Nokia: bad news without end

Like other CEOs of struggling companies, Stephen Elop has an unenviable job. He took over Nokia in 2010 when his predecessor had been unable to arrest the company’s decline.

Still, let’s not put too fine a point on it: Elop’s gamble to bet the company’s future on switching to the Windows Phone platform has been an absolute disaster.

In quarterly earnings announced Friday, the company lost €4 billion for the first 9 months of 2012 — nearly a billion of that in the 3rd quarter — versus €0.4 billion lost in the same period of 2011. This is not a one-time blip: here months ago, Nokia also lost money and announced massive layoffs.

Smartphone sales have been falling since 2010, but the major collapse came this year as the company phased out its Symbian handsets. AllAboutWindowsPhone.com (née AllAboutSymbian.com) published the damning chart:

Nokia has been more successful at killing Symbian — by starving new releases — than getting people to buy Windows Phones. In fact, as late as Q2, Nokia was still selling more Symbian than Windows phones.

The only uptick in smartphone sales in Q3 came because during Q3, the company has rebranded its S40 (now “Asha Touch”) as a “smartphone” platform. Whether or not the new classification is accurate, it doesn’t reduce in increased sales and highlights how far the company has fallen since its 2010 peak.

It seems like the assumptions behind the Windows bet were flawed. Nokia (or at least Elop) hoped that being the big fish in the Windows pond would be better than slugging it out in the Android market.

Yes, Nokia (at least for now) has the majority of WP sales, but that's not much. The assumption was that Windows Phone would be competitive with Android and iOS, but so far it isn’t. Q3 numbers won’t be out until next month, but in Q2 WP was #5 at 3.5%, after Android, iOS, BlackBerrry and Symbian. Meanwhile, the transition has been managed in such a way to kill its Symbian cash cow before the customers embraced its new products.

For years, Nokia was the world leader in both smartphones and handsets. Now Samsung is selling almost 3x as many Android smartphones as Nokia is selling for WP, Symbian and S40. If Nokia isn’t ready to compete with Samsung, maybe it should just close the handset business and focus on infrastructure.

More realistic is the advice from former Apple Europe president Jean-Louse Gasée: fire Elop and switch to Android. If Nokia’s board believed in accountability, they’d lower the axe after the end of the Christmas quarter, but more likely they’re going to limp along until they can no longer deny the reality of Elop’s failed platform strategy.

Symbian App Warehouse is now Symbian Horizon

In May, Symbian talked about plans to put together a wholesale app store for all its phones and operators. At the time, I suggested that the most descriptive name would be to call it “Symbian App Warehouse” but today it was announced as Symbian Horizon.

Perhaps for Brits the confusion with retailer Carphone Warehouse® (division of Best Buy) is too great, or perhaps it’s part of the forced silliness of Symbian Foundation as part of its efforts to act anti-corporate. Or perhaps they want a unique name (Horizon) and App Store (iPhone), App World (BlackBerry), Market (Android) and Marketplace (Windows Mobile) were already taken.

They’re still promising to do it free (rather than charge a nominal fee), which raises serious questions about how well a non-profit foundation can afford to scale up the evaluation and publishing process.

One way they can keep costs down is to not publish everything submitted. Rather than try to match Apple’s record of 65,000 apps in one year, Symbian sounds like it will be more selective.

Horizon is a publisher program similar to a book publisher or record label. Developers can submit their app or even an idea for an app that they will build. Symbian will select the best apps and help take them to market. We will sign the app, publish it to the App Stores and manage the transactions, all at no cost to the developers. It is a ‘code once, publish to many’ syndication service.

This approach will require more screening and will be subject to complaints about fairness, but (unlike the current Apple organization) the best apps won’t be lost in the clutter.

The devil is in the details, I think it’s a clever idea. Symbian Horizon will provide a common platform for developers (as Apple and Google and others do) while not trying to compete with or bypass the operator and handset maker stores. (Control is a big deal to Nokia, Vodafone, Orange and several other firms).

App stores: early or not at all?

In the past 10 months, the Apple app store has been a tremendous success, helping to fuel the success of the iPhone. Now all the other platforms owners (Google, Microsoft, RIM) and operators are planning their own app stores.

There are some dubious assumptions that both app store owners and app developers are making about app stores.

• Early apps were successful so we can be too.
• Early apps were successful but it’s too late for us.
• App stores made Apple a success and will make our platform a success too
• All we need is the “killer app” to make our platform a smash hit.

The answer is: Your mileage will vary.

All this is a preface to a discussion Wednesday in San Mateo by two Symbian Foundation executives — “catalyst” David Wood and interim marketing VP Ted Shelton — on their own planned app store.

The app store plan for Apple is pretty simple: Apple makes the phone, Apple makes the platform, and Apple strong-armed the carriers into providing (on-deck) access to App Store apps on any iPhone. For firms that license their OS (Google, Microsoft, Symbian) the story is quite a bit messier, since both the phone maker and the operator may want to get involved.

At the Nokia Developer Conference last month, Symbian Foundation head Lee Williams announced Symbian will be developing its own app store. It appears most analysts in the US missed the story, to the point that some (like my friend Matt Asay) are growing impatient.

Shelton and Wood talked about the app store Wednesday night to a small grouping of developers and analysts. The name is not settled, but the name I thought fit best was “Symbian App Warehouse.” Rather than sell to end users, they will certify applications and distribute them to all manner of application stores (e.g. Nokia Ovi) run by handset vendors, operators. The claim was that it would be without a fee, but I (like others) suspect in the long run they will need a minimal fee to cover operating costs; Mike Mace suggested 5-6%.

Symbian is shopping for lead ISVs: 5 developers in July, 100 in October for the 2009 Symbian Exchange and Exposition (“Come and SEE the future of mobile.”) The idea is to scale slowly to work out some of the kinks — not to impose some sort of limit as to the number of applications.

So the offer from Symbian was simple: do you want to be app # 45,678 at the Apple store or one of the first five at the Symbian store? As Shelton said, “the first movers have a greater opportunity to make money because there is a lower signal to noise ratio.” Palm has been making similar claims to prospective Pre developers (but with 0% share for its new platform vs. nearly 50% for Symbian).

