Saturday, June 15, 2013

A Look At the Pre-Elop Years

Recently I got a really relevant comment on my earlier post on Nokia. Let me copy-paste the comment here.

Anonymous said...
It Would be nice to see pre-Elop year in the graphs. Let's say Q3 2009 onwards. Now we know Nokia switched the strategy but do not e.g. see the rise of Android and drop of Nokia market share behind it.

I created this post to extend the revenue & profit graphs in the pre-Elop years. In fact, right from Q1 2009 to Q4 2012. So here's the first graph, showing revenues & net profit for Nokia group.

Click for larger view

As can be seen, the revenues were rising from 2009 onwards, peaking in each Q4 (the Western holiday season which sees greater revenues). However, the profitability of the company was not too great. Q3 2009 was loss-making, while most of the quarters, Nokia manged to make a few 100 million euros of profit.

Profits shot up in the Q4 of each 2009 (882 million euros), and 2010 (742 million euros). In Q1 2011, Elop's new Windows-Phone strategy was announced, and revenues started falling, and profitability was hit. But this was covered also in the last post.

Although it is easy to see that revenues were higher in the pre-Elop years of 2009 and 2010 (Elop joined Nokia in Q3 2010), one can always argue that the profitability of the company was in question. So was Nokia feeling the heat of the iPhone and Android beating down on it's profitability? To answer this,as in the last post, I looked at just the "Devices & Services" business... the one which is responsible for the smartphones and feature-phones.
So here's just Devices &Services over the same quarters...

Click for larger view

Now this graph shows solid revenue, profitability and growth in Devices & Services until Q4 2010. Note that the nature of the industry is such that the "Q4 peaks" will always occur. So for e.g. it was not alarming that revenues fell from Q4 2009 to Q1 2010. Note that even in weaker quarters, D&S maintained respectable profits. In fact, in some quarters it was the "sole bread earner", compensating for NSN's losses. All that changed from Q1 2011. Of course, there's no point in going over that again, as it's already covered in my last post.

What remains is market share, which, of course, does not look very good, given that Symbian was known to lose market share to Android. Here is the area graph from 2008 to 2012

Click for larger view

It can be seen that Nokia's Symbian platform dominated the smartphone OS'es in 2009 and started falling. The rate of decline accelerated in 2009, primarily because of Android popularity. So, from a market share point of view, it does looks like Nokia was in trouble, but Nokia's Devices & Services performance was solid throughout (see the D&S chart above). Post 2011, Elop's new strategy could not arrest the market share decline. I've plotted the Symbian and Microsoft WP/WM shares stacked on each other, so that one can see that even the combined Symbian + Windows Phone share is falling over the years. What Elop's strategy has done is make a profitable business that was losing market share become an unprofitable business that is still losing market share.

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