Nokia

Yesterday I made my predictions on Nokia's new platform strategy. They should  be treated as pure guesswork, but they are informed guesses. I based them on public information.

That information comes in the form of statements from Nokia's CEO at the earnings call. I made a table of all the statements that dealt with platform decisions and my interpretations of those statements.

You may do your own interpretation, but to me there is significant evidence here to support my predictions.

What Elop Said	My interpretation
In certain markets where there’s a greater preponderance of competing platform devices, we have some competitiveness problems	We have problems in the US
Broadly the conversation about operating system and positioning of relative operating systems in different places is something that we'll reserve for the February 11th meeting,	Different markets require different operating systems
The general comment I’d like to make though is that in today’s world it is the case that given the different price performance characteristics of different chipsets, we get into situations, where the best experiences are not necessarily delivered by systems that are capable of delivering the highest end experiences. We have to be very mindful at what level of the price curve we deliver what type of device with what operating system.	Different price points require different operating systems
When I think about geographies, the area, I've mentioned this indirectly during my comments, but I'll be more precise in answering your question and that is clearly, there is a pattern of disappointments in the United States. A pattern there where efforts have been made, competitiveness, challenges exist and we very much need to address those	We have problems in the US. We're going to address these.
That's why I characterize very clearly in the framework for the decision making ahead, that whatever the strategy is that we outline on February 11th, we very clearly will be ensuring that it gives us the opportunity to reopen doors in markets such as the US and some others where we have not recently been present	We are going to enter the US with this platform
With respect to the question of ecosystems and so forth, it's important to note, in my opening comments, I referenced the fact that there are today different ecosystems and different patterns at play	Different OS for different markets
If you like the high-end ecosystems where there is particular rate of momentum and share gain taking place. At the same time, the dynamics at the very low end of market which itself is an ecosystem of sorts, is very different with very different demands and expectations	High end and low end require different OS
I'll just offer that observation that today broadly in the world without any specific comment on us or our competitors, there are multiple ecosystem patterns that need to be considered	More on the need for multiple OS
I'd also point out that very critical in whatever combination of ecosystem or ecosystems or whatever our strategy outlines, the need to maintain sustainable differentiation between ecosystems and within the ecosystem relative to our competitors in that ecosystem is a top priority. In everything we consider, that’s something that will be very much on our mind.	What we chose gives us some degree of differentiation--It's possible concessions were negotiated
With respect to comparisons to other ecosystem shifts and things like that, the real thing that one must focus on is the quality of products in the market, the momentum that one already has	Symbian is not going to disappear
As we’ve described the Symbian momentum that we have today; a consideration of shift of ecosystem, certainly you have to consider that potential of market share changes	Symbian will lose share
With respect to the ecosystem comment, without getting into specifics of different options and things like that in detail, what I will say is that the word catalyze is to imply that there is a wide variety of participants in our world, and that includes competitors, it includes operators, other technology firms and so forth who in many respects have a common interest relative to the potential strength of other ecosystems and how they may develop over time	Partner is a tech firm that has common interest -- i.e. market entry
The catalyst of an ecosystem could be considered as making sure the right conditions are formed in the right companies, work in such a way that alternatives emerge in a marketplace that may not exist today	Looking at growing the market for the partner-- Microsoft
We made a decision to not proceed as people have thought we would proceed	This is not going to be business as usual
You'll see that pattern of decision making from us in terms of being very crisp about what constitutes great experiences and ensuring that that is what we are delivering to our customers.	This is a marketing-led effort. We're going to stay on message and not waffle on about technology

The smartphone market grew 73% in Q4. Here are the growth rates for vendors which regularly report smartphone sales:

• HTC: 142%
• Motorola: 96%
• Apple: 86%
• RIM: 40.5% (period ending November)
• Nokia: 36%

Samsung is not consistent in reporting smartphones and we don't have year-ago data but the following chart can be used to get a hint.

Samsung had a very good year with 25.2 million smartphones sold. This is compared to 2009 when they probably sold less than 5 million. Their growth has meant they overtook both Motorola and HTC and are likely to overtake RIM this year.

