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OpenStack adoption (by Q1 2016)

OpenStack Promise as per Moogsoft -- June 3, 2015For information on OpenStack provided earlier on this blog see:
– Disaggregation in the next-generation datacenter and HP’s Moonshot approach for the upcoming HP CloudSystem “private cloud in-a-box” with the promised HP Cloud OS based on the 4 years old OpenStack effort with others, ‘Experiencing the Cloud’, Dec 10, 2013
– Red Hat Enterprise Linux OpenStack Platform 4 delivery and Dell as the first company to OEM it co-engineered on Dell infrastructure with Red Hat, ‘Experiencing the Cloud’, Feb 19, 2014
To understand the OpenStack V4 level state-of-technology-development as of June 25, 2015:
– go to my homepage: https://lazure2.wordpress.com/
– or to the OpenStack related part of Microsoft Cloud state-of-the-art: Hyper-scale Azure with host SDN — IaaS 2.0 — Hybrid flexibility and freedom, ‘Experiencing the Cloud’, July 11, 2015

May 19, 2016:

Oh, the places you’ll go with OpenStack! by Mark Collier, OpenStack Foundation COO on ‘OpenStack Superuser’:

With OpenStack in tow you’ll go far — be it your house, your bank, your city or your car.

Just look at all of the exciting places we’re going:

From the phone in your pocket

The telecom industry is undergoing a massive shift, away from hundreds of proprietary devices in thousands of central offices accumulated over decades, to a much more efficient and flexible software plus commodity hardware approach. While some carriers like AT&T have already begun routing traffic from the 4G networks over OpenStack powered clouds to millions of cellphone users, the major wave of adoption is coming with the move to 5G, including plans from AT&T, Telefonica, SK Telekom, and Verizon.

We are on the cusp of a revolution that will completely re-imagine what it means to provide services in the trillion dollar telecom industry, with billions of connected devices riding on OpenStack-powered infrastructure in just a few years.

To the living room socket

The titans of TV like Comcast, DirecTV, and Time Warner Cable all rely on OpenStack to bring the latest entertainment to our homes efficiently, and innovators like DigitalFilm Tree are producing that content faster than ever thanks to cloud-based production workflows.

Your car, too, will get smart

Speaking of going places, back here on earth many of the world’s top automakers, such as BMW and the Volkswagen group, which includes Audi, Lamborghini, and even Bentley, are designing the future of transportation using OpenStack and big data. The hottest trends to watch in the auto world are electric zero emissions cars and self-driving cars. Like the “smart city” mentioned above, a proliferation of sensors plus connectivity call for distributed systems to bring it all together, creating a huge opportunity for OpenStack.

And your bank will take part

Money moves faster than ever, with digital payments from startups and established players alike competing for consumer attention. Against this backdrop of enormous market change, banks must meet an increasingly rigid set of regulatory rules, not to mention growing security threats. To empower their developers to innovate while staying diligent on regs and security, financial leaders like PayPal, FICO, TD Bank, American Express, and Visa are adopting OpenStack.

Your city must keep the pace

Powering the world’s cities is a complex task and here OpenStack is again driving automation, this time in the energy sector. State Grid Corporation, the world’s largest electric utility, serves over 120 million customers in China while relying on OpenStack in production.

Looking to the future, cities will be transformed by the proliferation of fast networks combined with cheap sensors. Unlocking the power of this mix are distributed systems, including OpenStack, to process, store, and move data. Case in point: tcpcloud in Prague is helping introduce “smart city” technology by utilizing inexpensive Raspberry Pis embedded in street poles, backed by a distributed system based on Kubernetes and OpenStack. These systems give city planners insight into traffic flows of both pedestrians and cars, and even measure weather quality. By routing not just packets but people, cities are literally load balancing their way to lower congestion and pollution.

From inner to outer space

The greatest medical breakthroughs of the next decade will come from analyzing massive data sets, thanks to the proliferation of distributed systems that put supercomputer power into the hands of every scientist. And OpenStack has a huge role to play empowering researchers all over the globe: from Melbourne to Madrid, Chicago to Chennai, or Berkeley to Beijing, everywhere you look you’ll find OpenStack.

To explore this world, I recently visited the Texas Advanced Computing Center (TACC) at the University of Texas at Austin where I toured a facility that houses one of the top 10 supercomputers in the world, code named “Stampede

But what really got me excited about the future was the sight of two large OpenStack clusters: one called Chameleon, and the newest addition, Jetstream, which put the power of more than 1,000 nodes and more than 15,000 cores into the hands of scientists at 350 universities. In fact, the Chameleon cloud was recently used in a class at the University of Arizona by students looking to discover exoplanets. Perhaps the next Neil deGrasse Tyson is out there using OpenStack to find a planet to explore for NASA’s Jet Propulsion Laboratories.

Where should we go next?

Mark Collier is OpenStack co-founder, and currently the OpenStack Foundation COO. This article was first published in Superuser Magazine, distributed at the Austin Summit.

May 9, 2016:

From OpenStack Summit Austin, Part 1: Vendors digging in for long haul by Al Sadowski, 451 Research, LLC:  This report provides highlights from the most recent OpenStack Summit

THE 451 TAKE OpenStack mindshare continues to grow for enterprises interested in deploying cloud-native applications in greenfield private cloud environments. However, its appeal is limited for legacy applications and enterprises sold on hyperscale multi-tenant cloud providers like AWS and Azure. There are several marquee enterprises with OpenStack as the central component of cloud transformations, but many are still leery of the perceived complexity of configuring, deploying and maintaining OpenStack-based architectures. Over the last few releases, processes for installation and upgrades, tooling, and API standardization across projects have improved as operators have become more vocal during the requirements phase. Community membership continues to grow on a global basis, and the supporting organization also depicts a similar geographic trend.

…  Horizontal scaling of Nova is much improved, based on input from CERN and Rackspace. CERN, an early OpenStack adopter, demonstrated the ability for the open source platform to scale – it now has 165,000 cores running OpenStack. However, Walmart, PayPal and eBay are operating larger OpenStack environments.

May 18, 2015:

Walmart‘s Cloud Journey by Amandeep Singh Juneja
Sr. Director, Cloud Engineering and Operations, WalmartLabs: Introduction to World’s largest retailer and its journey to build a large private Cloud.

Amandeep Singh Juneja is Senior Director for Cloud Operations and Engineering at WalmartLabs. In his current role, Amandeep is responsible for the build out of elastic cloud used by various Walmart Ecommerce properties. Prior to his current role at Walmart Labs, Amandeep has held various leadership roles at HP, WebOS (Palm) and eBay.

May 19, 2015:

OpenStack Update from eBay and PayPal by Subbu Allamaraju
Chief Engineer, Cloud, eBay Inc: Journey and future of OpenStack eBay and PayPal

Subbu is the Chief Engineer of cloud at eBay Inc. His team builds and operates a multi-tenant geographically distributed OpenStack based private cloud. This cloud now serves 100% of PayPal web and mid tier workloads, significant parts of eBay front end and services, and thousands of users for their dev/test activities.

May 18, 2015:

Architecting Organizational Change at TD Bank by Graeme Peacock, VP Engineering, TD Bank Group

Graeme cut his teeth in the financial services consulting industry by designing and developing real-time Trading, Risk and Clearing applications. He then joined NatWest Markets and J.P. Morgan in executive level roles within the Equity Derivatives business lines.
Graeme then moved to a Silicon Valley Startup to expand his skillset as V.P. of Engineering at Application Networks. His responsibility extended to Strategy, Innovation, Product Development, Release Management and Support to some of the biggest names in the Financial Services Sector.
For the last 10 years, he has held Divisional CIO roles at Citigroup and Deutsche Bank, both of which saw him responsible for Credit, Securitized and Emerging Market businesses.
Graeme moved back to a V.P. of Engineering role at TD Bank Group several years ago. He currently oversees all Infrastructure Innovation — everything form Mobile and Desktop to Database, Middleware and Cloud.  His focus is on the transformational: software development techniques, infrastructure design patterns, and DevOps processes.

TD Bank uses cloud as catalyst for cultural change in IT
May 18, 2015 Written by Jonathan Brandon for Business Cloud News

North American retail banking outfit TD Bank is using OpenStack among a range of other open source cloud technologies to help catalyse cultural change as it looks to reduce costs and technology redundancy, explained TD Bank group vice president of engineering Graeme Peacock.

TD Bank is one of Canada’s largest retail banks, having divested many of its investment banking divisions over the past ten years while buying up smaller American retail banks in a bid to offer cross-border banking services.
Peacock, who was speaking at the OpenStack Summit in Vancouver this week, said TD Bank is in the midst of a massive transition in how it procures, deploys and consumes technology. The bank aims to have about 80 per cent of its 4,000 application estate moved over to the cloud over the next five years.
“If they can’t build it on cloud they need to get my permission to obtain a physical server. Which is pretty hard to get,” he said.
But the company’s legacy of acquisition over the past decade has shaped the evolution of both the technology and systems in place at the bank as well as the IT culture and the way those systems and technologies are managed.
“Growing from acquisition means we’ve developed a very project-based culture, and you’re making a lot of transactional decisions within those projects. There are consequences to growing through acquisition – TD is very vendor-centric,” he explained.
“There are a lot of vendors here and I’m fairly certain we’ve bought at least one of everything you’ve ever made. That’s led to the landscape that we’ve had, which has lots of customisation. It’s very expensive and there is little reused.”
Peacock said much of what the bank wants to do is fairly straightforward: moving off highly customised expensive equipment and services, and moving on to more open, standardised commodity platforms, and OpenStack is but one infrastructure-centric tool helping the bank deliver on that goal (it’s using it to stand up an internal private cloud). But the company also has to deal with other aspects a recent string of acquisition has left at the bank, including the fact that its development teams are still quite siloed, in order to reach its goals.
In order to standardise and reduce the number of services the firm’s developers use, the bank  created an engineering centre in Manhattan and elected a team of engineers and developers (currently numbering 30, but will hit roughly 50 by the end of the year) spread between Toronto and New York City, all focused on helping it embrace a cloud-first, slimmed-down application landscape.
The centre and the central engineering team work with other development teams and infrastructure specialists across the bank, collecting feedback through fortnightly Q&As and feeding that back into the solutions being developed and the platforms being procured. Solving developer team fragmentation will ultimately help the bank move forward on this new path sustainably, he explained.
“When your developer community is so siloed you don’t end up adopting standards… you end up with 27 versions of Softcat. Which we have, by the way,” he said.
“This is a big undertaking, and one that has to be continuous. Business lines also have to move with us to decompose those applications and help deliver against those commitments,” he added.

May 9, 2016: From OpenStack Summit Austin, Part 1: Vendors digging in for long haul continued:

While OpenStack may have been conceived as an open source multi-tenant IaaS, its future success will mainly come from hosted and on-premises private cloud deployments. Yes, there are many pockets of success with regional or vertical-focused public clouds based on OpenStack, but none with the scale of AWS or the growth of Microsoft Azure. Hewlett Packard Enterprise shuttered its OpenStack Helion-based public cloud, and Rackspace shifted engineering resources away from its own public cloud. Rackspace, the service provider with the largest share of OpenStack-related revenue, says its private cloud is growing in the ‘high double digits.’ Currently, 56% of OpenStack’s service-provider revenue total is public cloud-based, but we expect private cloud will account for a larger portion over the next few years.

October 21, 2015:

A new model to deliver public cloud by Bill Hill, SVP and GM, HP Cloud

Over the past several years, HP has built its strategy on the idea that a hybrid infrastructure is the future of enterprise IT. In doing so, we have committed to helping our customers seamlessly manage their business across traditional IT and private, managed or public cloud environments, allowing them to optimize their infrastructure for each application’s unique requirements.
The market for hybrid infrastructure is evolving quickly. Today, our customers are consistently telling us that in order to meet their full spectrum of needs, they want a hybrid combination of efficiently managed traditional IT and private cloud, as well as access to SaaS applications and public cloud capabilities for certain workloads. In addition, they are pushing for delivery of these solutions faster than ever before.
With these customer needs in mind, we have made the decision to double-down on our private and managed cloud capabilities. For cloud-enabling software and solutions, we will continue to innovate and invest in our HP Helion OpenStack®platform. HP Helion OpenStack® has seen strong customer adoption and now runs our industry leading private cloud solution, HP Helion CloudSystem, which continues to deliver strong double-digit revenue growth and win enterprise customers. On the cloud services side, we will focus our resources on our Managed and Virtual Private Cloud offerings. These offerings will continue to expand, and we will have some very exciting announcements on these fronts in the coming weeks.

Public cloud is also an important part of our customers’ hybrid cloud strategy, and our customers are telling us that the lines between all the different cloud manifestations are blurring. Customers tell us that they want the ability to bring together multiple cloud environments under a flexible and enterprise-grade hybrid cloud model. In order to deliver on this demand with best-of-breed public cloud offerings, we will move to a strategic, multiple partner-based model for public cloud capabilities, as a component of how we deliver these hybrid cloud solutions to enterprise customers.

Therefore, we will sunset our HP Helion Public Cloud offering on January 31, 2016. As we have before, we will help our customers design, build and run the best cloud environments suited to their needs – based on their workloads and their business and industry requirements.

To support this new model, we will continue to aggressively grow our partner ecosystem and integrate different public cloud environments. To enable this flexibility, we are helping customers build cloud-portable applications based on HP Helion OpenStack® and the HP Helion Development Platform. In Europe, we are leading the Cloud28+ initiative that is bringing together commercial and public sector IT vendors and EU regulators to develop common cloud service offerings across 28 different countries.
For customers who want access to existing large-scale public cloud providers, we have already added greater support for Amazon Web Services as part of our hybrid delivery with HP Helion Eucalyptus, and we have worked with Microsoft to support Office 365 and Azure. We also support our PaaS customers wherever they want to run our Cloud Foundry platform – in their own private clouds, in our managed cloud, or in a large-scale public cloud such as AWS or Azure.
All of these are key elements in helping our customers transform into a hybrid, multi-cloud IT world. We will continue to innovate and grow in our areas of strength, we will continue to help our partners and to help develop the broader open cloud ecosystem, and we will continue to listen to our customers to understand how we can help them with their entire end-to-end IT strategies.

 December 1, 2015:

Hewlett Packard Enterprise and Microsoft announce plans to deliver integrated hybrid IT infrastructure press release

London, U.K. – December 1, 2015 – Today at Hewlett Packard Enterprise Discover, HPE and Microsoft Corp. announced new innovation in Hybrid Cloud computing through Microsoft Azure, HPE infrastructure and services, and new program offerings. The extended partnership appoints Microsoft Azure as a preferred public cloud partner for HPE customers while HPE will serve as a preferred partner in providing infrastructure and services for Microsoft’s hybrid cloud offerings.

“Hewlett Packard Enterprise is committed to helping businesses transform to hybrid cloud environments in order to drive growth and value,” said Meg Whitman, President and CEO, Hewlett Packard Enterprise. “Public cloud services, like those Azure provides, are an important aspect of a hybrid cloud strategy and Microsoft Azure blends perfectly with HPE solutions to deliver what our customers need most.”
The partnering companies will collaborate across engineering and services to integrate innovative compute platforms that help customers optimize their IT environment, leverage new consumption models and accelerate their business further, faster.
“Our mission to empower every organization on the planet is a driving force behind our broad partnership with Hewlett Packard Enterprise that spans Microsoft Azure, Office 365 and Windows 10,” said Satya Nadella, CEO, Microsoft. “We are now extending our longstanding partnership by blending the power of Azure with HPE’s leading infrastructure, support and services to make the cloud more accessible to enterprises around the globe.”
Product Integration and Collaboration HPE and Microsoft are introducing the first hyper-converged system with true hybrid cloud capabilities, the HPE Hyper-Converged 250 for Microsoft Cloud Platform System StandardBringing together industry leading HPE ProLiant technology and Microsoft Azure innovation, the jointly engineered solution brings Azure services to customers’ datacenters, empowering users to choose where and how they want to leverage the cloud. An Azure management portal enables business users to self-deploy Windows and Linux workloads, while ensuring IT has central oversight. Azure services provide reliable backup and disaster recovery, and with HPE OneView for Microsoft System Center, customers get an integrated management experience across all system components. HPE offers hardware and software support, installation and startup services to customers to speed deployment to just a matter of hours, lower risk and decrease total cost of ownership. The CS 250 is available to order today.
As part of the expanded partnership, HPE will enable Azure consumption and services on every HPE server, which allows customers to rapidly realize the benefits of hybrid cloud.
Extended Support and Services to Simplify Cloud
HPE and Microsoft will create HPE Azure Centers of Excellence in Palo Alto, Calif. and Houston, Texas, to ensure customers have a seamless hybrid cloud experience when leveraging Azure across HPE infrastructure, software and services. Through the work at these centers, both companies will invest in continuing advancements in Hybrid IT and Composable Infrastructure.
Because Azure is a preferred provider of public cloud for HPE customers, HPE also plans to certify an additional 5,000 Azure Cloud Architects through its Global Services Practice. This will extend its Enterprise Services offerings to bring customers an open, agile hybrid cloud with improved security that integrates with Azure.
Partner Program Collaboration
Microsoft will join the HPE Composable Infrastructure Partner Program to accelerate innovation for the next-generation infrastructure and advance the automation and integration of Microsoft System Center and HPE OneView orchestration tools with today’s infrastructure.
Likewise, HPE joined two Microsoft programs that help customers accelerate their hybrid cloud journey through end-to-end cloud, mobility, identity and productivity solutions. As a participant in Microsoft’s Cloud Solution Provider program, HPE will sell Microsoft cloud solutions across Azure, the Microsoft Enterprise Mobility Suite and Office 365.

May 9, 2016: From OpenStack Summit Austin, Part 1: Vendors digging in for long haul continued:

VENDOR DEVELOPMENTS

As of the Mitaka release, two new gold members were added: UnitedStack and EasyStack, both from China. Other service providers and vendors shared their customer momentum and product updates with 451 Research during the summit. Among the highlights are: ƒ

  • AT&T has cobbled together a DevOps team from 67 different organizations, in order to transform into a software company. ƒ
  • All of GoDaddy’s new servers are going into its OpenStack environment. It is also using the Ironic (bare metal) project and exploring containers on OpenStack. ƒ
  • SwiftStack built a commercial product with an AWS-like consumption model using the Swift (object storage) project. It now has over 60 customers, including eBay, PayPal, Burton Snowboards and Ancestry.com. ƒ
  • OVH is based in France and operates a predominately pan-Europe public cloud. It added Nova compute in 2014, and currently has 75PB on Swift storage. ƒ
  • Unitas Global says OpenStack-related enterprise engagements are a large part of its 100% Y/Y growth. While it does not contribute code, it is helping to develop operational efficiencies and working with Canonical to deploy ‘vanilla’ OpenStack using Juju charms. Tableau Software is a client. ƒ
  • DreamHost is operating an OpenStack public cloud, DreamCompute, and is a supporter of the Astara (network orchestration) project. It claims 2,000 customers for DreamCompute and 10,000 customers for its object storage product. ƒ
  • Platform9 is a unique OpenStack in SaaS startup with 20 paying customers. Clients bring their own hardware, and the software provides the management functions and takes care of patching and upgrades. ƒ
  • AppFormix is a software startup focused on cloud operators and application developers that has formed a licensing agreement with Rackspace. Its analytics and capacity-planning dashboard software will now be deployed on Rackspace’s OpenStack private cloud. The software also works with Azure and AWS. ƒ
  • Tesora is leveraging the Trove project to offer DBaaS. The vendor built a plug-in for Mirantis’ Fuel installer. The collaboration claims to make commercial, open source relational and NoSQL databases easier for administrators to deploy.

