North America still weak spot for Nokia, despite Q1 sales, profit gains

Strategy Analytics concurs that Nokia showed strong performance in emerging markets, but analysts there report the company’s plunging mobile phone shipments in the high-value North American market remained a key weak spot during Q1.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 4/17/2008

Nokia saw Q1 sales climb 28% on a year-over-year basis, defying the sluggish economic situation here in the United States, but analysts are warning that the Finland-based mobile phone maker still has its trouble spots.

Nokia’s sales of $20 billion (12.7 billion Euro) were accompanies by profit of $1.91 billion (1.2 billion Euro), up 25% compared to Q1 2007. 

"The overall device market developed as expected, with the greatest demand in emerging markets, where our position is very strong,” Olli-Pekka Kallavou, Nokia’s CEO, said in a statement this morning.

While market research from Strategy Analytics today concurred that Nokia showed strong performance in emerging markets, helping it avoid the threat of a global economic recession, analysts there report the company’s plunging shipments in the high-value North American market remained a key weak spot during Q1.

“North America, which despite a slowdown still accounts for 16% of global handset demand, remains a serious problem-child for Nokia,” Neil Mawston, director at Strategy Analytics, said in a statement. “It is the only major region of the world where Nokia is not number one. A lackluster CDMA handset portfolio and weak relationships with some major operators have caused its market share in North America to collapse from 20% in Q1 2006 to an estimated 7% in Q1 2008. With global handset revenues coming under increasing pressure in 2008, then the high-value North American market is one Nokia simply cannot afford to ignore.”

Added Strategy Analytics analyst Bonny Joy: “Nokia’s strong performance has been achieved by targeting high-growth emerging markets such as India and Africa, which have so far avoided much of the economic downturn that is sweeping developed regions like North America.”

According to Joy, Nokia has grown its handset shipments at an above-average 27% annual rate and held its share of the 290-million-unit global market at 40% for the past two quarters. Strategy Analytics estimated that Nokia shipped some 115.5 million units in Q1, compared to 174.5 million units shipped by all other handset makers.

The company, widely recognized as the top mobile phone maker above Samsung and Motorola, said it plans to take even more market share in Q2 and said its handset shipments are expected to be up “slightly” on a sequential basis.

“The competitiveness of our product portfolio is reflected in our market share and we target market share gains in the second quarter,” Kallavou said. “The portfolio is renewed on a continuous basis. While we will not have major new products shipping in the second quarter, we expect a number of new products to be shipping, and to have a positive impact on our results, in the second half of 2008."
 
Nokia said it continues to expect industry mobile device volumes in 2008 to grow approximately 10% from the approximately 1.14 billion units the company estimates for 2007.

However, the company forecasted the mobile device market to decline in value in Euro terms in 2008, compared to 2007, reflecting the negative impact of the weakened dollar, the general economic slowdown in the US, and possibly going forward some economic slowdown in Europe.

Nokia further said it continues to expect some decline in industry mobile phone average selling prices in 2008, primarily reflecting the increasing impact of the emerging markets and competitive factors in general.