Shelton had a point: ceteris paribus, later is worse. When I launched my Mac software company in July 1987 I had a far harder time getting carried by the channel and getting noticed than had Silicon Beach Software 3 years earlier. (I also had less money and less compelling applications). Of course, big companies with big budgets are better equipped to enter late than small self-funded (perhaps garage-dwelling) startups.

The iPhone App Store with its high visibility (and high download rate) would be very attractive if I had a narrow niche program, such as a virtual bass guitar. Unfortunately, PocketGuitar (99¢) already does that, and there are also other electronic guitars, several pianos, drum sets and even simulated sax, flute and bugle (blow on the mike). This is among more than 1300 applications listed under the “music” category.

So the Apple app market is heavily fragmented, and with a free online course being viewed by 100,000 developers, it will only get worse. Expectations for the Android Market mean that it is likely to head in the same direction. What should a developer do?

In the long run, developers will enter with one platform and then (if their app is hot) port to everything in sight; as with videogames, a platform will have only a temporary exclusive. The web-based apps (Facebook, MySpace, Google maps etc.) are already heading in this direction. A handful of companies (like Pangea Software on the iPhone) will figure out a way to come up with a string of hits.

In the short run, young developers need an open field market entry strategy: go where the competitors ain’t. Videogame developers have done this for more than a decade, just as companies choose geographic markets that are most promising. Once all the app stores have their initial launch ISVs, it will be up to developers to figure out a way to stand out of the clutter.

Symbian's planned app store

The Symbian Foundation has advertised for a new manager to run their app store:

The Symbian Foundation is looking for an Application Deployment Manager with a keen passion to drive a team in the creation of a superior Mobile Application Store. This will be a senior role within both the US office and Developer Services at The Symbian Foundation.

In this role, the Application Deployment Manager will work with the entire Symbian community (including device manufacturers and operators) to define, create and drive the deployment channels for Symbian Foundation’s Application Store.

It is interesting that the Symbian Foundation — substantially funded by Nokia — is creating a new app store while Nokia already is developing their own app store — due as the Ovi Store next month. The new store will support both S40 and Symbian S60, while presumably the Symbian store would only support S60.

Geeks hate ugly logos too

The Symbian Foundation has proudly announced its new logo, which is part of the whimsical branding that the foundation has been using for its appearances at Mobile World Congress (in Feb.) and CTIA (last week).

I find myself in an interesting position in commenting on the new branding.

My friend and co-author David Wood — the only Symbian executive to remain from beginning to end — is at the thick of it as the “Catalyst and Futurist” within the Symbian Foundation leadership team. David was (at one point) ecosystem manager for Symbian Ltd. Now that Symbian is open source, he is handing much of their community relations (although that job is far too big for one person to do alone).

Another friend and co-author, Mike Mace, posted an article Saturday about the Symbian logo entitled “The ugliest logo ever.” He worries that the logo will make it difficult to communicate Symbian compatibility if developers don’t want to display this logo. (I disagree with Mike slightly — I think the Symbian logo is uglier than Tux the penguin).

The money quote:

The bottom line is that any logo artless enough to please the open source community would be problematic as a marketing tool. As is often the case in marketing, you can't please all your audiences, so you can either be universally bland or you can optimize for one audience. I think the folks at Symbian decided that open source street cred is the thing they need most.

I don’t see it as either/or — but then Mike’s the mobile/PDA guy and I’m the open source guy.

While ugly might be necessary for free software movement types, it’s clearly a silly idea for the professional open source community. Geeks want to be associated with a winner, not with something that looks like a 2nd grade doodle.

There are many counter examples of projects that have both more professional looking logos and greater “open source street cred,” including

• Apache
• Eclipse
• Gnome
• Python

Even some of the older logos, like FreeBSD and Perl are superior to the Symbian Foundation look. Heck, I think my old company’s logo beats that of the MNC-funded nonprofit.

If Symbian were asking me, I’d quietly kill the heart. Keep it on the website, but deprecate any other use, and then retire it at the next major community milestone in Q3 or Q4.

To replace it, I’d design a tight new multi-color (or gradient) logo that evokes the Symbian spaceman, which is friendly, animate, unique and has a vaguely high-tech association. In the meantime, keep the spaceman on business cards and other collateral.

Of course, they’re not asking me. Instead, I’m guessing they’ll continue along, lost in branding space, until the person responsible for the logo leaves and internal politics allow the foundation to gracefully change course and pick something different.

It's the software, stupid!

In less than two years, Apple has gone from no cellphone to having a single phone model that accounts for a 8.2% of the 2008 smartphone market (10.7% in Q4) and 0.9% of the overall 2008 market. The secrets have been its pre-existing industry ties (including its brand, desktop software and iTunes Music Store), its skills as a systems integrator, and their ingenious strategy for creating a new ecosystem.

However, at its core Apple has succeeded because it’s a great software company. They have been a software company since their founding — when Steve Wozniak wrote software to control Apple’s first floppy disk drive. Apple has changed what consumers (and the industry) expects from a smartphone through their software.

Of the major players in the industry, only one or two have the prospect of also being great software companies. The rest should admit that they’re a failure and outsource software to outsiders, shifting from vertically integrated R&D to open innovation. This reminds me of my post-doc, when I studied how Apple dumped its below-average manufacturing capabilities and from then on used outsourcing.

Clearly Research in Motion (16.6% of smartphones, 1.9% overall) is a great software company. There are aspects of the BlackBerry software that I don’t care for, such as the browser. However, there is no question that they have both created a compelling user client and built a tremendously successful, rapidly growing business around systems integration with their industry-leading backend.

The market leader Nokia is the other possibility. From what I’ve seen, they’ve succeeded despite rather than because of their software. They have volume, market share (38.6%by Gartner’s 2008 estimate) , branding and solid hardware, but no one (other than the most hardened Nokia bigot) would say that their software interfaces are compelling or lead the industry in ease of use. It has been steadily losing smartphone market share to the BlackBerry and now iPhone.

