Didn’t you see? It was just Nokia World ! But with profits plummeting and executives fleeing -both at alarming rates-maybe it will be a reckoning instead.

Let’s not confuse things: Nokia still sells more phones than anybody in the world. One in three mobile devices sold all over this spring had Nokia stamped on the front . So why are their profits collapsing so precipitously , from $9 billion in 2007 to $312 million in 2009? And why can’t they come back inside the conversation?

Nokia: Fast Phones

If you’re reading this site, there’s a really slim chance that there is a Nokia to your pocket. Clone of you’re not really cruising Chowhound searching for a significant Mac. And that’s what Nokia makes: Big Macs. They make affordable feature phones which are insanely popular in China and India and lots more and plenty, much less so anywhere else on earth:
Of the staggering 111 million mobile devices Nokia sold this spring, 87 million were dumbphones. That’s various burgers.

Of course, even supposing smartphones are a small percentage of Nokia’s business, the company deals on this sort of scale that they actually still be able to hold 41% of the smartphone market . That’s a 10% decline from last year, and it’s at the least partially because their Symbian operating system has consistently been, for lack of a neater word, nightmarish . And early indications say that Symbian^3 on the flagship Nokia N8-the phone that outgoing chairman Olli-Pekka Kallasvuo recently said would ” mark the beginning of our renewal” – doesn’t look a lot better . McDonald’s might move numerous lattes, but that doesn’t make it Stumptown .

And like a fast food chain, Nokia isn’t all that invested in user experience-which in smartphones increasingly equtes to software experience. Software which, incidentally, Nokia could not care less about, in line with an email from a former Nokia software engineer to Daring Fireball :

Hardware Rules at Nokia. The software is written by the software groups inside Nokia, and it truly is then given to the hardware group, which gets to choose what software goes on the device, and our surroundings wherein it runs. All schedules are driven by the hardware timelines. It was not uncommon for us to offer them code that ran perfectly by their own test, only to have them do things like reduce the available memory for the software to 25% the desired allocation, and then point the finger back at software when things failed within the field.

But this comparison does have its limits: McDonald’s makes money around the globe, consistently and in great quantities. And McDonald’s also doesn’t waste untold time and resources seeking to invent filet mignon whole cloth.

So Nokia makes its money more through ubiquity and value, and cares more about hardware than software. It’s a method that used to work, before iPhone and Android came along to attack on all fronts. But Nokia’s got to have a plan to get things back on target, right?

Strange Bedfellows

Well… type of. There’s absolute confidence Nokia knows things aren’t peachy: OPK has described their situation as ” very tough at the high end.” He’s talking about smartphones. Their plan for the immediate future is the N8, which as I said before doesn’t seem like an anything-killer. So what’s saving Nokia inside the long-term?

Here’s where it gets weird. In case you’re a phone company, like Nokia, that makes pretty good hardware but hasn’t got the first clue on software, you’ve got some options. It is advisable keep throwing money at the issue, staunchly going it alone, hoping sooner or later you’ll get it right. You’ll want to embrace, a minimum of on an ordeal basis, a proven operating system like Android or a promising one like Windows Phone 7. You will need to ditch or spin off your collapsing smartphone business altogether, and deal with the profitable business of mass-producing cheap candybars for underserved markets.

Or it’s essential to do what Nokia did: hitch your star to Intel’s wagon.

The Nokia-Intel love affair’s been blooming all year, starting with the intertwining of their respective Maemo and Moblin platforms to create MeeGo . That move gave Nokia not one but two mobile operating systems in its portfolio, perfect for confusing the hell out of shoppers (irrespective of how nice MeeGo looks ):

The two companies are also teaming up to bring 3D interfaces to MeeGo devices, pouring millions of bucks into a new research facility and what amounts to an immense gamble on three or more product cycles from now. They can also be working on a chip together, because in for a penny in for a pound and all that.

The problem, after all , is that an Intel and Nokia partnership feels suspiciously like the blind leading the blind. Intel hasn’t come anywhere close to cracking the mobile market, to the point that they’re left seeking to buy their way in with acquisitions like Infineon . The two companies are matching size with size, sure, but in addition weakness with weakness.

A Poor Reception

Where Nokia gets absolutely slaughtered is here in North America. It’s by far their weakest market on the subject of volume, largely due to the superior homegrown competition. And it just keeps getting smaller:
Incoming CEO Stephen Elop-a Canadian transplant from Microsoft-knows exactly what the difficulty is, and what’s at stake. As he recently explained to the Financial Times :

” There are new patterns of communication and innovation going on first in North America… That’s a shift from years before when the advance of the mobile industry tended to begin in Asia and move through Europe and then to North America. Now there’s fresh innovation in North America and it’s critically important for Nokia to be participating in that market.”

The innovation race is person who Nokia’s losing, badly. And the unhappy part is, there’s no indication that they’re about to claw out of the outlet they’ve dug themselves. Reading Nokia’s official statements these previous couple of months in regards to the N8, the company appears like a degenerate gambler just watching for this one big score to get him back inside the game. Every financial release sites its imminent release as the light at the top of a completely long tunnel. But-in an awkward metaphorical extension-it’s just more tunnel.

Nokia still has a place inside the mobile world. an incredible one. However it’s more 7/11 than Whole Foods, more DSW than Saks. And there’s nothing wrong with that! Until they either embrace it or seriously change course, though, this spiral downward only gets worse.

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This post is tagged: daring-fireball, mobile-devices-, nokia software, outgoing chairman, software engineer, software experience, user experience