April 25, 2016:

AT&T’s Cloud Journey with OpenStack by Sorabh Saxena SVP, Software Development & Engineering, AT&T

OpenStack + AT&T Innovation = AT&T Integrated Cloud.

AT&T’s network has experienced enormous growth in traffic in the last several years and the trend continues unabated. Our software defined network initiative addresses the escalating traffic demands and brings greater agility and velocity to delivering features to end customers. The underlying fabric of this software defined network is AT&T Integrated Cloud (AIC).

Sorabh Saxena, AT&T’s SVP of Software Development & Engineering, will share several use cases that will highlight a multi-dimensional strategy for delivering an enterprise & service provider scale cloud. The use cases will illustrate OpenStack as the foundational element of AIC, AT&T solutions that complement it, and how it’s integrated with the larger AT&T ecosystem.

http://att.com/ecomp


As the Senior Vice President of Software Development and Engineering at AT&T, Sorabh Saxena is leading AT&T’s transformation to a software-based company.  Towards that goal, he is leading the development of platforms that include AT&T’s Integrated Cloud (AIC), API, Data, and Business Functions. Additionally, he manages delivery and production support of AT&T’s software defined network.

Sorabh and his organization are also responsible for technology solutions and architecture for all IT projects, AT&T Operation Support Systems and software driven business transformation programs that are positioning AT&T to be a digital first, integrated communications company with a best in class cost structure. Sorabh is also championing a cultural shift with a focus on workforce development and software & technology skills development.

Through Sorabh and his team’s efforts associated with AIC, AT&T is implementing an industry leading, highly complex and massively scaled OpenStack cloud.  He is an advocate of OpenStack and his organization contributes content to the community that represents the needs of large enterprises and communication services providers.

April 25, 2016And the Superuser Award goes to… AT&T takes the fourth annual Superuser Award.

AUSTIN, Texas — The OpenStack Austin Summit kicked off day one by awarding the Superuser Award to AT&T.

NTT, winners of the Tokyo edition, passed the baton onstage to the crew from AT&T.

AT&T is a legacy telco which is transforming itself by adopting virtual infrastructure and a software defined networking focus in order to compete in the market and create value for customers in the next five years and beyond. They have almost too many OpenStack accomplishments to list–read their full application here.

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Sorabh Saxena gives a snapshot of AT&Ts OpenStack projects during the keynote.

The OpenStack Foundation launched the Superuser Awards to recognize, support and celebrate teams of end-users and operators that use OpenStack to meaningfully improve their businesses while contributing back to the community.

The legacy telecom is in the top 20 percent for upstream contributions with plans to increase this significantly in 2016.

It’s time for the community to determine the winner of the Superuser Award to be presented at the OpenStack Austin Summit. Based on the nominations received, the Superuser Editorial Advisory Board conducted the first round of judging and narrowed the pool to four finalists.

Now, it’s your turn.

The team from AT&T is one of the four finalists. Review the nomination criteria below, check out the other nominees and cast your vote before the deadline, Friday, April 8 at 11:59 p.m.Pacific Daylight Time. Voting is limited to one ballot per person.

How has OpenStack transformed your business?

AT&T is a legacy telco which is transforming itself by adopting virtual infrastructure and a software defined networking focus in order to compete in the market and create value for customers in the next five years and beyond.

  1. Virtualization and virtual network functions (VNFs) are of critical importance to the Telecom industry to address growth and agility. AT&T’s Domain 2.0 Industry Whitepaper released in 2013 outlines the need as well as direction.
  2. AT&T chose OpenStack as the core foundation of their cloud and virtualization strategy
  3. OpenStack has reinforced AT&T’s open source strategy and strengthened our dedication to the community as we actively promote and invest resources in OpenStack
  4. AT&T is committing staff and resources to drive the vision and innovation in the OpenStack and OPNFV communities to help drive OpenStack as the default cloud orchestrator for the Telecom industry
  5. AT&T as a founding member of the ETSI ISG network functions virtualization (NFV) helped drive OpenStack as the cloud orchestrator in the NFV platform framework. OpenStack was positioned as the VIM – Virtual Infrastructure Manager. This accelerated the convergence of the Telco industry onto OpenStack.

OpenStack serves as a critical foundation for AT&T’s software-defined networking (SDN) and NFV future and we take pride in the following:

  • AT&T has deployed 70+ OpenStack (Juno & Kilo based) clouds globally, which are currently operational. Of the 70+ clouds 57 are production application and network clouds.
  • AT&T plans 90% growth, going to 100+ production application and network clouds by the end of 2016.
  • AT&T connects more than 14 million wireless customers via virtualized networks, with significant subscriber cut-over planned again in 2016
  • AT&T controls 5.7% of our network resources (29 Telco production grade VNFs) with OpenStack, with plans to reach 30% by the end of 2016 and 75% by 2020.
  • AT&T trained more than 100 staff in OpenStack in 2015

AT&T plans to expand to expand its community team of 50+ employees in 2016 As the chosen cloud platform OpenStack enabled AT&T in the following SDN and NFV related initiatives:

  • Our recently announced 5G field trials in Austin
  • Re-launch of unlimited data to mobility customers
  • Launch of AT&T Collaborate a next generation communication tool for enterprise
  • Provisioning of a Network on Demand platform to more than 500 enterprise customers
  • Connected Car and MVNO (Mobile Virtual Network Operator)
  • Mobile Call Recording
  • Internally we are virtualizing our control services like DNS, NAT, NTP, DHCP, radius, firewalls, load balancers and probes for fault and performance management.

Since 2012, AT&T has developed all of our significant new applications in a cloud native fashion hosted on OpenStack. We also architected OpenStack to support legacy apps.

  • AT&T’s SilverLining Cloud (predecessor to AIC) leveraged the OpenStack Diablo release, dating as far back as 2011
  • OpenStack currently resides on over 15,000 VMs worldwide, with the expectation of further, significant growth coming in 2016-17
  • AT&T’s OpenStack integrated Orchestration framework has resulted in a 75% reduction in turnaround time for requests for virtual resources
  • AT&T Plans to move 80% of our Legacy IT into the OpenStack based virtualized cloud environment within coming years
  • Uniform set of APIs exposed by OpenStack allows AT&T business units to leverage a “develop-once-run-everywhere” set of tools OpenStack helps AT&T’s strategy to begin to adopt best of the breed solutions at five 9’s of reliability for:
    • NFV
    • Internet-scale storage service
    • SDN
  • Putting all AT&T’s workloads on one common platform Deployment Automation: OpenStack modules have enabled AT&T to cost-effectively manage the OpenStack configuration in an automated, holistic fashion.
  • Using OpenStack Heat, AT&T pushed rolling updates and incremental changes across 70+ OpenStack clouds. Doing it manually would be take many more people and a much longer schedule.
  • Using OpenStack Fuel as a pivotal component in its cloud deployments AT&T accelerates the otherwise consuming, complex, and error-prone process of deploying, testing, and maintaining various configuration flavors of OpenStack at scale. AT&T was a major contributor towards Fuel 7.0 and Fuel 8.0 requirements. OpenStack has been a pivotal driver of AT&T’s overall culture shift. AT&T as an organization is in the midst of a massive culture shift from a Legacy Telco to a company where new skills, techniques and solutions are embraced.

OpenStack has been a key driver of this transformation in the following ways:

  • AT&T is now building 50 percent of all software on open source technologies
  • Allowing for the adoption of a dev ops model that creates a more unified team working towards a better end product
  • Development transitioned from a waterfall to cloud-native CICD methodologies
  • Developers continue to support OpenStack and make their applications cloud-native whenever possible.

How has the organization participated in or contributed to the OpenStack community?

AT&T was the first U.S. telecom service provider to sign up for and adopt the then early stage NASA-spawned OpenStack cloud initiative, back in 2011.

  • AT&T has been an active OpenStack contributor since the Bexar release.
  • AT&T has been a Platinum Member of the OpenStack Foundation since its origins in 2012 after helping to create its bylaws.
  • Toby Ford, AVP AT&T Cloud Technology has provided vision, technology leadership, and innovation to OpenStack ecosystem as an OpenStack Foundation board member since late 2012.
  • AT&T is founding member of ETSI, and OPNFV.
  • AT&T has invested in building an OpenStack upstream contribution team with 25 current employees and a target for 50+ employees by the end of 2016.
  • During the early years of OpenStack, AT&T brought many important use-cases to the community. AT&T worked towards solving those use-cases by leveraging various OpenStack modules, in turn encouraging other enterprises to have confidence in the young ecosystem.
  • AT&T drove these following Telco-grade blueprint contributions to past releases of OpenStack:
    • VLAN aware VMs (i.e. Trunked vNICs) – Support for BGP VPN, and shared volumes between guest VMs
    • Complex query support for statistics in Ceilometer
    • Spell checker gate job
    • Metering support for PCI/PCIe per VM tenant
    • PCI passthrough measurement in Ceilometer – Coverage measurement gate job
    • Nova using ephemeral storage with cinder
    • Climate subscription mechanism
    • Access switch port discovery for bare metal nodes
    • SLA enforcement per vNIC – MPLS VPNaaS
    • NIC-state aware scheduling
  • Toby Ford has regularly been invited to present keynotes, sessions, and panel talks at a number of OpenStack summits. For instance: Role of OpenStack in a Telco: User case study – at Atlanta Summit May 2014 – Leveraging OpenStack to Solve Telco needs: Intro to SDN/NFV – Atlanta Summit May 2014 – Telco OpenStack Roadmap Panel Talk – Tokyo Summit October 2015 – OpenStack Roadmap Software Trajectory – Atlanta Summit May 2014 – Cloud Control to Major Telco – Paris Summit November 2014.
  • Greg Stiegler, assistant vice president – AT&T cloud tools & development organization represented the AT&T technology development organization at the Tokyo Summit.
  • AT&T Cloud and D2 Architecture team members were invited to present various keynote sessions, summit sessions and panel talks including: – Participation at the Women of OpenStack Event – Tokyo Summit 2015 – Empower Your Cloud Through Neutron Service Function Chaining – Tokyo Summit Oct 2015 – OPNFV Panel – Vancouver Summit May 2015 – OpenStack as a Platform for Innovation – Keynote at OpenStack Silicon Valley – Aug 2015 – Taking OpenStack From Zero to Production in a Fortune-500 – Tokyo Summit October 2015 – Operating at Web-scale: Containers and OpenStack Panel Talk – Tokyo Summit October 2015 * AT&T strives to collaborate with other leading industry partners in the OpenStack ecosystem. This has led to the entire community benefiting from AT&T’s innovation.
  • Margaret Chiosi gives talks worldwide on AT&T’s D2.0 vision at many Telco conferences ranging from Optics (OFC) to SDN/NFV conferences advocating OpenStack as the de-facto cloud orchestrator.
  • AT&T Entertainment Group (DirecTV) architected multi-hypervisor hybrid OpenStack cloud by designing Neutron ML2 plugin. This innovation helped achieve integration between legacy virtualization and OpenStack.
  • AT&T is proud to drive OpenStack adoption by sharing knowledge back to the OpenStack community in the form of these summit sessions at the upcoming Austin summit:
    • Telco Cloud Requirements: What VNFs Are Asking For
    • Using a Service VM as an IPv6 vRouter
    • Service Function Chaining
    • Technology Analysis Perspective
    • Deploying Lots of Teeny Tiny Telco Clouds
    • Everything You Ever Wanted to Know about OpenStack At Scale
    • Valet: Holistic Data Center Optimization for OpenStack
    • Gluon: An Enabler for NFV
    • Among the Cloud: Open Source NFV + SDN Deployment
    • AT&T: Driving Enterprise Workloads on KVM and vCenter using OpenStack as the Unified Control Plane
    • Striving for High-Performance NFV Grid on OpenStack. Why you, and every OpenStack community member should be excited about it
    • OpenStack at Carrier Scale
  • AT&T is the “first to marketwith deployment of OpenStack supported carrier-grade Virtual Network Functions. We provide the community with integral data, information, and first-hand knowledge on the trials and tribulations experienced deploying NFV technology.
  • AT&T ranks in the top 20 percent of all companies in terms of upstream contribution (code, documentation, blueprints), with plans to increase this significantly in 2016.
    • Commits: 1200+
    • Lines of Code: 116,566
    • Change Requests: 618
    • Patch Sets: 1490
    • Draft Blueprints: 76
    • Completed Blueprints: 30
    • Filed Bugs: 350
    • Resolved Bugs: 250

What is the scale of the OpenStack deployment?

  • AT&T’s OpenStack based AIC is deployed at 70+ sites across the world. Of the 70+ 57 are production app and network clouds.
  • AT&T plans 90% growth, going to 100+ production app and network clouds by end of 2016.
  • AT&T connects more than 14 million of the 134.5 million wireless customers via virtualized networks with significant subscriber cutover planned again in 2016
  • AT&T controls 5.7% of our network resources (29 Telco production grade VNF) with a goal of high 80s by end of 2016) on OpenStack.
  • Production workloads also include AT&T’s Connected Car, Network on Demand, and AT&T Collaborate among many more.

How is this team innovating with OpenStack?

  • AT&T and AT&T Labs are leveraging OpenStack to innovate with Containers and NFV technology.
  • Containers are a key part of AT&Ts Cloud Native Architecture. AT&T chairs the Open Container Initiative (OCI) to drive the standardization around container formats.
  • AT&T is leading the effort to improve Nova and Neutron’s interface to SDN controllers.
  • Margaret Chiosi, an early design collaborator to Neutron, ETSI NFV, now serves as President of OPNFV. AT&T is utilizing its position with OPNFV to help shape the future of OpenStack / NFV. OpenStack has enabled AT&T to innovate extensively.

The following recent unique workloads would not be possible without the SDN and NFV capabilities which OpenStack enables: * Our recent announcements of 5G field trials in Austin * Re-launch of unlimited data to mobility customers * Launch of AT&T Collaborate * Network on Demand platform to more than 500 enterprise customers * Connected Car and MVNO (Mobile Virtual Network Operator) * Mobile Call Recording New services by AT&T Entertainment Group (DirecTV) that would use OpenStack based cloud infrastructure in coming years: * NFL Sunday Ticket with up to 8 simultaneous games * DirecTV Streaming Service Without Need For satellite dish

In summary – the innovation with OpenStack is not just our unique workloads, but also to support them together under the same framework, management systems, development/test, CI/CD pipelines, and deployment automation toolset(s).

Who are the team members?

  • AT&T Cloud and D2 architecture team
  • AT&T Integrated Cloud (AIC) Members: Margaret Chiosi, distinguished member of technical staff, president of OPNFV; Toby Ford, AVP – AT&T cloud technology & D2 architecture – strategy, architecture & pPlanning, and OpenStack Foundation Board Member; Sunil Jethwani – director, cloud & SDN architecture, AT&T Entertainment Group; Andrew Leasck – director – AT&T Integrated cloud development; Janet Morris – director – AT&T integrated cloud development; Sorabh Saxena, senior vice president – AT&T software development & engineering organization; Praful Shanghavi – director – AT&T integrated cloud development; Bryan Sullivan – director member of technical staff; Ryan Van Wyk – executive director – AT&T integrated cloud development.
  • AT&T’s project teams top contributors: Paul Carver, Steve Wilkerson, John Tran, Joe D’andrea, Darren Shaw.

April 30, 2016Swisscom in Production with OpenStack and Cloud Foundry

Swisscom has one of the largest in-production industry standard Platform as a Service built on OpenStack. Their offering is focused on providing an enterprise-grade PaaS environment to customers worldwide and with various delivery models based on Cloud Foundry and OpenStack. Swisscom embarked early on the OpenStack journey to deploy their app cloud partnering with Red Hat, Cloud Foundry, and PLUMgrid. With services such as MongoDB, MariaDB, RabbitMQ, ELK, and an object storage, the PaaS cloud offers what developers need to get started right away. Join this panel for take-away lessons on Swisscom’s journey, the technologies, partnerships, and developers who are building apps everyday on Swisscom’s OpenStack cloud.

May 23, 2016How OpenStack public cloud + Cloud Foundry = a winning platform for telecoms interview on ‘OpenStack Superuser’ with Marcel Härry, chief architect, PaaS at Swisscom

Swisscom has one of the largest in-production industry standard platform-as-a-service built on OpenStack.

Their offering focuses on providing an enterprise-grade PaaS environment to customers worldwide and with various delivery models based on Cloud Foundry and OpenStack. Swisscom, Switzerland’s leading telecom provider, embarked early on the OpenStack journey to deploy their app cloud partnering with Red Hat, Cloud Foundry and PLUMgrid.

Superuser interviewed Marcel Härry, chief architect, PaaS at Swisscom and member of theTechnical Advisory Board of the Cloud Foundry Foundation to find out more.

How are you using OpenStack?

OpenStack has allowed us to rapidly develop and deploy our Cloud Foundry-based PaaS offering, as well as to rapidly develop new features within SDN and containers. OpenStack is the true enabler for rapid development and delivery.

An example: after half a year from the initial design and setup, we already delivered two production instances of our PaaS offering built on multiple OpenStack installations on different sites. Today we are already running multiple production deployments for high-profile customers, who further develop their SaaS offerings using our platform. Additionally, we are providing the infrastructure for numerous lab and development instances. These environments allow us to harden and stabilize new features while maintaining a rapid pace of innovation, while still ensuring a solid environment.

We are running numerous OpenStack stacks, all limited – by design – to a single region, and single availability zone. Their size ranges from a handful of compute nodes, to multiple dozens of compute nodes, scaled based on the needs of the specific workloads. Our intention is not to build overly large deployments, but rather to build multiple smaller stacks, hosting workloads that can be migrated between environments. These stacks are hosting thousands of VMs, which in turn are hosting tens of thousands of containers to run production applications or service instances for our customers.

What kinds of applications or workloads are you currently running on OpenStack?

We’ve been using OpenStack for almost three years now as our infrastructure orchestrator. Swisscom built its Elastic Cloud on top of OpenStack. On top of this we run Swisscom’s Application Cloud, or PaaS, built on Cloud Foundry with PLUMgrid as the SDN layer. Together, the company’s clouds deliver IaaS to IT architects, SaaS to end users and PaaS to app developers among other services and applications. We mainly run our PaaS/Cloud Foundry environment on OpenStack as well as the correlated managed services (i.e. a kind of DBaaS, Message Service aaS etc.) which are running themselves in Docker containers.

What challenges have you faced in your organization regarding OpenStack, and how did you overcome them?

The learning curve for OpenStack is pretty steep. When we started three years ago almost no reference architectures were available, especially none with enterprise-grade requirements such as dual-site, high availability (HA) capabilities on various levels and so forth. In addition, we went directly into the SDN, SDS levels of implementation which was a big, but very successful step at the end of the day.

What were your major milestones?

Swisscom’s go-live for its first beta environment was in spring of 2014, go live for an internal development (at Swisscom) was spring of 2015, and the go-live for its public Cloud Foundry environment fully hosted on OpenStack was in the fall of 2015. The go-live date for enterprise-grade and business-critical workloads on top of our stack from various multinational companies in verticals like finance or industry is spring, 2016, and Swisscom recently announced Swiss Re as one of its first large enterprise cloud customers.

What have been the biggest benefits to your organization as a result of using OpenStack?

