a million or more returns in September, only to have to #39;resell#39; to those same customers another iPhone 4b in October. There will be arguments about phone numbers, there will be further #39;tester#39; phones - someone takes a 3GS model from end of September into late October as they await the new iPhone 4b model (under the #39;standard#39; 30 day trial period) - adding further costs to the carriers and Apple, etc...span style=mso-spacerun: yes#0160; /spanCarriers/operators will not be happy with Apple about this all. We have to see if some carriers/operators actually stop selling iPhone 4a, before the 4b is released ).br /br /WHILE WE ARE ON iPHONEbr /br /So on Friday I thought the Antennagate was pretty well covered and over. I didn#39;t expect Consumer Reports to come back and say, they still don#39;t endrose the original iPhone 4 (until it is technically fixed). So the free case did not satisfy Consumer Reports. This means that the story will continue in the press far more #39;loudly#39; than Apple had hoped. Just now I see on CNN#39;s news ticker (its Monday morning in Hong Kong) that CNN says Consumer Reports still doesn#39;t endorse the iPhone 4.span style=mso-spacerun: yes#0160; /spanBad news continuing.br /br /Meanwhile the idea of mentioning rivals at the press release did not go over well for Apple. So far at least Motorola, HTC, Nokia, Samsung#0160;and RIM have protested about Apple#39;s #39;self-inflicted problem#39;. What we now can expect, is plenty of consumer study groups to take popular smartphone models and compare to see whose #39;Death Grip#39; is worst - and here Apple really doesn#39;t want to get into this argument, they will now propel many news cycles more, where regardless of what the analysts find about the rivals, they will time and again, remind audiences that yes, the iPhone 4 does have a Death Grip problem - and most likely the finding is like with Consumer Reports - that the problem is worst for iPhone 4 (as they admitted, this is a radical antenna design - which Apple knew had bigger problems with dropping calls, than Apple#39;s own previous phones - and Apple is certainly not the master of cellular telephones, they are only 3 years into this technology). So how many of Apple#39;s carriers/opeartors will delay the launch? oiuth Korea#39;s KT has already announced a delay in its iPhone 4 launch. More to follow?br /br /So now because Apple had to pick on the rivals, it has all-but-guaranteed there will be ample more coverage of Death Grip comparisons, where Apple#39;s iPhone 4 will never come out better than rivals. The best Apple can hope for, is that others are verified to have the strongemsame level/em/strong of Death Grip (unlikely). More likely Apple comes out as strongemone of the worst/em/strong Death Gripsa and miscellaneous rival phone makers come out better. And imagine the furor, when some trusted independent sources find that in their tests, Apple does have a serious problem, but one or more of the phones Apple used in its video - the problem is not as serious as Apple claimed. Ouch. Apple has almost challenged the independent labs to go disprove their claim. And as radio environments are tricky, no doubt some will be able to prove that at least some of the claimed rival phones does not have that degree of a problem as Apple claimed - now Apple seems to be twisting the story about its rivals. If and when that happens, Apple looks like it has bended the truth (again) and that raises yet another media cycle of Apple-bashing, about the same issue that was supposed to be done and dusted on Friday.br /br /RUBS SOME THE WRONG WAYbr /br /So then the abrasive style that Apple had in its press conference has rubbed many the wrong way. This ends up coming to hurt Apple. In its multimedia show, Apple mentioned that the iPhone 4 has the best smartphone recommendation at PC World. Not anymore it doesn#39;t. After the press conference PC World has removed the recommendation and now does not offer a rating (the 3GS is there, rated 8th best smarpthone, HTC holds top spot). Apple tried to spin the story - to ignore the fact that the Death Grip is unique to iPhone 4, and kills phone calls. On any other phones, only the signal is reduced. No other phone manufacturer has resorted to emergency solutions of #39;you have to use a case to avoid the termination of calls#39;..