New-Tech Europe | September 2016 | Digital Edition

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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