Pluggability and multi-vendor interoperability (for instance with SDN like PLUMgrid or SDS like ScaleIO) to avoid vendor lock in and create a seamless system. OpenStack enabled Swisscom to experiment with deployments utilizing a DevOps model and environment to deploy and develop applications faster. It simplified the move from PoC to production environments and enabled us to easily scale out services utilizing a distributed cluster-based architecture.

What advice do you have for companies considering a move to OpenStack?

It’s hard in the beginning but it’s really worth it. Be wise when you select your partners and vendors, this will help you to be online in a very short amount of time. Think about driving your internal organization towards a dev-ops model to be ready for the first deployments, as well as enabling your firm to change deployment models (e.g. going cloud-native) for your workloads when needed.

How do you participate in the community?

This year’s Austin event was our second OpenStack Summit where we provided insights into our deployment and architecture, contributing back to the community in terms of best practices, as well as providing real-world production use-cases. Furthermore, we directly contribute patches and improvements to various OpenStack projects. Some of these patches have already been accepted, while a few are in the pipeline to be further polished for publishing. Additionally, we are working very closely together with our vendors – RedHat, EMC, ClusterHQ/Flocker, PLUMgrid as well as the Cloud Foundry Foundation – and work together to further improve their integration and stability within the OpenStack project. For example, we worked closely together with Flocker for their cinder-based driver to orchestrate persistency among containers. Furthermore, we have provided many bug reports through our vendors and have worked together with them on fixes which then have made their way back into the OpenStack community.

What’s next?

We have a perfect solution for non-persistent container workloads for our customers. We are constantly evolving this product and are working especially hard to meet the enterprise- and finance-verticals requirements when it comes to the infrastructure orchestration of OpenStack.

Härry spoke about OpenStack in production at the recent Austin Summit, along with Pere Monclus of PLUMgrid, Chip Childers of the Cloud Foundry Foundation, Chris Wright of Red Hat and analyst Rosalyn Roseboro. 

May 10, 2016: Lenovo‘s Highly-Available OpenStack Enterprise Cloud Platform Practice with EasyStack press release by EasyStack

BEIJING, May 10, 2016 /PRNewswire/ — In 2015, the Chinese IT superpower Lenovo chose EasyStack to build an OpenStack-based enterprise cloud platform to carry out their “Internet Strategy”. In six months, this platform has evolved into an enterprise-level OpenStack production environment of over 3000 cores with data growth peaking at 10TB/day. It is expected that by the end of 2016, 20% of the IT system will be migrated onto the Cloud.

OpenStack is the foundation for Cloud, and perhaps has matured in the overseas market. In China, OpenStack practices worthy of noticing often come from the relatively new category of Internet Companies. Though it has long been marketed as “enterprise-ready”, traditional industries still tend to hold back towards OpenStack. This article aims to turn this perception around by presenting an OpenStack practice from the Chinese IT Superpower Lenovo, detailing their journey of transformation in both the technology and business realms to a private cloud built upon OpenStack. Although OpenStack will still be largely a carrier for internet businesses, Lenovo plans to migrate 20% of its IT system onto the cloud before the end of 2016 – taking a much applauded step forward.

Be it the traditional PC or the cellphone, technology’s evolving fast amidst this move towards mobile and social networking, and the competition’s fierce. In response to rapidly changing market dynamics, the Lenovo Group made the move of going from being product-oriented to a user-oriented strategy that can only be supported by an agile, flexible and scalable enterprise-level cloud platform capable of rapid iterations. After thorough consideration and careful evaluation, Lenovo chose OpenStack as the basis for their enterprise cloud platform to carry out this “Internet Strategy”. After six months of practice, this platform has evolved into an enterprise-level OpenStack production environment of over 3000 cores with data growth peaking at 10TB/day. It’s expected that 20% of the IT system will be migrated onto the Cloud by the end of 2016.

Transformation and Picking the Right Cloud

In the past, internal IT at Lenovo has always been channel- and key client-oriented, with a traditional architecture consisting of IBM Power, AIX, PowerVM, DB2 and more recently, VMware virtualization. In the move towards becoming an Internet Company, such traditional architecture was far from being able to support the user and business volume brought by the B2C model. Cost-wise, Lenovo’s large-scale deployment of commercial solutions were reliable but complex to scale and extremely expensive.

Also, this traditional IT architecture was inadequate in terms of operational efficiency, security and compliance and unable to support Lenovo’s transition towards eCommerce and mobile business. In 2015, Lenovo’s IT entered a stage of infrastructural re-vamp, in need of using a cloud computing platform to support new businesses.

To find the right makeup for the cloud platform, Lenovo performed meticulous analyses and comparisons on mainstream x86 virtualization technologies, private cloud platforms, and public cloud platforms. After evaluating stability, usability, openness and ecosystem vitality and comprehensiveness, Lenovo deemed the OpenStack cloud platform technology able to fulfill its enterprise needs and decided to use OpenStack as the infrastructural cloud platform supporting their constant businesses innovations.

Disaster recovery plans on virtual machines, cloud hard drives and databases were considered early on into the OpenStack architectural design to ensure prompt switch over when needed to maintain business availability.

A Highly Available Architectural Design

On architectural logic, Lenovo’s Enterprise Cloud Platform managed infrastructures through a software-defined-environment, using x86 servers and 10GB network at the base layer, alongside internet-style monitoring and maintenance solutions, while employing the OpenStack platform to perform overall resource management.

To ensure high availability and improve the cloud platform’s system efficiency, Lenovo designed a physical architecture, and used capable servers with advanced configurations to make up the compute, storage network all-in-one, then using OpenStack to integrate into a single resource pool, placing compute nodes and storage nodes on the same physical node.

Two-way X3650 servers and four-way ThinkServer RQ940 server as backbones at the hardware layer. For every node there are five SSD hard drivers and 12 SAS hard drives to make up the storage module. SSD not only acts as the storage buffer, but also is the high performance storage resource pool, accessing the distributed storage through the VM to achieve high availability.

Lenovo had to resolve a number of problems and overcome numerous hurdles to elevate OpenStack to the enterprise-level.

Compute

Here, Lenovo utilized high-density virtual machine deployment. At the base is KVM virtualization technology, optimized in multiple way to maximize physical server performance, isolating CPU, Memory and other hardware resources under the compute-storage convergent architecture. The outcome is the ability to have over 50 VMs running smoothly and efficiently on every two-core CPU compute node.

In the cloud environment, it’s encouraged to achieve high availability through not hardware, but solutions. Yet still there are some traditional applications that hold certain requirements to a single host server. For such applications unable to achieve High Availability, Lenovo used Compute HA technology to achieve high availability on compute nodes, performing fault detection through various methods, migrating virtual machines on faulted physical machine to other available physical machines when needed. This entire process is automated, reducing as much as possible business disruptions caused by physical machine breakdowns.

Network

Network Isolation

Using different NIC, different switch or different VLAN to isolate various networks such as stand-alone OpenStack management networks, virtual production networks, storage networks, public networks, and PXE networks, so that interferences are avoided, increasing overall bandwidth and enabling better network control.

Multi-Public Network

Achieve network agility through multiple public networks to better manage security strategies. The Public Networks from Unicom, Telecom and at the office are some examples

Network and Optimization

Better integrate with the traditional data center network through the VLAN network model, then optimize its data package processing to achieve improved capability on network data pack process, bringing closer the virtual machine bandwidth to that of the physical network.

Dual Network Protocol Bundling and Multi Switch

Achieve high availability of physical networks through dual network protocol bundling to different switches.

Network Node HA

Achieve public network load balance, high availability and high performance through multiple network nodes, at which router-level Active/Standby methodology is used to achieve HA, which is ensured through independent network router monitoring services.

Storage

The Lenovo OpenStack Cloud Platform used Ceph as the unified storage backend, in which data storage for Glance image mirroring, Nova virtual machine system disc, and Cinder cloud hard drive are provided by Ceph RBD. Using Ceph’s Copy on Write function to revise OpenStack codes can deploy virtual machines within seconds.

With Ceph as the unified storage backend, its functionality is undoubtedly a key metric on whether the critical applications of an enterprise can be virtualized and cloud-ready. In a super-convergent deployment architecture where compute and storage run alongside each other, storage function optimization not only have to maximize storage capability, but also have to ensure the isolation between storage and compute resources to maintain system stability. For the IO stack below, Lenovo conducted bottom-up layer-by-layer optimization:

On the Networks

Open the Jumbo frame, improve data transfer efficiency while use 10Gb Ethernet to carry Ceph Cluster network traffics, improving the efficiency on Ceph data replication.

On Functionality

Leverage Solid State Disc as the Ceph OSD log to improve overall cluster IO functionality, to fulfill performance demands of critical businesses ( for example the eCommerce system’s database businesses, etc.) and achieve function-cost balance. SSD is known for its low power consumption, prompt response, high IOPS, and high throughput. In the Ceph log system, these are aligned to multithread access; using SSD to replace mechanical hard drives can fully unleash SSD’s trait of random access, rapid response and high IO throughput. Appropriately optimizing IO coordination strategy and further suit it to SSD and lower overall IO latency.

Purposeful Planning

Plan the number of Ceph OSD under the super-convergent node reasonably according to virtual machine density on the server, while assign in advance CPU and other memory resources. Cgroup, taskset and other tools can be used to perform resource isolation for QEMU-KVM and Ceph OSD

Parameter Tuning

Regarding parameter tuning for Ceph, performance can be effectively improved by fine-tuning parameters on FileStore’s default sequence, OSD’s OP thread and others. Additional tuning can be done through performing iteration test to find the most suitable parameter for the current hardware environment.

Data HA

Regarding data HA, besides existing OpenStack data protection measures, Lenovo has planned a comprehensive disaster recovery protocol for its three centers at two locations:

By employing exclusive low-latency fiber-optic cable, data can be simultaneously stored in local backup centers, and started asynchronously in long-distance centers, maximizing data security.

AD Integration

In addition, Lenovo has integrated its own business demands into the OpenStack enterprise cloud platform. As a mega company with tens of thousands of employees, AD activity logs are needed for authorization so that staffs won’t need to be individually set up user commands. Through customized development by part of the collaborator, Lenovo has successfully integrated AD functions into its OpenStack Enterprise Cloud Platform.

Overall Outcomes

Lenovo’s transformation towards being “internet-driven” was able to begin after the buildup of this OpenStack Enterprise Cloud Platform. eCommerce, Big Data and Analytics, IM, Online Mobile Phone Support and other internet based businesses, all supported by this cloud platform. Judging from feedback from the team, the Lenovo OpenStack Enterprise Cloud Platform is functioning as expected.

In the process of building up this OpenStack based enterprise cloud platform, Lenovo chose EasyStack, the leading Chinese OpenStack Company to provide professional implementation and consulting services, helping to build the initial platform, fostering a number of OpenStack experts. For Lenovo, community compatibility and continuous upgrade, as well as experiences in delivering services at the enterprise level are the main factors for consideration when choosing an OpenStack business partner.

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Marko Ahtisaari from Nokia and Steven Guggenheimer from Microsoft on the Internet of Things day of LeWeb Paris’12

Marko Ahtisaari: From the HERE location cloud, through design (principles) and new Lumia 620 announced, to the Internet of (Small) Things, or Nokia’s vision for IoT [leweb YouTube channel, Dec 5, 2012]

– [02:20] Now the Internet is everywhere around us on the multitude of devices.
– [02:40] We move forward … to an Internet of ten, twenty, thirty, forty smaller things that are on, in around us that are all connected to the Internet
– [03:48] So what kind of world we do want to have as we go forward is something where the technology allows us to reach each other remotely but doesn’t get in the way of human interaction and in that connection with the environment that we have every day. So that’s the first, I think, important shift when you’re talking about the Internet of Things. But the other, equallly important , is a return to the significance of place.
– [04:50] Now as we look at these devices that are increasingly packed with sensors, we know that they are aware and they know where they are. And all of these ten, twenty, imagethirty, forty things that we will have, on us, with us, will be located in a place. And to take advantage of that, to use location, if you like, as a lens for our activities and the experience we make, you need a digital model of the real world. And that’s what we’re building with what we have just recently recently announced as the HERE location cloud. [05:27]
[see:
Nokia redefines digital map landscape by introducing HERE as new brand for its location and mapping service [Nokia press release, Nov 13, 2012]
– HERE. City and Country Maps – Driving Directions – Satellite Views – Routes.
– HERE.
Developer Site.]
– [05:34] A real-time digital abstraction of the world, we call it HERE.
<from this on you should better watch the video about HERE>
– [10:08] <talk about design, you should watch as well> [10:55] The role of the architect and designer is to give a gentler structured life. The way I interpret that is that you focus on those things the people do fifty to hundred times a day, and you make them better. [11:10] <talk about design principles, continued now for Nokia smartphones> [14:06]
– [14:08] <talk about the new Lumia 620 announced on the scene> [19:45]
– When do you think the Internet of Things will be a reality?
[21:00] What you’re seeing now is the startups here are in the forefront. I think the key thing is to establish things that do one or two or three things, and do them extremely well. And for that we have these products here today. [21:28

Marko Ahtisaari, Executive Vice President, Design, Nokia… and introducing the brand new entry-level Lumia 620 as the manifestation of that Internet of SMALL Things as compact

Detailed information about the three subjects of his talk (or closely related), on my blog:

Nokia HERE Maps for everything, for FireFox OS in a strategic partnership with Mozilla [Nov 13, 2012]
The Where Platform from Nokia: a company move to taking data as a raw material to build products [April 7, 2012]
Nokia’s Lumia strategy is capitalizing on platform enhancement opportunities with location-based services, better photographic experience etc. [Jan 12 – April 27, 2012]
I WILL ADD TO THAT NOW:
Nokia HERE by Michael Halbherr [JB Su YouTube channel, Nov 15, 2012]

Nokia Design direction [Aug 1 – Oct 31, 2012]
Best practice industrial and user experience design – Nokia and Microsoft [Dec 17, 2011 – Jan 31, 2012]
Designing smarter phones–Marko Ahtisaari (Nokia) and Albert Shum (Microsoft) [Nov 23, 2011]
Nokia N9 UX [?Swipe?] on MeeGo 1.2 Harmattan [June 24, 2011 – Aug 10, 2012]
Nokia to enter design pattern competition for 2011 smartphones with MeeGo [Dec 9, 2010 – Jan 31, 2012]
– my detailed companion post on Lumia 620 giving also comparison with other WP8 Lumias: High-volume Nokia Lumia superphones with Windows Phone 8 extended on the top for China, and on the entry level needed for Asia and Middle-East as well [Dec 5, 2012]
Unique differentiators of Nokia Lumia 920/820 innovated for high-volume superphone markets of North America, Europe and elsewhere [Sept 6 – Nov 13, 2012]
Less focus on feature phones while extending the smartphones effort: further readjustments at Nokia [June 25 – Aug 9, 2012]
Nokia Lumia (Windows Phone 7) value proposition [Oct 26-28, 2011]

+ Nokia under transition (as reported by the company) [March 11 – 30, 2012]

+ Regarding the new products below the Windows Phone 8 based Lumias (Lumia 620 … Lumia 920) see:
With Asha Touch starting at $83 and Lumia at $186 Nokia targeting the entry-level and low-end smartphone markets–UPDATED [Dec 19, 2012] new entry prices and Lumia 505 (? $220 ?) with AMOLED ClearBlack and Gorilla Glass [Nov 1 – Dec 19, 2012]

france3 TV station put three questions to Ahtisaari after his keynote which shed more light on what is the connection of those things he was talking about to the subject of the Internet of Things:

Three questions to Marko Ahtisaari, Executive Vice President of NOKIA, and responsible for the Design 1. How the connected objects changed your life? 2. What is the connected object which you dream? 3. What will be your news in the next 12 months? Trois questions à Marko Ahtisaari, vice-président exécutif de NOKIA, et Responsable du Design 1. Comment les objets connectés ont-ils changé votre quotidien? 2. Quel est l’objet connecté dont vous revez? 3. Quelle va etre votre actualité dans les 12 prochains mois?

Strangely (or not, if taken otherwise) I could not find any written reports on the web about the HERE, the talk on design, only for the Lumia 620 announcement by Ahtisaari:

From The Australian report:

“It is a performance device in a compact package,” he said.

… the device does support Near Field Communication, which makes it possible for users to transmit data merely by tapping their phones or waving them near terminals equipped with the technology.

According to Mr Ahtisaari, when the phone goes on sale in January it will retail for $US249 ($238) before tax or subsidy. It will launch into the Asia Pacific region, the Middle East and Africa, before coming to Europe later.

“When we designed the Lumia family, we knew there was an opportunity for a more compact product,” he said. “But it still has the solid products like the camera and the signature apps we have developed like Maps, Drive, City Lens.

“We wanted something that was a bit more playful in a market that is essentially grey or black or white rectangles. We are introducing choice.”
The phone sits nicely in the hand and the high-colour gloss finishes have a richness which Mr Ahtisaari said was achieved by overlaying a translucent layer on top of an opaque layer.

From CNET report:

Marko Ahtisaari, Nokia’s executive vice president of design, put the new colors front and center as he unveiled the phone at the LeWeb conference here.

The phone comes in base colors, but using Nokia’s “dual shot” approach, transparent but colored covers that form new color combinations.

“With the 620, we wanted to introduce some bold blends,” Ahtisaari said. “We use a technique called dual-shot application of color, with an opaque layer underneath then a translucent layer above.” A yellow base becomes lime green with a cyan cover and orange with a red cover, for example.


Steven Guggenheimer: pretty clear Microsoft vision coming out of his discussion at LeWeb as:

– Huge ecosystem is the major attraction for partners
– Consistent UI across devices with choice in price, form factors and personalisation

CHOICE is indeed a unique proposition of Windows 8 for end-users, as it was well demonstrated (here just in form factors) by Microsoft on another event, the Gadget Show Live Christmas in UK (Dec 1, 2012). And keep in mind that this is just the beginning.

– Continuity in innovation while running an app on all those seemlessly
– Relieve HW manufacturers of the pretty painful extra SW work and bring more vendors to operators than just Apple and Samsung (even if Samsung will jump on the Windows bandwagon in full, in addition to Android) to select from, in particular Nokia as a big player
– CIOs getting cool devices that fit into enterprise IT in terms of security etc., while might be offered as real alternatives to iOS/iPad and Android devices to the end-users in terms of consumerization of IT
– Developers reusing their skills in the world of Windows embedded for IoT as well
– While Steven Sinofsky is a phenomenal visionary and shipper, one who ships products, but there is a great bench of executives, Julie Larsen Green, John DeVaan …, so the team is still there to continue on
– Enabling the digital world globally by serving the fastest growing markets of the developing world as well

Steven Guggenheimer, Corporate Vice President, Developer & Platform Evangelism Group, Microsoft & David Kirkpatrick, Founder & CEO, Techonomy Media. Questions from Kirkpatrick were: 1. [02:57] Why should we care about Microsoft and Windows? 2. [05:26] What is the case that you can really have a better phone, a better tablet than what Apple is making , and what Google is making and licensing? 3. [07:12] What is the most amazing stuff we are going to see as consumers, as employees on these phones and tablets, that we can’t do on the other products? What is the differentiated selling proposition? 4. [09:19] What is the next phase beyond the little rectangle of glass we carry on in or pocket? 5. [11:36] The trade-off required from the HW vendors for this, does it frustrate them, or you feel they can be completely fine with it? … with some going with Android … Samsung we have seen making big-big play on Android. 6. [13:04] How big of a potential partner is Samsung for you? … [13:45] Presumably there is a huge opportunity for you guys … to get a swing in effect. 7. [14:50] Operators might want a third choice [vs. Apple and Samsung only] but if Windows 8 starts to really take-off … Samsung will just go right there and that does not really help the operators in that respect. [Your opinion?] … [15:35] Operators in a way are key ally for you. 8. [15:55] CIOs are clearly another huge ally of yours. … Tell us a few of the reasons why. 9. [17:30] How is IoT fit into Windows 8 pitch? 10. [19:40] What does it [Sinofsky being forced out] do to the shape of Microsoft? What was your reaction to Sinofsky leaving? How big the deal is it for the company? 11. [20:58] How do you think about global and the developing worlds’ importance in terms of what you are doing?

