Let’s do some Bloodbath news. How is the smartphone market doing mid-way in this Year 2 of Smartphones, the Electric Boogaloo? The weather report for the summer is sunny for some, shady for others and stormy for some. Let’s start with the two who already reported.
RIM IN TURMOIL
Blackberry maker RIM reported second quarter 2011 results first. That was the first quarter for ages that RIM reported a real units decline in smartphone sales (not just a decline in market share, which RIM had reported for several quarters while still growing total unit sales). RIM sales hit 13.3 million units, down from 14.5 million in the previous quarter. The market share for RIM is now down to 13%.
The staff at RIM is panicking, seeing what happens over at Nokia, and feeling that the management is not focusing on the right problems. An open letter by an anonymous employee has attracted a lot of attention by the industry. Meanwhile there is now speculation if and when RIM will fall behind HTC in total smartphone sales (it is taken as a given that Samsung has now passed RIM already). Well, we have the actual reported 2Q numbers from HTC, so let’s see.
HTC GROWING STEADILY: 114% May YoY, 88% June YoY growth
The biggest Android manufacturer, HTC keeps growing. They just reported 2Q numbers at 11.0 million smartphones sold. That is a strong growth of 13% from 1Q when they sold 9.7 million smartphones. HTC has picked up another market share point and now their market share in 2Q is 11%. But clearly they did not catch up to RIM yet. If these trends hold, they would be neck-to-neck by 3Q and HTC should pass RIM by fourth quarter. That is assuming that RIM cannot turn around their sales during the autumn sales frenzy.
HTC gives us an very interesting glimpse into their split of handsets by operating system. They said that in 1Q HTC sold 9.3 million Android-based smartphones. Why is that interesting? Because the total first quarter HTC smartphone shipments were 9.7 million. So ‘all other’ smartphone platforms – Windows Mobile and Microsoft Windows Phone 7 – combined – sold for Microsoft’s strongest partner, HTC – a total of 400,000 units. That’s nothing! So smartphones made by HTC, sold by HTC and running Microsoft’s two operating systems, sell so poorly that HTC’s own Android based phones outsell them by 23 to 1 – this is exactly why HTC had such a disappointing quarter in 1Q, and why they said they will shift their emphasis away from both Microsoft operating systems to Android.
And to show they know how to do cool funky future tech phones, HTC is now showing their newest model that has 3D display and dual cameras for stereoscopy 3D capture. Similar to what Sharp first did out of Japan and LG has been starting to sell this Spring. So HTC is the third smartphone maker with 3D displays and 3D cameras.
Apple didn’t give us a new iPhone 5 for June. Its delay is rumored to be because Apple designed the iPhone 5 to have a virtual SIM card, and the operators/carriers were having none of that. So Apple redesigned the iPhone 5 to have a microSIM card and this redesign caused the delay to around September. It’s all rumors, but we do know that Apple submitted to ETSI the standardizing body for such things in mobile telecoms as SIM cards, a new specification micro SIM in May for which Apple got Orange UK to support it.
We have no official word when the iPhone 5 (or whatever the next iPhone will be called) will be released but Apple analysts expect late September launch to help boost 3Q sales, then offer strong iPhone sales for a strong Christmas quarter. There is growing speculation that Apple will split the iPhone into two products, a premium iPhone like the ones we have had, that is a showcase of Apple excellence at roughly the 600 dollar unsubsidized price range; and a cheaper iPhone ‘Nano’ with smaller form factor and more modest tech specs, to sell at roughly half the price, for the entry level model and intended in particular to help Apple sell in the Emerging World markets. (Regular readers remember I have been advocating Apple to do exactly that for more than a year now, it’s high time!).
Those who estimate iPhone sales seem to be converging on a 2Q sales level of about 16-17 million iPhone units, thus about 16%-17% market share if that happens. We will know later this month when Apple reports.
