Having quickly crunched and mulled Nokia's Q2 numbers, ratings agency Fitch has done the only logical thing - since CEO Elop has ensured that everything is riding on his Lumia strategy - and downgraded Nokia's credit-worthiness to BB-, which is another notch deeper into 'junk'' status.
More than coincidentally, 'junk' is the rating many users have apparently been giving the Lumia phones themselves. According to a survey conducted by the Yankee Group (which unlike many analyst houses doesn't seem overly worried about upsetting Microsoft), far from basking in a warm glow of user approval the Lumia has more often than not got a DD- from those unlucky enough to have purchased one.
Despite a reported US$150 million marketing promo and a keen price ($99 - and now $49) buyers of the AT&T Lumia 900 were underwhelmed - 41 per cent gave it a 1 out of 5 rating on the likelihood that they'd recommend it to friends. Overall the ratings came out at 2.5 out of 5: so a bit of a flop... an Eflop perhaps.
That reluctance to recommend was duly reflected in the Lumia sales numbers - a strong initial showing of first-time buyers (they claimed), but then a quick flattening off as word-of-mouth failed to excite extra sales and quite likely dampened them.
As a result - and despite a few headlines that seemed to suggest otherwise - there was nothing in the Nokia results that showed any major turn-around in its fortunes, so quite why they stimulated a significant recovery in the Nokia share price must remain a mystery. Not as bad as analysts feared was the consensus explanation, 'spin wins over substance' is ours.
Nokia's results last week showed that it had sold 4 million lumias and about 600,000 in the US. This was thought to be a big improvement for the company and about 1 million more phones than analysts expected. In fact it is still selling more non-Windows smartphones (Symbian and MeeGo) than Windows, although of course these sales have collapsed since Elop announced his MS strategy in early 2011.
Total sales are 5 per cent down from the first quarter of this year and revenue is down by 25 per cent from a year ago. In fact revenue for the quarter was €7.54 billion which was head of the consensus of €7.35 billion.
It's hard to see what possible comfort a shareholder could get from that.
Perhaps the spinning machine has been doing some extra whirring to make up for the lack of 'whir' sounds from the sales machine. Here is Nokia's US president,
Chris Weber, as quoted in early May in PC Magazine.
"Demand has been outstripping supply for the first couple of weeks, and we've been working hard to rectify that," he said. "The demand for cyan [phones] is significantly outpacing supply. When you give people something different from a design perspective - colors, etc - it really stands out, and consumers want that."
In fact Nokia did manage to sell 4 million Lumias, but not so many in the US where (despite the marketing) it sold just the 600,000. But that didn't stop the clever spin - my favourite was the "Lumia sells faster than the iPhone" story which was widely picked up. Research firm Strategy Analytics pointed out that Nokia had managed to ship 10.9 million of the devices in its first three quarters, while Apple shipped just 5.4 million iPhones in the last three quarters of 2007.
As a comparison, however, this is baloney. Apple only launched the iPhone with AT&T in the US for two quarters before it was launched in the UK and Germany, whereas Nokia has launched the Lumia in 50 countries with several devices. Plus (of course) Apple was launching into a market that didn't yet really exist (the SDK and the download store were still a year away) and which, we were all being told at the time, it couldn't expect to do very well from a standing start. Whereas Nokia is trying to scrape together a tiny share of a huge and still-growing market... but can't even manage that.
The latest news in today is that Nokia (says Elop according to the Financial Times) will deploy a new carrier sales strategy. It will form exclusive partnerships for its phones with specific carriers in each country (as Apple did initially with the iPhone) to support its next range of Lumia Windows Phone 8 models. A strange move, to say the least and one which has us all fearing for Tomi Ahonen's health. He had already run out of swear-words when Microsoft announced the non-upgradeability of the current Lumias to Windows Phone 8,
but this is the final straw.
So the Lumia 900 isn't a huge hit. Surprise! Any smartphone sporting a non-Apple or non-Android OS would find it an uphill task in this market so it's hardly surprising that Nokia is going to find the Windows route hard graft. What's been impressive, though, is the spin machine. 5 out of 5!