Detailed information about the subjects of this discussion (or essentially related, as that of Intel), on my blog:
Boosting both the commodity and premium brand markets in 2013 with much more smartphones and tablets while the Windows notebook shipments will shrink by 2% [Nov 20, 2012]
Giving up the total OEM reliance strategy: the Microsoft Surface tablet [June 19 – July 30, 2012]
The future of Windows Embedded: from standalone devices to intelligent systems [March 9-29, 2012]
Steven Sinofsky, ex Microsoft: The victim of an extremely complex web of the “western world” high-tech interests [Nov 13, 2012]
Microsoft Surface with some questions about the performance and smoothness of the experience [Nov 12, 2012]
Microsoft Surface: its premium quality/price vs. even iPad3 [Oct 26, 2012]
Microsoft Surface: First media reflections after the New-York press launch [Oct 26, 2012]
ASUS: We are the real transformers, not Microsoft [Oct 17, 2012]
Urgent search for an Intel savior [Nov 21, 2012]
Intel Haswell: “Mobile computing is not limited to tiny, low-performing devices” [Nov 15, 2012]
Can VIA Technologies save the mobile computing future of the x86 (x64) legacy platform? [Nov 23, 2012]
AMD 2012-13: a new Windows 8 strategy expanded with ultra low-power APUs for the tablets and fanless clients [Feb 3, 2012]
BUILD 2012: Notes on Day 1 and 2 Keynotes [Oct 31, 2012]
Acer Iconia W510: Windows 8 Clover Trail (Intel Z2760) hybrid tablets from OEMs [Oct 28, 2012]
NOOK Media LLC: the finalization of the strategic joint venture between Barnes & Noble and Microsoft [Oct 6, 2012]
The cloud experience vision of .NET by Microsoft 12 years ago and its delivery now with Windows Azure, Windows 8/RT, Windows Phone, iOS and Android among others [Sept 16-20, 2012]

I searched the web for reports on that discussion and attributed that to the questions shown above. It’s quite typical that there were only two reports, the TechCrunch one just simply copied in quite a number of others. As you could see these two reports are also just focusing on certain questions and also reporting on them in a kind of distorted/biased way. So I will recommend read once again my concise summary of the microsoft vision as truly represented by Guggenheimer and watch the video record as well (if you have not done so yet).

Here is what I’ve found:

1. [02:57] Why should we care about Microsoft and Windows? 
TechCrunch’s summary of the answers:

Starting off the discussion, Kirkpatrick noted how Microsoft is still unsurpassed in the enterprise and how its successes like Xbox and Kinect reflect on the company’s strengths. At the same time, though, many people remain very skeptical about the company’s future – especially in the startup and developer community. Asked about why we should care about Microsoft and Windows 8, Guggenheimer noted that the company’s scale, including the millions of PCs that are expected to sell next year, make it an interested target for developers. He also stressed how the Windows store charges developers less than most other stores (especially for developers with sales over $25,000) and offers them access to a broader hardware ecosystem and access to significantly more eyeballs than other platforms.

memburn’s summary of the answers:

In one word: “opportunity.” Guggenheimer confirmed that some 1500 devices have been certified for Windows 8 already… and it only launched in October. The potential for growth is massive. Users can upgrade from older versions of Windows or buy a new device: and Windows 8 runs on tablets, laptops, desktop computers and smartphones. Whether the adoption curve will really spike as high as Microsoft hopes it will remains to be seen, but this is a key point for major app developers: they won’t build for a platform that no one is using, or for one where they can’t guarantee the best possible experience for their users.

Guggenheimer says that if developers want hundreds of millions of devices to have the potential to access their apps, Windows 8 is the way to go. He also stressed the flexibility of the company’s system. For example, developers can use Microsoft’s engine to accept payments from users, or they can use their own.

2. [05:26] What is the case that you can really have a better phone, a better tablet than what Apple is making , and what Google is making and licensing?
3. [07:12] What is the most amazing stuff we are going to see as consumers, as employees on these phones and tablets, that we can’t do on the other products? What is the differentiated selling proposition?
TechCrunch’s summary of the answers:

Kirkpatrick pushed Guggenheimer to explain why Microsoft’s products are better and why developers – and consumers – should care. Guggenheimer took the standard Microsoft line here and argued that the company’s new products like Windows 8 and Windows Phone 8 offer a more personalized experience (he was clearly referring to the live tiles here) and a broader choice of form factors and price points than its competitors. It’s clear that for Guggenheimer, who previously focused on hardware, after all, the wide variety of hardware devices in the Windows ecosystem is a major selling point. This holiday, he said, will be interesting, but we will see thousands of devices in all kinds of sizes and designs by next year.

memburn’s summary of the answers:

“For the individual, it’s the personalised setup,” said Guggenheimer. There is a “constantly updating customised screen”, a number of devices at a range of price points and the choice of more and more phones, tablets, laptops and desktop computers. “Give hardware manufacturers a year with Windows 8, and you’ll see hundreds of thousands of devices,” said Guggenheimer.

While the devices come in every shape, size and colour, he said they have one thing in common: a consistent user experience. “As developers, when you build an app, it runs on all of those [devices],” said Guggenheimer.

5. [11:36] The trade-off required from the HW vendors for this, does it frustrate them, or you feel they can be completely fine with it? … with some going with Android … Samsung we have seen making big-big play on Android.
memburn’s summary of the answers:

He sees it as a middle ground between Android and Apple’s strategies:

  1. Apple’s model: Build all the hardware so all the software will run on the machines, but only offer consumers a limited choice of devices
  2. Android’s model: While manufacturers can build any hardware they like, the software experience is not consistent over all devices. It’s lead to the dreaded f-word that is a major drawback for Android users: fragmentation.
  3. Microsoft’s model: Partner with manufacturers and provide enough definitions for the hardware so that there are set standards, so all the applications will run on every device, but still offer the customers a wide product range.

10. [19:40] What does it [Sinofsky being forced out] do to the shape of Microsoft? What was your reaction to Sinofsky leaving? How big the deal is it for the company?
TechCrunch’s summary of the answers:

Kirkpatrick, of course, also used this opportunity to ask about Steven Sinofsky’s unexpected exit from Microsoft just days after the launch of Windows 8. According to Guggenheimer, Sinofsky is a “phenomenal visionary” and “phenomenal shipper.” While Kirkpatrick insinuated that Sinofsky was pushed out, Guggenheimer obviously wouldn’t say so and just reiterated Microsoft’s company line that he “decided to leave.” “We’ll miss Steven,” he said, but he also argued that Microsoft has a very deep bench of executive talent.

memburn’s summary of the answers:

The quick departure of the former President of the Windows Division just days after the launch of the OS he helped design has sparked lots of rumours about whether he left voluntarily or was pushed out. Guggenheimer didn’t elaborate on exactly what happened, but he admits that while they’ll “miss him” and “he did great things” at Microsoft, “we have a great bench — the team under Steven is still there.”

11. [20:58] How do you think about global and the developing worlds’ importance in terms of what you are doing?
memburn’s summary of the answers:

With the range of low and high-end devices and partnerships with major international manufacturers, Guggenheimer seems to think the answer to that question is ‘yes’. He said that they’re focusing on the shift: the market in countries like China has outstripped places like the US, and Microsoft is aiming to enable the digital world globally. He said that international expansion is not an obstacle for developers, stating simply that “if you develop for Windows, it’s going to work in 200 countries.”

And finally see what was shown by Microsoft at LeWeb 2012 [Charbax, Dec 8, 2012]

Microsoft is showing off Surface RT, Windows Phone 8, Windows 8, a bunch of devices running these.

Nokia under transition (as reported by the company)

Note and updates: stock price is up 3.17%  as per above (those numbers are in US$)
– see more: Nokia trying the first Lumia month in China with China Telecom exclusive [March 28, 2012]
– Nokia seeks to retake China market share [Reuters, March 28, 2012]: “Shares in Nokia rose 3 percent to 4.116 euros, helped also after Sweden’s Swedbank lifted its rating to “buy” from “neutral”.
– Are Nokia’s Largest Shareholders Betting on a Turnaround With New Releases in China? [Wall St. Cheat Sheet, March 28, 2012]

279 institutional firms indicated owning shares of Nokia Corporation (NYSE:NOK) in both Q3 2011 and Q4 2011. These firms reported owning a total of 348.305 million shares on 09/30/2011 and 382.757 million shares [out of 3.74B, i.e. ~10%] on 12/31/2011. The shares closed at $5.66 on 09/30/2011 and $4.82 on 12/31/2011, for an aggregate market value of $1.971 billion and $1.845 billion, respectively.

– Nokia: The Recovery Begins; One Analyst Turns Bullish [Forbes, March 30, 2012]

… Town Hall Investment Research analyst Jamie Townsend this morning upped his rating onNokia to Buy from Avoid.

His view: for Nokia, the turnaround has begun. And for that he credits the company’s still unfolding new relationship with Microsoft, and its decision to adopt Windows Phone 7 as the operating system for its high-end smartphones.

“Our renewed enthusiasm is primarily driven by Nokia’s smartphone business and our belief that long term the company is now poised to slowly reestablish itself as a meaningful player in smartphone markets around the world,” Townsend writes in a research note. “While we believe that Q1 and Q2 2012 will continue to show the struggle between the death of Symbian and the rise of WP7, we also believe the pieces are now in place for a gradual reversal in the market share losses experienced in the last three years. Specifically, we are expecting positive unit surprises in the U.S. and Western Europe over the next two quarters, albeit coming off a very low base and expectations. While only a wild card right now, we also believe that some sort of partnership between Microsoft, Nokia and RIM is now a real possibility.”

“We believe that there are two issues for RIM that relate to NOK,” he writes. “First, we believe that RIM is now where NOK was approximately a year ago. There was no longer any doubt as to the declining state of the smartphone business but also no clear path to recovery. As we know from Nokia’s last year, the recovery required bold action and the a long lead time to the actual point of product improvement. We believe investors should wait until the recovery is clear which in our view is not yet the case with RIM, but is now on the near horizon for NOK.”

“Second, RIM management on the quarterly conference call made it abundantly clear that the company is seeking a new partnership that will allow it to enhance its consumer appeal but allow it to focus its attention on its core historical strength with the enterprise,” he adds. “We believe that this strategy carries a number of risks, but also believe that Nokia/Microsoft represents the most likely candidate for such a partnership. We have no data points to support that this will happen or that Nokia/Microsoft would want it to, but believe it to be a real possibility over the next six months. Should it occur we believe it would be perceived as a meaningful positive for NOK shares.”

NOK this morning is up 7 cents, or 1.2%, to $5.49.

End of updates

According to the below excerpts from the Nokia 2011 fiscal year report [March 8, 2012]

Current strategic business units, their responsibilities and accountabilities:

[F-9] As of April 1, 2011, the Group’s operational structure featured two new operating and reportable segments: Smart Devices and Mobile Phones, which combined with Devices & Services Other and unallocated items form Devices & Services business.

As of October 1, 2011, the Group formed a Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services. Location & Commerce business is an operating and reportable segment. From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate reportable segment of Nokia. As a consequence, Nokia currently has four operating and reportable segments: Smart Devices and Mobile Phones within Devices & Services, Location & Commerce and Nokia Siemens Networks.

Prior year segment specific results for 2009 and 2010 have been regrouped and recasted for comparability purposes according to the new operational structure.

[F-26] Nokia’s reportable segments represent the strategic business units that offer different products and services. The chief operating decision maker receives monthly financial information for these business units. Key financial performance measures of the reportable segments include primarily net sales and contribution/operating profit. Segment contribution for Smart Devices and Mobile Phones consists of net sales as well as its own, directly assigned costs and allocated costs but exclude major restructuring projects/programs and certain other items that are not directly related to the segments. Operating Profit is presented for Location & Commerce and Nokia Siemens Networks. Nokia evaluates the performance of its segments and allocates resources to them based on operating profit/contribution.

Smart Devices focuses on smartphones and smart devices and has profit-and-loss responsibility and end-to-end accountability for the full consumer experience, including product development, product management and product marketing. ([52] Nokia’s portfolio of smartphones covers price points ranging from around EUR 100 to more than EUR 500, excluding taxes and subsidies. During 2011, we shipped approximately 77.3 million smartphones.)

Mobile Phones focuses on mass market feature phones and related services and applications and has profit-and-loss responsibility and end-to-end accountability for the full consumer experience, including development, management and marketing of feature phone products, services and applications. ([54] Nokia’s portfolio of feature phones covers a wide range of price points from the Nokia 100, our most affordable device which costs about EUR 20, excluding taxes and subsidies, through to devices with more premium features costing upwards of EUR 100, excluding taxes and subsidies. During 2011, we shipped approximately 339.8 million feature phones.)

Devices & Services Other includes net sales of Vertu, spare parts and related cost of sales and operating expenses, as well as intellectual property related royalty income. Operating expenses of Devices & Services Other also include common research and development. Other income and expenses include major restructuring projects/programs related to the Devices & Services business as well as other unallocated items.

Location & Commerce develops a range of location-based products and services for consumers, as well as platform services and local commerce services for the Group’s feature phones and smartphones ([96] in support of our strategic goals) as well as ([96] a portfolio of products for the broader Internet ecosystem, including products for our direct competitors) for other device manufacturers, application developers, Internet service providers, merchants, and advertisers. Location & Commerce also continues to serve NAVTEQ’s existing customers both in terms of provision of content and as a business-to-business provider of map data ([56]providing comprehensive digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, Internet-based mapping applications and government and business solutions). Location & Commerce has profit and loss responsibility and end-to-end accountability for the full consumer experience.

Nokia Siemens Networks provides a portfolio of mobile, fixed and converged network technology, as well as professional services including managed services, consultancy and systems integration, deployment and maintenance to operators and service providers.

[F-71] Nokia Siemens Networks B.V., the ultimate parent of the Nokia Siemens Network group, is owned approximately 50% by each of Nokia and Siemens and consolidated by Nokia. Nokia effectively controls Nokia Siemens Networks as it has the ability to appoint key officers and the majority of the members of its Board of Directors, and accordingly, Nokia consolidated Nokia Siemens Networks.

Business and segment information:

2009 2010 2011
Devices & Services
Net sales (EUR in M) 27853 29134 23943
Operating profit (EUR in M) 3564 3540 884
Gross margin 33.10% 29.90% 27.70%
Operating margin -1% 12.20% 3.70%
Volume (units in M) 431.8 452.9 417.1
ASP (EUR) 64 64 57
Smart Devices
Net sales (EUR in M) 12649 14874 10820
Gross margin 37.20% 30.80% 23.70%
Contribution margin 11.40% 9.30% -3.80%
Volume (units in M) 67.8 103.6 77.3
ASP (EUR) 187 144 140
Mobile Phones
Net sales (EUR in M) 14644 13696 11930
Gross margin 28.50% 28.00% 26.10%
Contribution margin 15.30% 17.00% 12.40%
Volume (units in M) 364 349.2 339.8
ASP (EUR) 40 39 35
Location & Commerce
Net sales (EUR in M) 756 869 1091
Operating profit (EUR in M) -594 -663 -1526
Gross margin 82.70% 80.60% 80.40%
Operating margin -78.60% -76.30% -139.90%
Nokia Siemens Networks
Net sales (EUR in M) 12574 12661 14041
Operating profit (EUR in M) -1639 -686 -300
Gross margin 27.10% 26.80% 27.10%
Operating margin -58% -5.40% -2.10%
Nokia Group
Net sales (EUR in M) 40984 42446 38659
Operating profit (EUR in M) 1197 2070 -1073
Gross margin 32.40% 30.20% 29.30%
Operating margin 2.90% 4.90% -2.80%

The overall market situation and the related Nokia strategies and actions:

Devices & Services:

[87] In 2011, the global mobile device market benefited from continued strength in key growth markets, such as the Middle East and Africa, Greater China and Latin America and, according to our estimate, industry mobile device volumes increased by 11% during the year. Smartphones continued to capture the major part of the volume and value growth, as well as the public focus, in the mobile device market. We estimate that our mobile device volume market share was 26% in 2011, compared to an estimated 32% in 2010, with the decline primarily driven by market share losses in the smartphones segment.

In February 2011, we announced our new strategy for our Devices & Services business, which has three core elements.

First, in smartphones, we announced our partnership with Microsoft, discussed below, to bring together our respective complementary assets and expertise to build a new global mobile ecosystem for smartphones. Under the partnership, formalized in April 2011, we are adopting and licensing Windows Phone from Microsoft as our primary smartphone platform. We launched our first Nokia products with Windows Phone under the Lumia brand in October 2011.

Second, in feature phones, our strategy continues to be to leverage our innovation and strength in growth markets to connect the next billion people to the Internet and information. Through our investments in developing assets designed to bring a modern mobile experience – software, services and applications – we believe we have the opportunity to connect the “next billion” aspirational consumers around the world to the Internet and information, especially in key emerging markets.

Third, we believe we must also invest to take advantage of future technology disruptions and trends. Through ongoing research and development, we plan to explore and lead next-generation opportunities in devices, platforms and user experiences to support our industry position and longerterm financial performance.

The competitive landscape for that is the following:

[60] The mobile device market continues to undergo significant changes, most notably due to the broad convergence of the mobile telecommunications, computing, consumer electronics and Internet industries. With the traditional feature phone market continuing to mature, a major part of volume and value growth in the industry has been in smartphones offering access to the Internet. Additionally, other large handheld Internet-centric computing devices, such as tablets and e-readers, have emerged, trading off pocketability and some portability for larger screen sizes, but in many cases offering both cellular and non-cellular connectivity in the same way conventional mobile devices do. Due to their larger size, such devices are not replacing conventional mobile devices, but are generally purchased as a second device. Nevertheless, larger-screened Internet-enabled devices have captured a significant share of consumer spend across the broader market for mobile products and digital content and in different ways. For example, some competitors seek to offer hardware at a low price to the consumer with the aim of capturing value primarily through the sale of content.

The increasing demand for wireless access to the Internet has had a significant impact on the competitive landscape of the market for mobile products and digital content. Companies with roots in the mobile devices, computing, Internet and other industries are increasingly competing directly with one another, making for an intensely competitive market across all mobile products and services. At the same time, and particularly in the smartphone and tablets segments, success for hardware manufacturers is increasingly shaped by their ability to build, catalyze or be part of a competitive ecosystem, where different industry participants, such as hardware manufacturers, software providers, developers, publishers, entertainment providers, advertisers and e-commerce specialists are forming increasingly large communities of mutually beneficial partnerships in order to bring their offerings to the market. A vibrant ecosystem creates value for consumers, giving them access to a rich and broad range of user experiences. As a result, the competitive landscape is increasingly characterized in terms of a “war of ecosystems” rather than a battle between individual hardware manufacturers or products.