Samsung owes its success mainly to adopting Android. As can be seen in the next chart, Samsung moved rapidly to shift its portfolio from non-smart to smart. This is quite a feat considering the starting point well below that of Nokia.

From 2% of total phones to 15% smartphone volumes in 18 months is astonishing.

Extrapolating for the missing data leads to an estimate of smartphone growth for Samsung of over 500%.

Nokia must compete on an ecosystem to ecosystem basis.

In addition to great device experiences we must build, capitalize and/or join a competitive ecosystem. The ecosystem approach we select must be comprehensive and cover a wide range of utilities and services that customers expect today and anticipate in the future.

Nokia CEO Discusses Q4 2010 Results - Earnings Call Transcript - Seeking Alpha

These kind of statements are signaling that there will be fundamental changes announced.

Here are my guesses for the February 11 announcement:

1. There will be a multiple OS strategy
2. The US market will be the first to see a new non-Nokia OS. I would guess Windows Phone with AT&T.
3. Low end devices will remain with Symbian due to price considerations for the chipsets, components.
4. MeeGo will be phased out in phone products but development will continue for tablets

This may seem like a radical departure, but in many ways it's not. Nokia has nothing to lose in the US as its platforms have zero traction. By maintaining Symbian for low end devices, they can still aim for differentiation where Nokia feels it still has distribution and cost leverage. This strategy will also allow speed in time to market.

With a market share of 31.5 percent, Nokia is still the largest vendor of handsets in the Indian market, followed by Chinese brand G'Five with about 10 percent share, IDC said on Wednesday.

via PCWorld.

No, I haven't heard of G'Five either. The article goes on to say that there are 68 new vendors in the market accounting for 41% of total shipments. There were only five new vendors with a share of 1% in the first quarter of 2008.

It was not long ago that Nokia held over 70% of the Indian market. That market is now larger but the share for Nokia has dropped by half at least. The share was not lost to Samsung but to 63 new entrants. They managed to capture 40% of the market, roughly equal to what Nokia lost.

These new vendors will launch Android phones next year or the year after that. According to IDC, Android obtained 9.4% in the third quarter up from 2.9% y/y. The number of Android models went from 2 to 19 in the same time frame.

What does this mean for Your favorite mobile OS?

I'm sure many will use the Indian example as evidence of the inevitable ubiquity of Android. However, I would note that data networks are still very sparse in India and 3G has not reached a level of penetration that makes mobile broadband a common experience [citation needed].

The funny thing is that this lack of connectivity is not likely to be an obstacle to Android as it wasn't an obstacle to Symbian in the pre-3G era in Europe. More than half of Nokia's smartphones were selling without data plans in Europe well into 2009. Nearly all were selling without data in Africa, Middle East and India. Smartphones without data plans are just high end feature phones. They can be used for picture/video taking, listening to music/video, FM radio and, if they have a keyboard, for more productive text messaging. In emerging markets dual SIMs, FM radio and removable storage are killer features. Mobile browsing isn't.

A lack of broadband is however an obstacle to the iPhone. Here's why:

With the exception of those seeking "luxury" phones (a very small minority), the iPhone is too expensive in markets without subsidy. That's because the price Apple sets is very high (€630 or well over $800 at retail). This is not entirely because the product is inherently more expensive. Much of that extra cost is margin for Apple. What makes it popular is that much of that extra cost is paid by the operator who accounts for it as a subsidy. Don't pity the operator though. That subsidy is there for a reason: because the product entices users to data-oriented consumption at a higher monthly service fee.

The entire business model for the iPhone is to wrap a high-ARPU mobile broadband service plan with shiny metal and glass.

Put another way, an iPhone without a broadband connection is just a voice phone with an integrated iPod touch. You're better off getting a cheap phone and an iPod, or maybe an Android or Nokia phone.

When the iPhone 3G launched in India in 2008 with a price near $1000 it flopped. Many were quick to note that Apple did not understand the market. However few pointed out that the "3G" in the product's name was not just a marketing ploy. It was its Raison d'être.

To study the impact of iPhone in emerging markets you need to first plot out the penetration of mobile broadband.

When reading the comments disputing the possible end of the voice-phone era I'm reminded of similar comments disputing the end of the PDA era.