The wild card is Symbian, the longtime OS supplier for its high-end S60 phones. Nokia spent €264 million (more than $400 million) to buy that portion of Symbian it didn’t own already, with the deal closing last November. With the entire solution in house, will the Nokia team respond effectively to the iPhone challenge by hiring outside usability experts? Or will they continue to do more of the same, with hardware and software features substituting for a compelling user experience?

There are promising signs. Even before Nokia began to shift from handsets to services, it spent heavily on software. It has a more coherent platform strategy than any of the other top five vendors, limiting itself to S40 and S60. It also was an early adopter of WebKit — Apple’s modernization of KDE’s HTML libraries — and thus have a browser experience that approaches Apple’s and Google’s.

For the rest of the industry, the only hope is outsourcing software. Without the sin of pride and “not invented here,” Taiwan’s HTC has been gaining market share rapidly (from a low base) by using operating systems from Microsoft and Android. The enterprise-centric Windows Mobile doesn’t have a compelling user experience, and Android is a long way from being the ne plus ultra of cellphone experience, but they are both better options than what HTC could have done on its own.

Sony Ericsson (7.6% in 2008) is hardly sinless here: with parents like Sony and Ericsson it would be impossible. However, their falling market share appears to have woken them up. They have been a longtime member of the Symbian alliance, they’ve added Windows Mobile to their portfolio, and they have announced plans to ship an Android phone.

Motorola seems like it is also admitting their software weaknesses and moving towards open innovation. Software has been Motorola’s downfall as they missed the shift from component-based functionality to software-based functionality and thus have been a non-entity in smartphones,.

However, things seem to be changing in the face of unrelenting bad news: the longtime #2 vendor has fallen to 5th place (below 7%) in the Q4 estimates. Led by a new outside co-CEO with no allegiance to the old way of doing things., they seem to realize they have to do something new. Two of their three platforms are now outside platforms: WIndows Mobile and Android, and if Android proliferates to the low-end (as predicted), they can probably drop their legacy P2K low-end platform.

This leaves the two big Korean players, Samsung and LG, who were #2 and #3 in global sales in the 4th quarter and accounted for 16.3% and 8.4% for the entire year. Even more so than Nokia, they have succeeded despite their software.

Samsung has an incoherent smartphone strategy that surpasses even Motorola, with shallow experiments in just about everything. They shipped the best Palm OS phone ever, my longtime favorite the i500. They have been a Symbian member but done little with it. The closest thing they’ve had to a smartphone hit has been the BlackJack, which feels like a surfboard to me but has won some praise. They were an early member of the Embedded Linux Consortium and has long shipped Linux smartphones to China. Meanwhile, they are a founding member of both the LiMo and Android consortia, and claim they’ll ship examples of each this year.

At this point, Samsung seems committed to using open innovation for their high-end phones, but they still use their own OS for the bulk of their phones. Will they see software as essential to the usability of their products or just a cost to be minimized in their low end phones?

Historically, in electronics LG has copied its larger longtime rival. LG has done Windows Mobile and Symbian phones, and someday will do Android too. Still, LG seems even less committed to first-class software for its phones, and thus unique devices (like the LG Lotus) languish for lack of connectivity with applications and other devices.

I have long been skeptical of the prediction that the fragmentation of cellphone operating systems must inevitably end — a prediction that most recently I heard in December at a Symbian event and yesterday at an Android event. I think a bigger impact on fragmentation — and industry usability — would be to end the “not invented here” mentality and mediocre in-house software solutions, switching to one of the major shared platforms like Symbian, Android, or even Windows Mobile.

Smartphone market share

2008 Q4 smartphone marketshare estimates from Gartner, and the folks at the Symbian Foundation are crowing about the results:

• Symbian 47.1%
• RIM (BlackBerry) 19.5%
• Windows Mobile: 12.4%
• Mac OS X (iPhone) 10.7%
• Palm OS 0.9%
• Other 1.1%

If I were working for Symbian (or Nokia), I’d be a little less sanguine. Compared to a year ago, Windows Mobile and Palm OS are unchanged, but RIM and Apple have risen from 14% to 30%.

Nokia still doesn’t have a US presence, and until they do, RIM and Apple will continue to clean up here. The question is, will its rivals make significant inroads into Nokia’s dominant smartphone market share in Europe and the Rest Of World.

Apple may have a superior product, but it has two key vulnerabilities. First, in most (but not all) of the world, it has limited distribution through its country exclusives. RIM and Nokia have been trying to get their products distributed as widely as possible.

Secondly, Apple has a single premium-priced product while its rivals have product lines at a wide range of price points. In a price-sensitive economy, even in the high-end smartphone segment one would expect demand to shift to less expensive models.

Apple will someday have a range of iPhone products, just as it has a range of laptops. It’s possible those products will be announced in June, but Apple could lose a lot of its hard-won share in the meantime.

Symbian going CDMA

In advance of this week’s GSM Mobile World Congress, Qualcomm has joined the Symbian Foundation (as have HP and MySpace). Qualcomm of course is interested in supporting CDMA around the world, in addition to its dual mode 3G processors.

Rumors of Symbian CDMA support date to at least 2004. Nokia had once sponsored an adaptation of Symbian S60 to work with CDMA – presumably to gain access to the US market and segment where it’s had a relatively weak presence.

Back in 2005, MobileTracker reported that Nokia had won FCC approval for the Nokia 6638:

The FCC has approved (FCC ID QMNRM-18) the Nokia 6638, the first CDMA Series 60 phone. Visually, it looks just like the Nokia 6630 with the addition of a [very long] antenna. Since the 6638 is a CDMA handset, Nokia is most likely aiming for a US release.

The phone was compatible with Verizon’s two CMDA bands, 800 MHz and 1.9 GHz.But the phone apparently never made it to the market.

Qualcomm has already joined the Android Foundation. Apparently Qualcomm has worked on a Windows Mobile prototype that works on Qualcomm chips, and its chips power several BlackBerry models that are dual cdma2000/W-CDMA, including the Storm and the 8830 world phone.

