16 Comments

Summary:

Nokia posted a 30.5 percent drop in earnings today on sales of 12.2 billion euros ($16.5 billion). The company saw its market share erode by 2 percent from the previous quarter and blamed price cutting by competitors for taking buyers.

Nokia posted a 30.5 percent drop in earnings today on sales of 12.2 billion euros ($16.5 billion). This wasn’t surprising as the Finnish phone maker had warned the world last month that this would happen. But it’s frustrating that the company, which saw its market share erode by 2 percent from the previous quarter, would blame price cutting by its competitors for taking buyers. Part of the problem is that Nokia’s late to the game when it comes to giving buyers what they want.

Sure, price-cutting is a pain to deal with, but since Nokia said it doesn’t plan to answer those price cuts with cuts of its own, it needs to get in gear and focus on boosting sales of its high-end phones. Although, price cuts in that market are coming too.

Nokia has made some brilliant phones but has lagged when it comes to building new ones targeted at the consumer population, which is snapping up smartphones at a rapid clip. An analyst told Forbes that half of the total value of the cell phone market will comes from sales of smartphones next year. But the people spending those dollars aren’t the business users who have purchased Nokia’s N or E series of devices — they want music players, touch screens and whizzy apps that allow them to see their social networks. Nokia’s getting started with the launch of its 5800 XpressMusic handset earlier this month, so we’ll see if that will help keep it on top.

Also as part of the earnings call, Nokia revealed that it would pay Qualcomm 1.7 billion euros ($2.29 billion) in the fourth quarter as part of a patent settlement made earlier this year. I’m hoping this means good news for getting Nokia phones on Verizon’s CDMA network.

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  1. Nokia CFO Simonson: We have lower costs, better brand & quality « TokenFinn Thursday, October 16, 2008

    [...] is not buying that excuse as Nokia’s market share on smart phones has dropped from 50% year ago to 35% last [...]

  2. Once again, a VERY poor analysis of the Nokia situation, coming from a USA-based iPhone-blinded person. YES Nokia lost marketshare this quarter, but that’s all due to the fact that they didn’t release anything substantial this quarter. N78 is just your average handset (although one would argue that it can do A LOT), N96 was out very late in the quarter. Only the E66 and E71 made it this quarter, and we all know how Eseries sales are much lower than Nseries.

    Anyhow, Nokia knew this beforehand, because they are focusing on the next quarter. They have a hell of few months ahead with the N96, N79 and N85 making it to the markets, and the 5800 xpressmusic also released in some countries, with Comes With Music.

    But what you need to know is that Nokia is in a transition phase. They aquired Trolltech, they aquired Symbian and Open Sourced it, they have also been working for a year on their own new music, maps, files, sharing and games services. They are trying to put everything together now, and at the same time they are moving from S60 3rd Edition to S60 5th Edition (that’s the “touch screen” interface you want). This sort of blank period always happens when you quit a certain phase and enter another. It’s understandable, it’s predictable, it’s temporary.

    And on a side-note, Nokia has blown up all the cards with the 5800 XpressMusic pricing. “Others cut prices? Well, so do we, watch us!”.

    And before saying something in the lines of Nokia handsets don’t do music or whizzy apps or whatever, try S60. E71 or N82 for example. Putting aside the touchscreen (which Nokia had since the 7700 and 7710, mind you, very ahead-of-their-time handsets), S60 can offer anything you’d want to do on a mobile phone. You can also MMS, copy/paste, use A2DP, connect your device on TV-Out, assign any song as a ringtone and even view flash on the browser! O’really!

  3. I suspect Rita works at Nokia.

  4. Some observations you might want to consider

    1. Does the main hypothesis of your article apply to the American market or its valid for the Global Market. Not everyone is enamoured by the touch metaphor or the smartphone approach. Does Nokia’s share in the US have a bearing on the analysis.

    2. A question I have is this, Can one be a one trick act aka iPhone and dominate all segments ?

    3. Have the others got their act together ie Samsumg, LG, HTC etc on a global scale. Yes they get a lot of coverage in the media but does coverage translate to conversion and service.

    4. Objectively speaking, is the current Nokia line incapable of competing with the products on a segment wise basis ?

    5. How do the emerging markets view various incumbents and also specifically do they have distribution and service networks in place to compete ?

    Your views would be appreciated. Regards.