Although the Apple Newton pioneered the market in 1992 and John Sculley came up with the acronym, the Newton did not sell in significant volumes. It wasn't until 1997 with the Palm Pilot that the PDA market took off. Microsoft quickly followed with a licensed OS based on Windows CE. In 2001 Microsoft launched the Pocket PC brand to cement its attack on the PDA market. The first phones using a Microsoft OS were using something called Pocket PC Phone Edition. The first Nokia smartphones (Communicators) were built like mobile PDAs.

The logic was quite compelling. The original PDA was built to mobilize contacts, calendars and notes. They replaced bulky paper organizers and seamlessly synced to PC productivity software like Outlook. It was a compelling product in the US where small business customers needed to keep track of hundreds of contacts. Users could even 'beam' contacts to each other via infrared. The idea of adding a phone function to the device made sense insofar as contacts could be immediately dialed from the contact app rather than typed into another device's phone keypad.

By the early 2000's PDAs were forecast to sell by the hundreds of millions. There were millions of dedicated users who downloaded apps and thousands of developers being courted by platform builders. Palm even invented the word "ecosystem" as it refers to mobile platforms.

However, I remember reading sites dedicated to this community and there were many people who rejected the concept of a PDA with an integrated mobile phone. They liked the fact that the PDA was not bundled with a phone plan. They upgraded PDAs in a different cycle from phones and besides, phones are for talking and PDAs were for something else.  It was even more difficult to justify the conflation of the two products when considering the corporate purchasing of PDAs. PDAs were procured by IT departments and phones came with contracts that were managed by a different department.

What's a device vendor to do? The most avid customers of PDAs did not like the idea of burdening the product with a phone. RIM was doing its thing with moving pagers to include voice, but that was a different job to be done. The story is picked up here by this comment:

I was hired by RIM in 1999 just before they began work on their first phone .... Coming from a two-way pager background, RIM decided that phones should have two-way push synchronization of pretty much everything that Exchange provided along with a limited WML browser. The general thought was that phones would never have sufficient power density or radios sufficient bandwidth to allow anything more. That was incredibly predictably wrong, but it's how things went down.

Along with RIM was Ericsson, Palm, Motorola, and Qualcomm. Motorola came from a similar background as RIM and went on to build very similar devices. Both Nokia and Ericsson had come from phones and had decided feature phones should have far more sophisticated PDA functions. Palm started with PDAs then moved to the phones, but adamantly dismissed ideas like wireless synchronization for years making their first attempts at smart phone far more like early Nokia Communicators than early Blackberrys...

So the point is that all these companies were fighting over what amounts to overgrown PDAs with phones and wireless stacks strapped on. Everyone assumed power density was no where even close to what was needed for general computing, that a full featured browser and heavy duty Internet services were impossible due to bandwidth and latency. Take a look at how our Java expert groups named standards, how people at the time talked about what features smart phones should have, and its clear that no one thought an iPhone was possible. Even Danger, which eventually went on to work on to create Windows Phone 7 and Android, was just working on a better Blackberry.

via: shacknews

But what does this have to do with the future of voice-phones?

The problem is that the vendors that lost this game failed because they listened to their customers. Like with PDAs or with the original mobile phones or first generation of PCs, early adopters are not the audience that should be consulted on how to improve the product.

Early Windows Mobile users were ecstatic about the platform and rejected new UI metaphors because they wanted a "mobile Windows". Palm fans stuck with the PalmOS even though it was well past its shelf date in the Treo because they treasured the original PDA metaphors.

Every company paying attention to the market in 2005 would have been eagerly pursuing corporate buyers of PDAs and aiming complex products at enthusiastic PDA users.

And yet, non-consumers should also not be trusted with their opinions. Most early surveys would show that the vast majority of consumers found that mobile phones were not good value for the money. Later the same audience would declare that smartphones were not worth buying.

There are many voice-only users in the world who are happy with their products and not interested in any new options.

So what's a marketer to do?

If you can't ask early adopters and you can't ask non-consumers for hints then where can clues be found?

What history shows is that consumers have been happy to trade up to technology that offers more option value.

