Business Watch: Spoils in the Christmas handset market go to…

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Dominic White rounds up the handset manufacturers’ latest results, which shows a continuance of Apple’s dominance and indicate the size of Nokia’s current struggles

Pore over the latest results of mobile phone manufacturers and it becomes clear very quickly that Apple won the Christmas quarter hands down.

Not only did the iPhone manufacturer overtake Google’s Android in terms of smartphone market share, but it also smashed Nokia.

Take these figures for example: while Nokia’s underlying earnings plunged 73 per cent, Apple’s revenues rose by 73 per cent. It’s a sign of just how far the two companies’ fortunes have diverged.

And while Sony Ericsson and Motorola continued to struggle, and HTC lost momentum, Samsung put in a solid performance and LG’s showing hinted at a possible turnaround.

So first off, what went wrong at Nokia and can it be fixed?

The Finnish giant’s smartphone sales plummeted by a third in the fourth quarter to 19.6 million handsets – an alarming figure perhaps, but not as bad as some analysts had feared.

That performance was thanks in part to the Microsoft joint venture that the then new chief executive Stephen Elop announced a year ago, to a storm of scepticism.

The controversial tie-up showed some modest early signs of success: sales of the first handsets introduced using Microsoft’s operating system – the Lumia devices – surpassed the £1 million mark.

But it’s not a number that’s going to cause any alarm at Apple or Google. And analysts at Kantar Worldpanel ComTech reckon the flagship Lumia 800 model didn’t even break into the smartphone top 10 over Christmas.

The fact remains that, despite 10 years of striving to repeat its PC success in smartphones, Microsoft’s market share has shrunk to peanuts.

And while Nokia remains the biggest handset maker in the world by volume it also continues to get hammered by cheaper Chinese suppliers at the low-margin, cheap and cheerful end of the market.

Analysts estimate that it shed seven percentage points of total global market share after it shipped 113.5 million devices in total, a fall of eight per cent.

Nokia on heaven’s door?
A year ago Elop told staff Nokia was on a “burning platform” – the numbers suggest that Elop’s fire extinguisher hasn’t worked yet, as does the fact that he refused to give targets for 2012.

Nokia’s handset business will just break even in the first quarter, whereas analysts were forecasting a profit.

It is likely that the company will win back at least some market share in the key smartphone market this year.

But Nokia really is that far behind it will take a remarkable turn of fortunes for Elop to have a meaningful impact.

At least he will have a new chairman to guide him soon in the form of Risto Siilasmaa (pictured), who will replace long-time chairman Jorma Ollila in May.

The situation at Apple could hardly be more different.

The Californian company smashed all Wall Street forecasts with its quarterly forecasts, propelling its shares to a point where it is once again challenging Exxon Mobil for the title of ‘world’s most valuable company’.

What got the Street most excited was the company more than doubled the volume of iPhones it sold the previous Christmas. Yes, doubled.

What makes that even more staggering is that Apple did it without the help of a genuinely new model – the iPhone 4S has some natty features but it did not represent the quantum leap the market is looking for when the iPhone 5 is unveiled.

Kantar reckons Apple’s share of the US market doubled over the year to 44.9 per cent in the Christmas quarter, overtaking Google’s Android, which remained strong but edged from 50 per cent to 44.8 per cent.

The slightly cheaper Android phones remain dominant in Germany, France and Spain, perhaps helped by the fact that their citizens are so scared about the fortunes of the euro.

But in the UK Apple is closing in on Android, with its market share jumping from 22 per cent for 34 per cent.

It’s a very promising start for Steve Jobs’s replacement Tim Cook. The question now is, what will his next trick be?

Motorola’s financials were in stark contrast. The company that invented the mobile phone managed to convert an $80 million profit a year ago into an $80 million loss on flat revenues.

Revenues from mobile sales rose five per cent, but these were not the kind of results Google investors would have hoped for as the search engine giant seeks clearance for its planned $12.5 billion takeover of the firm.

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