#0160; br /br /This is likely to expand too. There are all those sites who love all things Apple, who have had time to already express their love. They can#39;t #39;help#39; by reminding people that they still love the iPhone 4. There are all those sites who did honest comparisons and analysis, who came to the conclusion that the iPhone 4 is great, and say so. They have no reason to come back now and reinformce their finding. But there will be plenty who didn#39;t like what Apple said or did - or perhaps also, who think that they didn#39;t consider dropped calls #39;seriously enough#39; and now come to revise their view. There won#39;t be any sites who hated the iPhone 4 who suddenly now love it. There won#39;t be any #39;migration#39; that way. But as we see from PC World, and that Consumer Reports has to make a big deal about it, that they still don#39;t endorse the iPhone 4, there will be a nasty growing bunch who change their minds or who make noise about the bad news. As long as Antennagate is in the news, it is a #39;lose-lose#39; situation for Apple.br /br /And then there is the #39;rest of the world#39;. The iPhone 4 is now going on sale in over a dozen more countries shortly. Each of them has their own testing labs and consumer advisors. All trust Consumer Reports and follow what CR says. All will want to do an honest test - and will test extra hard, to try to replicate Death Grip, because not only does CR say it exists - strongemApple itself has said there is a problem/em/strong. Many of these labs would never have bothered to try to test for Death Grip. Now everybody will expect it. So now the national tech advisor sites and magazines will want to test #39;thoroughly#39; how serious the problem is. And understand, they will rather want to test the Death Grip for an extra week or two, to be sure they are not claiming it doesn#39;t exist - rather than to find the problem and be able to verify it does exist - and advise their audiences exactly how serious the problem is...br /br /The problem is not going away. I do think it will diminish, but we will now find some ripples this week in the US oriented press, but then we#39;ll get #39;bursts#39; of bad news in many other countries as their national testers discover proof of Death Grip. And then is the ticking time bomb, where is the first major analyst to test Apple#39;s claim that all smartphones have this problem....br /br /SO CLOSE, YET NOTbr /br /Since Apple was going to give out the free cases, and as they knew 16,500 people had already called Apple to complain, and as they knew the dropped calls were 1 in 100 calls more than with previous iPhones - why didn#39;t Apple just forget about the rival phones, and simply say, quot;yes there is a minor problem, we are sorry about it, and we will fix it, and we will give all a free casequot;. That was all strongemin the SCRIPT/em/strong for the day. That would have been a 100% home run. What on earthy compelled Steve Jobs to now introduce the isue about rival pohnes - where Apple knows full well, no other phones have as bad a Death Grip problem as their phone. What was tehre to gain out of it, except now the pain of weeks more of Antennagate? Why include that unnecessary hostile attack on the rest of the industry. That was a red flag to the rivals, and a clear challenge to the press to go compare. This is a lose-lose for Apple, even if others are implicated too, every time Death Grip is mentioned, Apple is the strongemleading culprit of the news story/em/strong. Every time the iPhone 4 is reminded to have Death Grip problems! And for every story where rivals are also implicated, there will be stories where at least one of the rivals is not shown as bad, or in the worst case, that Apple#39;s iPhone 4 comes out worst at Death Grip. Apple#39;s news coverage will be bad - or worse. Bad news, bad news and more bad news. Now the problem is NOT going away and Apple is hearing much more about Death Grip...br /br /So even where Death Grip has nothing to do with the story, like the Quarterly results coming out this Tuesday (and unit sales of IPhones from April to June did not have time to be impacted at all by the Death Grip story by June 27, the last day of sales counted into this quarter) - the press stories will mention Death Grip, and worse, if iPhone sales are even slightly below 8.75 million units of Q1, then the press will #39;question#39; whether the drop was due to Death Grip (as it could not have been, but most journalists won#39;t know that, and the Death Grip is now the news) - and