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    Home Latest News
    • Mobile

    Rivals Close In on Nokia

    Written by

    Carol Ellison
    Published July 16, 2004
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      Yesterdays earnings reports from Nokia Inc. and Sony Ericsson Mobile Communications AB, and another Friday morning from Samsung Electronics, played out like classic David vs. Goliath drama with Nokia, titan of the mobile handset market, foundering under the slings and arrows of nimble competitors.

      Nokia dominated the opening scene yesterday with a good-news, bad-news report for the quarter ending June 30. Net profits were up, but net sales were down. Net operating profit was up but—get ready for the wallop—mobile phone sales were down. This from the company that essentially defined the market.

      By contrast, sales at Sony Ericsson, which reported later in the day, were up 34 percent. And Samsung then added insult to Nokias injury with its report that the company tripled second-quarter profits over that of a year ago. Handsets are just one part of Samsungs overall business but, more than others, Samsung has driven the handset market with clamshell designs that feature color screens and cameras. That formula scored the company record sales of 22.7 million phones last quarter.

      /zimages/5/28571.gifClick here for reviews of six multifunction cell phones.

      Like any good CEO, Nokia Chairman Jorma Ollila put a rosy spin on the story during Nokias earnings call. The company, he said, “managed to limit negative market share through product introductions and selective price cuts.”

      For the record: Net profit was up 14 percent from 624 million euros ($777 million) in the same quarter last year to 712 million euros; net sales were down from 7 billion euros to 6.6 billion euros. Operating profit was up 11 percent from 818 million euros to 907 million euros on a one-time 90-million-euro return. Mobile phone sales dropped 13 percent to 4.2 billion euros from Nokias year-ago quarterly performance of 4.8 billion.

      And the immediate outlook doesnt look too good. In the coming quarter, the company expects net sales of between 6.6 billion euros and 6.8 billion euros, compared to 6.9 billion euros in the same quarter last year. (Statisticians sitting out there with pencils sharpened might want to look at the companys full presentation.)

      None of this should come as a surprise. Near-monopolies have a way of eroding as others find ways to make money in the same market. For years, Nokia was the 800-pound gorilla in mobile handsets. And it still is. It just isnt what it used to be. In May, Stamford, Conn.-based Gartner Inc. released a report that showed Nokias dominance is dwindling, and dwindling fast. According to Gartner, Nokias 35 percent market share in the first quarter of 2003 had slipped nearly 6 percent by the first quarter of 2004. For its part, Nokia admits it arrived too late to the clamshell-and-camera-phone party.

      To that, Ben Wood, Gartners principal analyst for mobile terminals and cell phones, added another reason: “the decision by operators in Western Europe to source more phones from Nokias competitors.” That would be Sony Ericsson, among others. Motorola, Samsung and Siemens all saw growth in the mobile terminal business last year at Nokias expense.

      /zimages/5/28571.gifClick here for Carol Ellisons analysis of the BlackBerrys success in the handheld market.

      Returning to Thursdays events, we jump from Finland to Tokyo and Stockholm where Sony and Ericsson, equal partners in the mobile communications venture that bears their names, jointly released their earnings report just hours after Nokias. Sony Ericsson announced a stunning 34 percent increase in sales over the same quarter of the previous year and an increase in net income of 177 million euros. The company also upped its global sales projections for the year by 50 million units. (Click here for the webcast.)

      Sony Ericsson President Miles Flint attributed his companys performance to “continued strong demand for our style-oriented lineup of imaging and multimedia phones.” The company underscored the point by announcing three new GSM phones and a camera phone for gamers the same day.

      For its part, Nokia made no secret of its plan for aggressive pricing. It cut pricing last quarter on consumer phones. “We thought Nokia could at least stop the declining market share in the quarter,” said Gartner analyst Carolina Milanesi. “They did manage to do that in Western Europe but not all across the globe.”

      Whats more, the enterprise did not see the benefit of the price cuts that targeted consumer phones. “They are very careful on how theyre cutting their pricing,” said Milanesi, noting that Ollila told analysts he wants to win market share, not buy it.

      Im not so sure. Nokia remains the 800-pound gorilla in the handset business. It may be down but its hardly out.

      Gartners first quarter analysis pegged Nokias market share at a diminished-but-still-sizeable 28.9 percent, compared with Sony Ericsson, which is in the No. 5 position with a growing-but-still-small 5.6 percent share of the market; Motorola, in second with 15.4 percent; Samsung, with 12.5 percent; Siemens, with 8 percent; and “others,” with 23.3 percent.

      Nokias market share is still leagues ahead of its competitors and, if it should choose to further price cuts, it could pressure “others” even if its odds-on competitors do not feel the bite.

      /zimages/5/28571.gifCheck out eWEEK.coms Mobile & Wireless Center at http://wireless.eweek.com for the latest news, reviews and analysis.

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      Carol Ellison
      Carol Ellison
      Carol Ellison is editor of eWEEK.com's Mobile & Wireless Topic Center. She has authored whitepapers on wireless computing (two on network security–,Securing Wi-Fi Wireless Networks with Today's Technologies, Wi-Fi Protected Access: Strong, Standards-based Interoperable Security for Today's Wi-Fi Networks, and Wi-Fi Public Access: Enabling the future with public wireless networks.Ms. Ellison served in senior and executive editorial positions for Ziff Davis Media and CMP Media. As an executive editor at Ziff Davis Media, she launched the networking track of The IT Insider Series, a newsletter/conference/Web site offering targeted to chief information officers and corporate directors of information technology. As senior editor at CMP Media's VARBusiness, she launched the Web site, VARBusiness University, an online professional resource center for value-added resellers of information technology.Ms. Ellison has chaired numerous industry panels and has been quoted as a networking and educational technology expert in The New York Times, Newsday, The Los Angeles Times and The Wall Street Journal, National Public Radio's All Things Considered, CNN Headline News, WNBC and CNN/FN, as well as local and regional Comcast and Cablevision reports. Her articles have appeared in most major hi-tech publications and numerous newspapers and magazines, including The Washington Post and The Christian Science Monitor.

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