Now Qualcomm has committed resources to the major smartphone operating systems — pretty much everything outside the iPhone. From now on, we’ll see how many operators and manufacturers use Qualcomm chips for their Android, Symbian or Windows Mobile smartphones.

Symbian joins tool commoditization

As David Wood mentioned in his blog last Friday (during his visit to the US), the S60 development environment Carbide from Nokia is now available free. (It’s also mentioned by bloggers Lucian Tomuta and Simon Judge). Of course, Carbide is based on the open source Eclipse IDE.

Of course, having a free (as in beer) IDE is the bare minimum nowadays for getting ISV interest in a smartphone platform. Today you can get a free download of the IDE for the gPhone, the iPhone SDK or various BlackBerry JDEs. Microsoft apparently still sells Visual Studio and its various Windows Mobile add-ons.

What remains as an issue is the host platform. Symbian, Windows Mobile and BlackBerry require Windoze PC while Apple (natch) requires Mac OS X. Google and its Android work with either (or Linux).

While gcc from the FSF/Project GNU has been available for decades, it has been the combination of Eclipse and the Internet that really combined to commoditize development tools over the past decade: if programmers expect free tools or nothing, it doesn’t get much more commodity than that. It seems as though the real passing point came in February 2005, when Borland joined the Eclipse Foundation. After that, there was no turning back.

Nokia's new subsidiary

Largely lost in the announcements at Nokia World is this press release

Nokia acquires Symbian Limited
December 02, 2008

Espoo, Finland - Nokia today announced that it has completed its offer to acquire Symbian Limited. All conditions to Nokia's offer to acquire Symbian Limited have been satisfied and it has received valid acceptance of greater than 99.9% of the total Symbian shares that Nokia did not already own. Symbian is the software company that develops and licenses Symbian OS, the market-leading open operating system for mobile devices.

The closing of the offer is a fundamental step in the establishment of the Symbian Foundation, announced on June 24, 2008 by Nokia, together with AT&T, LG Electronics, Motorola, NTT DOCOMO, Samsung, Sony Ericsson, ST-NXP Wireless, Texas Instruments and Vodafone. More information about the planned foundation can be found at www.symbianfoundation.org.

All Symbian employees are planned to become Nokia employees on February 1, 2009.

After 10 years, Symbian is gone as an independent company. Although the acquisition marks an important milestone to the plan announced June 24, the more important milestone will be (as noted) when the employees get all shuffled around and dispersed to Nokia divisions after Feb. 1. The bulk of today’s Symbian Ltd. — software engineers and associated QA and management — will presumably end up somewhere within handset R&D.

One major unknown (and for now unknowable) is how loyal Symbian handset makers (beyond Nokia) remain. Nokia’s always had a difficult time balancing its internal goals against attracting competitors to share an ecosystem. There have also been a series of one-off problems that seemed to jinx the other participants: Motorola’s ongoing saga, Sony Ericsson’s withdrawal from much of the world, and the emphasis of the Korean vendors on cool hardware rather than usable software.

Something that will be resolved sooner is the nature of the Symbian Foundation. The most successful multi-firm open source consortium is the Eclipse Foundation, which lists 17 names on its staff page. By my guess, this is a small fraction of those portion of Symbian employees that today work with the Symbian ecosystem — the “few hundreds” mentioned in a June interview.

Presumably the goal of the foundation (as with any consortium) is to be supported by a broad base of members rather than getting most of its money from one or two highly motivated members. Nokia will pay for a thousand employees (in R&D) but will its partners (with their smaller smartphone sales) pay for hundreds of foundation employees?

At Nokia World, Symbian Foundation executive director (designate) Lee Williams gave one of the keynotes. Williams was the obvious candidate, as a member of the (former) Symbian board and the outgoing head of Nokia’s S60 software development (a distinction that will go away once S60 and Symbian are merged). He also had experience as a manager at Be Inc. (the Apple spinoff) before and after it was acquired by Palm.

Alas, the first 15 minutes of the talk is exceedingly platitudinous, as executives seem wont to do with a large captive audience.

The useful part of the talk is the last eight minutes, beginning with the phrase "In terms of the goals of the foundation at a very concrete and practical level …” The basic message (in R&D speak rather then MBA speak) is that Symbian OS will leverage its economies of scale and scope to maintain its lead over all rivals. He emphasized three major goals

• A complete platform in 2009, and with it a more compete platform — in terms of devices, third party applications and platform maturity — than any rival.
• Hardware agnostic. 7 chipsets, 5 baseband modems, plus other chipsets and components
• “A real ecosystem” of a wide range of firms, small and large, with no one party advantaged

Obviously paying the Symbian engineers to keep updating the OS will work as long as Nokia pays the bills, and there should be some great improvements of efficiency and effectiveness after Nokia removes the Symbian/S60 schism.

The long term question is outside participation and financial support for the Foundation outside Espoo. In theory, open source should attract third party participation but in practice it rarely works that way: when a single firm sponsors an open source community, usually other firms choose not to participate due to a lack of accessibility. The IP may be open but the production and/or governance are not.

IBM gained outside supporters when it created Eclipse it created the open source Eclipse Project, but today that remains unique. Symbian was already fairly open — certainly as open as many standard consortia — and for now it’s not clear whether Nokia owned (with a smaller open source foundation) will be more open (in governance) than the previous arrangement.

Nokia to release Symbian TD-SCDMA phone

TD-SCDMA is China’s homegrown claim to 3G mobile connectivity, an attempt to reduce royalty payments to foreign IP holders and force foreign telecom makers to license Chinese patents. The technology was originally developed by Siemens (back when they made cellphones) and Chinese scientists. There have long been questions about the radio technology and (thus far) user tests seem to bear that out.

Chinese ministry plans for TD-SCDMA have been on again and off again for years — and with them, the government’s willingness to license any 3G technology (since no other 3G technology would be allowed until TD-SCDMA could be deployed).

TheTD-SCDMA rollout was long planned to be showcased at the Olympics, and 20,000 phones were distributed to foreign visitors there.