roll out a bunch of analysts who hopefully mostly will say, no Death Grip did not impact June sales - but then they will add that it hurts July sales etc.. and the news is not the awesome iPhone sales growth for Q2, it is Death Grip again... Apple could have killed Death Grip on Friday, but it looks now that they failed and this story will be how the Summer of Apple 2010 will be remembered... Not happy time at Apple HQ. Didn#39;t their PR people understand the basics that if you go wrestle with a pig, you end up just as dirty as the pig, except that the pig loves it...span style=mso-spacerun: yes#0160; /spanhaha...span style=mso-spacerun: yes#0160; /spanSince Apple was going to apologize anyway, to admit the problem anyway, and give free cases anyway, then be nice about it. The story would have been over..o:p/o:p/p/span p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5pto:p/o:p/span/p p class=MsoNormal style=MARGIN: 0mm 0mm 0ptspan style=FONT-FAMILY: Arial; FONT-SIZE: 10.5ptThats how I see it now on Monday morning..span style=mso-spacerun: yes#0160; /spanWe have to see. I honestly did think on Friday that it was over, I thought Apple did the right thing with the free cases and felt that was fair. But now, judging by the reactions over the weekend, I now am pretty sure it is not over and Apple will continue to suffer Antennagate for the next months until iPhone 4b ships. (No wonder Apple is now supplying cots to their Antenna engineers - haha, says something that this #39;working our butts off#39; degree of Apple urgency of fixing the problem did not really become that urgent, until Consumer Reports did its piece. Thank goodness for Consumer Reports. Without it, Apple might never have bothered..)br /br /And sadly, where the iPhone 4 did truly move the goalposts with Retina Display, that great tech improvement is now totally overshadowed by Death Grip.o:p/o:p/span/p

So the Apple extraordinary press conference on the iPhone 4 Death Grip problem is over. I was following the twitter feed on it and several news sites but obviously was nowhere near it and the press conference was not on the major 24 hour news channels.br /br /APPLE ADMITSbr /br /There were some who attended the event who were not happy with Apple#39;s way of communicating the matter, but to me that really doesn#39;t matter in the current smartphone bloodbath. It is clear there is an antenna problem. Apple said that 0.55% of those who have bought an iPhone 4 have already called Apple to complain about it - as a percentage that#0160;may be small, but remember that many buy cases with their phones which would#0160;eliminate the problem; and the US networks are bad so if the user knows the network is patchy at their home, they#0160;might not even notice that the#0160;new iPhone#0160;4 has more dropped calls, etc. But 0.55% is 16,500 people#0160;calling to complain. Thats not a couple of Toyota Prius cars with brake problems. Thats 16 thousand people who have already found the problem so bad they have called Apple - how many more have called ATamp;T#0160;etc.br /br /I think it was totally disingenous of Apple to try to argue earlier that there was #39;no problem#39; or that it was only software, if 16 thousand people called Apple directly about this very problem (I would venture to guess, that there were many tens of thousands more emails and Apple help forum posts and complaints about this too, so the problem must have been massive and obvious from early on). And no doubt they heard from ATamp;T calling center that it is getting many times this number of calls with this same recurring problem. But that was part of the early mistaken PR spin approach that Apple had taken. Thankfully Consumer Reports came in with their verdict, which finally forced Apple to own up to this mounting problem.br /br /APPLE COULD HAVE BEEN EVIL ABOUT ITbr /br /The real point is, that Apple could have said #39;no big problem, you deal with it, there is a bandaid solution if you don#39;t like it, go buy a case, or return the phone.#39; Apple didn#39;t. They could have taken a half-way solution, of giving a discount on cases but not a free case. But no, Apple did the right thing.br /br /APPLE DID THE RIGHT THINGbr /br /They admitted to the problem and they gave a free solution. So yes, Apple admits there is a problem with their Antenna, and they admit they are not perfect, but then they did the right thing. They gave every iPhone 4 owner a free case or the Apple rubber band that will cover the metal antenna and remove the Death Grip problem. If the consumer has#0160;already bought one, they get a refund.br /br /Furthermore, Apple is working to fix the problem which it hopes is fixed#0160;after by early Autumn. And meanwhile#0160;Apple has extended the return period which normally is 30 days for refund, to September 30, with full refund without even a restocking fee.