Nokia’s struggle at the sharp end

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Nokia’s latest results show a company stagnating, despite its busy activity beyond manufacturing. Dealers claim it has already lost the battle at the very high-end of the market. David Pittman reports

Not so long ago, Nokia was the undoubted king of the handset world. From the classroom to the boardroom, most of society was using its handsets.

That has changed. At the business end, Research in Motion’s BlackBerry range has huge importance, and increasingly Apple’s premium consumer-focused iPhone devices are taking share from it.

And Nokia faces intense competition in the mass market also, where brands from the East are increasing sales and profits. Samsung has run Nokia close in Europe for some time. HTC, and latterly Huawei and ZTE, are contenders now as well, with an open ticket from Google’s Android operating system.

But it is at the business end that its problems are most acute, and its task most daunting. Just ask the market. The B2B channel says BlackBerry best fits the profile of the enterprise user, and the iPhone comes on like an executive toy.

Mark Gordon, managing director at B2B dealer Evolve Telecom, says: “People compare BlackBerry and iPhone as the best device for business email. Some customers use the Nokia E62 and E72 but sales are low. People who don’t require mobile email tend to end up with a Nokia handset.”

Mark Bowman, managing director of B2B telecoms services provider Livvy’s Group, says: “BlackBerry and iPhone lead the business market. Nokia goes to the low-end. The 2610, say, is a basic handset, and works well for those who just want voice.”

A recent study by UK research firm YouGov says even consumer confidence in the Nokia brand is waning, with 34 per cent of existing smartphone owners considering Nokia for their next handset, and just 10 per cent expecting to go with it; down from 46 per cent and 19 per cent respectively in the same study at the end of 2009.

More than half of those polled are considering an Apple iPhone, and 41 per cent positively expect to be in possession of one when their airtime contracts are renewed. Fewer are considering a BlackBerry (31 per cent) than a Nokia, reflective perhaps of its narrower focus, but more expect (14 per cent) to take one at least.

By comparison, HTC has shown minimal growth in both respects (of one per cent, to 28 per cent and 10 per cent, respectively), but growth nonetheless.

And there is a sense, still, its brand has less influence than any of the above-mentioned trio, and that its success has come via its association with Google and its favour within network retailers for well-specified, usable, affordable smartphones.

And then there are Nokia’s own figures, published at the end of last month, which indicate some stagnation.

Nokia reckons 338 million handsets were shipped in Q2 2010, up five per cent in the quarter and 14 per cent in the year. Nokia’s percentage share was steady (33 per cent, or 111 million units) sequentially, in line with the increase, but down two percentage points year-on-year.

A similar trend can be seen in the smartphone market, where its growth is broadly in line with the market – 24 million units out of a total of 59 million smartphone units in the quarter, or just shy of 41 per cent, compared with 21.5 million (from 52.6 million) last quarter and 16.9 million (from 41 million) in the year-ago period.

But annual growth in unit sales of eight per cent, and of 42 per cent in smartphones specifically, trails rival firms: Apple sold 61 per cent more iPhones (8.4 million in the quarter) and RIM shifted 43 per cent more BlackBerrys (11.2 million).

Of course, these figures show the niches both these brands operate in, compared with the monster Nokia, which shifted at least twice as many smartphones and 10 times as many handsets in total.

Its finances tell a more difficult story, and one of a smaller company attempting to ape Apple principally with divergent interests beyond manufacturing.

Net sales increased just one per cent annually in its second quarter, to £6.5 billion, from all devices, services and other interests.

By comparison, Apple revenues leapt 78 per cent from £6.3 billion to £10.2 billion, including all Mac, iPod, iTunes and application sales.

At RIM, revenue was up 24 per cent to £2.8 billion. At HTC, revenue jumped 58 per cent to around £1.2 billion.

Worse, Nokia’s profits have slumped from £318 million in the second quarter of last year to £190 million in the quarter just gone – a collapse of more than 40 per cent.

And to mark its fall, Apple recorded stonking profit and profit increase of £2.1 billion, a jump from £1.2 billion. RIM also improved and outran Nokia – £494 million, up from £456 million.

Full article in Mobile News issue 469 (August 2, 2010).

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