In August the Chinese government confirmed that it was forcing allowing the country’s largest operator, China Mobile, to build a nationwide network, after trials in eight cities began in April. China Mobile had hoped to offer W-CDMA (with its breadth of manufacturers and economies of scale) or to provide dual coverage, but the Ministry of Industry and Information Technology (MIIT) said no.

With the country’s largest operator now stuck pledged to deploy TD-SCDMA, foreign makers of handsets and semiconductors will kowtow before the technology to demonstrate to MIIT their loyalty and avoid ceding the market to rivals.

On Wednesday afternoon in China, Nokia announced that not only will it support TD-SCDMA phones in China, but that it plans to release a phone next year using Symbian OS:

Nokia has started the development of a TD-SCDMA device based on S60 on Symbian OS, and plans to launch the product before the end of 2009.

Nokia's S60 TD-SCDMA device will enrich the TD-SCDMA device portfolio for Chinese consumers, and promote the development of TD-SCDMA in China.

Symbian is the world's leading smartphone platform, with over four million developers globally. By launching the S60-based TD-SCDMA device, Nokia combines Symbian's massive resources with the market opportunities provided by TD-SCDMA. There are currently over 10 000 third-party S60 on Symbian OS applications commercially available. The current S60 on Symbian OS applications will be compatible with S60-based TD-SCDMA devices, offering enriched experiences to China's TD-SCDMA users.

Thus far, S60 has been GSM (or W-CDMA only). It would appear that this will be the first time it’s been deployed on another radio interface (with a different SIM card architecture, signaling, etc. etc.). There were once plans announced to release a CDMA version but somehow the phone never got released — perhaps due to Qualcomm/Nokia IP hassles or Nokia’s withdrawal from the CDMA market.

There has been some speculation about Nokia’s commitment to S60, both with its Maemo tablets and the plans to open source Symbian. If such speculation were accurate, then the decision to use S60 in China would be surprising, given China is the world’s biggest market (and market penetration) for Linux phones (cf. Motorola.cn). Although I have no inside information, this implies that Nokia’s smartphone strategy for the next 18 months still remains firmly in the Symbian camp.

Nokia don't get no respect

On Tuesday my friend David Wood of Symbian published a passionate rebuttal to a Forbes article about how the iPhone has won the hearts and minds of Silicon Valley, while Nokia has failed.

The article by Brian Caulfield aptly portrays Nokia as the Rodney Dangerfield of the cell phone industry:

Welcome to the kangaroo court, Silicon Valley style. Nokia may sell a phone somewhere on this planet every 18 seconds, but among the digerati in the Valley, that doesn't get the Finnish handset giant much respect. Here, the natives are all toting iPhones and BlackBerrys and raving about new horizons on the mobile Web.
…
Tech blog impresario Michael Arrington [said] "I believe that Nokia and Symbian [the software that powers its smart phones] are irrelevant companies at this point," he pronounced from the stage.

Quite a verdict, considering that Nokia sells close to half of all smart phones worldwide (and 40% of all phones) and has 9,200 applications written for its phones. In early July it plunked down $410 million to buy the portion of Symbian it didn't already own.

Unlike David, I think the article is pretty fair — at least from an American standpoint, which is all it claims to be. The article notes Nokia’s global dominance and calls the verdict a “kangaroo court” (i.e. completely unfair).

However, the point of the article is Nokia’s failure to have much of an impact in North America, either with the tech industry or with consumers. Lord knows that it’s trying, by moving its CTO to Palo Alto. It’s also clear that Nokia as the most aggressive US university outreach program of any mobile phone company, with multi-man year efforts at Stanford, UCLA and MIT. But its handset share and mindshare are almost off the radar.

So it’s indisputable that Nokia’s (and with it Symbian) so far has lost in the US market, including the high-end smartphone market that they dominate in the global market. The iPhone and Blackberry are winners and Nokia is an also-ran. The question that the Europeans (and Japanese and Koreans) are asking is: so what?

The so what is that before the iPhone, efforts to kickstart the mobile Internet have largely failed, at least in the developed countries. Operators and manufacturers come up with all sorts of technologies and businesses but they’re not getting adopted.

The iPhone is getting used and is getting the mobile Internet adopted. It’s also winning the hearts and minds of third party software and services — both for the cool factor, but also because it has users that will try these technologies. I know both geeks and housewives that swear by it, just as the Mac is gaining share on Windows in the desktop.

Ease of use is a big deal, and Forbes gets it even if Nokia doesn’t. I will probably never own an iPhone until they end the Cingular exclusive. However, I do own a Nokia E65, which is a pretty good phone, a mediocre PDA and a useless web device. Overall, the S60 user interface lacks the consistency and regularity of the iPhone or even the early Palm PDAs.

The iPhone-like design is certainly the way forward in North America. It’s possible (but by no means certain) that it’s also the way forward in Europe and Asia.

In a standards war, we assume that winning third party developers feeds the positive feedback loop driven by network effects. However, winning third party developers is no guarantee of success. The Mac had cool apps in the 1980s and 1990s but later got crushed by Windows 95. In Symbian, the UIQ APIs had far more apps but S60 sells more than 80% of the Symbian phones (and thus UIQ is being phased out in favor of S60). Palm did a great job of winning ISVs which did nothing to solve its long-term slide in new products (and thus market share).

Most marketing problems have a basis in fact. Successful companies usually assume that marketing problems are because the market isn’t getting their message (NB: Microsoft, Intel) — but often it’s because they’re not listening to the market. Nokia (and its soon-to-be subsidiary Symbian) can continue to shoot at the messenger, or they can respond to the iPhone challenge by making their products easier to use and more compelling.

My hunch is that Apple has at least another year or two before Nokia gets its software act together. (And if Nokia doesn’t, then Microsoft, RIM, LG or Samsung will). So, as when it faced Windows 95, Apple better have something up its sleeve to further advance innovations when competitors catch up to its first mobile phone act.

Symbian's new ecosystem

Today Symbian officially announced its new ecosystem program, the Symbian Partner Network. The new program is available now and the old one goes away next month. Existing partners were briefed under NDA last April but the announcement was delayed until June (and then July) to allow time for the transition.