#0160;br /br /This could have turned into a PR nightmare. Now its a small blotch in what has been an impressive history of excellence in high technology. No company is perfect. This was handled with reasonably good PR, and reasonably rapid response, before it seriously damaged Apple#39;s brand and reputation.br /br /That was the right thing to do. Thank you Apple. br /br /HOW NOW BROWN COW?#0160; WHAT NEXT?br /br /My instant vibe on what will follow. The existing Apple users of any Apple brand will feel this is more than fair. They will see this as proof Apple goes beyond what is needed to satisfy their customers. So this reinforces their loyalty and love of the brand. With media, I think that early part of every smartphone has problems and the magnitude is very tiny in the big scheme of things - when added with the free cases - pretty much shuts up most who may have wanted to pursue their Pulitzer Award dreams on the antennagate revellations. So the negative vibes should calm down. On sales - the iPhone is still having demand far exceed supply. For those who may have been deterred from buying an iPhone 4 on the rumors, or now on the admission of a fault - the effect will be miniscule. The iPhone 4 will continue to be a smash hit product for Apple and will become easily their best-selling iPhone model ever. Of the investors/owners in Apple stock, I am so bad at guessing what trhey do, but to me, the fair thing would be that this could have been a devastating situation, it is now cleared and Apple can return to growth and huge profits. I thing the investors will reward Apple for handling this crisis well and the stock should rebound (but I am not an investment analyst haha)br /br /For some#0160;non-Apple#0160;customers who are considering an iPhone, this may give pause, but not in a meaningful degree. Especially as the story will now mostly diminish and vanish from the press. But be rest assured, the press will now be hunting other smartphones for Death Grips too, so the tables will be turned. Apple will have learned from this to test every future phone antenna every which way possible. The interesting story is what other new smartphones currently in the market, or launched this Autumn, will fall prey to the same problem (or if we find a famous big phone model is suddenly delayed for 3 months after today, there could be an antenna problem or some other such glitz and that manufacturer would want to avoid another such PR nightmare.br /br /Well, the Q2 sales numbers for iPhone are coming out Tuesday and they will not be impacted by the Death Grip in any case, as the story hadn#39;t broken to the mass market press by that time. (the Apple watchers expect mild decline sequentailly from Q1. I think they will report roughly flat sales, but we#39;ll see on Tuesday). The actual sales impact of antennagate will impact Q3, in a very modest way, which nobody will really know. No doubt Q3 will be Apple#39;s best-ever iPhone sales quarter, and the cost of these free cases won#39;t be meaningful in the few dozens of millions of dollars, out of the Billions that Apple makes in profits. But the one long term redeeming factor, the silver lining in this little turbulence is for Apple - is that its brand loyalty will no doubt be strengthened by this story. The Apple loyalist customers - the #39;army of fanatics#39; as Jonathan MacDonald would call them - will be even more convinced after this that Apple is the best tech company, that even when it stumbles, it gives#0160;the best possible#0160;solution to its customers. This will build Apple loyalty over time - helping then of course, to drive the profits that Apple can generate from its premium products, sold to customers who care for the brand. Yes,#0160;a win for Apple.#0160;