So we then hear from the raging bull of the smartphone market, Samsung. Samsung seems to be giving the industry nothing but news of big successes. The latest is that their newest model of the Galaxy, the Galaxy S2, has set a Samsung record for fastest sales of a new Samsung model ever. The previous Samsung record was with the Galaxy S which sold 3 million in 85 days. Samsung is now performing better than the best Nokia could do who did 4 million with the Nokia N8 in 4Q of last year (3 million in 55 days is the speed of about 4.5 million over 3 months). But the grand master is still Apple, the iPhone 4 sold 3 million units in only 30 days. But Samsung is catching up and growing by leaps and bounds. Oh, and as usual, the newest phones don’t launch in the USA, Samsung’s Galaxy S2 is coming to American shores… ‘later’ this year – with all four operators.
Meanwhile I am still hunting for those elusive bada OS shipment numbers. My projections say they should have passed 10 million bada devices sold already, but Samsung has not released the number. Is bada not selling as well as we expect, or are Samsung waiting to surprise us with a massive number at their next quarterly results later in July. We have to see.
And while I projected that Apple has grown past Nokia for 2Q, Nomura analysts have calculated that Samsung has passed Nokia in 2Q. It suggests it’s a close three-way race who is first, second and third. My gut says Apple is still ahead of Samsung in 2Q, but yes, Nokia may well have fallen behind both. Then the big race is for 3Q and as Samsung is in a strong growth trajectory, it is up to Apple, can they release the iPhone 5 in the final week of 3Q to jump their sales. It will be interesting times.
NOKIA KILLS MEEGO AGAIN, AND AGAIN, AND AGAIN
Nokia had its biggest buzz and positive press reaction to the MeeGo powered N9 smartphone that Nokia had seen for years. It was a massive positive story for Nokia. Even the stock market loved the story and Nokia’s share price got a jump. MeeGo was slick and sexy, the N9 was a hot phone with excellent specs. Any CEO who loves his company would celebrate and cherish the moment and do his best to promote and prolong that success. But not Stephen Elop. No. What did he do. He immediately moved to quash any possible good will that the N9 and MeeGo were generating. He first ‘revealed’ the first look of a Microsoft Windows Phone 7 based phone – which looked to most analysts identical to the N9 except for one mysterious button. And he did it in a most clumsy way telling a packed audience "don’t show these pictures" while at least two news outlets were videotaping his presentation. The stock market rewarded Stephen Elop’s new Microsoft Phone 7 based Nokia phone preview with a share market decline. He stole all the thunder and bizarrely for a CEO, he actually stifled a stock market rally. What is wrong with this guy Elop? Who does he work for? He certainly doesn’t seem to be working for Nokia.
If that’s not enough to help kill Nokia N9 and MeeGo, Elop went in public to say that "even if the N9 and MeeGo were a success, there will be no more MeeGo devices". What? Even if this totally new Nokia product is a market success, the CEO will kill it. That’s a very special kind of love, isn’t that. It’s not euthanasia, which one might argue, Stephen Elop was doing for Symbian. No, it’s pure murder what Elop is now committing to MeeGo.
And to be absolutely sure, that MeeGo has zero chance of even a ‘fair fight’ – Nokia has since kindly announced to us which markets will get MeeGo. The N9 will not be launched in.. the UK, Germany, France, Italy, Spain and the Netherlands (and several other major Nokia markets). That’s the ‘big six’ Western European markers where most of European smartphones are sold! Not a one of them gets to play with MeeGo, none of them get to buy the N9 ! This is Nokia’s way of killing Me softly with Microsoft, killing Me softly, with Microsoft, killing Me softly, that’s Elop! And by weird coincidence have a guess what are the six European countries that will be the launch markets for the new Microsoft WP7 phones? Yes, the UK, Germany, France, Italy, Spain and the Netherlands! Is Elop really this afraid of MeeGo? He has to sterilize Western Europe against MeeGo, keep it pure, so it’s not ‘polluted’ by the better OS that Nokia’s own designers created, so that Europe would be willing to buy Microsoft’s OS. Who is Elop working for? This is not in Nokia’s interest, this is a CEO who is working for the best interests of a rival corporation! Elop is not looking after Nokia’s best interests, he is looking after Microsoft’s best interests.