David Wood (author of DW2-0) was quoted this morning as explaining the new program to IDG. The main differences are that the program cost $1,500/year instead of $5,000, and that the service is increasingly automated (to improve scalability and reduce costs).

Obviously things have changed with the Nokia buyout, and it's not clear what role the program will play before or after the transition to Symbian Foundation (which will have its own similar or different program).

Still, the program may live longer than the predicted 6-9 months. Due to third party licensed code, Sun required much longer than anticipate to release OpenSolaris as open source, and among the 30 million lines of Symbian OS code similar problems are certainly lurking. So even with a Symbian Foundation, the disclosure of OS code may be covered under NDA for a little while longer.

There is also the question of whether Nokia really is in any hurry to release the code. Both Google’s open vaporware alliance and LiMo are today walled gardens rather than open source projects. And I don't know how much pressure there is for openness: LiMo has just swallowed its main European competition, LiPS, which agreed last month to be folded into LiMo.

Nokia also has thus far not understood open source software, at least at the level where decisions are made. There definitely are people at Symbian who do understand, and others in a position of influence who are trying to get it.

If/when Symbian eventually does go fully open source, it will be a very different world than today for the Symbian partner network. The current network is managed through contractual restrictions on access to source code — which are more generous than most proprietary software, but obviously less flexible than an open code repository like Apache or Eclipse.

Also, combining S60 with Symbian OS under one roof (and killing the other UIs) will bring together the entire Symbian stack, to compete directly with the integrated Windows and Linux stacks. Thus the platform (and the partner relationships) will look more like any other OS platform strategy (except of course for the open source part).

Who cares about mobile phone operating systems?

Obviously I’m interested in Tuesday’s announcement of Nokia’s plan to buy Symbian, convert all its employees to Symbian employees, and then release most (all?) of the technology as open source. Since I do research about operating systems strategy, open source and the mobile phone industry — and have been a consultant to Symbian — this is of great interest to me.

However, this month has been the most crazy one of my research career. I have worked on nine different papers this month, and four of them (three of them brand new) in the past 36 hours. So let me offer some quick observations and provide the real post later on. (For thoughtful analysis, see the postings by David Wood and Mike Mace.)

I want to engage one quick point. Jason Hiner of ZDNet asks whether the war of mobile phone operating systems between open source Symbian, Android (the gPhone), and Windows Mobile can ever be won — if the fragmentation will ever coelesce around a single standard:

They all seem to be assuming that the mobile phone market will mirror the computer market, which is dominated by a small handful of platforms: Windows, Mac OS X, and Linux. The reality is that there is likely to be a much larger diversity of platforms in the mobile world.

In addition to Android, Symbian, and Windows Mobile, there is now the iPhone with its OS X-based platform. And, beyond those four, there’s a plethora of phone makers that run their own proprietary operating systems on a variety of phones, sometimes with a customized OS for each phone.

It’s going to be very hard to put the genie back on the bottle in the phone market. All of these different types of phones are already out there and will be in use for years to come. Some may argue that the smartphone market does not have as many players as the general mobile market, but the lines are blurring between standard mobile phones and smartphones.

All of this means that counting on software platforms to deliver mobile applications and services to a large number of users is probably not going to be very practical. There’s too much platform fragmentation and diversity, and that’s unlikely to change.

I am willing to agree that there will never be a single winner — even Microsoft admits that the fluke of the Wintel monopoly will not be repeated. But that doesn’t mean the contest is not worth fighting: there will be winners and losers in the mobile OS platform wars, and the financial returns are always better for the winners.

Meanwhile Oh Malik (in his excellent posting) shows more understanding of the mobile phone industry dynamics by handicapping the likely survivors of this war. In first place is LiMo (which Hiner ignored) at 60%, while Symbian and iPhone are tied for second at 50%.

Malik also notes that platform standardization is really only a factor on high-end smartphones which account for 10% of the market, while low-end phones are done as do-it-yourself proprietary operating systems. So there is a lot of growth left for multi-device, multi-generational standards for the vast majority of mobile phones that don’t use one of the major technologies. Nokia shifting S40 to S60 (once it’s in-house) is the most immediate opportunity. The other big opportunity is for Motorola to resolve its fragmented platform strategy — between LiMo, gPhone, Symbian and Windows — and put all its weight behind a single technology.

OK, so I’m a platform guy, and I love platform wars. Even so, I think the relative success (and survival) of these various platforms will influence the market share of handset makers and also how quickly users make regular use of the mobile Internet.

Symbian's second 10 years

My friend, client and soon to be co-author David Wood has started a blog. (I warned David about blogging as a productivity destroyer, but he’s gone ahead anyway).

The blog is not one in his official capacity as executive VP for research at Symbian, but obviously it’s influenced by his work as the only remaining Symbian executive founder (and many years with Psion before that). One of his first articles (posted Monday) is entitled “Anticipating the next ten years of smartphone innovation.”

David reminisces a little about the first 10 years (Symbian was founded in June 1998) but it’s not primarily about that. The company has a slick official 10th birthday site. I half expected Andrew Orlowski of the The Register to a Symbian retrospective, but I guess he burned out with last year’s long feature on Psion’s last great product, the Series 5 PDA.

Instead — as the lead researcher of an IT company should do — David looks forward. Here are some key smartphone trends he predicts:

• Component prices will continue to fall.
• Quality, performance, and robustness will continue to improve.
• Users will discover that phones can do more than just phone calls and SMS.
• The smartphone ecosystem will to innovate in new services
• Even cooler smartphones will come out

I’m not going to try to summarize the entire posting, because it’s easy enough to read here.

David’s blog is added to the blogroll on the right: a list of people I know personally whose occasional postings I find insightful. So far, I have decided as a matter of policy to omit those who seem to be full-time bloggers — if for no other reason that competing with them would cause me to spend even more time blogging.

Reading Symbian tea leaves

Again for the iPhone paper, I’m trying to better understand the details of 2007 smartphone sales beyond what Canalys provided. This afternoon I tried to figure out Windows Mobile and gave up, because of contradictions between Microsoft’s data and Canalys’ data.