At the heart of the major ecosystems is the operating system and the development platform upon which devices are based and services built. In smartphones, our competitors are pursuing a wide range of strategies. Many device manufacturers are utilizing freely available operating systems, the development of which is not paid for from device sales revenue or software license fees. The availability of Google’s Android platform has made entry into and expansion in the smartphone market easier for a number of hardware manufacturers which have chosen to join Android’s ecosystem, especially at the mid-to-low range of the smartphone market. For example, some competitors’ offerings based on Android are available for purchase by consumers for below EUR 100, excluding taxes and subsidies, and thus address a portion of the market which has been traditionally dominated by feature phone offerings, including those offered by Nokia. Accordingly, lower-priced smartphones are increasingly reducing the addressable market and lowering the price points for feature phones.

In general, we believe product differentiation with Android is more challenging, leading to increased commoditization of these devices and the resulting downward pressure on pricing. In addition, there is uncertainty in relation to the intellectual property rights in the Android ecosystem, which we believe increases the risk of direct and indirect litigation for participants in that ecosystem. Google, HTC, LG, Motorola, Samsung and Sony Ericsson are among competitors which have deployed the Android operating system on their smartphones. Samsung is among our strongest competitors, competing with us across a broad range of price points.

Other companies favor proprietary operating systems, including Apple, whose popular high-end iPhone models use the iOS operating system, and Research in Motion (RIM), which deploys Blackberry OS on its mobile devices. Both Apple and RIM have developed their own application stores, through which users of their products can access applications.

Apple, which has already gained a strong position in the market for high-end smartphones and tablets, has also used the strength of its ecosystem to further expand its offering of digital content through other interfaces such as television sets. Similarly, Google has sought to extend the Android ecosystem with its Google TV Internet-based television service.

Nokia currently offers smartphones based on the Symbian, MeeGo and Windows Phone operating systems, and we are transitioning to using Windows Phone as our primary smartphone platform. Users of Symbian-based Nokia products can access digital content and third-party applications through Nokia Store, while users of our Windows Phone devices can access the Microsoft-run Marketplace for digital content and third-party applications. The Windows Phone operating system is also being deployed on smartphones by others, including HTC and Samsung.

The significant momentum and market share gains of the global ecosystems around the Apple and Android platforms have increased the competitive barriers to additional entrants looking to build a competing global smartphone ecosystem, such as Nokia with the Windows Phone platform. At the same time, other ecosystems are being built which are attracting developers and consumers, and which may result in potential fragmentation among ecosystem participants and the inability of new ecosystems to gain sufficient competitive scale.

We also face intense competition in feature phones where a different type of ecosystem from that of smartphones is emerging involving very low-cost components and manufacturing processes, with speed to market and attractive pricing being critical success factors. In particular, the availability of complete mobile solutions chipsets from low-cost reference design chipset manufacturers has lowered the barriers of market entry and enabled the very rapid and low-cost production of feature phones by numerous manufacturers in China and India, which are gaining significant market share in emerging markets, as well as bringing some locally relevant innovations to market. Such manufacturers have also demonstrated that they have significantly lower gross margin expectations than we do.

We also face competition from vendors of unlicensed and counterfeit products with manufacturing facilities primarily centered around certain locations in Asia and other emerging markets which produce inexpensive devices with sometimes low quality and limited after-sales services that take advantage of commercially-available free software and other free or low-cost components, software and content. In addition, we compete with non-branded feature phone manufacturers, including mobile network operators, which offer mobile devices under their own brand, as well as providers of specific hardware and software layers within products and services at the level of those layers rather than solely at the level of complete products and services and their combinations. In the future, we may face competition from established Internet companies seeking to offer smartphones under their own brand.

Our competitors use a wide range of other strategies and tactics. Certain competitors choose to accept significantly lower profit margins than we are targeting. Certain competitors have chosen to focus on building products and services based on commercially available components and content, in some cases available at very low or no cost. Certain competitors have also benefited from favorable currency exchange rates. Further, certain competitors may benefit from support from the governments of their home countries and other measures which may have protectionist objectives.

Transition:

[88] Year 2011 was a year of transition for Nokia. Prior to the announcement of our partnership with Microsoft in February 2011 and the adoption of Windows Phone as our primary smartphone platform, the Symbian and MeeGo operating systems were our primary smartphone platforms. Following our announcement of the Microsoft partnership, we expected to sell approximately 150 million more Symbian devices in the years to come and to ship one MeeGo device. However, the demand for our Symbian devices began to deteriorate. The consequent decline in our Smart Devices net sales and profitability was a result of both a decline in our Symbian smartphone volume market share and pressure on pricing as competitors aggressively capitalized on our platform and product transition. Towards the end of 2011, the competitiveness of our Symbian devices continued to deteriorate as changing market conditions created increased pressure on Symbian, which further adversely affected our Smart Devices net sales, profitability, market share and brand perception. In certain markets, there has been an acceleration of the trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths, which has contributed to a faster decline in our Symbian volumes than we anticipated. We expect this trend to continue in 2012.

To endeavor to maximize the value of our Symbian asset going forward, we expect to continue to ship Symbian devices to specific regions and distribution channels, as well as to continue to provide software support to our Symbian customers, through 2016. The software support for our Symbian customers was outsourced to Accenture commencing from September 2011. As a result of the changing market conditions, combined with our increased focus on Nokia products with Windows Phone, we believe we will sell fewer Symbian devices than previously anticipated.

Towards the end of 2011, we launched the Nokia Lumia 800 and Nokia Lumia 710, our first smartphones based on the Windows Phone platform. During 2011, we also launched the Nokia N9, which was the outcome of efforts in our MeeGo program. Since the start of 2012, we have continued to bring the Lumia experience to several more geographies, including the United States, where we have launched the Nokia Lumia 900, the first LTE device designed specifically for the North American market, which is available exclusively through AT&T. In late February 2012, we announced our intention to bring the Lumia 900 to markets outside the United States and introduced the Lumia 610, our lowest cost Lumia smartphone to date.

During the first half of 2011, our mobile device market share decline was further negatively affected by weakness in our feature phone portfolio primarily due to a lack of a dual SIM offering. During the second half 2011, however, the competitiveness of our feature phones improved when we introduced several dual SIM devices, as well as the new Nokia Asha range of feature phones, which offers a more smartphone-like user experience. These new additions helped us recapture some market share in the feature phone segment.

Year 2012 is expected to continue to be a year of transition, during which our Devices & Services business will be subject to risks and uncertainties, as our Smart Devices business unit continues to transition from Symbian products to Nokia products with Windows Phone and our Mobile Phones business unit continues to bring more smartphone-like features and design to our feature phone portfolio. Those risks and uncertainties include, among others, continued deterioration in demand for our Symbian devices; the timing, ramp-up and demand for our new products, including our Lumia devices; further pressure on margins as competitors endeavor to capitalize on our platform and product transition; and uncertainty in the macroeconomic environment. Mainly due to these factors, we believe that it is not appropriate to provide annual financial targets for 2012.

Longer-term, we target:
• Devices & Services net sales to grow faster than the market, and
• Devices & Services operating margin to be 10% or more, excluding special items and purchase price accounting related items.

Partnership with Microsoft:

[F-26] In February 2011, Nokia announced a partnership with Microsoft to bring together the respective complementary assets and expertise of both parties to build a new global mobile ecosystem for smartphones. The partnership, under which Nokia is adopting and licensing Windows Phone from Microsoft as its primary smartphone platform, was formalized in April 2011.

The Group is paying Microsoft a software royalty fee to license the Windows Phone smartphone platform, which the Group records as royalty expense in its Smart Devices cost of goods sold. Nokia has a competitive software royalty structure, which includes annual minimum software royalty commitments and reflects the large volumes that the Group expects to ship, as well as a variety of other considerations related to engineering work to which both companies are committed. The Group expects that the adoption of Windows Phone will enable it to reduce significantly its operating expenses.

In recognition of the contributions that the Group is providing, the Group will receive quarterly platform support payments from Microsoft. ([90] In the fourth quarter of 2011, we received the first quarterly payment of USD 250 million (approximately EUR 180 million).) The received platform support payments are recognized over time as a benefit to our Smart Devices costs of goods sold. The total amount of the platform payments is expected to slightly exceed the total amount of the minimum software royalty commitments.

The Microsoft partnership also recognizes the value of intellectual property and puts in place mechanisms for exchanging intellectual property rights.

[89] We are contributing our expertise on hardware, design and language support to the Microsoft partnership, and plan to bring Nokia products with Windows Phone to a broad range of price points, market segments and geographies. We and Microsoft are closely collaborating on joint marketing initiatives and on a shared development roadmap on the future evolution of mobile products. The goal for both partners is that by bringing together our complementary assets in search, maps, locationbased services, e-commerce, social networking, entertainment, unified communications and advertising, we can jointly create an entirely new consumer proposition. We are also collaborating on our developer ecosystem activities to accelerate developer support for the Windows Phone platform on our mobile products. Although Microsoft will continue to license Windows Phones to other mobile manufacturers, the Microsoft partnership allows us to customize the Windows Phone platform with a view to differentiating Nokia smartphones from those of our competitors that also use the Windows Phone platform.

Specific initiatives include the following:

  • Contribution of our mapping, navigation, and certain location-based services to the Windows Phone ecosystem. We aim to build innovation on top of the Windows Phone platform in areas such as imaging, while contributing our expertise on hardware design and language support, to help drive the development of the Windows Phone platform. Microsoft will provide Bing search services across our mobile device portfolio and will contribute its strength in productivity tools, advertising, gaming, social media and a variety of other services. We believe that the combination of navigation with advertising and search services will enable better monetization of our navigation assets and create new forms of advertising revenue.
  • Joint developer outreach and application sourcing to support the creation of new local and global applications, including making Windows Phone developer registration free for all Nokia developers.
  • Planning towards opening a new Nokia-branded global application store that leverages the Windows Marketplace infrastructure. Developers would be able to publish and distribute applications to hundreds of millions of consumers that use Windows Phone, Symbian and Series 40 devices.
  • Contribution of our expertise in operator billing to ensure participants in the Windows Phone ecosystem can take advantage of our billing relationships with 112 operators in 36 markets.

Strategy for the trend: Continued Convergence of the Mobile Communications, Computing, Consumer Electronics and Internet Industries

[90] Value in the mobile handset industry continues to be increasingly driven by the convergence of the mobile communications, computing, consumer electronics and Internet industries. As consumer demand and interest for smartphone and tablets with access to a range of content has accelerated, new opportunities to create and capture value through innovative new service offerings and user experiences have arisen, with a greater emphasis and importance on software and ecosystem-driven innovation, rather than standalone devices. These opportunities seek to capitalize on various elements of ecosystems such as search services, maps, location-based services, e-commerce, social networking, entertainment, communications and advertising. Capturing these opportunities requires capabilities to manage the increased complexity and to provide an integrated user experience where all these various elements interact seamlessly either in one device or across multiple devices and electronic products. We expect these new opportunities to continue to emerge in 2012.

We believe that we are well-positioned with our new strategy and partnership with Microsoft, including our collective goal to build a new global mobile ecosystem for smartphones, to capture a number of these opportunities.

In Mobile Phones, we plan to leverage our innovation and strength in growth markets to connect the next billion people to the Internet and information. We also plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems for our feature phones.

Strategy for the trend: Increasing Importance of Competing on an Ecosystem to Ecosystem Basis

[91] The increasing importance of ecosystems is, to a large degree, driven by the convergence trends mentioned above and the implications for the competencies and business model adjustments required for longer-term success. In the market for smartphones, we have seen significant momentum and emphasis on the creation and evolution of new ecosystems around major software platforms, including Apple’s iOS platform and Google’s Android platform, bringing together devices, software, applications and services. A notable recent development has been the increased affordability of devices based on the Android smartphone platform, which has enabled them to compete with a portion of the market that has traditionally been dominated by feature phone offerings. As Android is available free of charge and a significant part of the source code is available as open source software, entry and expansion in the smartphone market has become easier for a number of hardware manufacturers that have chosen to join Android’s ecosystem. Additionally, the success of an ecosystem and its ability to continue to grow may also depend on the support it lends to different kinds of devices. With multiple products available to suit different needs, such as mobile devices, tablets, computers and televisions, there is demand for greater seamless interaction between these devices. A number of vendors across different ecosystems are pursuing multi-screen strategies to capitalize on these opportunities.

Our partnership with Microsoft brings together complementary assets and competencies with the aim of creating a competitive smartphone ecosystem. We believe that together with Microsoft we will succeed in attracting the necessary elements for the creation of a successful ecosystem and that by extending the price points, market segments and geographies of our Windows Phone smartphones, we will be able to significantly strengthen the scale and attractiveness of that ecosystem to developers, operators and partners.

Strategy for the trend: Increased Pervasiveness of Smartphones and Smartphone-like Experiences Across the Price Spectrum

[91] During the past year, we saw the increasing availability of more affordable smartphones, particularly Android-based smartphones, connected devices and related services which were able to reach lower price points contributing to a decline in the average selling prices of smartphones in our industry.

This trend affects us in two ways.

First, it puts pressure on the price of our smartphones and potentially our profitability, as we need to price our smartphones competitively. We currently partially address this with our Symbian device offering in specific regions and distribution channels, and we plan to introduce and bring to markets new and more affordable Nokia products with Windows Phone in 2012, such as the Nokia Lumia 610 announced in February 2012.

Second, lower-priced smartphones put pressure on our higher-end feature phone offering from our Mobile Phones unit. We are addressing this with our planned introductions in 2012 of smarter, competitively priced feature phones with more modern user experiences, including software, services and application experiences. In support of our Mobile Phones business, we also plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems.

Strategy for the trend: Increasing Challenges of Achieving Sustained Differentiation and Impact on Overall Industry Gross Margin Trends

[91] Although we expect the mobile device industry to continue to deliver attractive revenue growth prospects, we are less optimistic about the gross margin trends going forward. The creation and momentum of new ecosystems, especially from established Internet players with disruptive business models, has enabled handset vendors that do not have substantial software expertise or investment in software development to develop an increasingly broad and affordable range of smartphones and other connected devices that feature a certain user interface, application development and mobile service ecosystems. At the same time, this has significantly reduced the amount of differentiation in the user experience in the eyes of consumers. Our ability to achieve sustained differentiation with our mobile products is a key driver of consumer retention, net sales growth and margins. We believe that as it becomes increasingly difficult for many of our competitors to achieve sustained differentiation, overall industry gross margin trends may be depressed going forward.

Through our partnership with Microsoft and development of the Windows Phone ecosystem, we will focus more of our investments in areas where we believe we can differentiate and less on areas where we cannot, leveraging the assets and competencies of our ecosystem partners. Areas where we believe we can achieve sustained product differentiation and leadership include distinctive design with compelling hardware, leading camera and other sensor experiences and leading location-based products and services. Other ways for us to differentiate our products include using our localization capabilities, global reach, strong brand and marketing. We believe that our first Lumia devices reflect a number of these new and differentiated experiences on Windows Phone. We expect to continue to introduce new and more differentiated products from our Lumia product family in multiple markets throughout 2012.

In the Mobile Phones business, we believe our competitive advantages – including our scale, brand, quality, manufacturing and logistics, strategic sourcing and partnering, distribution, research and development and software platforms and intellectual property – continue to be important to our competitive position. Additionally, we plan to extend our Mobile Phones offerings and capabilities during 2012 in order to bring a modern mobile experience – software, services and applications – to aspirational consumers in key growth markets as part of our strategy to bring the Internet and information to the next billion people. At the same time, we plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems.

Finally, we believe that we must invest in new projects to drive differentiation and take advantage of future technology disruptions and trends. Through ongoing research and development, we plan to explore and lead next-generation opportunities in devices, platforms and user experiences to support our industry position as well as our ability to further differentiate over the longer-term. For example, new web technologies such as those commonly referred to as HTML5 may lead to less operating system-centric ecosystems. It is important to be able to drive such industry developments, which we believe will define the future of our industry.

Strategy for the trend: Emergence of New Business Models

[92] We believe that the traditional industry monetization model – capturing the value of the overall experience through the sale of a mobile device – will continue to dominate in the near to medium term. However, we are also seeing the emergence of new indirect monetization models where the value is captured through indirect sources of revenue such as advertising revenue through applications rather than the actual sale of a device. These indirect monetization models could become more prominent in our industry in the longer-term. Accordingly, we believe that developing a range of indirect monetization opportunities, such as advertising-based business models, will be part of successful ecosystems over the coming years. Obtaining and analyzing a complex array of customer feedback, information on consumer usage patterns and other personal and consumer data over the largest possible user-base is essential in gaining greater consumer understanding. We believe this understanding is a key element in developing new monetization opportunities and generating new sources of revenue, as well as in facilitating future innovations, including the delivery of new and more relevant user experiences ahead of the competition.

The exploration of new revenue streams is a key element of our partnership with Microsoft. We are jointly developing new services with Microsoft to drive innovation and new sources of revenue from our ecosystem. We believe that our ability to understand the specific needs of different geographic markets and consumer segments and to localize services and applications appropriately will be a key competitive differentiator. To support this, in the coming years we plan to invest in local advertising platforms to further enhance and enrich our localized offerings. Supported by our scale, we believe that we have the opportunity to deliver more compelling and relevant local services and to build new monetization models for Nokia and the Windows Phone ecosystem.

Strategy for the trends in: Supply Chain, Distribution and Operator Relationships

[93] The industry in which we operate is one of the fastest growing and most innovative, with a broad range of industry participants contributing product and technological innovations. In particular, the role of component suppliers has grown in importance. At the same time, much of the value creation for consumers has shifted from hardware to software. Nevertheless, we believe that there continues to be substantial room to innovate in hardware. From that perspective and in order to deliver market-leading innovations and sustainable differentiation through hardware, it is critical to have good relationships with high quality suppliers. With good supplier relationships, allied with the strength of our world-class manufacturing and logistics system, we believe we are well-positioned to deliver high-quality hardware as well as to respond quickly to customer and consumer demand.

Amid rapid change in the industry, we have also seen new sourcing models emerge. Especially in smartphones, our competitors have shifted from traditional multi-sourcing strategies where you have multiple suppliers for each component, to more focused sourcing strategies where they integrate key strategic suppliers closer to their operations as well as use advance cash payments to secure supply for several quarters in advance in order to have more unique and differentiated components as well as more predictability in their sourcing. This means that we also need to look for new and more innovative ways of sourcing key components, particularly in our Smart Devices business.

Our own manufacturing network continues to be a valuable asset, especially in our high-volume Mobile Phones business. We realized, however, that we need to adjust our manufacturing to meet the lower overall demand for our products and increase our speed to market for our mobile products. In 2011 and in February 2012, we announced our plans to adjust our manufacturing capacity and renew our manufacturing strategy to focus product assembly primarily in Asia to better reflect how our global networks of customers, partners and suppliers have evolved. The changes included the closure of our manufacturing facility in Cluj, Romania at the end of 2011. We also announced planned changes at our facilities in Komárom, Hungary, Reynosa, Mexico and Salo, Finland. These three facilities are planned to focus on smartphone product and sales package customization, serving customers mainly in Europe and the Americas, while our smartphone assembly operations will be transferred to our facilities in AsiaBeijing, China and Masan, South Korea – where the majority of our component suppliers are based. With these adjustments to our manufacturing network, we are aiming to continue to generate meaningful benefits relative to our competitors.

As in any global consumer business, distribution continues to be an important asset in the mobile device industry. We believe the breadth of our global distribution network is one of our key competitive advantages. We have the industry’s largest distribution network with more than 850,000 points of sale globally. Compared to our competitors, we have a substantially larger distribution and care network, particularly in China, India and the Middle East and Africa.

