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Why Apple is Doomed (and why Nokia failed)

Written on 11 September 2013 by Sam Volkering

Why Apple is Doomed (and why Nokia failed)

It was early in 1991. I’m not 100% sure what month – I was only seven – but I distinctly recall having seen Edward Scissorhands at the movies.

Anyway, I was at home and my Dad walked in with a box and told me to, ‘Come check this out.

Low and behold it was one of those new mobile phones. It was basically the same as the telephone but without the cords. And instead of the rotary dial like our downstairs telephone it had soft plastic buttons. And a cool green screen with black numbers on it.

It sat in what I now call a ‘dock’ so the battery could charge. But when you took it out of the dock you could call anyone from pretty much anywhere. It was black and I thought it was as cool as my uncle’s pager…

Nokia: The Original ‘Must Have’ Mobile Brand

The phone Dad had was the Nokia Cityman 100. Of course 23 years ago I had no idea just how important the name Nokia would be in modern technology. I also had no idea that it might eventually be the blueprint of how another massive company, Apple, might be doomed to the same eventual fate.

As the years rolled by, the brand Nokia started to hold greater significance in my life. And just before the turn of the century I had a Nokia 3210 in my hand.

The 3210 was eventually replaced with a 5210. (Still to this date the best phone I ever owned. It was indestructible.) I had a brief relationship with a Sony Ericsson K800i and when it broke well before its time, ended up with a Nokia N73.

Of course it all culminated in an Apple iPhone, and then a Samsung Galaxy S2. Soon I’ll be courting a Sony Xperia Z1. But enough with mobile phone memory lane.

The 3210 and Nokia is where it all began. Nokia is where it all began for anyone born before 2007.

Admittedly texting was new to me in 1999. I was more inclined to spend my time making a ‘snake’ dart around a screen eating ‘apples’. But nonetheless the svelte shaped 3210 meant I was digitally connected to the world.

And I wasn’t alone. In fact if you didn’t have a Nokia phone in your school bag, you were an outsider. Well not an outsider. It’s just more likely you were a ‘Motorola guy’.

The thing was in the playground it was Nokia vs. Motorola. And you had to make a choice; it said a lot about the individual. The situation bears a striking resemblance to the current Apple vs. Android problem many teenagers now face.

Little did I realise that the Nokia 3210 would go on to sell 160 million units worldwide. In comparison it took Apple over four and a half years to reach the same sales numbers. And for Apple to hit 160 million units they’d need the iPhone, iPhone 3G, 3GS, iPhone 4 and 4S.

But the 3210 wasn’t the best seller Nokia had to offer. They sold 250 million units of the Nokia 1100 when released in 2003. The 1100 was, and still to this day is, the single most popular (in terms of sales) mobile phone of all time.

Nokia was the king of mobile phones. We would wait in anticipation of what models would come out next. To think people these days talk about Apple’s amazing ability to put out a new version of the iPhone every year…here’s a news flash, it’s not that amazing.

Since 1982 Nokia has released 501 models plus a concept phone called the Morph in 2008. That’s an average of 16.16 phones per year for 31 years. And people say Apple is the king of innovation…?

I decided that in fairness to Apple, I’d put together a comparison chart to illustrate how good Nokia was.

Look, here’s the lowdown of how the story unfolds for Nokia.

Nokia was the leader in mobile phones. They were unbeatable. They would pump out great, new innovative phones, year on year on year. They dominated the mobile phone market for decades. They were mobile phone pioneers. They were leading innovators, geniuses, they were Apple in the 90′s and 00′s when it came to phones.

Everyone had a Nokia. And I mean, everyone. There’s even a good chance, in the shed or some untouched drawer somewhere in your house is a (still working) Nokia.

And if we’d said back in the 90′s and 00′s Nokia will be a shadow of its former self in 15 years time, and Microsoft will own it, you’d have had us certified insane.

The Decline of a Giant

Well here it is, 15 years later, the behemoth phone giant Nokia is a shadow of its former self. It’s now part of Microsoft’s half-baked attempt to build something just half as good as the current range of Samsung phones.

And Microsoft got it at a bargain price too. A measly 5.44 billion euros. Which is…approximately 1/35th the market cap Nokia had in 2000.

Friedrich Nietzsche said, ‘Many are stubborn in pursuit of the path they have chosen, few in pursuit of the goal.

I don’t really know what Nokia’s goal was. But I do know they were stubborn in pursuit of the path chosen. Nokia’s stubbornness led them to the development of their own Operating System (OS). And it was the Symbian platform that signaled the end of Nokia.

The phones they made were good, very good. But they shunned the Android OS by Google and decided to go it alone. They wanted it all. End to end integration with their own OS. Rather than look at the bigger picture of open source platforms, Nokia wanted to keep it all in-house.

And then other Symbian users decided Android was the answer. Sony and Samsung jumped ship, leaving only Nokia as the user of the Symbian platform. And general reviews from consumers were the Symbian platform was horrible compared to Apple’s iOS and Google’s Android OS.

But still they didn’t get it.

So disastrous was their stubbornness to develop their own entire ecosystem, that eventually Nokia dropped Symbian. It simply became uneconomical to pour money into a failing business arm.

Then the plan got worse. They decided to partner up with Microsoft and their Windows Phone OS (WP)

The worst thing was Microsoft had half-baked WP too. Desperate to get in on the OS action, WP came out to horrendous reviews. It was a poor competitor to Android and the iOS.

