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Nokia keeps its market share lead despite dwindling profits

The mobile phone market is facing massive losses during the economic crisis as consumers are not purchasing new devices they way they did in previous years. There are a few exceptions in the smartphone market with Apple and RIM doing well despite the economy.

Nokia is the world's largest producer of mobile phones. Despite the distinction of having the largest market share, Nokia's profits are down massively compared to the same period of 2008. CNET News reports that Nokia announced this week that its net profits for Q1 2009 fell a massive 90% compared to the same quarter in 2008.

Nokia's Q1 ended on March 31 and during the period net profits were 122 million euros compared to Q1 2008 net profits of 1.22 billion euros. Analysts had expected Nokia to report profits of 306 million euros, roughly twice what it reported.

Sales for the quarter dropped from 12.66 billion euros in 2008 to 9.27 billion euros for the quarter, also below analyst expectations of 9.80 billion euros. According to Nokia, it shipped 93.2 million handsets during Q1 2009, a number 19% below the amount of handsets shipped in 2008 and down 18% from Q4 2008.

Nokia had previously stated that it expected sales to be down 10% in 2009 compared to 2008, but much of the decline is expected in the first half of 2009. Nokia reports that Q2 sales volumes are expected to maintain current levels.

Nokia maintained its 37% market share over the quarter blaming the poor sales on the economic crisis. Nokia is also losing ground in one of the few remaining areas of growth in the mobile phone market -- high-end smartphones. Nokia is under heavy pressure from competing firms Apple and RIM in the high-end market.

Nokia maintains that it is seeing success with the 5800 XpressMusic smartphone and shipped 2.6 million units in Q1 2009. The 5800 XpressMusic was pulled from the U.S. market soon after its introduction after issues with 3G network compatibility were discovered.

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It's not just the economy . . .
By stromgald30 on 4/18/2009 12:19:44 AM , Rating: 2
An almost 20% drop in sales? Has the other cell phone manufacturers' experienced this? I think this has more to do with Nokia's target market shrinking and competition increasing than the economy.

I honestly can't think of the last Nokia phone I wanted/envied. They don't even have a gimmick like Motorola and the RAZR (followed by the KRZR, SLVR, etc).

They do seem to make decent candybar style phones. My dad got one for cheap to hold him over from when his phone got wet/stopped working and when his contract expired. But, the market for smart phones is growing, with Blackberry, Samsung, Palm, Apple, and Google all jumping in. I haven't heard of any big splashes from Nokia in this arena.

IMO, Nokia has stayed in the simple basic phone market too long. If I'm going to pay $50+ for a phone, I'll get one with a touch screen and/or keyboard. Nokia's small smart phone selection and the shift in the market are what's killing their sales.




RE: It's not just the economy . . .
By Rookierookie on 4/18/2009 1:45:53 AM , Rating: 2
I don't pay $50+ for a phone.

But then, I don't use a Nokia either...


RE: It's not just the economy . . .
By akugami on 4/18/2009 1:21:13 PM , Rating: 4
You DO pay more than $50 for a phone, you just don't realize it.

Go look at unsubsidized phones in Europe if you want to see the true costs of cell phones. Heck, look at some of the models out here and compare the unsubsidized to subsidized costs. An iPhone is $600 vs $100 on contract. Many other phones for $50 or free are $400 unsubsidized. Ask yourself how the phone companies can afford to eat costs of hundreds of dollars per phone?


RE: It's not just the economy . . .
By Belard on 4/19/2009 5:06:21 AM , Rating: 2
I spent $225 on a Sony unlocked phone... only $100 more on a contract phone, but my contract wasn't up for renewal...

I find unlocked phones from SONY to be better than AT&T (which uses SONY GUI's - but made it ugly and points to AT&T store).

The last Nokia I saw was a friends... junk. Horrible screen and sound... worse than a cheap SONY phone.

Nokia maybe bigger in outher countries, but they sure aren't trying in the USA.


