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smartphone, which he also announced)
but would use Microsoft’s Windows
Phone. This turned out to be a bad
decision for a couple of reasons. The
first is that when the announcement
was made, Nokia didn’t actually have
any Windows-based phones available.
And if the CEO says the current
operating system is not up to scratch,
the customers believe him.
Have you heard of the Osborne effect?
It even has its own Wikipedia page.
If you are old enough, you might
remember that Adam Osborne had a
very successful product, the Osborne 1,
which was the world’s first “portable”
computer (it only weighed 24 lbs).
He announced that the next product
would be compatible with the IBM PC.
Unfortunately, it hadn’t been built,
but the promise of it was enough that
nobody in their right minds would buy
an Osborne 1 in the meantime, and the
company went bankrupt before it could
deliver.
Well, a similar thing happened to Nokia.
While waiting for those Windows-
based phones to show up, sales of
other smartphone products went down
dramatically. People who were loyal
to Nokia and wanted a smartphone
couldn’t get one so they either went to
Apple or (mostly) to Samsung.
Nokia Corporate Profits vs Smartphone
Unit Profits
Suddenly Nokia was losing money in
smartphones, something it had never
done before, and losing a lot of money
overall. And look at the date the trouble
started, almost exactly to the day when
the Windows Phone announcement
was made.
But coming from Microsoft, Elop
made another mistake. He brought in
sales and marketing executives from
Microsoft that he had faith in, but they
all made the same mistake given their
background. If you are selling PCs, then
you build a good one and people go to
Fry’s or Amazon or wherever and buy it.
Mobile is not like that. It is mediated by
the carriers. Even Apple, when it came
out with the iPhone, couldn’t just pile
up boxes in its own stores and sell them
with a line around the block, they had a
exclusive deal with AT&T since you can’t
sell a mobile phone without at least
one carrier signing on. In the US, this
is especially true since most handset
sales take place through the carrier’s
own stores. The carriers hate Microsoft.
They could look at the PC industry and
see that control of the industry was lost
to Microsoft (and Intel) and they were
not going to let that happen to them.
Prior to Elop and his team arriving,
Nokia had the best carrier relationships
in the world. Afterwards, not so much.
Nokia Smartphone Market Share
Collapse During Elop Strategy
Eventually, Microsoft purchased Nokia’s
handset business (leaving them with
networks and mapping) in 2013 (deal
closed in 2014) for $7.2B or so. But in
some ways that made things worse,
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