So this evening, I looked at Symbian sales, which Canalys said accounted for 67% of global smartphone sales in 2006 and 67% in 2007. I have friends at Symbian but had no help from them on this endeavor.

Symbian has three user interfaces: S60 (owned by Nokia), UIQ (owned by Sony Ericsson and Motorola) and MOAP (owned by NTT DoCoMo and used only in Japan). All of the UIs are licensed to other vendors, but everyone knows that S60 phones from Nokia are the bulk of Symbian’s revenues.

Canalys provided two hard numbers: Symbian OS is 77M of the 112M smartphones (excludes wireless handhelds) shipped in 2007, and Nokia accounts for 60.5M devices (which is S60 smartphones plus a few Maemo tablets). Beyond that I had to dig.

Symbian issues press releases and quarterly fast facts now and again, so it was pretty easy to estimate the MOAP sales as 14.2M for 2007. There’s no hard numbers for S60, so I used the Nokia sales as a proxy (understating the S60 total), and then assumed the rest was UIQ (perhaps overstating). These are my estimates:

Platform	Q4 Sales	Share	2007 Sales	Share
S60	18.8M	81.5%	60.5M	78.5%
MOAP	3.8M	16.3%	14.2M	18.5%
UIQ	0.5M	2.2%	2.3M	3.0%
Total	23.1M		77.1M

Then I went to the Symbian website and counted the number of current, forthcoming and discontinued phone models by vendor and UI. The Japanese “FOMA” models require a little digging since they are branded by DoCoMo; however, everyone knows who the vendor is because the first letter of the model number gives it away, like “F” for Fujistu.

This is my tally of the models listed by Symbian:

UI	Vendor	Coming	Current	Discontinued	Total
S60	Nokia	5	36	11	52
	Samsung	1	6		7
	LG	1	1		2
	Panasonic		1	1	2
	Lenovo		1		1
	Siemens			1	1
MOAP	Fujitsu		19	8	27
	Mitsubishi		18	1	19
	Sharp		11		11
	Sony Ericsson		8		8
	Motorola		1		1
UIQ	Sony Ericsson		8	2	10
	Motorola/Sendo		3	2	5
	Arima			1	1
	Grand Total	2	77	16	95

In the past year, the main change in vendor participation seems to be the new Motorola UIQ phones after they bought Sendo. It‘s hard to tell how they are doing — or how the Samsung S60 phones are doing.

However, it appears that Sony Ericsson sold about 41 million Walkman phones in 2007 while UIQ phones were at most about 2.3 million. That implies that SE is less committed to Symbian as a multimedia platform than Nokia is — or perhaps SE is mainly targeting low-end MP3 players while Nokia is emphasizing multimedia more.

Sony Ericsson toys with the dark side

In conjunction with 3GSM (aka GSM World Congress aka Mobile World Congress), Microsoft announced Sunday that it has finally won Sony Ericsson over to its camp. Of course, Sony Ericsson still retains a significant financial stake in Symbian OS as the owner of UIQ Technology.

This got me to wondering about all the side bets being made by the major cell phone vendors. Below are the platform choices by the top 2007 mobile phone vendors; X is a major bet and † is something that (for now) looks like a side or limited bet.

Vendor	Share	Symbian	Windows	Linux
Nokia	38%	X		†
Samsung	14%	X		†
Motorola	14%	†	†	X
Sony Ericsson	9%	X	†
LG	7%	†		†

The 110 current Symbian cellphones far exceeds that of the 39 Windows Mobile phones. Linux can be used for smartphones and feature phones, but at least among smartphones the market share is (roughly)

• 62% Symbian S60 (inferring from Nokia smartphone sales)
• 15% Symbian UIQ and MOAP
• 13% Windows
• 11% RIM
• 4% Linux (estimated from 2006, 2007 Canalys data)
• 3% iPhone
• 2% other including Palm, proprietary OS

In contrasting the willingness of European vendors to partner with the Evil Empire, it would seem that Sony Ericsson wants to sell smartphones in North America and Nokia doesn’t.

Of the side bets, rumors have it that Motorola will make more Symbian UIQ phones using its acquisition of Sendo. And of course all the efforts to use Linux as a mobile phone platform are still early, and all of the vendors could have major Linux commitments if the OVA or LiMo catches on.

Apple: We're #3!

On Tuesday, Canalys released its estimate that 115 million “smart devices” were shipped in 2007, where such devices are defined as “smart phones and wireless handhelds”; as best I can tell the numbers are 112 million vs. 3 million. (It’s hard to tell how many of the latter are Palm PDAs, Windows PDAs or an iPod Touch).

Canalys is coy about full year results, but the stats for Q4 allow comparison of the overall handset market (released last month by IDC) and the “smart device” market. Making some reasonable assumptions (in italics)

Vendor	All handsets		Smart Devices
Nokia	133.5M	40.0%	18.8M	53.0%
Samsung	46.3M	13.9%
Motorola	40.9M	12.2%	2.3M	6.5%
Sony Ericcsson	30.8M	9.2%
LG	23.7M	7.1%
RIM	4.0M	1.2%	4.0M	11.3%
Apple	2.3M	0.7%	2.3M	6.5%
Others	52.5M	15.7%	8.1M	22.8%
Total	334.0M	100.0%	35.5M	100.0%

Of the “other” smartphones, about half are Windows mobile. Apple is tied for third with Motorola on smartphones, but of course Motorola sells 20x as many featurephones.

Other smartphone stats from Canalys:

• Worldwide, the Q4 operating system share is 65% Symbian, 12% Windows, 11% RIM, 6.5% iPhone and about 5% Linux. Of the Symbian, 82% is Nokia; presumably most of the rest of Sony Ericsson.
• In the US, Q4 device market share was RIM (Blackberry) 41%, iPhone 28%, Windows 21%, Palm 9% (Note the overlap of Palm Windows devices).

Also on Tuesday Apple, introduced new iPhone and iPhone Lite models:

Model	8gb	16gb	32gb
iPod Touch	$299	$399	$499
iPhone	$399†	$499†

† plus a two-year contract unless you figure out how to unlock the iPhone

Apple is certainly holding off on cutting prices on either model, which presumably awaits the 3G iPhone in June or July.