RE: It's not just the economy . . .
By Hare on 4/19/2009 4:28:34 PM , Rating: 2
quote:
I find unlocked phones from SONY to be better than AT&T (which uses SONY GUI's - but made it ugly and points to AT&T store).

Do you really think that operators make phones or operating systems?!? They make requirements for phone manufacturers like Sony Ericsson, Nokia etc who make the devices and operating systems. They are just customized for different operators if they wish so. Nokia makes everything between 10$ - 1000$ phones. When you say that something is junk you could maybe give a hint if you are talking about some low end crap that should be sold in rural India (but some US operator wants to sell it also because there is very little phone cost to hide in the monthly bill) or some decent device like the AT&T E71x (Nokia)?


RE: It's not just the economy . . .
By cheetah2k on 4/19/2009 11:04:37 PM , Rating: 2
On the other hand, I often think that some of Nokia's loss in profit has also to do with the quality of their handsets, rather than just the state of the economy.

For example, I've had the chance to play Nokia's new flagship Express Music 5800 touch screen, and amongst the hype, I've been totally disappointed. Admittedly, this is Nokia's first real stab at a touch screen phone, the phone is cheap enough and the voice/sound quality is good as usual. But the touch screen is really bad - as is the UI that goes with it.

Unfortunately, just like this economic downturn, we're going to hit a downturn in quality, but without much change in price, which will also lead to a drop in sales.


RE: It's not just the economy . . .
By Hare on 4/20/2009 10:21:44 AM , Rating: 3
quote:
I've had the chance to play Nokia's new flagship Express Music 5800 touch screen


Flagship? It's Nokia's entry to touch phones and price wise it's in the low 1/3 of Nokia's offering. N and E-series devices are mid-to-high end.


RE: It's not just the economy . . .
By robinthakur on 4/20/2009 11:10:07 AM , Rating: 1
Agreed, after all the hype that this was going to be an "iPhone-killer", the 5800 is laughably bad. Seemed quite poorly thought out, as though Nokia deliberately made a point of not trying Apple's device prior to making it.

Since I got my first iPhone a while ago and now the 3G, I wouldn't consider going back to Nokia or many other brands actually (except Blackberry...maybe). The iPhone is simply so much more versatile and so much better designed. Nokia and the rest seem to fall over themselves to clone it, but never manage to get close to its level of usability, which is odd considering the R&D budget they all must have.

I would say that Nokia is losing its touch at the High end as well (and I'm not counting Vertu lol). Save from the occasional interestingly designed 88xx, they all look pretty dated. For their time, back in the day the N series were good phones (e.g. N70, N80), but recent ones like N96 have not impressed me. Bloated, heavy and behind the times. The E71 is ok, but really who would want one when you can have a real Blackberry like the Bold and stop messing about with wannabees?

I live in Europe (UK) and outside adverts I can't remember the last time I saw someone using a Nokia. Everyone I know has a Blackberry, Samsung or an iPhone 3G.


RE: It's not just the economy . . .
By Hare on 4/20/2009 11:45:36 AM , Rating: 3
quote:
The E71 is ok, but really who would want one when you can have a real Blackberry like the Bold and stop messing about with wannabees?

Many, why? The Bold is huge compared to the E71 (a low wider and almost double the thickness), it has a crappy camera, it has poor connectivity features (lack of WLAN is ridiculous) and the GPS doesn't do much compared to Nokia Maps (or installable TomTom etc). The only thing going for the Bold is the good resolution but it's pretty much moot as the physical display is so small that qvga is enough.

Who wants a real blackberry when you can get a device that is better?


RE: It's not just the economy . . .
By Hare on 4/18/2009 5:44:06 AM , Rating: 5
Nokia is doing a lot better than Sony Ericsson, Samsung, LG etc. The problem is that Nokia isn't big in the States and most Nokia devices sold there are low-end (guess why most comments coming from US residents are biased). Check out Nokia N97, E71, N810 etc if you want to see cool devices. The E71 kicks blackberry ass so hard it's amusing.