• Television went from cheap/free over-the-air broadcast with limited channel options to expensive cable with large option value in channels. Even if most of those options went unused, they are still valued.
• Telephony went from low cost reliable landlines to high cost, less reliable but with much more option valuable mobility. Having the option to call a person vs. calling a place (where a person might be) changed the calculation of whether you make the call. Calling became much more popular.
• Data as well went from metered dialup to unmetered high option valued broadband. From a luxury, to the least likely service an unemployed user might give up.
• Emerging market users hungered for mobile phones even though they cost more than several months' wages because they gave access to information and increased the option value of their labor.

Each of these huge technology transitions came associated with increased costs for the consumer, but that cost went toward the purchase of a far larger option value.

The problem is that users cannot calculate option value in their minds when faced with a market research questionnaire. How can they envision all the ways they would use a new product they've never used before? How can they "get it" without observing it in use or spending time thinking of "how they would use it" or asking someone who tried it? In a nutshell, users are willing to pay for option value but can't envision or quantify this value without observing a finished, polished product in use.

This is the problem faced today by branded phone vendors. Asking or observing current users of smartphones does not provide any incentive to sell low end versions. Asking or observing non-consumers seems to indicate no interest in newfangled complex or costly products.

But the calculus that must be made is one of option value. Does the new product offer significant option value? Will this option value be easily realized? This is not easy to determine, but it's a method that is far more promising than asking users their opinion.

The PDA was not a product that was introduced by the incumbent computer vendors because their customers did not ask for it. Once established, the PDA was not replaced by a product that PDA users asked for either.

Smartphones are following this well trodden path. The high end devices are evolving into computer replacements nobody asked for (but everybody will use). The low end products are adding data option value to voice-oriented users who never asked for anything more.

In a recent article I made the claim:

My bet is that by the end of 2012, it will be hard to find any branded phones which won’t run a smartphone

I also showed how pricing has evolved over the last three years.

Two days later an article in Fortune's Google24/7 blog highlighted the possible price points of low-end smartphones:

I had a chance to speak with Jim Tran, VP/GM – Handset Line of Business for Broadcom, who was able to elaborate on the details of the new processor and what it meant for the industry.  Here are some of Broadcom's bullet points:

The BCM2157 baseband, since it combines many functions on one chip, is able to run more efficiently, meaning less battery power will be needed than on current basic handsets

Low-cost, low-power, 65 nm digital CMOS process means the silicon will be cheap

The dual-core processors will run at 500-800mhz.

Supports portable Wifi hotspot and Android 2.2 and up

But the kicker is the price.  Tran says that phones made from the BCM2157 chipset will retail for under $100 and may dip as low as $75.  Those devices should debut in just 3-6 months (and we might hear about them next month at CES)....

To be clear, That sub $100 price is not the cost of materials, it is the suggested retail price after the manufacturers (and carriers) have taken their profits.

via 2011 will be the year Android explodes - Google 24/7 - Fortune Tech.

My own data shows that the average selling price for the top eight phone vendors for Q3 of 2010 was $156. Smartphone-only vendors were charging $450 on average and diversified vendors selling both smart and non-smart phones were charging $144 on average.

Nokia's ASP for its entire line-up was $88 (spread over about 84 million non-smart and 26.5 million smartphones).

What strikes me about the claim from Broadcom is that a $100 retail price for a smartphone implies an ASP of about $85 or so (assuming $15 or a very modest 18% channel mark-up).

That means that a smartphone could be built using this chip which would have nearly half the average price of all branded phones sold last quarter.

It would also be priced cheaper than the average price Nokia charged for all its phones (75% of which were non-smart phones.)

And this type of phone could be available not in three years in three months.

The chart above shows how prices could collapse.

Of course, low price is not the only condition for the widespread substitution of smart devices in vendor portfolios. But it does take away a significant objection. It no longer seems far-fetched to say that in another two years the price points for smartphones will be low enough to make them marketable in all markets. This may in fact be true next year.

I suspect that non-branded vendors will lead the way and make these devices widely available in emerging markets. The question will then be entirely up to the branded vendors whether they will follow or will they try to market dumb phones vs. smart phones at similar price points. Will buyers opt for a branded device with no ecosystem or unbranded device with the Android ecosystem?