Who's ready for the mobile web?

In January, Mike Mace and I both had an intuitive feel that the iPhone was going to change the mobile phone industry. Four months after the first iPhone shipped, I think our intuition has been born out to a greater or lesser degree.

Aided by very satisfied customers and the consequential word of mouth, Apple sold nearly 1.4 million iPhones in the first 94 days. This is AT&T's top selling phone (at 13%) and 4th overall in the US. Of course, Apple is not #4 overall since most vendors sell dozens of models.

In particular, one thing came through loud and clear last week at the CTIA Wireless IT conference (the premier mobile web conference in the US). Admirers and rivals admitted that Apple finally did a mobile browser right, and that accounts for much of its success (an advantage emphasized by their current advertising).

Web browsing solves the fragmentation of the US market, and provides a least common denominator between desktop and cellphone. If all app developers, content providers, cellular operators and mobile phone makers all agreed to use the web -- based on W3C and IETF open standards -- then the mobile Internet couldn't be any more open than that. This openness and ubiquity would eanble all sort of positive network effects to spur adoption, and leverage off the installed base of the wired Internet. Another factor for openness is that Apple's iPhone browser is based on WebKit, the open source project Apple created (from KHTML), which in turn reduces the barriers to imitation for its web browser. (In case web apps aren't enough, this month Apple adddressed the criticism about a "closed" iPhone by announcing it will release formal software development kit for native apps in February.)

If Apple establishes the browser as the key enabler of the mobiler Internet, how well situated are the major handset vendor? Based on Q3 2007 sales estimates, here's the list and my prediction:

• Nokia (38.6%). It ships more smartphones than anyone, owns S60 and the largest share of Symbian Ltd. It has been taking more risks with software than any other cell phone company, including its Maemo web tablet platform. Even if we worried about Nokia falling behind, they are already ready to match Apple by porting WebKit to S60.
• Samsung (14.7%). Has a wide range of software strategies, including Symbian S60, Windows Mobile and its own OS. Historically the Koreans don't grok software, but S60 will have a good browser and Windows Mobile could too (assuming Mobile IE is a fully compatible browser) -- so it may depend on the mix of software platforms they are selling.
• Motorola (12.9%). Like Samsung, Motorola has a mix of platforms: Windows Mobile, Symbian UIQ and its own solution (now shifting towards mobile Linux). Although in principle Linux should have a great browser, Motorola once said that the browser choice was up to the carrier.
• Sony Ericsson (9.0%). SE's smartphone strategy is tied to UIQ -- a Symbian OS layer that it used to own but is now going to share with Motorola. Since UIQ 3.0, UIQ has depended on the Opera browser, which has yet to inspire the enthusiasm of WebKit.

Any others? I think HTC will do well, because it thus far has made its impact with Windows Mobile, but now also has the prospect of the Google phone. On the other hand, while RIM has always understood software and has done well with e-mail, it is not known for its browsers.

Of course, this is a very US-centric view. For Europe, I expect browsers to be important too, but the smartphone market is much less fragmented than the US and much of the market can be reached by writing a native S60 application. Meanwhile, in Japan, the mobile Internet (as Jeff Funk as noted) is whatever DoCoMo says it is.

The rewards of platform control

This semester, my MBA students have become familiar with Symbian and its relationship with Nokia. Although little known on this side of the pond, Symbian is the leading supplier of operating systems for those high-end cellphones that are most driving development and adoption of the mobile Web.

At Monday's Smartphone Summit, Symbian's Executive VP of Research David Wood delivered an important keynote on Symbian's plans and expectations for competing with mobile Linux and other platform rivals. I'm sorry I couldn't hear my friend talk, but this fall I'm spending Monday and Wednesday morning's imbuing 20-somethings with the tools and techniques of competitive strategy. Fortunately, the talk was covered by one of the two main US cellphone trade journals, RCR News.

Seeing the dead tree version of RCR News was one of the highlights of my visit to the CTIA conference, as it brought back memories of my subscription to RCR 12-13 years ago when I started doing research on the cellphone industry. Reading the articles from the RCR weekly (and show daily), it was interesting to note that the "reporters" were quite opinionated (if not caustic) in their interpreting of the news. The coverage of David's talk by Phil Carson was no exception:

With no authoritative, tech-savvy rebuttals to slow Wood’s steamroller, the all-roads-lead-to-Symbian view may have carried the day for the uninitiated.

To be fair, Wood’s data on Symbian’s current market dominance may be irrefutable—even if his rhetoric would have you believe that market trends spell nothing but doom for competitors. Smartphone sales now outstrip laptops, seven of 10 smartphones run Symbian and the latter has successfully defended its market share against rivals for two years. One can understand how Symbian’s most fervid evangelist would declare: Game over!

Except that the market clearly demands diversity and the forces arrayed to compete with Symbian, particularly in the United States, are among the toughest competitors in the business. It might have been more entertaining if representatives for those camps suddenly popped out on stage to rebut some of Wood’s rhetoric—a sort of OS cage match. But, of course, that goes with the territory here at CTIA I.T. & Entertainment 2007.

Symbian's high market share worldwide has not translated (yet) into success in North America. Certainly Carson is right that Symbian faces more competition here, with the onetime dominance of Palm that's now been supplanted by RIM. Of course, the real problem is that carrier control determines which mobile phone technologies get in customer's hands, and for a GSM-based technology (like the Symbian-enabled Nokia phones), access to the US market means cooperation from AT&T, which thus far has not been forthcoming.

In between the sarcasm, Phil did seem (somewhat) persuaded by Wood's belief in the future of convergence mobile phones:

The smartphone, Wood predicted, will become life’s remote control, handling home functions and financial matters as well as stodgy old communications.

The upshot, according to Wood, is that smartphones are becoming a matter of lifestyle.

“You don’t have to be smart to use them and the device makes you smart,” Wood said.

And with 25% of all network operator revenue derived from smartphones that run Symbian—Wood’s figures, not ours—then Symbian is destined to rule!