Furthermore, it emerged that Nokia has cut its prices across the whole range of its smartphones, as high as 15% at the top end – the top end – of its smartphones. Nokia is already at about zero profit or making a loss in 2Q which ended June 30. Now for the start of July we hear that Nokia cuts the prices of its biggest source of any remaining profits – top end smartphones by a sixth! That is massive. It means Nokia is STARTING the race into 3Q with far deeper losses already. The reseller boycott is really hurting Nokia and now its obstinacies to not even release the much-loved N9 into those markets that refuse to sell Symbian only shows that the CEO prefers to damage Nokia than let a Nokia-built hit product help rescue the company. Stephen Elop is destroying Nokia as we speak. This price cut across the board now by Stephen Elop is EXACTLY what got Olli-Pekka Kallasvuo fired last summer! What madness in Nokia management and the Board of Directors allowed this Microsoft Muppet to REPEAT a FAILURE that almost destroyed Nokia just LAST YEAR… Duh? What part am I not understanding in this?
MOTO – NOTHING NEW ON THE WESTERN FRONT
In the Motorola corner, I find nothing remarkable to report for now. We await quarterly results.
We’ll await quarterly results but could be interesting as Sony Ericsson in 1Q 2011 sold as much phones as in whole of second half of 2010. Then again, it was only 4.9 million smartphones.
HUAWEI, ZTE CHINA GROWING
In the Asian corner, Huawei might be better known for its infrastructure gains, but the company is reporting strong growth of its smartphones. They say they are on pace to do 12 million smartphones sales this year, which would put them at about 3 million level for 2Q. They would soon be nipping on the heels of say a Motorola.
And Chinese rival ZTE more known for handsets but also selling infrastructure is not to be left behind. They just celebrated their 2 millionth Blade smartphone, a touch screen Android device.
I’d like to hear how the LePhone is doing from Lenovo. After a noisy launch the smartphone whose name is translated as ‘Happy Phone’ in Chinese, is not really giving Lenovo the sales success we were expecting. It seems it’s not that easy for PC makers to transition into handset makers ha-ha…
HP WANTS TO LICENSE webOS
In the PC corner, HP is still showing nothing significant out of its Palm acquisition. A couple of handsets have been announced, nothing spectacular happening’ anywhere. Now we hear from HP that they are eager to license the Palm WebOS to third party manufacturers. I can see this would be to HP’s interest yes, to build a bigger ecosystem etc. But I can’t see the benefit for any handset maker to go with this miniscule and unproven OS. If you want to go with a manufacturer who also makes their own phones, then going with bada will get you instantly what, a 10x bigger market and app store and installed base. And if you want to go with a new OS that is not controlled by a handset maker, then go with Intel and MeeGo, where three dozen device manufacturers are already signed up and half a dozen devices are already available (mostly tablet PCs but obviously Nokia will have two MeeGo devices this year).
ANDROID IS JUST MASSIVE
The latest numbers from Google are in: Android passed the 500,000 daily activations level in June. That’s an annual level of 183 million, and on a quarterly level it means that at the end of June Android was activating at the level of 46 million devices per quarter. That is not Android’s actual performance in 2Q for two reasons – first, it includes the tablets, so smartphones will probably be a million or two below that – and secondly, it’s the performance at the end of the quarter, when it was far less at the beginning of the quarter. Nonetheless, Android is clearly the biggest OS out there and still growing very strongly.