It becomes harder to envision any reason why non-smart devices will earn positions in portfolios two years from now.

Note that I'm not suggesting that the market for high-end smartphones is threatened yet--there is still a lot of innovation that still needs to happen to shape that market into one of mobile computing (vs. mobile phoning).

Instead, what I am suggesting is that the bottom of the phone market is very vulnerable to becoming smart. This may sound like an odd sort of disruption, but it's a very sinister threat to companies who are in the business of selling brands and not platforms.

One of the most popular themes running through the mobile phone industry this year has been the unprecedented growth in Android adoption. I've argued that the adoption was initiated on the supply side by vendors and operators, but demand has certainly manifested itself.

Android is almost viral in the way it spreads. With no constraints on intellectual property, pricing, contracts, modification or terms of distribution, the incentives to push product out are phenomenal. It even works, mostly.

One hypothesis of the consequences of this viral adoption is that there will be a "commoditization" of smartphones with rapid price erosion to follow. This in turn might even lead to lower margins for Apple and RIM and most major vendors, including those selling Android itself.

In order to test this hypothesis, we need to look at what has been happening to prices. If prices have started tipping down at more than their usual rate then maybe commoditization is happening.

We can begin this test with the industry's canary in the coal mine: RIM. RIM has been struggling for growth in the very market where Android has been growing the fastest. Is RIM's pricing under pressure?

Interestingly, no. Their ASP (average selling price) decline, from an average of $350 to $310 in late 2009, came before the Android avalanche. During this year, the ASP has held steady, even rising in the last two quarters to $315 while Android activations reached 300k/day.

So I don't see a big problem with RIM, yet.

What about the industry as a whole? Can we see patterns that suggest imminent commoditization? Using the top 8 vendors (Nokia, Motorola, Samsung, Sony Ericsson, LG, RIM, Apple and HTC) and using volume-weighted ASP (total device sales divided by total units sold) we have the following chart:

Since the second half of 2007 the "industry ASP" (blue line) has actually increased. This is even though there was a huge recession in the middle of the time period.

This should be only slightly surprising. If you suspected that the iPhone may have a lot to do with that, you would be right. If you remove Apple from the mix, the second line (in orange) shows that the top vendors (ex-Apple) had some, but quite quite mild erosion (from an ASP of $133 to $129)[1].

This is far milder than what's been happening in the PC sector where prices are dropping catastrophically (According to NPD the average selling price of all Windows portable PCs has fallen from $659 in Oct. 2008 to $519 in Oct. 2009).

So Apple was a big contributor to the industry increasing its pricing power.[2] but even without Apple the industry has been holding on.

But is this just a lull?

Is Android going to stop the growth?

We can look at the pricing data one more way: If we separate the eight companies into two cohorts, the "diversified" vendors who sell both smartphones and regular phones vs. the "pure play" smartphone-only vendors, we get the following price history.

What is happening is that the diversified (Nokia, Samsung, LG, Sony Ericsson, Motorola) saw modest price declines (from $128 to $114) while the pure-players saw price appreciation (from $378 to $449). This is with the early impact of Android priced in. Unfortunately I don't have a chart showing non-smartphone prices in isolation, but I would be willing to bet it would be a significant negative slope.

In these two lines Android is not an independent variable. Android was adapted by some of the diversified vendors (all but Nokia), but in different ways. The thing is that Motorola and Sony Ericsson had great increases in ASP with Android. Among the pure-play vendors only HTC adopted Android and its performance is undistinguished vs. RIM which didn't.

So what, if anything, has Android done to pricing?

I argue that there is no evidence in the pricing data of a coming commoditization of smartphones. Android vendors were able to use the platform to move to higher pricing and the more they switched their portfolio to Android the more they got a better average price. At the same time those vendors who built smartphones without Android also saw strong price supports.

The only correlation with pricing power is whether you build smartphones or dumb phones. The more smartphones you build, the more price you can charge. This is regardless of platform.

The reason for this is that the smartphone market is growing so rapidly (90% y/y). There is limited direct competition between smartphones and a lot of competition between non-smartphones and smartphones--a battle smartphones are winning handily, irrespective of price. Smartphones seem to be what everyone wants.

