Nokia: Why Stephen Elop Made The Correct Decision In Abandoning Symbian

| About: Nokia Corporation (NOK)


Nokia's (NYSE:NOK) CEO Stephen Elop has been criticized a lot since he declared that Nokia should support the Windows operating system rather than Symbian. Seeking Alpha author Reza H. Namavar is one of those critics. About a month ago, he wrote a very interesting article, in which he explained how Stephen Elop destroyed Nokia. But while his article had some interesting insight, it suffered from lack of objectivity, and as I will argue in this article, Nokia had no choice but to abandon Symbian.

Symbian wasn't doing well before the "Burning Memo"

Reza writes:

When Stephen Elop took the reins of Nokia , the company was flying high, contrary to what Americans may think. The company had 60% market share in smartphones, was selling over half a billion phones, and had potentially the next best thing in its pipeline.

There are two problems with the above quote. First of all, the 60% market share needs a source as Nokia in terms of operating systems had a 36% market share with Symbian, and I have no idea where he gets the 60% number from.

Secondly, Nokia wasn't flying high back in 2010. During my research for this article, I read several articles from early 2010 which discussed the problems Symbian faced, and several solutions were proposed. However, none of those articles claimed that Symbian was a sustainable operating system for Nokia.

The reason why Reza probably thought Nokia was doing well can be seen in the below graph. The graph (which appears in the middle of his article) illustrates how Nokia's smartphone sales increased in every single quarter until Elop "released" the "Burning Platform memo." Reza believes that Elop "killed off Symbian" by releasing the memo, in which he acknowledged that Symbian wasn't a very good operating system.

But the above graph is highly misleading. If we instead look at the below graph, we can clearly see that Symbian's market share had begun its decline before Elop released his Burning Platform memo. This indicates that Symbian wasn't "flying high" in 2010. Rather, Symbian sales increased because the size of the smartphone market grew at a very high rate.


When that is said, I agree that the Burning Platform memo was a mistake (whether it was intentionally leaked or not), but the effect is overstated, and Symbian was definitely a dying/burning platform. Sales would have declined regardless of what Elop had done.

The N9 isn't superior to the Lumia

Reza also argues that Nokia's decision to make Windows phones was a mistake since it already had spent resources developing the MeeGo OS. He tries to back up his claim by arguing that the MeeGo OS was pretty popular among customers since one of the MeeGo phones (the N9) "apparently" outsold Lumia phones during Q4 2011. He writes:

Nokia released one MeeGo phone before Elop killed it, the N9. In 2011, Nokia sold by many calculations close to or well over 1 million N9s. That one phone sold close to or more than the entire Windows Phone lineup.

But Reza's numbers are most likely wrong, as his source is using some rough assumptions. Since sales figures of the N9 (and Lumia as well) are relatively small, a wrong assumption can make a huge difference. Instead of using assumptions, why not just look at estimations from research firms such as Gartner and Canalys?

Canalys makes the following estimations regarding sales of N9 and Windows Phones during Q4 2011:

The total was helped by 1.2 million and 0.6 million shipments of its Windows Phone and MeeGo-based products respectively

Gartner doesn't make separate estimates for MeeGo, but instead it estimates that global sales of "other smartphones" totaled roughly 1.16 million. Given those numbers, I think it's unlikely that the N9 alone accounted for over 80% of "other smartphone" sales.

Also, according to Stephen Elop (if you trust him), Lumia Phones definitely outsold N9s.

Nokia's appstore wasn't that great

Below is another quote from Reza's article:

On top of this, at the time, the Nokia Ovi app store for Symbian had 40,000 apps available and one of the widest user bases of any platform (yes even more than Apple). Again, why would any competent executive decide to destroy a platform carefully built over the past five years

As Nokia was the market leader in the smartphone market in 2010, it doesn't surprise me to learn that Nokia Ovi had a lot of apps available. But this was the exact point by Elop's Burning memo; sales and the amount of apps available may still look decent, but the platform is burning and sales will eventually decline. The problem Nokia had with regards to its app-store was that it had many different versions of Symbian, and apps created for one set of devices often didn't work on other Symbian devices.

Furthermore, young developers weren't very enthusiastic about developing apps for Symbian. So while the 40,000 apps was a pretty decent number at that time, the future didn't look very bright for the app store.


As long as you know what you are looking for, you can always find statistics to back up your claim. In my opinion, the real decision Elop faced in 2010 was whether Nokia should join Android, stay a bit longer with Symbian or adopt Windows.

I think Stephen Elop considered Android as the "safe" option, but he also considered the OS as a system which primarily appealed to "tech-geeks" rather than the average user. The popularity of the Samsung Galaxy S3 somewhat disproved that theory and ,in hindsight, Nokia's share price would probably have been higher had they joined Android.

But it's always easy to make judgment in hindsight, and I think we should give Elop another 6-18 months, as it remains to be seen how Windows 8 will affect Lumia sales. Samsung (OTC:SSNLF) and HTC are joining the Windows ecosystem as well, and with Lumia as the flagship, all hope is not lost yet for Nokia.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.