When you think about the prices remember that Nokia sells huge amounts of unlocked devices so there's absolutely no point comparing those prices to operator deals where the cost of the device is hidden in the phone bill. Most people are just too dumb to understand this.


RE: It's not just the economy . . .
By melgross on 4/18/2009 7:38:08 PM , Rating: 2
Samsung is doing very well.


RE: It's not just the economy . . .
By Hare on 4/19/2009 2:37:55 AM , Rating: 2
Samsung is trying to gain marketshare by slashing prices (they don't have the volume advantages that Nokia has). In the long term profits are necessary. Gaining market share but losing money doesn't get you far. Samsung is doing better than Sony Ericsson but they definately are not doing very well (very few companies are these days).


By Aloonatic on 4/20/2009 4:00:38 AM , Rating: 3
I'm not sure how things work in other markets, I can only speak of the experience I, my family and my peers have in the UK.

An awful lot of phones are sold "pay as you go" over here, but they tend to be cheap older phones and they service the kids pocket money/grandparent light use market, whereas the majority of the high end phones are included in contract deals.

A couple of years ago they typical contract that mobile phone operators were pushing on people were 12 month contracts, with additional benefits for 18 month contracts there were not really all that more attractive, especially when you knew that you could get a new phone in 12 months time, probably for "free" with your next contract. Now however, the 12 month contracts are very unattractive, 18 month contracts are much more reasonable and then 24 month contracts have sprung up from nowhere.

I know that I have gone from contracts lasting 12 months to one lasting 18 months, as have most of my friends. So where, in the past Sony, Nokia or whoever were getting paid for a phone every 12 months by the phone service providers, now it seems that they have to wait for 18 months.

It's not hard to see that with increased competition from Apple taking al larger share of the (probably) more lucrative and profitable high end market and being squeezed by phone service providers along with the recession, that these kinds of figures are somewhat inevitable.


RE: It's not just the economy . . .
By DLeRium on 4/20/2009 3:22:48 PM , Rating: 2
BASIC smartphone?

Let's see what the N95 has that came out in 2007 that the iPhone did NOT have in 2007.

- 5MP Camera
- Video Recording
- Secondary camera for video calls
- GPS
- 3G
- FLASH for camera
- microSD for expandability
- No retarded recessed 3.5mm plug
- COPY AND PASTE

Blah blah blah. This is the typical ignorant US cell phone user that hits up the AT&T store and gets a BRANDED LOCKED phone by Motorola called the RAZR and thinks its the best damn thing out there.

Today, the N95 still has THE BEST 5MP shooter out there. Ok, you can say the N82 is a step ahead because of flash but besides low light conditions, the N82 and N95 are identical in camera performance.

Nokia isn't big in the US but neither are cutting edge cell phones. Thus when you look at the rest of the world, you will wonder why they are all on Nokias. The same goes with SE. SE only had penetration after AT&T decided to market their W580.

Keyboard? Someone obviously hasn't used the Nokia E-series before. Seriously, shut up.

This is just like the Nokia 5800 thread when people talked nonsense because they didn't even know such a phone existed and obviously knew nothing about it to say anything meaningful.

If you look at research it shows that Android and Symbian are really going to be the ones to make it big in the next few years. S60 is evolving to open source with the SE Idou, and Android's next revisions are going to make open source big. Apple has a lot of catching up. Just because idiotic users drool over the iPhone in the US doesn't mean it's THE smartphone of the world.


RE: It's not just the economy . . .
By Hare on 4/20/2009 3:41:05 PM , Rating: 2
You forgot multitasking, usb mass memory mode (no apps necessary for moving files freely), real bluetooth support, turn by turn navigation, freedom to install anything you want from anywhere you want (not limited to a certain appstore with certain approved apps) etc, etc, etc...

