Cutting Room: The king is dead, long live the king

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Samsung overtaking Nokia as the world’s number one handset manufacturer is no surprise and while Samsung continues to dominate, Nokia’s problems deepen

Samsung has overtaken Nokia as the world’s leading handset manufacturer with a global market share of 25 per cent, compared to Nokia’s 22.5 per cent.

It was only a matter of time. It seems any remaining loyalty towards the Finnish giant has been largely squeezed away, with Samsung gaining the lion’s share.

Samsung’s rise has been almost as astonishing as Nokia’s demise, particularly over the past 12 months.

Devices such as the Galaxy S range have sold in the millions, with the S II model selling more than 20 million since May last year. A third ‘S’ range device was to be announced last week as Mobile News went to press.

The financial performances of the two demonstrate the magnitude of the divide.

Samsung Electronics’ 2012 Q1 results show handset shipments topped 93 million, helping the firm increase net profits to £2.75 billion, up by 81 per cent from a year ago. Operating profits rose by 70 per cent to £3.1 billion.

Sales increased by 22 per cent year on year to £24.6 billion, driven primarily by the growth of Samsung’s Mobile Communications division.

In contrast, Nokia’s results were disastrous. The manufacturer posted a loss of £1.1 billion, compared to a profit of £359 million in Q1 2011.

Sales fell by 29 per cent year on year to £6 billion and by 26 per cent from the £8.2 billion Q4 2011 figure.

Smartphone sales fell by 52 per cent year on year to £1.39 billion and were down by 38 per cent from Q4 2011. Feature phone sales were down by 32 per cent to £1.88 billion, and were also 24 per cent down year on year.

The firm shipped 82.7 million handsets, down by 24 per cent from Q1 2011 and by 27 per cent from the previous quarter.

From this, smartphone volumes fell by 51 per cent compared to the same period last year, and by 39 per cent from the previous quarter.

Like Samsung, Apple’s Q1 2012 financial results were phenomenal. Sales of the iPhone, compared to a year earlier, were up by 88 per cent to 35.1 million units, while iPad sales grew even more, up by 151 per cent to 11.8 million units.

Profits almost doubled to £7.2 billion compared to the previous quarter, with revenue up from 15.4 billion in Q4 2011 to £24.4 billion.

Nokia UK chief Conor Pierce told a national newspaper back in December he was looking to capitalise on ‘iFatigue’ – suggesting customers wanted an alternative to the iPhone.

His theory doesn’t appear to have worked.

Nokia’s decision to commit to using Microsoft’s Windows Phone operating system was meant to spark a revival – but it simply hasn’t happened.

Nokia boss Stephen Elop admitted as much when he commented on the company’s damning results last month – stating that establishing momentum in the UK through sales of its Lumia handsets had been difficult.

Many had predicted as much. The Windows Phone operating system is still not generating the demand and appeal Nokia had hoped for, and it is being trounced by Android and

Apple in terms of take-up and interest from both business and consumers.

Meanwhile, it seems Samsung can do no wrong, making the best decisions based on the current market. It quickly adopted Android as the main OS for its key devices, such as the

Galaxy range, offering Windows as an alternative choice.

Samsung is also continuing its success in the tablet market with 10 variations of its tablet, the Galaxy Tab.

The Galaxy Note is its attempt to create a smartphone–tablet device. A lot of money seems to have been pumped into marketing the Note and for the most part it seems to have been very well received.

Nokia must be wondering where to go next. It doesn’t yet have a tablet on the market.

It has said previously it doesn’t want to put “just another” tablet on the market – but surely it is better to have a presence than not, even if the market remains confused and dominated by the iPad?

When the Lumia 800 handset launched in November, the initial response was largely positive. Indeed it won the Mobile News Awards trophy for the most innovative handset.

The device’s features were impressive and it was the best Nokia had built in recent years. But reports of software glitches have dampened the market’s initial enthusiasm.

In the retail sector, the story doesn’t change much.

Consumer confidence is key for any manufacturer. Without it they will always struggle to overcome word-of-mouth recommendation despite impressive multimillion-pound marketing campaigns.

The fact Nokia has dropped to second also suggests Samsung and the chasing pack have begun to erode Nokia’s share on low-tier models in developing markets – a sector that kept Nokia on top for a number of years.

With the Galaxy S III buzz in the coming weeks, we can only see the Samsung’s winning streak going on and on.

Samsung has launched a number of teaser trailers for the device on the internet and these have received hundreds of thousands of hits, showing the level of interest in the manufacturer’s products and the allegiance to its brand.

In addition, the Apple circus will start up again in the Summer when the countdown to the next iPhone begins.

What would Nokia give for such mania?

Competition is good and we hope for a Nokia renaissance. But don’t ask us to put our hard-earned down on it happening just yet.

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