  5. Stacey Higginbotham Thursday, October 16, 2008

    I think the handset market has room for more niches now than a few years ago. In a market with such variety and so many vendors, Nokia’s ability to have 38 percent market share is good, but losing share and seeing the average cost of its handset go down means it can’t be complacent. It obviously competes today, but lagging on touch was a serious issue. Its actions regarding VoIP that OM has talked about seem to signal a disconnect from end users as well.

    I actually don’t have, nor want an iPhone, but I will admit I have a bias toward developed markets. That being said, if Nokia doesn’t want to cut prices like its competition is, I think it needs to focus on the high-end, because that’s where people buy based on features and a brand rather than price. Developing markets as a rule are more price sensitive.

  6. Quickthink » Blog Archive » A Faster Slowdown Thursday, October 16, 2008

    [...] FOLLOW -. Check out this quote from Giga ” … An analyst told Forbes that half of the total value of the cell phone market will [...]

  7. Nokia has a history of missing the boat. It missed clam shells and it got beaten handsomely by the thin Razr from Motorola. It still ended up with 40% market share.

    The above commenters are right to point out that the US market is Nokia’s weakest. So the iphone obsession doesn’t damage it there much because it’s not that strong. Plus, we’re entering hard times, so Apple is going to have to cut prices. At least here in Finland (no I don’t work for Nokia) the iphone is much more expensive than even the N95 and N82.

    All this said I do wonder why Apple, a newcomer to the mobile phone market, can make a decent mobile OS while Nokia can’t. Symbian’s okay of course but there’s no reason for Apple to have stolen a march given the resources Nokia has.

  8. First of all I’d like to point out that I work for Nokia.

    I didn’t like the critisism of the aurthor of the article or the first commentator, there is nothing wrong with expressing an open opinion as long as it is from an informed source. Because Nokia is a transparent company we are able to have debates like this, and I am allowed to reply to this sort of post in work time with my managers blessing.

    There has been much written over Nokia and others products, but the fact remains that telecoms is evolving into a services led market not a hardware business. To that end a previous post has already stated how far Nokia has come towards becoming an Internet company in a very short space of time.

    Look at the ‘Comes with Music’ service, somthing that only can be made possible by large companies embracing change together, you get unlimited access to the millions of tracks in the Nokia Music catalogue for one year and once downloaded, they are yours to keep. Once you have bought a Nokia CWM device, there is no per track cost for these unlimited downloads and no maximum of 120 tracks as some media reports have suggested. Music can be downloaded directly to your CWM device or via your compatible PC too. Look forward at what the impact on the market that this sort of initative has for all of us.

    Love or loath Nokia you have to acknowledge that the world of telecoms would not have the sweep of products and services without the spur that open platforms, innovative products (how many other major companies would bring out a web pad and support a community for its development) and leadership that has been a hallmark of the company’s growth.

    To answer a couple of points raised earlier, you don’t get to be number one by following, copying or waiting, you do it by innovating and leading. This involves change and it should be apparent to anyone who blogs or reads the news that this is an area Nokia excels in. Also it’s been asked why it’s easy for new companies to make successful products. Again its easy to target the gaps in the market rather than meet the fight head on, this is Marketing 101. But look how many companies tried and failed to establish themselves, and then look where the products that have been successful in recent years are being built and their complexity level.

    I enjoyed the article, but I didn’t agree with it because it an assessment of a global business from a local view point. At the end of the day though that is the authors right. And sitting here I am able to reply and suppot that right from a handheld computer that my company helped bring into being.

    Mark

  9. Stacey, Thank you for your comments..

    Mark , For all the growth that one has seen in Nokia’s share, the next step points to one thing , Re-Inspire your existing customers to a new way of mobility. At the moment as a Nokia customer ,I do not see myself getting inspired to buy the new latest from Nokia or anyone else. If Nokia inspires as it has done in the past it would be interesting , but for now this conversation is interesting.

  10. Syament – Sell to me? C’mon you can do better than that……Rather than trying to randomly fire sparks of inspiration that may or may not ignite your interest how about telling us what would inspire you? If you do I promisre that I’ll point the right folk towards this thread.

    To be fair I’ll tell you what last inspired me: Yesterday I came back home on an aircraft catching up on tv shows that I had (legally) downloaded over wifi at the airport, free, gratis, using my home broadband roaming contract – that was cool. Earlier in the day I had watched one of our SVP’s commenting on another blog, unpromped, because that what he’s into – that inspired me.

    Mark

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