During 2011, the importance of operator-driven distribution increased. Whereas in the past operators dominated distribution only in the large western markets in Europe and the United States, they have recently been growing their share of distribution in large growth markets such as China, a traditionally strong market for us. We have been historically more successful where our mobile products are sold to consumers in open distribution through non-operator parties. It is therefore increasingly important to not only have a large number of points of sale globally, but also to have good relationships with key operators in each region.

Strategically, we want to be the preferred ecosystem partner for operators. By creating a new global mobile ecosystem with Microsoft and focusing on driving operator data plan adoption in lower price points with our feature phone offering, we believe we will be able to create a greater balance for operators and provide attractive opportunities to share the economic benefits from services and applications sales compared to other competing ecosystems, thereby improving our long-standing relationships with operators around the world.

Strategy for the trends related to: Speed of Innovation, Product Development and Execution

[94] As the mobile communications industry continues to undergo significant changes, we believe that speed of innovation and product development are important drivers of competitive strength. For example, a number of our competitors have been able to successfully leverage their software expertise to continuously bring innovations to market at a pace faster than typical hardware cycles. This has placed increasing pressure on all industry participants to continue to shorten product creation cycles and to execute in a timely, effective and consistent manner.

In February 2011, we announced our new strategy, including changes to our operational structure, company leadership, decision-making, ways of working and competencies designed to accelerate our speed of execution in an intensely competitive environment. The changes to our ways of working fall into six categories:

  • globally accountable business units;
  • a revised services mission;
  • local empowerment;
  • simplified decision-making;
  • a performance-based culture with consistent behavior; and
  • a new leadership structure with new leadership principles.

We believe under the new operational structure and with these new ways of working we can deliver noticeable improvements to our speed of innovation, product development and execution of both our Smart Devices and Mobile Phones business units.

Strategy for the trends related to: More Active Licensing Strategies of Patents and Intellectual Property

[94] Success in our industry requires significant research and development investments, with intellectual property rights filed to protect those investments and related inventions. In recent years, we have seen new entrants in the industry as new ecosystems have lowered the barriers to entry. In 2011, we saw intensified and more active licensing and enforcement strategies of patents and intellectual property emerge through a series of legal disputes between several industry participants as patent holders sought to protect their intellectual property against infringements by new entrants. It is not only traditional industry participants that have sought to safeguard their intellectual property; non-manufacturing patent licensing entities owning relevant technology patents have also actively been enforcing their patents against new entrants. These companies’ sole business model is to buy patents from the innovators and to maximize the value from those patents. As a result, the industry’s focus on patents and intellectual property has increased significantly and patent portfolios have become increasingly valuable for industry participants. Increased activity has also created lucrative opportunities to monetize patents by selling them to others. We expect this trend to continue in 2012. We believe we are well-positioned to both protect our existing business as well as generate incremental value to our shareholders through our industry-leading patent portfolio.

We are a world leader in the development of mobile devices and mobile communications technologies, which is also demonstrated by our strong patent position. During the last two decades, we have invested more than EUR 45 billion in research and development and built one of the mobile device industry’s strongest and broadest intellectual property right portfolios, with over 10 000 patent families. In 2011, we continued to work hard to enforce our patents against unlawful infringement and realize the value of our intellectual property. Our 2011 initiatives included, among other things, the signing of a patent license agreement with Apple, which we expect will have a positive financial impact on our future business, as well as capitalizing on strong market conditions by divesting several hundred patent families in a series of transactions to non-manufacturing patent licensing entities. Despite such divestments, we have maintained the strength and size of our patent portfolio on a stable level of approximately 10 000 patent families.

Strategy for the trends related to: Uncertain Global Macroeconomic Environment

We are currently experiencing a time of great global macroeconomic uncertainty. This uncertainty can cause unprecedented and dramatic shifts in consumer behavior, which can have significant effects on the mobile device industry. These effects could include, for example, consumers reducing the amount they are willing to spend on mobile products, which would negatively affect industry average selling prices, or consumers postponing purchases of new products, which would negatively affect device replacement cycles. These types of shifts in consumer behavior could potentially have a material adverse effect on our net sales and profitability in 2012.

While negative to the industry overall, we believe that the impact of any dramatic shifts in consumer behavior could be mitigated to a certain extent by our global distribution network, geographically well diversified supply-chain, relatively fragmented customer space and the breadth of our offering, which covers a wide range of price points. Furthermore, during our ongoing transition to Windows Phone as our primary smartphone platform our financial position has continued to be relatively strong. We continuously monitor the strength of our financial position and assess its adequacy in different net sales and profitability scenarios.

Additionally, we have identified and implemented certain precautionary measures designed to limit the possible immediate direct negative consequences resulting from the potential deterioration of the economic situation within the eurozone.

Restructuring in accordance with all that:

[F-64] In April 2011, Nokia announced plans to reduce its global workforce by about 4 000 employees by the end of 2012, as well as plans to consolidate the company’s research and product development sites so that each site has a clear role and mission. In September 2011, Nokia announced plans to take further actions to align its workforce and operations, which includes reductions in Sales and Marketing and Corporate functions in line with Nokia’s earlier announcement in April 2011. The measures also include the closure of Nokia’s manufacturing facility in Cluj, Romania, which – together with adjustments to supply chain operations – has affected approximately 2 200 employees. As a result, Devices & Services recognized a restructuring provision of EUR 456 million in total.

In 2010, Devices & Services recognized restructuring provisions of EUR 85 million mainly related to changes in Symbian Smartphones and Services organizations as well as certain corporate functions that were expected to result in a reduction of up to 1 800 employees globally.

[96] The factors and trends discussed above influence our net sales and gross profit potential. In addition, operational efficiency and cost control are important factors affecting our profitability and competitiveness. We continuously assess our cost structure and prioritize our investments. Our objective remains to maintain our strong capital structure, focus on profitability and cash flow and invest appropriately to innovate and grow in key strategic areas.

We expect that the adoption of Windows Phone as our primary smartphone platform will enable us to reduce significantly our operating expenses. For example, the Microsoft partnership allows us to eliminate certain research and development investments, particularly in operating systems and services, which we expect will result in lower overall research and development expenditures over the longer-term in our Devices & Services business.

We announced in 2011 that we are targeting to reduce our Devices & Services operating expenses by more than EUR 1 billion for the full year 2013, compared to the Devices & Services operating expenses of EUR 5.35 billion for the full year 2010, excluding special items and purchase price accounting related items.

We have announced a number of planned changes to our operations during 2011 and 2012 in connection with the implementation of our new strategy in our Devices & Services business and the creation of our new Location & Commerce business. The planned changes include substantial personnel reductions, site and facility closures and reconfiguration of certain facilities.

Initially, we announced that we are focusing our restructuring work primarily on the research and development teams to ensure that we correctly allocate resources for the new strategy at appropriate cost levels. In addition, we agreed to outsource our Symbian software development and support activities to Accenture, which resulted in the transfer of approximately 2 300 employees to Accenture.

We later announced that we are accelerating structural change in other parts of the organization in order to ensure that we are responsive to the changing dynamics in our industry. This phase includes the alignment of our markets organization and other supporting functions. For sales, this includes a move to simplify our model based around four regions, twenty areas and additional local offices that serve individual countries or territories.

We also announced plans to adjust our manufacturing capacity and renew our manufacturing strategy to reflect how our global networks of customers, partners and suppliers have evolved, including the closure of our facility in Cluj, Romania, the review of our manufacturing operations in Komárom, Hungary, Reynosa, Mexico and Salo, Finland and the transfer of smartphone assembly operations to Beijing, China and Masan, South Korea.

With respect to combining NAVTEQ and our Devices & Services social location services operations to form our Location & Commerce business, we announced a plan to capture potential synergies and opportunities to increase effectiveness through automation. The planned changes in the Location & Commerce business are estimated to affect approximately 1 300 employees.

Since we outlined our new strategy, we have announced total planned employee reductions of approximately 11 500 employees, as well as the transfer of approximately 2 300 employees to Accenture as noted above.

The planned measures support the execution of our strategy and are expected to bring efficiencies and speed to the organization. In line with our values, we are offering employees affected by the planned reductions a comprehensive support program. We remain committed to supporting employees and the local communities through this difficult change.

As of December 31, 2011, we had recognized cumulative net charges in Devices & Services of EUR 797 million related to restructuring activities in 2011, which included restructuring charges and associated impairments. While the total extent of the restructuring activities is still to be determined, we currently anticipate cumulative charges in Devices & Services of around EUR 900 million before the end of 2012. We also believe total cash outflows related to our Devices & Services restructuring activities will be below the level of the cumulative charges related to these restructuring activities.

In the past, our cost structure has benefited from the cost of components eroding more rapidly than the price of our mobile products. Recently, however, component cost erosion has been generally slowing, a trend that adversely affected our profitability in 2010 and 2011, and may do so in the future.

The currency volatility of the Japanese yen and United States dollar against the euro continued to put pressure on our costs in 2011. During 2011, we were able to manage the currency volatility driven cost pressure with an appropriate level of hedging and by managing our sourcing towards more favorable currencies. Our currency exposure profiles have not changed significantly and continued currency volatility of the Japanese yen and US dollar against the euro may negatively affect us in the future.

Location & Commerce:

[97] Our Location & Commerce business aims to positively differentiate its digital map data and location-based offerings from those of our competitors and create competitive business models for our customers.

In the fourth quarter 2011, we conducted our annual impairment testing to assess if events or changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable. As a result, we recorded a charge to operating profit of EUR 1.1 billion for the impairment of goodwill in our Location & Commerce business. The impairment charge was the result of an evaluation of the projected financial performance of our Location & Commerce business. This took into consideration the market dynamics in digital map data and related location-based content markets, including our estimate of the market moving long-term from fee-based towards advertising-based models especially in some more mature markets. It also reflected recently announced results and related competitive factors in the local search and advertising market resulting in lower estimated growth prospects from our location-based assets integrated with different advertising platforms. After consideration of all relevant factors, we reduced the net sales projections for Location & Commerce which, in turn, reduced projected profitability and cash flows.

Location & Commerce’s resources are primarily focused on the development of:

(i) content, which involves the mapping of the physical world and places such as roads and points of interest, as well as the collection of activity data generated and authorized for use by our users;

(ii) the platform, which adds functionality on top of the content and includes the development tools for us and others to create on top of it; and

(iii) applications built on the content and platform.

Our Devices & Services business is a key customer of Location & Commerce. Devices & Services purchases map and application licenses from Location & Commerce for its Nokia Maps service sold in combination with GPS enabled smartphones.

Competition:

[61] With respect to digital map data and related location-based content, several global and local companies, as well as governmental and quasi-governmental agencies, are making more map data with improving coverage and content, and high quality, available free of charge or at lower prices. For example, our Location & Commerce business competes with Google which uses an advertising-based model allowing consumers to use its map data and related services in their products free of charge. Google has continued to leverage Google Maps as a differentiator for Android, bringing certain new features and functionality to that platform. Apple has also sought to strengthen its location assets and capabilities through targeted acquisitions and organic growth.

Location & Commerce also competes with companies such as TomTom, which licenses its map data and where competition is focused on the quality of the map data and pricing, and Open Street Map, which is a community-generated open source map available to users free of charge. Aerial, satellite and other location-based imagery is also becoming increasingly available and competitors are offering location-based products and services with the map data to both business customers and consumers in order to differentiate their offerings.

Strategy for the trend: Location-Based Products and Services Proliferation

[97] A substantial majority of Location & Commerce net sales in 2011 came from the licensing of digital map data and related location-based content and services for use in mobile devices, in-vehicle navigation systems, Internet applications, geographical information system applications and other location-based products and services. Location & Commerce’s success depends upon the rate at which consumers and businesses use location-based products and services. In recent years, there has been a strong increase in the availability of such products and services, particularly in mobile devices and online application stores for such devices. Furthermore, as the use of the Internet through mobile devices has been growing rapidly, the anchor of the Internet is moving from the desktops to mobiles. This shift is making location-based content a key element of most Internet experiences. We expect this trend to continue, but we also expect that the level of quality required for these products and services and the ability to charge license fees for the use of map data incorporated into such products and services may vary significantly. By combining our NAVTEQ business with our Devices & Services social location services operations, we believe our Location & Commerce business will be better positioned to capture emerging business opportunities with a broader offering which is no longer limited to digital map data.

Strategy for the trend: Increasing Importance of Creating an Ecosystem around Location-Based Services Offering

[97] Creating a winning ecosystem around our Location & Commerce’s services offering will be critical for the success of this business. The longer-term success of the Location & Commerce business will be determined by our ability to attract strategic partners and developers to support our ecosystem. Location & Commerce is aiming to support its ecosystem by enabling strategic partners and independent developers to foster innovation on top of their location platform. We believe that making it possible for other vendors to innovate on top of Location & Commerce’s high quality location-based assets will further strengthen the overall experience and make our offering stronger and more attractive.

Strategy for the trend: Emergence of the Intelligent Sensor Network

[98] Mobile Internet devices are increasingly being enabled with a rich set of sensors such as a GPS, a camera and an accelerometer which enable interaction with the real world. This interaction also enables the collection of large volumes of rich data which, when combined with analytics, enable the development of increasingly sophisticated, contextually-aware devices and services. We believe the combination of NAVTEQ with our Devices & Services social location services operations will enable Location & Commerce to participate in this industry development and seize new opportunities to deliver new experiences that bridge the virtual with the real world.

Strategy for the trend: Price Pressure for Navigable Map Data Increasing

[98] Location & Commerce’s net sales are also affected by the highly competitive pricing environment. Google is offering turn-by-turn navigation in many countries to its business customers and consumers on certain mobile handsets at no charge to the consumer. While we expect these offerings will increase the adoption of location-based services in the mobile handset industry, we also expect they may lead to additional price pressure from Location & Commerce’s business customers, including handset manufacturers, navigation application developers, wireless carriers and personal navigation device (“PND”) manufacturers, which are seeking ways to offer lower-cost or free turn-by-turn navigation to consumers. Turn-by-turn navigation solutions that are free to consumers on mobile devices may also put pressure on automotive OEMs and automotive navigation system manufacturers to have lower cost navigation alternatives. This price pressure is expected to result in an increased focus on advertising revenue as a way to supplement or replace license fees for map data.

In response to the pricing pressure, Location & Commerce focuses on offering a digital map database with superior quality, detail and coverage; providing value-added services to its customers such as distribution and technical services; enhancing and extending its product offering by adding additional content to its map database, such as 3D landmarks; and providing business customers with alternative business models that are less onerous to the business customer than those provided by competitors. Location & Commerce’s future results will also depend on Location & Commerce’s ability to adapt its business models to generate increasing amounts of advertising revenues from its map and other location-based content.

We believe that Location & Commerce’s PND customers will continue to face competitive pressure from smartphones and other mobile devices that now offer navigation, but that PNDs continue to offer a viable option for consumers based on the functionality, user interface, quality and overall ease of use.

Strategy for the trend: Quality and Richness of Location-Based Content and Services Will Continue to Increase

[98] Location & Commerce’s profitability is also driven by Location & Commerce’s expenses related to the development of its database and expansion. Location & Commerce’s development costs are comprised primarily of the purchase and licensing of source maps, employee compensation and thirdparty fees related to the construction, maintenance and delivery of its database.

In order to remain competitive and notwithstanding the price pressure discussed above, Location & Commerce will need to continue to expand the geographic scope of its map data, maintain the quality of its existing map data and add an increasing amount of new location-based content and services, as well as using innovative ways like crowd sourcing to collect data. The trends for such location-based content and services include real-time updates to location information, more dynamic information, such as traffic, weather, events and parking availability, and imagery consistent with the real world. We expect that these requirements will cause Location & Commerce’s map development expenses to continue to grow, although a number of productivity initiatives are underway designed to improve the efficiency of our database collection processing and delivery. In addition, we will need to continue making investments in this fast paced and innovative location-based content and services industry, for instance through research and development, licensing arrangements, acquiring businesses and technologies, recruiting specialized expertise and partnering with third parties.

Restructuring in accordance with all that:

[F-64] In September 2011, Nokia announced a plan to concentrate the development efforts of the Location & Commerce business in Berlin, Germany and Boston and Chicago in the U.S., and other supporting sites and plans to close its operations in Bonn, Germany and Malvern, U.S. As a result, Location & Commerce recognized a restructuring provision of EUR 25 million.

Nokia Siemens Networks:

[99] Nokia Siemens Networks’ has a broad portfolio of products and services designed to address evolving needs of network operators from GSM to LTE wireless standards, a base of over 600 customers in over 150 countries serving over 2.5 billion subscribers and one of the largest services organizations in the telecommunications infrastructure industry. The company’s global customer base includes network operators such as Bharti Airtel, China Mobile, Deutsche Telekom, France Telecom, Softbank, Telefonica O2, Verizon and Vodafone.

Geographical diversity provides Nokia Siemens Networks with opportunities in both emerging markets, which may experience rapid growth, and developed markets where it believes its technologically advanced products and services portfolio provides a competitive advantage, while the geographic diversity of its customer base reduces exposure to fluctuating economic conditions in individual markets.

Nokia Siemens Networks’ net sales depend on various developments in the global telecommunications infrastructure and related services market, such as network operator investments, the pricing environment and product mix. In developed markets, operator investments are primarily driven by capacity and coverage upgrades, which, in turn, are driven by greater usage of the networks primarily through the rapid growth in data usage. Those operators are targeting investments in technology and services that allow them to provide end users with fast and faultless network performance in the most efficient manner possible, allowing them to optimize their investment. Such developments are facilitated by the evolution of network technologies that promote greater efficiency and flexibility.

In addition, those operators are increasingly investing in software and services that provide them with the means to better manage end users on their network, and also allow them additional access to the value of the large amounts of subscriber data under their control. In emerging markets, the principal factors influencing operator investments are the continued growth in customer demand for telecommunications services, including data, as well as new subscriber growth. In many emerging markets, this continues to drive growth in network coverage and capacity requirements.

The telecommunications infrastructure market is characterized by intense competition and price erosion caused in part by the entry into the market of vendors from China, Huawei and ZTE, which have gained market share by leveraging their low cost advantage in tenders for customer contracts. In recent years, the technological capabilities of those vendors, particularly Huawei, has improved significantly, resulting in competition not only on price but also on quality.

The pricing environment remained intense in 2011. In particular, the wave of network modernization that has taken place, particularly in Europe but increasingly in other regions including Asia Pacific, has experienced some aggressive pricing as all vendors fight for market share.

Nokia Siemens Networks’ net sales are impacted by those pricing developments, which show some regional variation, and in particular by the balance between sales in developed and emerging markets. While price erosion is evident across most geographical markets, it continues to be particularly intense in a number of emerging markets where many operator customers have been subject to financial pressure, both through lack of availability of financing facilities during 2011 as well as profound pricing pressure in their domestic markets.

Pricing pressure is evident in the traditional products markets, in particular, where competitors may have products with similar technological capabilities, leading to commoditization in some areas. Nokia Siemens Networks’ ability to compete in those markets is determined by its ability to remain price competitive with its industry peers and it is therefore important for Nokia Siemens Networks to continue to reduce product costs to keep pace with price attrition. Nokia Siemens Networks continued to make progress in reducing product and procurement costs in 2011, and will need to continue to do so in order to provide its customers with high-quality products at competitive prices. There is currently less pricing sensitivity in the managed services market, where vendor selections are often largely determined by the level of trust and demonstrated capability in the field.

In November 2011, Nokia Siemens Networks articulated its regional strategy, identifying three markets, Japan, Korea and the United States, as its priority countries where it will target growth. The Middle East and Africa, where political, financial and competitive pressures have led to particular weakness in 2011, will be the focus of turnaround efforts. In the remaining regions, Latin America, China, Asia-Pacific, Canada and Europe, Nokia Siemens Networks goal will be to defend market share and find areas for future profitable growth.

