The situation is complicated.

What happened? First and foremost, retailers became angry because they understood that they were selling something with no future, and they simply stopped buying phones in bulk. There are markets that have been fatally affected by the situation, primarily China and India. In China, Nokia’s share of newly sold smartphones has fallen from over 70% to less than 30%, and the situation is similar in India. These are currently the two most important markets in terms of volume. Brands such as TCT Mobile (Alcatel) and Huawei, companies that would not have dared to do anything so bold last year, began to go after the company in these markets.

On top of that, the company reduced the prices of its smartphones by 15%, a relatively unusual move that reduced the company’s revenues, along with the revenues of retailers selling these phones, and did not compensate for this with higher sales volumes – and thus logically undermined retailers’ willingness to recommend Nokia phones to customers.

The situation was further complicated by Microsoft’s announcement that it was buying Skype. Will this product, whose name is synonymous with a swear word among mobile operators, be integrated into all Windows Phones? Or what will happen? This does not seem to be the case for many mobile operators, especially in countries where they can afford to impose stricter controls and supervision of sales, and this was another argument for the exceptionally poor results in the “emerging markets” of India and China. The only region where Nokia ultimately grew was Latin America. The only product with which Nokia pleasantly surprised the market was dual SIM phones, a product that the company had been noticeably lacking for ten years and which is a common feature of other manufacturers’ offerings. Dual SIM phones sold 2.6 million units, mainly in the Indian market, thanks to which Nokia did not fall as much here as it did in China.

Another source has confirmed that the situation is not very optimistic. Texas Instruments has warned its investors that one of its largest customers is significantly reducing its chipset purchases due to low sales, which will also affect TI’s results. It is an open secret that this customer is Nokia.

The results announced for the third quarter of 2011 confirm this trend. Nokia has a 14% share of the smartphone market with just under 17 million smartphones sold, which contrasts with its 33% share in the same period last year. On the contrary, Samsung has become the leader, selling 27.8 million smartphones, followed by Apple with 17.1 million phones. Although the company will begin selling new Lumia phones with Windows Phone 7 in limited quantities and in selected markets at the end of 2011, the situation is not expected to change radically by the end of the year. There are few Lumia phones and competition from WP7 phones is fierce, while their only distinguishing feature is essentially their price tag.

No matter how you look at the situation, it is very unflattering. Practically everyone has turned their backs on Nokia. First the geeks, then the developers, the sellers, and now even the customers. The only ones who remain are the shareholders. Surprisingly, they believed Steve Elop’s claim after the results were announced that they were actually good, even though they were well below market expectations and are the worst results in Nokia’s modern history.

Table of contents