Then in the Symbian corner, we hear that the sales channel is boycotting all Symbian phones. In many stores the carriers have pulled all Nokia phones off the shelves. Nokia is releasing several cool hot new phones and most carriers are actively ignoring these, because they are on the Symbian OS. Stephen Elop initially said that Nokia would commit to 150 million more Symbian phones, which meant Symbian sales would end in the summer of 2012. Now Elop is talking of far extending Symbian’s ‘life’ (for what that is) and is talking of Nokia supporting Symbian to year 2016. It’s far too little, Mr. Elop, and far too late. You killed Symbian on February 11 and you cannot bring it back alive.
MICROSOFT ALSO IN BOYCOTT
The more interesting twist to the tale is the sudden Microsoft boycott. This was already reported by several US newspaper who surveyed US resellers (Microsoft’s best market) and found that there were no Microsoft phones, or the only phone on exhibit was a broken phone; and that sales staff were very actively steering customers who asked for Microsoft phones, to buy Android. Why is this? It’s like I said when we learned of Microsoft buying Skype – this is the death-nail to Microsoft Windows Phone 7. The mobile operators/carriers hate Skype with a passion. It’s their number 1 hated service and brand. The carriers witnessed how utterly Skype devastated the traffic, revenues and profits of the fixed landline cousins in telecoms operators/carriers. The wireless carriers/mobile operators will not allow Skype to come and mess up their nice little voice-calls based playground.
And immediately after Microsoft bought Skype, the carriers placed Microsoft based smartphones in boycott. I predict that there will be no subsidized Microsoft WP7 based phones ever. The carriers will never support Microsoft because Microsoft bought Skype. And thus, the smartphone operating system which is most guaranteed to fail – is Windows Phone 7. It is destined to fail not because the OS is good or bad, not because the ecosystem is good or bad, not because the handsets are good or bad – it’s because the carriers hate Skype.
P.S. look at the biggest (and longest serving) Microsoft smartphone manufacturer, HTC, is doing. They are shifting their Microsoft-based phone manufacturing away, and onto… Android. This is the biggest Microsoft partner, actively shifting away from Microsoft to Android.
Even the news from Microsoft’s home market is dismal. The latest Nielsen survey tells us that even now, a year after Microsoft Windows Phone was launched, it lags the older sibling from Microsoft, Windows Mobile by a ratio of 9 to 1! Even that ‘obsolete’ Symbian is in twice as many pockets in America as Microsoft’s mighty Windows Phone, according to Nielsen. Even the near-invisible HP owned new Palm Web OS has achieved twice the penetration than Windows Phone, and Microsoft’s miracle OS can only match that of the older Palm OS, at one percent penetration – in the USA, Microsoft’s best market! That is evidence that the market is truly rejecting your offering on a massive scale. In new phone sales, Nielsen says exactly the same, Microsoft, for all its amazing branding and marketing, has managed in 2Q to sell… 1% of all new US cellphones. That is miserable.
After Nokia pulled away from MeeGo partnership, Intel is working double-time to ensure MeeGo is viable and will survive. They’ve had several netbooks released on the MeeGo operating system and have heard from reassured partners that they will remain with MeeGo. There are over 3 dozen manufacturers committed to MeeGo (mostly car makers, home electronics and PC makers) but also at least 4 handset makers – ZTE, Huawei, LG and Panasonic. And probably the most significant partner in the MeeGo ecosystem is China Mobile, the world’s biggest mobile operator/carrier which alone is about twice as big as all USA based mobile phone operators/carriers added together.
When China Mobile says their preferred smartphone OS is MeeGo, they can very well dictate that to be the OS on all smartphones that China Mobile would support in its marketing and its stores and its campaigns. Still, the buzz around the N9 and the very warm reception that MeeGo got, has come as a very welcome boost to the rough year that MeeGo is having. MeeGo is the youngest and newest OS for a good reason – it can therefore also be the best. But is it coming too late. Time will tell. If Nokia had bothered to support MeeGo, it would instantly be one of the big platforms, especially after Nokia built the migration path for the 400,000 strong Symbian developer community to develop apps for both Symbian and MeeGo using the Qt tool.