So the real question that should be asked is:

Why do vendors bother making any dumb phones at all?

If you look at the third chart above you can see how attractive it must be for the diversified vendors to abandon the non-smart market to ZTE, Huawei et. al. Perhaps Nokia can still make a small profit there but to do so you need to run faster and faster toward extraordinarily low costs and prices. A point where phones cost less than everyday consumables. What keeps Samsung and LG in that game? Motorola and Sony Ericsson left once they hit profit warnings. Is that what it takes to drop what seems to be a loser business? I think not.

My bet is that by the end of 2012, it will be hard to find any branded phones which won't run a smartphone OS. Demand and supply of smartphones will race each other to overwhelm portfolio logic at the largest companies. The zero (visible) cost of Android will snowball this effect. What's even more provocative is that I believe the "others" will follow and abandon voice-oriented phones for smartphones almost immediately after the larger group.

So what have the Androids ever done for us?

I've long argued that the phone market should be studied as a whole because the competition is not between platforms but between smart and non-smart. Pricing is a leading indicator of what drives decision making inside vendors and it leads margin, and thence portfolio discussion. Android is expanding the market without crushing pricing. The margin expansion is what attracts more vendors and creates more demand. It's a virtuous cycle.

In a way, this is all good news--even for Apple. A world full of smartphone users is a better addressable market for iPhones than one filled with voice products. iPhone's traction was always in markets which had been seeded by some smartphones: the US with RIM and Europe with Symbian. Such a smartphone-soaked world will have better mobile broadband infrastructure, users with more demanding tastes and awareness of the value that a smart device can bring.

---

[1] The effect of "other" vendors not among the 8 listed is a big unknown. It's been estimated that they now make up as much as 30% of total volumes and that they are beginning to ship significant volumes with Android. Without visibility into that part of the market, we should be cautious. However, the eight vendors sampled here are still a significant cohort and the conclusions still appear reliable.

[2] This industry had, until 2007 suffered from chronic price erosion. Each sustaining innovation drove a mild burst of pricing power but it never seemed to last. From color screens to bluetooth, to 2.5G to 3G to MMS, to cameras to music playback, each hardware advance was not enough to keep the erosion away. The tipping point seems to be the iPhone and the shift to software as the component that drives price power.

When comparing smartphone platforms it's tempting to consider the global market as unified and commonly addressable. However, when you look at individual countries some strange patterns of behavior emerge:

• Indonesia, the fourth most populous country in the world (230 million people) loves Nokia's Communicator. It's the ultimate mobile status symbol.
• Japan had one of the largest installed bases of Symbian phones. The version running in Japan is not compatible with versions elsewhere. Famous for its Galapagos mobile culture, the iPhone is changing what the Japanese consider the basis of phone performance.
• The iPhone just became Korea's favorite smartphone even though hegemonic Samsung and LG are doing a roaring trade selling Android phones elsewhere.
• The US has four incompatible 3G network technologies in widespread use. No widely distributed smartphone phone works with any two. Blackberry ruled supreme until AT&T started promoting the iPhone and Verizon started promoting Android.
• Latin America loves BlackBerry. BBM is wildly popular as an SMS alternative.
• Saudi Arabia loves BlackBerry. When face-to-face conversations are taboo, the BlackBerry is a social lubricant.
• Australia loves the iPhone. Android is almost non-existent.
• Italy has more smartphones per capita than the US. The majority are made by Nokia.
• China uses two incompatible 3G technologies. The most popular (TDSCDMA) is not available anywhere else. WiFi was illegal in phones until this year.
• Germany has a disproportionally large installed base of Windows Mobile
• There are no Blackberries in Finland.

Although some of these idiosyncrasies may be cultural (like the Indonesian penchant for large devices) most of them are due to operator decisions. In some cases operators choose incompatible network technologies to protect from competition. In others they promote local vendors or price certain products out of reach.

Sometimes big bangs take place and demand explodes for "banned" technologies or vendors. However, it's just as easy to see how the pendulum can swing against free market choice.

Ultimately users and device vendors are at the mercy of operator decisions. In the long term operator control over platforms might diminish but it will take many years.