pDoing some updates to the Smartphone Bloodbath of 2010. This edition is #39;a lot to do about Samsung#39;br /br /SAMSUNGbr /br /Lets start with Samsung Galaxy. There was a nice picture of the iPhone 4 and the Samsung Galaxy side-by-side in a phone store, as taken by Mrbangbang - please take a look (a href=http://twitpic.com/25g310Picture of Galaxy and iPhone 4/a). Now here is my point. For the normal consumer - not like you and me at this blog, the normal person - look at that picture and consider your mother or cousin or uncle in a phone store somewhere, pondering the choice of the next phone. The two look almost identical. But the Galaxy has a bigger screen. Even with the iPhone 4 Retina Display, the Galaxy has a Super Amoled screen, so both seem far sharper and brighter and better than most other screens in the store - but the Galaxy is strongemsignificantly/em/strong bigger. Suddenly the Samsung is a very compelling player. Then as they are priced (without contract) about the same, it comes to the distribution. Samsung has roughly three times the networks than Apple has, for example all 4 big carriers in the USA carry the Galaxy. I don#39;t mean it will sell as well as the Apple, it doesn#39;t have to. Because Samsung has several cheaper phones that it can then sell to those customers who don#39;t want to pay the price of a top line smartphone.br /br /While we are on Samsung, the first Bada phone, the Wave has passed 1 million unit sales. Thats pretty solid for approximately one quarter worldwide. Its nowhere near Apple#39;s iPhone 4 selling 1.7 million units in a couple of days, but remember, thats not the right comparison. The comparison is to the original launch, first phone on a new operating system. So the right comparison is to the original iPhone 2G launch of 2007. And 1 million Waves compare rather well in that context - far better than for example Google#39;s highly visible #39;superphone#39; launch of the Nexus One. Thus Bada is already selling better for Samsung than its Symbian and MS Windows Mobile based phones, and looks to be well on target to be about a third of all Samsung smartphones sold in 2010, behind only Android devices.br /br /APPLEbr /br /So the iPhone Death Grip is now verified by Consumer Reports. That is bad news for Apple who tried to pass the problem off as a software glitz.. Then it was reported by Bloomberg that Steve Jobs was told by Apple engineers of the antenna problems#0160;a year ago, so Apple has been launching a product they knew was faulty,#0160;and since then have tried to hide the fact. Now Apple stock has taken big hits as over 3,000 press stories have covered the problem and late night comedians ridicule Apple about it. Apple has#0160;scheduled a totally unusual press conference for Friday, very unusual especially considering their Quarterly results come out next week. There are those who say Apple needs to issue a recall. That would be the end of the iPhone market chances, so I don#39;t see that happening. A#0160;rebate coupon or free rubber band shield sounds like the solution to me, that would be in Apple#39;s best interest.br /br /But while the Death Grip#0160;consumes the tech news, there is good news too for#0160;the iPhone. US#0160;consumer survey by Changing Wave and UK consumer survey by You#0160;Gov both put the iPhone on top as the most desirable smartphone - by a wide margin. It is very clear that worldwide, the iPhone is currently the world#39;s#0160;most desired phone. Absolutely and without any doubt. Because of its high price, that cannot turn into global market share domination obviously, but it is the main#0160;ingredient in why Apple is so incredibly profitable in its phone business, while so many others are struggling.br /br /Here is my quick squabble with Apple. You have the world#39;s most desirable#0160;phone. You also know, its not hte outwardly design which is relatively easy to copy (see Galaxy above), the real secret sauce to Apple loyalty is your#0160;User Interface. Your phones are by far the most user-friendly.#0160;Why limit yourself to the few high end customers? Because all who have used an iPhone fall in love with it, you should flood the market with reasonably priced mid-price Nano iPhones and sell them with minimal profit margin. But flood the market. Why? Because the replacement cycle for phones is 18 months, and anyone using an iPhone will want another iPhone next time. So the Nano owner of 2010 will buy the iPhone 6 in 2012, at full price, and no magic by Samsung or Nokia or RIM or Motorola or HTC will be able to change their minds. NOW is the time to release a cheap iPhone Nano. Strip a few of#0160;the premium aspects of the iPhone 4 - obviously the retina display for