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Spillikins #64. Nokia N8 companys flagship or disappointment of the year?

The week turned out to be muddled, but rich on events. Just as I went on a business trip and lost control over the events, our site was hacked and thousands of pages were infected by Trojans. After six hours the virus was beaten, the site was deleted from Googles block-list and the hole was found and closed. The whole team and me personally are apologizing for the situation and hope to avoid it in future, although no one can feel safe from such attacks, which is obviously not a good thing. Right now we are working at minimizing the probability of such situations in future. Thanks for your patience, understanding and support. Now, let us turn from this sad topic to traditional issues of Spillikins.

Content:

  1. Nokia N8 companys flagship for the next two quarters or where is Nokia going?
  2. Quarter statistics Sony Ericsson
  3. Quarter statistics Nokia
  4. Apple iPhone HD new flagship from Apple

Nokia N8 companys flagship for the next two quarters or where is Nokia going?

For me the question what is happening with Nokia remains open. Why instead of producing cool devices the company gives priority to services, while the main concept is still to sell handsets. Unfortunately, the company like Nokia lacks flexibility and cannot change its business processes quickly. Thus we are facing the situation when the company leaves innovations for those ready to invest into R&D, to risk, by releasing solutions already proved. Excellent sales of Nokia N97 turned out to be a great failure in terms of the device perception and in this market segment the company lost many loyal customers, who decided to flip over to BlackBerry, Apple iPhone or even Samsung next time. Since Nokia N95 the company hasnt had a sure-fire flagship attracting large audience, but it needs such a device greatly to improve its affairs. And there we have a total confusion. The keypad-lacking Maemo6 was to be the flagship of 2010, but as it turned into MeeGo the idea was abandoned, so the companys only hope is Vasco (N8) that is both the first device on Symbian^3 and Nokias flagship. It will be marketed even more heavily then Nokia N97 as it is this product the company counts on.

All discussions with Nokia people revealed one and the same idea that is apparently rooted in the company. It is a software component rather than a hardware one that will play the major role and give the new incentive to Nokias development, refresh the way the company is perceived by consumers. That is why I was looking forward to this product ignoring early versions that in terms of interface were almost similar to the S60 5th edition with a number of functions varying. As weeks passed this "updated" interface turned out to be a breakthrough for Nokia. To call it disappointment is to say nothing. The company has just failed to make a spurt in order to turn the tide in its favor. Now Nokia says that the spurt should be made in the first two quarters of 2011. Promises are a good thing but Id rather look at real products instead of listening to how interesting everything will be. Later about it.

Lets take a look at Nokia N8 and try to assess the capabilities of the device. Well, as for appearance, you can see everything on the pictures, the display is covered with glass, multi-touch support is present, but it cannot be regarded as a great advantage as this feature is now standard for many Android-based phones. As for the impression from the display, it is totally similar to that of Nokia X6. It takes you some time to get used to text input.

The phone size as well as build quality is fine although the dust is gathered under the screen like with the X6. The rear hosts a 12 MP camera with flash.

The camera takes good quality pictures, a bit better than those taken with Sony Ericsson Satio, but it is not a revolution. Video is captured in HD (720p). Unfortunately there are no advantages over other manufacturers models. Not taking camera hardware into consideration the model is not different from other models on various platforms. It is rather quick if the phone lacks content. Should you saturate the memory with various apps, photos, videos, the standard sluggishness occurs. There is no striking difference from other S60-based products. Comparing with Sony Ericsson Vivaz, for instance, the N8 doesnt look faster which is rather sad. Certainly when the model is launched we will be told how wonderful everything is hardware-wise. But I see the same picture on several prototypes of different degree of readiness.

One of the unusual traits of this device is HDMI output. On the outside it looks like a regular HDMI port, but in fact it is smaller, so we failed to use a standard cable. I do not see a reason for such a solution, it does not seem logical.