I personally like the iPhone a lot but in strict terms it's questionable if it really is a smartphone.


Share price
By Eri Hyva on 4/18/2009 3:41:08 PM , Rating: 3
Nokia share price jumped over 10% after this result was announced.

Sony Ericsson made loss of 379 million euros in the same period, axes 2000 people more. SE sold 35% less phones than January-March last year. Turnover dropped from 2,7 billion to 1,7 billion.




RE: Share price
By melgross on 4/18/2009 7:46:43 PM , Rating: 2
Don't compare them to S-E. They've been trouble for some time.

Nokia is the biggest, just like Motorola used to be before they lost their way, as Nokia seems to be doing now.


RE: Share price
By Aloonatic on 4/20/2009 7:12:19 AM , Rating: 2
I think most phone manufacturers are struggling. That market has matured, the rapid growth had to come to an end sooner or later. The new features and what-not are not so appealing to the main stream who don't want all the fancy features of an iPhone (or pay for them) and whilst a few years ago there was a massive difference between a modern phone and a 2 year old phone now there isn't really much to differentiate them, to the masses, so they are happy to keep what they have got for a little longer.

Having Apple enter the market and appear to do well (as you can't help but have growth when you first enter the market after all) and have hit thee ground running with a good product in the most profitable sector, phone service providers extending contract lengths and the worst recession in a long long time means that it's good if they still look like they are able to survive.


Fired
By B166ER on 4/17/2009 11:39:29 PM , Rating: 1
Someones f-ing fired.




RE: Fired
By spread on 4/17/2009 11:47:39 PM , Rating: 3
It's expected. People don't care to spend $300 on that shiny new phone with 30,000 useless features when its hard to even keep a job.


A 90% drop in profits
By dflynchimp on 4/18/2009 8:34:08 PM , Rating: 2
Means they still made a profit. It doesn't mean they're doing well, but it doesn't put them in the red (yet). Sony Erikson by comparison is really tanking.

The phone industry, like so many other commodity industries, is feeling the crunch of the economy. Right now the larger concensus is "if it ain't broke, don't replace it", this applies heavily to the electronics industry. I'm on the AT&T service, which while it ain't the best gives me a free (or subsidized) upgrade every two years, giving very little incentive for me to dole out $300-$400 for a phone unless my current one is broken.




nokia is investing
By bluemagic on 4/19/2009 7:38:23 AM , Rating: 2
Nokia has been doing a huuuuge amount of investing in new tech and software startup companies over the last year which will have contributed to some of this loss as well.

But from this investment will in the next couple of years bring nokia devices in about 20 countries an app store, music store (unlimited free downloads) , video, games store, maps, skype and i am sure other stuff

http://www.ovi.com/services/
https://publish.ovi.com/login (developers app store)

Their os is also now open source to compete against android.

They have to do this to compete in the software market because their current lead in hardware is being closed rapidly.

The software potential of phones is still in its infancy and i liken it to what the windows 95 days were like.

We will have personal computers on our person which can handle 90% of what my pc does today within the next 10 years. Whether or not nokia will be the best company to utilise this for a superior user experience is another story.

http://www.concept-phones.com/news/folding-screen-...




Includes one time charges
By randomname on 4/21/2009 8:24:13 AM , Rating: 2
The actual profit was around 500 million euros.

http://www.nokia.com/A4132057

Some of those expenses included shutting down plants in Germany, where only wealthy companies have the money to shut down plants. Nokia is doing pretty well, but they are trying to squeeze every buck out their manufacturing business, as basic cell phones are more and more becoming commodity products. They also stopped ordering products from subcontractors due to the downturn. Here in Finland they have also been outsourcing R&D to universities (over the past few years), so they can end projects fast without the hassle of laying off people.

Not very nice for the subcontractors or people at NRC (Nokia Research Centre), but hey, it's business. Cell phones are becoming less and less exciting, at least the way Nokia is making them.




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