Over recent years, the telecommunications infrastructure industry has entered a more mature phase characterized by the completion of the greenfield roll-outs of mobile and fixed network infrastructure across many markets, although this is further advanced in developed markets. Despite this, there is still a significant market for traditional network infrastructure products to meet coverage and capacity requirements, even as older technologies such as 2G are supplanted by 3G and LTE. As growth in traditional network products sales slows, there is an emphasis on the provision of network upgrades, often through software, as well as applications, such as billing, charging and subscriber management, and services, particularly the outsourcing of non-core activities to companies

The competitive landscape for that is the following:

[70] Conditions in the market for mobile and fixed network infrastructure and related services improved, but remained challenging and intensely competitive in 2011. The market continued to be characterized by mixed trends as growth in mobile broadband and services was offset by equipment price erosion, a maturing of legacy industry technology and intense price competition.

Industry participants have changed significantly in recent years. Substantial industry consolidation occurred in 2007 with the emergence of three major European vendors: Alcatel-Lucent, Ericsson and Nokia Siemens Networks. The break-up of Nortel occurred in 2009 when it entered bankruptcy protection and many parts of the business were sold, including the wireless carrier unit, Metro Ethernet Networks, and its GSM business. In January 2011, Motorola Solutions completed its separation from Motorola Mobility Holdings Inc. In April 2011, Nokia Siemens Networks acquired the majority of Motorola Solutions’ wireless network infrastructure assets.

During 2011, the competitive environment in the telecommunications infrastructure market was characterized by continued overall growth in global network operators’ capital expenditures in Euro terms, mainly attributable to the Japanese, Chinese, APAC, North East Europe and Latin American markets. Growth in capital expenditures declined in the Middle East and remained relatively unchanged in the European and North American markets in Euro terms in 2011. Increased smart phone usage drove increased investments in the United States and European wireless markets. The vendors from China, Huawei and ZTE, continued to grow their market share but at a slower pace than in previous years and continued to challenge Alcatel-Lucent, Ericsson and Nokia Siemens Networks. Nokia Siemens Networks’ ability to compete with low-cost vendors primarily depends on its ability to be price competitive and, in certain circumstances, its ability to provide or facilitate vendor financing. In recent years, the technological capabilities of the Chinese vendors, particularly Huawei, has improved significantly, resulting in competition not only on price but also on quality. In addition to the major infrastructure providers, Nokia Siemens Networks also competes with Cisco and NEC.

In the Networks Systems business, the decline of 2G (GSM, CDMA) continued in 2011, whereas investments in 3G continued and increased worldwide. Also, fourth generation (4G) LTE trials and pilots continued strongly as operators continued to merge towards next generation LTE and all-IP networks. Within the LTE segment, leading vendors are competing based on factors including technology innovation, network typology and less complex network architectures as well as integration towards all-IP networks.

Growth in wireline and wireless broadband services sped up optical and wireless network upgrades in developed markets. In addition, the related investment in mobile backhaul networks continued to increase due to data traffic increases in the operator networks.

In services, which remained the fastest growing part of the industry, competition is generally based on a vendor’s ability to identify and solve customer problems rather than their ability to supply equipment at a competitive price. Competition in services is from both traditional vendors such as Alcatel-Lucent, Ericsson and Huawei, as well as non-traditional telecommunications entities and system integrators, such as Accenture and IBM. In addition to these companies, there are also local service companies competing, which have a narrower scope in terms of served regions and business areas.

Nokia Siemens Networks’ Business Solutions business unit assists network operators in transforming their business, processes and systems to enhance the customer experience, drive new revenue and improve operational efficiency to enable them to successfully address the challenges and opportunities of mobile broadband, smartphones, tablet computers, multi-play offerings, service innovation and new growth areas. In this area, Nokia Siemens Networks faces competition also from information technology and software businesses like Accenture, Amdocs, HP, IBM and Oracle, which are active in areas such as the service delivery platform market and business insight and analysis services.

Certain competitors may receive governmental support allowing them to offer products and services at substantially lower prices. Further, in many regions restricted access to capital has caused network operators to reduce capital expenditure and has produced a stronger demand for vendor financing. Certain of Nokia Siemens Networks’ competitors may have stronger customer financing possibilities due to internal policies or government support. While the amount of financing Nokia Siemens Networks provided directly to its customers in 2011 remained at approximately the same level as in 2010, as a strategic market requirement it plans to offer this financing option only to a limited number of customers and primarily to arrange and facilitate such financing with the support of export credit or guarantee agencies.

Strategy for the trends in: Mobility and Data Usage

[100] Over recent years the two most evident trends in the telecommunications market – the rise in use of  mobile services and the exponential increase in data traffic – have converged. One result is that services once regarded as available primarily, if not exclusively, through fixed or wireline network are increasingly in demand from wireless networks also.

Alongside traditional voice and data services, such as text messaging, end-users access a wealth of media services through communications networks, including email and other business data; entertainment services, including games and music; visual media, including high definition films and television programming; and social media sites. End-users increasingly expect that such services are available to them everywhere, through both mobile and fixed networks, and a wealth of new devices, optimized to allow them to do so, have become available including tablet computers, highly sophisticated multimedia smartphones, mobile broadband data dongles, set-top boxes and mobile and fixed line telephones.

The widespread availability of devices has been matched by a proliferation of products and services in the market that both meet and feed end-user demand. These continue to drive dramatic increases in data traffic and signaling through both mobile access and transport networks that carry the potential to cause network congestion and complexity. During 2011, this increase continued to gain momentum as more users moved towards smartphones and tablets and even more devices that require constant connectivity were introduced to the market.

While the growth in traffic is clear, it has not been met by corresponding growth in operators’ revenues from data traffic, where growth appears to be slowing. This presents operators with a challenge: to cope with the growing traffic load within networks, it is fundamental that operators continue to invest in their networks, but within the financial constraints that their current business models dictate.

This means that while the addition of capacity, speed and coverage is crucial, it is critical that networks are built efficiently and effectively in a manner that optimizes capital investment and delivers networks with architecture sufficiently flexible to cope with evolving requirements.

During 2011, Nokia Siemens Networks recognized the centrality of mobile networks to the future development of telecommunications and announced that it would place mobile broadband at the heart of its strategy, articulating an ambition to provide the world’s most efficient mobile networks, the intelligence to maximize the value of those networks and the services capability to make all elements work together seamlessly. Nokia Siemens Networks said it expected to increase investment in mobile broadband.

Also during 2011, Nokia Siemens Networks launched the network architecture designed to equip operators to meet the challenges they are facing. “Liquid Net” architecture provides flexibility across networks to adapt to changing customer needs instantly, using existing resources more efficiently. This optimizes capital investment and allows operators to seek new revenue opportunities. Liquid Net uses automated, self-adapting broadband optimization to remain constantly aware of the network’s operational status, as well as the services and content being consumed, to ensure the best user experience. Liquid Net consists of three areas: Liquid Radio, Liquid Core and Liquid Transport.

Strategy for the trends in: Managed Services and Outsourcing

[101] There has been an acceleration in the development of the managed services market as operators increasingly look to outsource network management to infrastructure vendors. The primary driver for this trend is that managed services providers are able to offer economies of scale in network management that allow the vendor to manage such contracts profitably while operators can reduce the cost of network management. The outsourcing trend is also underpinned by many operators taking the view that network management is no longer either a core competence or requirement of their business and are increasingly confident they can find greater expertise by outsourcing this activity to a trusted partner that can also improve quality and reliability in the network.

Nokia Siemens Networks believes that this trend will continue and that it could in future be driven by financial imperatives of its customers facing slowing revenue growth but a continuing requirement for capital investment in their networks, a dynamic that has the potential to threaten their profitability levels. This results in some operators aiming to control their operating expenditure. In those circumstances, the outsourcing of the management of their network to infrastructure vendors, such as Nokia Siemens Networks, can be an attractive option.

In emerging markets, such as Africa and India, price pressure and competition in the end-user market has increased the financial pressure on many operators, which in turn has resulted in a similar trend as operators have looked to control and cut costs through outsourcing network management.

The trend towards network management outsourcing is evident in every region of the world and has intensified. Nokia Siemens Networks believes that this trend generates its own momentum in the market as vendors can increasingly demonstrate their capabilities with reference accounts and operators are exposed to their competitors taking steps that can enhance profitability and improve network quality and reliability.

In the announcement of its new strategy in November 2011, Nokia Siemens Networks reaffirmed its commitment to services, and will continue to aim to support mobile operators with high end services and will seek to maximize the potential of its global delivery model, with its global network solution centers in Portugal and India which offer the benefits of scale and efficiencies both to Nokia Siemens Networks and its customers.

Strategy for the trends in: Customer Experience Management

As operators in many markets see the growth of net new subscribers slowing or even stopping, they are increasingly focused on leveraging the value of the subscribers they have. As the acquisition of new subscribers to networks in such markets can be both difficult and expensive, customers look to limit “churn”, where end users transfer to a rival service provider, as well as to increase the revenue derived from each user through the addition of value-added services, such as access to media and entertainment and social networking services. This often requires that operators invest in software and solutions that allow customers to enjoy an improved experience. One of the key foundations for this improved end-user experience is understanding an end user’s behavior and preferences, which in turn allows the operator to tailor service offerings to the individual consumer. This not only includes services and applications, but also bespoke billing platforms and identity management solutions.

Nokia Siemens Networks continues to develop and enhance its offerings in this area, and in November 2011 announced that its Customer Experience Management unit would be a lead business area in its new strategy. Nokia Siemens Networks believes it has the industry’s leading subscriber database management platform, complemented by flexible billing and charging platforms and other software and solutions that provide its customers with the tools, flexibility and agility required to respond to a rapidly changing end-user market. Nokia Siemens Networks also provides business process and consulting services that help to lead its customers through business transformation opportunities.

Strategy related to: Motorola Solutions Acquisition

[102] In April 2011, Nokia Siemens Networks acquired the majority of the wireless network infrastructure assets of Motorola Solutions for a total consideration of EUR 642 million. The acquisition increased Nokia Siemens Networks’ global presence and expanded its position and product offerings in key markets. See Item 4B. “Business Overview – Nokia Siemens Networks – Motorola Solutions Acquisition.”

Trasition to a: New Strategy and [the corresponding] Restructuring Program

[103] Nokia Siemens Networks’ focus is on becoming the strongest, most innovative and highest quality mobile broadband and services business in the world. Rather than targeting the full spectrum of telecommunications equipment and services, Nokia Siemens Networks is the first of the telecommunications companies to refocus on providing the most efficient mobile networks, the intelligence that maximizes the value of those networks and the services that make it all work seamlessly.

In November 2011, Nokia Siemens Networks announced a new strategy, including changes to its organizational structure and an extensive restructuring program, aimed at maintaining and developing Nokia Siemens Networks, position as one of the leaders in mobile broadband and services and improving its competitiveness and profitability. Nokia Siemens Networks expects substantial charges related to this restructuring program in 2012. See Item 4B. “Business Overview—Nokia Siemens Networks—New Strategy and Restructuring Program” for a description of the main elements of the new strategy.

Year 2012 will be a year of transition for Nokia Siemens Networks as it implements its new strategy and restructuring program. Accordingly, Nokia and Nokia Siemens Networks believe it is currently not appropriate to provide annual targets for Nokia Siemens Networks for 2012. Additionally, the macroeconomic environment is making it increasingly difficult to estimate the outlook for 2012.

Longer-term, Nokia and Nokia Siemens Networks target Nokia Siemens Networks’ operating margin to be between 5% and 10%, excluding special items and purchase price accounting related items.

Nokia Siemens Networks targets to reduce its annualized operating expenses and production overheads, excluding special items and purchase price accounting related items, by EUR 1 billion by the end of 2013, compared to the end of 2011. While these savings are expected to come largely from organizational streamlining, the company will also target areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses and a significant reduction of suppliers in order to further lower costs and improve quality.

Nokia Siemens Networks plans to reduce its global workforce by approximately 17 000 by the end of 2013. These planned reductions are designed to align the company’s workforce with its new strategy as part of a range of productivity and efficiency measures. These planned measures are expected to include elimination of the company’s matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of Motorola’s wireless assets, efficiencies in service operations and company-wide process simplification.

Nokia Siemens Networks has begun the process of engaging with employee representatives in accordance with country-specific legal requirements to find socially responsible means to address these reduction needs. Nokia Siemens Networks will continue to share information in affected countries as the process proceeds. In order to reduce the impact of the planned reductions, Nokia Siemens Networks intends to launch locally led programs at the most affected sites to provide re-training and re-employment support.

Nokia CEO: salespeople to deliver true WP7 retail experience supported by improved product management, marketing and accelerated global coverage with a full breadth of products

Nokia Quarter 4 results 2011 webcast [Nokia, Jan 26, 2012]:

prepared remarks by Stephen Elop, President & CEO

[02:00] … Lumia

In Q4 2012 Lumia was introduced to:

  • a number of European countries
  • Hong Kong, India, Russia, Singapore, Taiwan and South Korea

… [remarks on January US introduction already covered by me in detail: Nokia’s Lumia strategy is capitalizing on platform enhancement opportunities with location-based services, better photographic experience etc. [Jan 12, 2012]]

  • China and Latin America in this half

Current situation:

  • to date well over 1 million Lumia devices sold
  • since mid November from zero markets to 15 markets, from zero devices to well over a million devices, from no presence in the US to being in lead in the AT&T’s LTE launch

From this beachhead you will see us to push forward with the sales, marketing and successive product introductions necessary to be successfull.

Our performance with Lumia on a country by country basis varies. Often [it] is a combination of relative brand strength and retail execution capabilities.

  • For example, in the United Kingdom, where competitive ecosystems are firmly entrenched, we have seen mixed retail execution around Lumia devices with a range of results among different locations, different chains, different stores and so on.
  • Contrarily in Germany and Spain we have seen steady, weak on weak improvement in Lumia device activations up to the Holiday season followed by a small expected dip in the last week of the year, and then a continued weak on weak growth in January.

.. we are in the heart of our transition, which means as we bring the first of our new devices to market there are areas we are learning and areas where we must adjust:

  1. We are learning more about the variations in our store by store retail execution related to Lumia. Our consumer research indicates and response at CES validates that once a consumers use a Lumia device their responses are positive. Where we’ve secured strong support from the operators we need to increase the engagement of the retail sales associates in the stores, because it is the retail associate who speaks with our consumersand puts the Lumia device in their hands. As a result we are adjusting, we are adjusting our retail tactics by increasing the quantity and quality of our retail associate traning programs, seeding more Lumia devices into the market, and increasing point of sales activities.
  2. With the continued focus on consumer net promoter scores we are also learning about the areas where consumers are most favorable towards the specific capabilities of Lumia and those areas upon which we need to focus. For example, we’ve received very positive feedback on the elegance of design, ease of use, and absolute performance of the products. On the other hand, consumers initially reported that battery performance needed focus. Thus we immediately adjusted to improve battery performance with software updates which are now in the market. This rapid cycle of consumer learning and Nokia response is a critical part of our improved approach to product management.
  3. We are learning that awareness of Lumia is steadily growing, assisted by each of the successive product and country launches that continue. As awareness grows we are adjusting the focus of our marketing efforts from an aspirational aspect of a new launch towards an emphasis on a differentiated experiences and capabilitiesof the Lumia products.
  4. We are learning about the importance of truly breaking through. Thus we are adjusting our plans to increase the rate at which we enter new markets during the course of 2012. We also are increasing the focus of our corporate resources on continued marketing campaigns, and we are working to accelerate the introduction of a full breadth of products.

Overall we’re pursuing this pattern. We’ll take each step up the ladder one running at a time recognizing that the competitive dynamics vary country by country. This underscores the large amount of work immidiately ahead of us to break through as the third ecosystem, to capture the attention of retail sales associates, to convert the increasing awareness around Lumia and the purchase intent, and ultimately to delight our consumers. [09:12]

the essence of the answers to some questions:

on carriers’ motivation:

… motivation on third ecosystem is very strong … consistency on user experience on behalf of Microsoft … it is in our favor but we need earn their respect …

on Lumia sell-through:

… different [retail] experiences and so forth … focus on when and how those [retail] experiences are different … we do see different [retail] experiences and patterns in different countries … some are related to competitive dynamics, brand strengths, retail capabilities and so forth … for example, a lot of those reports tend to focus on UK, which in the context of Europe is the hardest market in terms of breaking through the strength of the competing ecosystems and so forth … you’ll see a lot of ballance in that direction … what’s really interesting is, and this is we’re so much in very early days that you have to really dig into the details … even when you’re in the UK. I was there a couple of days ago, and as you can imagine, I went to store, to store, to store, and asking: tell me about smartphones, what’s new and all that type of thing. You’ll see a great variability of in-store performance in terms of retail experience. .. in certain stores the retail presentation is great, the associates are well trained, everything is right, and of course it correlates very closely with the success that we’re seeing in certain chains of stores, in certain areas and so forth. Very good performance. … In other areas we are not as far along as we need to be. We need better retail execution, associates are not as well prepared, or there are other dynamics that are at play. The reason I tell you about this variability is because, first of all, how people report depend very much on the experience they have, this mix from location to location in some countries. But also as you assess, OK, as we apply more resource, as we make sure that we are very focussed on getting everyone upto the base level, if not the excellent level of retail execution, we can clearly see our way through the work that need to be done in order to deliver the results that we want to continue to deliver. …       

on China dynamics:

… The Chinese operators are increasingly, on accellerated basis entering into structures where there’s effectively retail rate plan bundling is going on at the store. The operators are driving very hard for the volume of 3G data subscribers. And this is not necessary an economic measure as it is driving volume on certain networks for certain technologies. I think those targets are probably set more broadly for all of the operators [he could mean: by the state, as all three operators are majority owned by the state]. And the impact of that is that they are discovering that with very low priced devices on certain radio technologies they can drive a lot of volume at those levels. And so we are seeing, for example, a very significant uptake in a number of low-priced devices that are on CDMA, there’s also a very significant focus on the Chinese technology TD-SCDMA, again all of the low levels ought to drive those volumes. My comment in the prepared remarks is that Symbian is not well positioned today against that. We do not have Symbian CDMA products at all, so we are not participating in that part of the market. So as that part of the market grows our addressable market has gone down because of that. In TD-SCDMA we do have some products in that space but not at the price points and configurations that is the real focus of this market. …

… We have not yet announced our specific products for the Chinese market but I will say that when we first announced our launch plans, I think all the way back in October, we did highlight that we would have CDMA based Windows Phone products and TD-SCDMA Windows Phone products. That thing said it is the case that we have work to do to successively drive the prices down further and further and further. That will take a bit of time but this is clearly the pattern you are going to see us on the months ahead. …

[I have a couple of deep and current analysis on that:
The new, high-volume market in China is ready to define the 2012 smartphone war [Jan 6, 2012]
China TD-SCDMA and W-CDMA 3G subscribers by the end of 2011: China Mobile lost its original growth momentum [Jan 21, 2012]
China becoming the lead market for mobile Internet in 2012/13 [Dec 1, 2011]]

on differentiating the Windows Phone:

… the overall user experience is differentiated against Android … good response from the customers on Music service included, location services (Map and Drive) … partnerships: e.g. ESPN … in addition we have to ensure that the retail experience is differentiated … even price, e.g. in US/T-Mobile case already …

[I have a couple of deep and current analysis on that:
Nokia’s Lumia strategy is capitalizing on platform enhancement opportunities with location-based services, better photographic experience etc. [Jan 12, 2012]
The precursor of 2012 smartphone war: Nokia Lumia vs. Samsung Omnia W in India [Jan 3, 2012]
The leading ClearBlack display technology from Nokia [Dec 18, 2011]
Nokia Lumia (Windows Phone 7) value proposition [Oct 26, 2011]]

on rapid scalability for lower prices of Chinese market:

… a critical consideration for us … work is under way with Microsoft … you will see a stepwise progress in that direction in the periods ahead.

on the mobile phones business:

… feature phones and how that market is perceived is less about the collection of features and what it does and doesn’t do, but it is more about the price span, the opportunity to drive, increase sales in that area, to serve consumers who don’t want to spend the money, or don’t have the money to spend on what we would today consider smartphone and so forth. …

[I have a deep and more current information on that:
Smarterphone end-to-end software solution for “the next billion” Nokia users [Jan 9, 2012]]

Nokia Lumia Momentum Map [Nokia Maps Blog, Jan 15, 2012]

If a picture is worth a thousand words, an interactive map is at least worth ten thousand words! To coincide with the launch of Nokia Lumia in USA; we launched the Nokia Lumia Momentum Map – an interactive way to check out the countries where Nokia Lumia smart phones are either available or will be coming soon. You can also check out the tweets, videos and photos from users about the Lumia series.