As for the interface I have only one thing to say. The only thing I have to do here is to share my thoughts. In short it does not appeal to me. There is no development that we see in Android, iPhone OS, and Bada from Samsung. Everything is exactly the same as it was before with the same subtle changes, but functionality changed very little. It has been brushed, washed, but not polished. Nokia has made a kind of cosmetic customization that should appeal to users, but it doesnt. I have a feeling that Nokia had settled in some fairyland, where users buy tons of the company products. However, it is not so. Nokia N8 as the flagship looks not just pale, it is something vague. The company will attract the audience with the help of advertising and then start selling the product and it will sell it only to push more people away from the brand. I have an impression that Nokia has agents from another vendor working for it, sabotaging and deliberately destroying Nokia brand. Otherwise it is impossible to explain what is happening.

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Quarter statistics Sony Ericsson

In the last Spillikins there was not enough space to talk about Sony Ericsson quarterly results, so having highlighted the main topic we are moving on to the elimination of debt. Well, many of us perceived the news that Sony Ericsson returned to profitability for first time in 6 quarters as something good and positive. But let's look at the price the company had to pay for such a victory as it was very expensive indeed. In the 4th quarter of 2009 Sony Ericsson was able to sell through wholesale channels 14.6 million phones, in the first quarter of 2009 - 14.5 million phones, while in the first quarter of 2010 - only 10.5 million phones. What is the reason for this failure? The explanation lies in the fact that the company has become a niche player, whose products are now ignored by major global carriers. Sales fall by 28 percent is caused by carriers do not regarding the products from Sony Ericsson as competitive relative to other brands, therefore the sales dropped. This is not a deliberate step by Sony Ericsson, but rather a forced one. BMC factory can produce the existing models in large quantities, and larger lots mean higher profitability, but this does not happen as there is no demand for the products.

And here we need to ask the question: what helped the company to reduce its costs so significantly? Dismissal of employees, reducing R&D costs to the minimum. You need a proof? Here we go: the company buys an ODM phone and calls it a musical solution, placing it in the Walkman lineup. The manufacturer does not add a 3.5 mm jack, but announces support of FLAC format, which means that device is for the music lovers. In theory. In practice, everything turned out to be rather sad. The audio quality this model can offer lies below any criticism and is inferior to the Sony Ericssons own old A200 platform. It is a way all Chinese manufacturers follow by adding to their own phones flashy labels of various technologies, but do not care if these "technologies" are supported somehow.

The main goal for the company is to keep their sales at a 10.5 - 11 million units per quarter level in 2010. At the same time, it should maintain the profitability of operations. This is possible only if the competition for Android-phones will not sharpen suddenly. The company already went down to a whole new level and it will not look like a winner either with the highest prices for their products or with very niche offers. Look at the results of the quarter and see that the average cost of the company phone has grown to 134 Euros, which is a record for a market that does not speak about excellent results, but rather indicates the absence of budget models, as well as devices belonging to medium price-bracket. What stands behind the companys gradual withdrawal from the majority of market segments? The results of the first quarter suggest that Sony Ericsson has totally become the niche player. By early 2011 it will either reverse this negative trend, or continue its way down.

Q12009 Q4 2009 Q1 2010
Number of units shipped (million) 14.5 14.6 10.5
Sales (Euro m.) 1,736 1,750 1,405
Gross margin (%) 8% 23% 31%
Operating income (Euro m.) -369 -181 20
Operating margin (%) -21% -10% 1%
Restructuring charges (Euro m.) 12 150 3
Operating income excl. restructuring charges (Euro m.) -357 -32 23
Operating margin excl. restructuring charges (%) -21% -2% 2%
Income before taxes (IBT) (Euro m.) -370 -190 18
IBT excl. restructuring charges (Euro m.) -358 -40 21
Net income (Euro m.) -293 -167 21
Average selling price (Euro) 120 120 134

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Quarter statistics Nokia

The results of the first quarter are excellent given that the company continues to increase sales of budget models, and the pressure on it in top price-bracket by all competitors is increased. In this segment Nokia has no adequate answer to propositions from other companies and taking into account that a number of competing models will be released in the near future the situation will worsen. The only response from Nokia is price dumping, lowering prices on their phones in top segment. The company needs to hold on until 2011 when there will be no delays in R&D. Compared with the first quarter of 2009 all market indicators excluding average price went up, which is positive news. Negative news are related to the fact that mainly the company sells its budget models, gradually its influence on the high end market disappears. Here other companies are becoming major players. Just look at the table with the results, they dont need any comments.