example - give it visibly a #39;nano look#39; ie smaller so a 3 inch screen for example. Then mostly do the specs of the iPhone 3GS ie 3 megapixel camera for example. Give it one or two #39;improvements#39; beyond the 3GS that the 4 has, like now the flash for#0160;the camera. Just a few tidbits, so the consumer can see this is a 2010 phone, not a repackaging of a 2009 phone. br /br /But then price it at half that of the iPhone#0160;4#0160;(in non-subsidised markets, that means 300 dollars vs 600 dollars) and in subsidised markets like the USA,#0160;do the deal with the carriers to get this phone in at near zero cost. Make it 25 dollars or 50#0160;dollars on ATamp;T? Suddenly the world is tuned upside-down. The iPhone family explodes. You still make all the profits on the iPhone 4, because all old iPhone 2 or 3 owners will not #39;downgrade#39; to the Nano, they will want the 5 megapixel camera and#0160;retina display etc. But those who never had an iPhone and can#39;t justify the cost - this Nano will easily tripple your market share. Then like any good drug dealer, you lure them in with the cheap stuff, then you turn them onto the hard stuff. Come on, Apple, we know you have to release a Nano model#0160;sooner or later. NOW is the time, not in 2012 when Androids, Badas and Symbians rule the world... Yes, this would be a tiny margin product in 2010, but the iPhone 4 is raking in profits hand over fist. And these Nano owners will be iPhone users for life. You can milk them for profits their#0160;whole lifespan..br /br /Ok, back to the Bloodbath update.br /br /NOKIAbr /br /Nokia is going to announce quarterly results next#0160;week so nothing much in the news officially from Nokia, but the You Gov study did give some ok news and some devastating news. The ok news is that Nokia continues to be the second most desirable smartphone brand in the UK, although its preference is declining. Nokia is far above its traditional handset rivals, ie Samsung, LG, Motorola, SonyEricsson. But the bad news is that UK based Nokia smartphone owners are very reluctant to recommend Nokia. So it seems to be#0160;becoming a phone owners are ashamed to own.#0160;Not good news, but this is why Anssi Vanjoki was brought in to fix. That customer survey is symptomatic of how badly Nokia#39;s preference has#0160;been hurt recently.br /br /MOTObr /br /Motorola releases Charm, a youth oriented QWERTY smartphone running Android. Did they finally read my blog haha?br /br /GOOGLEbr /br /Google reported today. No#0160;new amazing unit sales#0160;numbers, so we are still at the 160,000 Android devices activated per day level (Android being the world#39;s second most popular smartphone OS, ahead of Apple and RIM, behind only Symbian which activates 260,000 smartphones per day). But there was news about the Android App Store. It has now 70,000 apps, so it is ramping up quite rapidly (Apple still leads with about 250,000 but the gap is closing fast). And while Google didn#39;t#0160;give a number, the AndroLib download counter passed the 1 billion Android app download milestone. This is about in a year. Apple#0160;is doing about 4 billion per year.#0160;The Ovi store was doing half a billion early this year and GetJar#0160;is the second biggest although now Android is closing up on that.br /br /MICROSOFTbr /br /Steve Ballmer admitted that Microsoft goofed with smartphones and lost a whole generation, but promises Phone 7 will bring Microsoft back into the game. br /br /ZTEbr /br /The Chinese mobile phone maker who is the world#39;s#0160;4th biggest phone maker, is now selling a basic cheap touch screen smartphone in Europe. In the UK it is priced at one sixth the price of the top line phones like iPhone, Galaxy etc and is available for prepaid customers. It#0160;runs Android, is modest in specs, but is poised ot be a big market success due to its modest price.br /br /SAMSUNG AND THE FUTURE OF SMARTPHONESbr /br /But I want to end back with Samsung. I have been saying the Asians make the most advanced phones. And once again we have evidence of it.#0160;In Singapore now#0160;Samsung is launching its#0160;flagship phone, the Samsung Galaxy Beam, an#0160;Android based superphone, the world#39;s first that incorporates a#0160;pico projector. Ultracool. I want one of those haha...br /br /Thats the#0160;quick update from the Bloodbath wars of 2010. I will report on what Apple said in its Press Conference also about the Death Grip.#0160;/p