The story of the Microsoft Nokia mash-up went like this…

  1. Nokia make great phones. Has rubbish OS.
  2. Microsoft make great software but not phones. Has rubbish OS.
  3. Nokia partners up with Microsoft. Both pray problems are over.
  4. Problems aren’t over.
  5. Nokia sells devices business to Microsoft for peanuts.

My point here is Apple is doing a Nokia right now. In fact, you could take the Nokia story and just start replacing the name with Apple.

Apple has been the king of phones since they launched the iPhone in 2007. Dominating the landscape of innovation and consumer reviews. But they’ve come to a grinding halt.

The most innovative thing about the next iteration of the iPhone is it might have a fingerprint scanner. Don’t get me wrong, bionic identification is a staple of the future. But let’s be serious. I had a fingerprint scanner on my Toshiba Satellite laptop 6 years ago.

How about a retina scanner, DNA reader…just something new?

Why Apple is in a Permanent Downtrend

What is happening to Apple is they’ve forgotten how to be pioneers. Much like Nokia did. Apple is now trying to recapture market share rather than create new markets.

It’s heading down the exact same well-worn path that Nokia started down some five years ago. In short, they’re doomed.

Nokia sold more phones, was more innovative and a stronger market player than Apple was today. But Nokia failed. Why? Because they didn’t adapt to the times fast enough. They missed the boat and have been playing catch up for the last 10 years.

And right now Apple is in the midst of their ‘Nokia Moment’.

Take a look at the two graphs above. The first one shows a tremendous run from the beginning of 2005 through to late 2007. It then shows a capitulation of epic proportions. And along the way down to the cellar, there were a few blips of optimism to keep the die-hard believers invested. This of course is the chart of Nokia.

The second graph shows the same tremendous run over a three-year period and then a significant fall over the next year. This is the chart of Apple, and my point is they’re treading a similar pathway. It’s just Apple is lagging five years behind Nokia. Let just hope Apple investors are not as die-hard as the Nokia investors were.

Give Apple another five years. See where they’re at then. If they continue on this current path of stubbornness they’ll be in the same boat Nokia is in now.

Say goodbye to the Nokia name. I grew up with Nokia and will keep a few models in my personal tech museum. They’ll still probably work in another 30 years too. It’s a sad day in tech when you lose one of the greats. But this won’t be the last one to fall.

Blackberry is teetering on the edge of extinction too. They have been for the last few years, but that’s another tale for another day. And the way Apple is going they might just be the next giant to fall.

You might scoff at the thought, and claim, ‘They’re too big, too powerful to fail.’ But we all thought the same of Nokia, and look at them now.

Sam Volkering+
Technology Analyst

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Sam Volkering
Sam is an amazing talent at finding new, cutting-edge technologies and translating that research into how the future will look — and where the investment opportunities lie. When he’s not working as Money Morning's Technology Analyst, Sam writes his own free daily e-letter Tech Insider, and uncovers the most exciting tech investments around the globe for readers of Revolutionary Tech Investor. If you’d like to more about Sam’s financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays. Read more about Technology Analyst Sam Volkering.

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3 Comments For This Post

  1. Frank Says:

    I had been waiting years for Nokia to jump onto the Android bandwagon but I eventually yielded to disappointment and peer pressure and bought a Galaxy S3.

    Whilst I am waiting for warranty repairs on a phone that has never been dropped or even scratched, I revert to my trusty N95 and also realise that my father is still using my ancient Nokia 3110 which has often been exposed to salt water and dropped dozens of times over more than 15 years.

    Sad days indeed.

  2. Luke Says:

    Great read. How do they compare to with patents granted around the world?

  3. Sam Danielles Says:

    I really appreciate the well-written review. The downtrend of any company, business or an industry can be easily seen by the way they present the product to the customer. Forget about all academic jargon and see the steps of a company such as Nokia.
    1) Develop a product / technology.
    2) Market it successfully, attracting more and more people.
    3) Celebrate several years of growing sales due to planned stepwise innovation.
    4)The company gains a “status” among customers and starts increasing product prices only because people call it is a “prestigious brand”.
    5)When the market share is great and the company becomes a “giant,” they think “well, lets charge high prices for people to enter the brand umbrella”
    6) Innovation becomes diluted, slow, and un-interesting. Innovation becomes replaced by stupid changes (e.g. changing the appearence of icons, changing colours, unnecessary customizations, fonts, pictures and all kinds of B***S***
    7)Products become ridiculously expensive, just for the brand, while a cheaper competitor gives better stuff cheaper. New customers think “man! lets try that too”
    8) New company slowly takes bites from the market while the expensive giant attempts to copy and follow the newbie in an unsuccessful attempt.
    9) When customers go for the renewal of their product or the service, they go for the cheapest, best product with a better future.

    This is what happened/happens to Motorola, Nokia, Ericsson, Blackberry, Microsoft, Kodak, Fujifilm, MSN, Hotmail, Yahoo, hp, Siemens, Crysler, Volvo, Archos, Acer, Panasonic, Sony (some parts), obviously apple and many other companies.

    Samsung, LG, Sony, HTC, Huawei, Canon, Nikon, Acer, LG, and many similar players are still in the game. Their fate will be decided by how they face, Innovation, cost, and compatibility with the rest of the world.

    More to come.


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