Non-IFRS first quarter 2010 results 1
EUR million Q1/2010 Q1/2009 YoY Change Q4/2009 QoQ Change
Net sales 9 522 9 276 3% 11 988 -21%
Devices & Services 6 663 6 173 8% 8 179 -19%
NAVTEQ 189 134 41% 225 -16%
Nokia Siemens Networks 2 718 2 990 -9% 3 625 -25%
Operating profit 820 514 60% 1 473 -44%
Devices & Services 804 642 25% 1257 -36%
NAVTEQ 41 5 720% 54 -24%
Nokia Siemens Networks 15 -122   201 -93%
Operating margin 8.6% 5.5%   12.3%  
Devices & Services 12.1% 10.4%   15.4%  
NAVTEQ 21.7% 3.7%   24.0%  
Nokia Siemens Networks 0.6% -4.1%   5.5%  
EPS, EUR Diluted 0.14 0.10 40% 0.25 -44%
  Reported first quarter 2010 results
EUR million Q1/2010 Q1/2009 YoY Change Q4/2009 QoQ Change
Net sales 9 522 9 274 3% 11 988 -21%
Devices & Services 6 663 6 173 8% 8 179 -19%
NAVTEQ 189 132 43% 225 -16%
Nokia Siemens Networks 2 718 2 990 -9% 3 625 -25%
Operating profit 488 55 787% 1 141 -57%
Devices & Services 831 547 52% 1 219 -32%
NAVTEQ -77 -120   -56  
Nokia Siemens Networks -226 -361   17  
Operating margin 5.1% 0.6%   9.5%  
Devices & Services 12.5% 8.9%   14.9%  
NAVTEQ -40.7% -90.9%   -24.9%  
Nokia Siemens Networks -8.3% -12.1%   0.5%  
EPS, EUR Diluted 0.09 0.03 200% 0.26 -65%

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Apple iPhone HD new flagship from Apple

Just as Apple iPhone OS 4.0 was shown, this month presented its newest intrigue - on Engadget three pictures of the future phone from Apple were published and then Gizmodo burst with a series of photographs and description of the phone. The world was split between those who saw Apples arm in this product, and those who asserted that never ever under any circumstances, "it" cannot be an Apple-branded handset. The first ones proved to be right; Apple demanded that Gizmodo return its property, namely the prototype that one of the company employees lost in the bar. Conspiracy theories assuming that it is a controlled leak do not hold any water because it does not give company anything. Apple has never been keen on studying demand in such a way and forums discussions are unlikely to be relevant for production forecasting, especially considering the deficit of the current iPhone 3GS and company inability to keep up with the demand.

So what has changed in next? The main change is that just like in iPad the company used a microSIM which will limit grey market exports from American market and make it an operator-targeted product. Flash was added to the camera, but there is no information about camera resolution although optics are known to have changed. The situation with display remains unknown, the diagonal undergone no alterations but the resolution is likely to go up.

The company add second microphone to improve speech quality which is standard for modern devices. The battery is more capacitive. In short that is all.

The trump card of the new iPhone is not a new hardware, it evolved - revolutions are not necessary here. The main advantage is the software that in 4.0 version has been improved significantly and now is at the level of top-notch devices from other companies. There is more animation, it is faster, better quality, plus various unique Apple traits and the presence of a vast number of apps speak in products favor. The forth Apple-branded phone promises to become the most widely sold product of the company. It is this model that can be regarded as a threat to Nokia and Samsung. The company sticks to the strategy of releasing single products and although it has something in its sleeve to enlarge the line-up, it doesnt think it is necessary to undertake such a step during the current model deficit.

Many things have been left behind, but we will return to them during the week and discuss everything in detail. I wish you energy for good deeds and positive mood for the whole week.

Do you want to talk about this? Please, go to our Forum and let your opinion to be known to the author and everybody else.

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Eldar Murtazin (eldar@mobile-review.com)
Twitter    Livejournal

Published — 28 April 2010

Have something to add?! Write us... eldar@mobile-review.com

 

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