The content of the Momentum Map as of Jan 15, 2012:

Country Lumia 710 Lumia 800
Germany Now Now
Netherlands Now Now
Italy Now Now
Russia Now Now
India Now Now
Hong Kong Now Now
Taiwan Now Now
Singapore Now Now
Spain Jan 11, 2012 Now
United Kingdom Feb 1, 2012 Now
USA (+ Lumia 900
“in coming months”)
Jan 11, 2012 Coming Soon
France n.a. Now
Austria Coming Soon Now
Hungary Jan 20, 2012 Jan 20, 2012
Greece Jan 21, 2012 Jan 20, 2012
Portugal Feb 2, 2012 Jan 26, 2012
Switzerland n.a. Jan 13, 2012
Denmark n.a. Jan 20, 2012
Sweden n.a. Jan 23, 2012
Norway Feb 1, 2012 Feb 1, 2012
Canada Feb, 2012 Feb, 2012
Belgium Mar 1, 2012 Feb 1, 2012

More information:
Nokia Q4 2011 net sales EUR 10.0 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.29) Nokia 2011 net sales EUR 38.7 billion, non-IFRS EPS EUR 0.29 (reported EPS EUR -0.31) [Nokia press release, Jan 26, 2012]
Quarter 4 report tables in xls [Jan 26, 2012]
Nokia Names Siilasmaa as Chairman to Replace Retiring Ollila – BusinessWeek

… Nokia investors lost more than 60 billion euros ($79 billion) in share value after Apple Inc. leapfrogged it with the iPhone. Siilasmaa will oversee Chief Executive Officer Stephen Elop’s efforts to win customers as Apple and Google Inc. expand into new markets. … An investor in Finnish startups, Siilasmaa may also broker more tie-ups with new companies such as “Angry Birds” maker Rovio Entertainment Ltd.
“I don’t want to leave a fortune to my kids,” Siilasmaa told a panel on startup investment …

Nordic Chairman of the Year 2009: Speech of thanks by Risto Siilasmaa, F-Secure Oyj. [Feb 18, 2010]

Relative to that media reports are very narrow focused as you could even see from the below entries considered the best among them:

Nokia Posts Huge Loss [The Wall Street Journal, Jan 27, 2011]

Gartner analyst Carolina Milanesi said Nokia’s shipments were in line with expectations. ‘Overall, what we have been looking for is an improvement over the third quarter, and we got that. But while it seems Nokia is on track, there is still a lot more to do,’ she said.

Nokia CEO taps salesmen to assure Lumia push [SlashGear, Jan 27, 2012]

Over the last year when it came to Windows Phone, we saw a lovely looking user interface fall victim to less than stellar engagement and interest on the part of the public – Stephen Elop this week says that it’s the work of the salesmen, not the manufacturer, to make the final drop of the device into the hands on the consumer. Without a doubt there’s a certain flair to the Lumia line of smartphones being released both here in the USA and abroad this year, but without the folks in the stores actually pointing people to the hands-on equipment, there’s certainly no chance of a big hit in the engagement environment. Elop let the world know in Nokia’s sales call what he expects from store employees in the very near future.

Without that final point-of-sale touch, all else will certainly fail, at least that’s what Nokia’s top minds seem to be saying this week. Though the devices are perfectly legitimate in their build and execution, and the advertisements surrounding them may be lovely, there’s always a third step that must be taken. Elop said thusly this week in Nokia’s sales call:

“We need to increase the engagement of the retail sales associates in the stores, because it is the retail associate who speaks with our consumers and puts the Lumia device in their hands. For example, in the United Kingdom, where competitive ecosystems are firmly entrenched, we have seen mixed retail execution around Lumia devices with a range of results among different locations, different chains, different stores and so on.” – Elop

And the comments were mostly supportive of that:

Joseph ParadisModerator1 day ago

I think he has a good point. I had known about WP7 for quite some time before the launch and had already chosen the phone I wanted. The last step for me was going to the store and getting a little hands-on to seal the deal. I had 3 sales reps (from 3 different stores) tell me to check out the Android phones instead (?!). One told me that the Windows OS is no good because its buggy, the other two were just astounded that I was interested in a WP7. I knew way more about the specs of those phones (and a good count of Android phones) than the sales rep. There are a lot of people who I think would like Nokia WP7 phones and other WP7 phones, but kind of go to the store without much knowledge and get carted around by these reps who may have ulterior motives.

Stephens_ElopedModerator1 day ago

I think anyone who is reading a website like SlashGear is the kind of person who probably knows more than the average salesperson in a mobile phone store. Definitely. I’ve had the experience of being “too knowledgeable” myself on many occasion. You stand there listening to false information and you’re either tempted to let it fly, (poor guy didn’t any training) or if they’re douches, you just say, “No, you’re wrong, the N9/L800/L910 isn’t all aluminum, it’s all poly-carbonate, which is a plastic.”

I think salespeople in the States are the worst – they’re so entrenched with Android and iPhone (and also any OEM + WP that ISN’T Nokia), that unless Nokia say, “ok salesteam, here’s a much, much bigger commission for you if you sell a Lumia”, then they haven’t got much chance of changing the mindset of the average American consumer. It’s not a Nokia friendly world here, so they’ve got to up their game. TV ads ain’t nowhere near enough.

CleverModerator22 hours ago

It’s definitely the salespeople who make it hard for WP7 to take off. Phone carriers make their biggest profits from sales of Android handsets and are able to load the Android phones with their bloatware, therefore the sales staff are trained to push these phones over iPhone and WP7 handsets.
Here in Australia our stores are all Android themed and one store in Melbourne has a whole floor called “Android Land”, where phone shoppers can explore and learn all about the Android ecosystem. Now that there are some decent WP7 handsets coming out, I think Microsoft really needs to do three things to get their OS to take off:

1 – Get some handsets out to carriers and stores. Only 1 carrier out of 4 in Australia even sells WP7 devices and they are outdated and you’d be lucky to even find them on display in stores. I think a lot of people would like to by a Nokia N900 but if it takes another 12 months before they even hit our shelves I’m sure we will have lost interest.

2 – Work with carriers to not only sell WP7 devices but to actually push them. Make the devices resonably priced and give carriers incentives in the way of good subsidies to entice them to get their staff to actually push WP7 devices.

3 – Market WP7 so people actually know it exists and know to look for it when they do walk into a phone store. Apart from us tech heads I would bet that half of the population doesn’t even know that WP7 exists. People who don’t know about something are a lot less likely to purchase it. Where are the TV ads telling us why we should be buying a WP7 device?

Dumb salesmen are hurting us – Nokia CEO [The Register, Jan 27, 2012]

Incentivising the McJobs

Analysis Stephen Elop got a pretty indulgent reception from analysts, and most of the press yesterday, after delivering some shocking results. Nokia turned a profit of €2bn into a loss of €1bn in the new boss’s first full year; volumes are down by 29 per cent; sales of the new Windows phone are unremarkable (to put it generously); and Elop has scrapped guidance for the rest of the year. [Summary] News like this would normally have analysts reaching for the panic button – but not today. Why would this be?

Well, obviously, much can be explained by the appreciation that Nokia is in rapid transition – it isn’t even a full year since the Elopcalypse. Elop got the bad news out of the way in his (still) remarkable Burning Platforms memo. But it’s also because he was quite unexpectedly frank and forthcoming about why Nokia isn’t making more headway with its shiny new platform – the one that isn’t burning. Elop explained that Nokia has a very stiff learning curve ahead of it in consumer retail. He also said that sales staff in the channel weren’t helping. He even detailed this country-by-country. I’m surprised more Nokia-watchers haven’t remarked on this – or why Elop dwelled on retail in such detail.

Nokia staff should be glad he did, because of a forlorn sight I saw last November. Just as the Christmas shopping season was getting underway on London’s Oxford Street, I saw a quite ominous sight. The flagship West End Carphone Warehouse store, next to John Lewis, had large posters in the window announcing the arrival of the Lumia 800. There were two live Lumia 800s available for curious punters to play with – of around half a dozen such working retail models from rivals. Except they weren’t live. They were completely dead. And although Nokia had secured the prime corner spot for its devices, it may as well have hidden them on some remote industrial wasteland. The shop was very busy, but nobody came and asked if they could see the Lumia working.

If Nokia is to claw its way back into contention, this won’t do. Getting one million Lumias stocked really isn’t a terrific achievement considering that the six largest European markets had the 800, and some pretty significant Asian markets had the 710. The needle hasn’t moved.

“There are areas where we are learning and areas where we must adjust. First, we are learning more about the variations in our store-by-store retail execution related to Lumia,” said Elop yesterday.

He then re-emphasised how important it was to show people the Windows UI, and suggested that quality of the sales droids was very variable:

“We need to increase the engagement of the retail sales associates in the stores, because it is the retail associate who speaks with our consumers and puts the Lumia device in their hands,” he added, correctly. And he singled out some of the domestic channel here, suggesting he hadn’t been impressed by what he saw:

“For example, in the United Kingdom, where competitive ecosystems are firmly entrenched, we have seen mixed retail execution around Lumia devices with a range of results among different locations, different chains, different stores and so on.”

I know several first-time smartphone buyers and Windows Phone wasn’t even on the radar. People don’t know it exists. In the UK, Android gained an early and enthusiastic foothold, which two years on translates into a mature and knowledgeable market. The Samsung Galaxy SII was the best-selling phonein the UK at Christmas, by some distance. For the average punter a buying decision begins with a binary choice between Apple and BlackBerry, and if it’s a touchscreen then it’s between the iPhone and “one of the other lot”. The other lot is Android. Sales staff in stores like Carphone aren’t uniquely thick – they’re like all savvy retail staff – they want their commission, and they know there’s a huge appetite for Android out there.

It’s a sign of how things have changed. Nokia can no longer play hardball with its channel partners – today, it really needs their help. Windows has made no impression on the market and gaining people’s attention – which includes aligning the incentives of the channel – is going to be much more expensive than analysts realise.

I’m onto my second Lumia, and I like the UI very much indeed. But I still haven’t seen a civilian – someone who isn’t an analyst, journalist or Nokia industry partner – carrying a Lumia in the wild. Have you?

Nokia’s North America centric approach for Windows Phone 7

Follow-up:
Nokia Lumia (Windows Phone 7) value proposition [Oct 26, 2011]
Designing smarter phones–Marko Ahtisaari (Nokia) and Albert Shum (Microsoft) [Nov 23, 2011]
Note: Both Lumias come first to countries other than North-America where a portfolio of Lumias will be introduced just the first half of 2012. 

Update 2:
Nokia US President Chris Weber: Why Lumia’s a hit [Nokia Conversations, Dec 20, 2011]

Chief explains why the 710 is right for America and hints: you ain’t seen nothing yet

I got a few minutes with Chris Weber, President, Nokia North America, after the smartphone sales announcementlast Wednesday. Without further ado, here’s what went down…

Chris, what excites you particularly about the Nokia Lumia 710 coming to the US on T-Mobile?

First of all, this is a world-class smartphone that is aimed at converting current feature-phone owners over to the exciting world of smartphone ownership. Our numbers show that more than 150 million Americans don’t have smartphones currently. Many are on the fence because of high phone costs or high monthly plan costs.

The Lumia 710, with T-Mobile, will cost only $49 and monthly plans will cost around $50 per month.

What sets the 710 apart from the competition?

The Lumia 710 has a great hardware offering with a 1.4 Ghz SnapDragon processor, a color-popping ClearBlack display, and Nokia’s exclusive Nokia Drive, which offers great point-to-navigation so you can leave your GPS behind when traveling. Not to mention, you get Nokia’s amazing industrial design all backed by the amazing usability of Windows Phone.

This is the first look for Nokia fans in the US at Windows Phone – what’s cool about it?

Windows Phone is amazingly fast and usable right out of box. Because Windows Phone integrates popular social networks like Facebook, LinkedIn and Twitter – users can easily sign in and utilize these without installing apps for them.

It’s known that first-time smartphone owners hate setting up their devices and installing loads of apps just to get started on their networks of choice. On Windows Phone, you do a simple set up process and you’re good to go.

My favorite uses for Windows Phone are the People Hub, Live Tiles and the amazing Open Table integration that helps you find reservations all within the Local Scout utility – this is very cool.

Tell me more about the custom offerings for the Lumia phones, specifically Nokia Maps and ESPN – what can we look forward to?

Nokia Maps and ESPN will come pre-loaded on the phones at purchase. Rest assured that Nokia Maps is a huge platform for us that we see a lot of potential for. There will be exciting announcement and additions in the near future, but I can’t say more now.

As for ESPN, our partnership with them has yielded unique experiences and custom content to the Nokia Lumia 710. Again, we have some awesome features that sports fans will just eat up coming in the near future, we are iterating fast and news will be coming in the coming months.

So, this is the start of a set of Nokia phones, can you elaborate?

I can say that we have been talking to a number of carriers and we’ve been astounded at their overwhelming support. We will be launching more phones on other carriers. The Lumia 710 is the start of a portfolio of products aimed at the United States.

We like to call our Windows Phone Portfolio rollout “rolling thunder”. What this means is that we will have numerous announcements spread throughout the coming months that will offer something for everyone.  In our view, this is a marathon, not  a sprint, and we anticipate being a major player in the US market by this time next year.

More information:
T-Mobile brings Nokia Lumia 710 to the U.S. [joint press release, Dec 14, 2011]: “Nokia and T-Mobile deliver a leading entry-level Windows Phone experience to the nearly 150 million Americans still to make the transition to smartphones.” [expected to be available starting Jan. 11]
Nokia Lumia 710 now shipping [Dec 9, 2011]: “Second Windows Phone smartphone from Nokia reaches stores today [in Taiwan]”

Update 1:
DroidUser999 says: … What happened to Nokia-MS Party on Aug 17th. Did they announce anything? [August 17, 2011 at 12:42 pm]

Taigatrommel says: August 17, 2011 at 6:38 pm

It was said they’d have a “small portfolio of devices” ready this year for small launch on limited regions.

I think they talked about a touch-only phone as well as one with a keyboard. So this small portfolio would include two different devices.

– More information (for the gaming and entertainment space): Nokia Windows Phone to debut on August 17 at the huge gamescom 2011 event [Aug 3, 2011 with updates up to Aug 20, 2011]

@dnystedt Dan Nystedt
Nokia supplier, Compal, to start shipping Windows Phone 7 smartphones to Nokia in September, total 2 million in Q4, Taiwan media say.
12 Aug via web

– More information: First Nokia WP7 in Q4 via an ODM route from Compal [Aug 13, 2011, with updates up to Aug 17, 2011]

End of updates

Exclusive: Nokia to Exit Symbian, Low-End Phone Businesses in North America [AllThingsD, Aug 9, 2011]

In an interview with AllThingsD, the head of Nokia’s U.S. subsidiary [Chris Weber] said that the company will also focus exclusively on sales through traditional wireless carriers. In the past, Nokia has sold its smartphones at full price to consumers, after finding carriers unwilling to significantly subsidize or market the products. It has also had a significant — if low margin — business selling low-cost feature phones.

North America is a priority for Nokia, Weber said, in part because it is a key market for Microsoft and also because Nokia sees it as a key to winning in the smartphone battle globally.

We’ll develop for North America and make the phones globally available and applicable,” Weber said. “In fact, evidence of that is that the first Windows Phones that will ship are being done by our group in San Diego.”
[where the headquarters and main engineering sites of Qualcomm are]

Nokia plans its biggest-ever marketing pushfocused on reestablishing its presence in the U.S.

“Without getting into numbers, it is significantly larger than anything we have done in the past and the most we will invest in any market worldwide,” Weber said. “They are putting their money where their mouth is.”

Nokia exec: Android and iPhone focus on the app is “outdated” [VentureBeat, Aug 9, 2011]

Weber … cited an effort to consolidate many of Nokia’s U.S. operations in Sunnyvale, a project he says resembles running a start-up [with a challenger mentality]. Since Weber joined Nokia in February, he’s already changed 80 percent of his leadership team, noting that he has “10 to 11 new direct reports” out of a total of 14.  Weber had left Microsoft in December, after running enterprise sales for the software giant.

Weber called Android and the iOS phone platforms “outdated.” While Apple’s iPhone, and its underlying iOS operating system, set the standard for a modern user interface with “pinch and zoom,” Weber conceded, it also forces people to download multiple applications which they then have to navigate between. There’s a lot of touching involved as you press icons or buttons to activate application features. Android essentially “commoditized” this approach, Weber said.

Nokia, by contrast, will offer a more seamless and efficient interface with its “live tiles and hubs” approach. It does this via Microsoft’s Windows Phone operating system, where applications will be integrated into everything you do. For example, if you want to communicate with a business contact, you select the contact from your address book, and then communicate in any way you want — via LinkedIn, Facebook or Twitter — without having to open those individual applications. That’s because everything is built around contacts, not applications. And your profile and most important contacts are represented by tiles on your home screen, which update dynamically as you or your contacts make status updates. On the iPhone and Android, by contrast, the home screen icons remain static.

Here’s one killer feature afforded by Mango: Using it, Nokia phones will be able to use voice commands to complete tasks without ever touching the phone. Weber demoed this feature for me (but unfortunately, wouldn’t let me shoot video of it), but here’s how it worked: When I texted him, his phone received the text and then automatically read the message out to him. He then directed his phone — again, using only voice — to reply to me with a spoken message. It arrived on my phone promptly. He did all this without ever touching his phone. And he’s said he’s used the voice feature to conduct scores of phone conversations, too, answering and hanging up without ever touching the phone. That’s pretty cool, indeed.

In fact, we’ve previously referenced this technology. However, Weber said the feature is much better than Android or Apple equivalents, because with those competing phones you have to touch the phone each time you want to initiate their voice-to-text features.

It’s a certainly a good feature to showcase, but its also not a game-changer, that massive overhaul that could give Nokia a decisive lead.

It’s not clear exactly how Nokia plans to distinguish itself from the host of other manufacturers — HTC, Samsung and LG — who are also committed to building phones on Mango.

Weber kept stressing Nokia’s superior hardware. And Nokia will also benefit from its relative leadership in location-based services via its ecommerce and maps offerings, which it owns directly, and therefore can monetize more effectively.