COUNTRY OVERVIEW: JAPAN
I want to also include a few highlights from a couple of national markets. After Stephen Elop killed Symbian on February 11, Japan’s NTT DoCoMo, which has been the biggest and most loyal partner to support Nokia, immediately moved away decisively from Symbian and onto.. Android of course. We hear now that for 2Q in Japan, Android has passed past the iPhone. Same phenomenon as we saw in the USA a year ago. It is inevitable (that Android will grow past the iPhone) because of Android’s ‘army’ of suppliers. And consider how crazy the Symbian death was – this was a closed market, where several million Symbian handsets were sold every quarter regularly as clockwork by makers such as Sharp and Fujitsu etc. Now they are shifting to Android.
In the India market, Voice & Data the market analysts calculated that the total India handset market (not smartphones but all phones) grew 15% in the past year. They measure by revenue not by unit sales but the findings are still indicative of what is happening in the Emerging World markets. Voice & Data report that Nokia sales are flat, i.e. Nokia was not able to grow where the industry grew (so in effect, Nokia has witnessed a one sixth loss in market share in one year). Nokia which has owned as high as 70% of India’s market share is now down to 39%. Samsung is gaining, and grew by 22% to reach a market share of 17%. Domestic Indian brand Micromax is in third place, and grew 43% in the past year to 7% market share. And the astonishing performer in India is Blackberry where all other bigger rivals mostly sell dumbphones, Blackberries are very expensive smartphones, yet grabbed 6% of the market in India. But please remember, this measurement is not by unit sales, it is by dollar sales revenues, so of course a few unit sales of expensive Blackberries will count the same as many sales of cheap Micromax ‘dumbphones’. Nonetheless, by revenues, RIM is India’s fourth-best-selling handset. Quite an achievement in the world’s second largest handset market.
Lets get back to the Nielsen 2Q study of the US domestic market. They found that 2Q was the first quarter where more smartphones were sold than dumbphones, and for the installed base in the USA, already 38% of all phones in use were smartphones. These are trends that follow leading Western European countries, which themselves follow leading global countries in smartphone adoption like Singapore, UAE and Saudi Arabia. Those three countries have passed the point where more than 3 out of every 4 phones sold is a smartphone already.
But yes, in America.. Nielsen reports that Android has 38% of the US domestic smartphone market. The iPhone is ranked number 2 at 27%. Blackberries are at 21% – but remember, Nielsen measures domestic users not business users so Blackberry’s total penetration rate is higher than this. Windows Mobile the old and defunct Microsoft OS has 9%. Symbian has 2%, HP’s WebOS (the new Palm OS) has 2% and the old Palm OS has 1%. Oh, and Microsoft’s new Windows Phone OS has .. 1%.
THATS IT FOR NOW
We await the results of the most unpredictable quarter ever in smartphones, as Nokia crashes and burns after Stephen Elop set his company’s strong platforms on fire. In 1Q we only got a partial impact of that fire, now we have the first full results. Will Nokia land at 14% or 13% or 12% market share in 2Q? Who knows. It was 29% in 4Q, the last full quarter before Stephen Elop made his big announcement to kill Symbian and abandon MeeGo.
What of Apple. The iPhone had its China effect in 1Q but now for the first time in years, there is no new iPhone for the end of June. But the iPhone had spread from AT&T to Verizon, and Apple released the White iPhone (said to be very popular in China for example). How did Apple do in 2Q. We have to wait to see. And we know Android grew strong but how did the Android members fare? We heard from HTC but how about Samsung, LG, Sony Ericsson and Motorola. We’ll know during July. And yes, Microsoft? What kind of numbers do we hear from Redmond. Will they even dare to release the Windows Phone sales numbers or will they attempt to hide the numbers. This will be an interesting month to report what’s happening’ in the smartphones space. Stay tuned.