Several readers pointed out that in my discussion on the market share of modular vs. inter-dependent market shares for smartphones, Nokia was incorrectly classified as having an inter-dependent software architecture since the Symbian platform is/was a modular component.

The problem is that the relationship between Symbian and Nokia is not that of independent modules. Nominally, the two are independent and mutually exclusive, but, in practice, Symbian has always been so heavily dependent and influenced by Nokia that it's never been possible to declare its governance fully independent.

I won't describe the full history since there are many other sources (good example here.) But I will point out that since Nokia licensed Symbian exclusively and Symbian obtained the vast bulk of license fees from Nokia, the relationship was one similar to a bilateral monopoly.

Nokia's bargaining power over Symbian was always high enough to affect its operations. "Ownership" does not only infer a formal control over equity, and many would agree that Nokia "owned" Symbian even when it held less than 50% of the equity. The relationship was so tight, that even though there were other members of the consortium with board seats, the licensing by Nokia's competitors was always very limited. The only significant non-Nokia revenue for Symbian came from Japan where Nokia did not have a presence.

After Symbian was effectively acquired by Nokia, the ownership became both de jure and de facto. The open sourcing of the Symbian code made it no less a Nokia operation than the open sourcing of Android makes it no less a Google operation.

So for all intents and purposes, the relationship between Symbian and Nokia makes Nokia's smartphone hardware inter-dependent on Symbian's software.

Now, given that the way the products are built in practice may be far from integrated, it would seem that Nokia's management captured the worst of both worlds: Modular implementation of an inter-dependent business. Nokia captured all the downside of modularity (poor integration and polish) without any of the benefits (e.g. flexible supply chain or lower R&D.)

In previous posts I detailed shares for units, sales and profits. I also offered different ways to look at the data like rankings and profit "area" maps.

This article is about the absolute numbers. What is the total market in terms of units sold, sales and operating profits.

The time frame remains from the second quarter in 2007 to the third quarter of 2010. The same eight vendors are analyzed (with "Other" available for units analysis only).

The first observation is that the market grew to new heights in Q3. 340 million phones in the quarter means that we might be looking at a very good holiday season. The market was range-bound due to the recession and its over-hang, but there seems to be a good indicator of macro-level recovery

On an individual competitor basis, the share snapshot pictures we saw earlier gave a good summary of the condition of competitors. Here we see the evolution of absolute units and sales over time. It's instructive to scan the two charts as a pair to see how units and sales are affecting the positions of the participants.

I clustered the "pure smartphone" vendors at the top of the charts so you can visually separate them from the broader portfolios of the others.

Finally, here is the evolution of total profitability (operating) for the participants. I annotated Nokia and Apple for calibration.

(note the color coding legend in the pervious charts).

What is most impressive is how LG, Motorola and Sony Ericsson seem to be in the same boat. At the same time, Apple, RIM and HTC are outstanding in performance. And Nokia and Samsung are stuck in a dilemma. On the other hand, every vendor is different in many ways, and it's inaccurate to paint them with the same brush.

Overall, we see a pattern of increased absolute value in the market. All but one vendor is profitable, and sales are increasing. A large part of the growth is due to the transition of the market to smartphones.

There is some confusion with the latest Canalys teaser press release. The implication is that Apple has lost smartphone platform share due to the Android surge.

Using the published data, it's easy to see that Apple has continued to increase share in both smartphones and handsets as a whole.

I used green bars to represent quarterly share of smartphones and blue bars to represent quarterly share of all phones.

I used orange line to show trailing four quarters (TTM) share in regular phones and red for smartphones.

Here are the Q2 to Q3 changes in share for the vendors whose data is published:

1. Nokia 38.4% to 32.7%
2. Motorola 4.32% to 4.7%
3. Samsung 5.11% to 9.71%
4. RIM 18% to 15%
5. Apple 13.5% to 17.4%
6. HTC 8.65% to 8.41%
7. Other 12% to 12%

Sequentially, Nokia lost 5.6% of share, Samsung gained 4.6%, RIM lost 3% and Apple gained 4%, Motorola, HTC and Other remained largely unchanged.