IHS Global Insight Perspective | |
Significance | Nokia expects that smartphones will amount to a bigger share of its device sales next year, which would slow down the fall of average selling price and lift profitability. |
Implications | The Finnish handset giant is shifting its focus towards new technologies and the services sector, and says while it still faces significant challenges, its direction is now clear. |
Outlook | Although Nokia has high expectations for next year, the other global handset vendors seem more cautious—but there is little doubt the key growth area will be the smartphone market. |
Nokia has predicted a rebound in global mobile phone sales in 2010, with the Finnish handset giant's chief executive stating industry device volumes to be up by approximately 10% over the year. Speaking at its capital markets day in Helsinki, Nokia CEO Olli-Pekka Kallasvuo stated he expected the markets to bounce back, fuelled chiefly by smartphone growth, but he expected Nokia's share of the overall market to be flat in 2010, while the value of its market share in terms of euros would grow slightly.
Nokia also stated that its operating system (OS) Symbian would remain the key software platform on its smartphones, emphasing that it had made significant improvements to the next version of the user interface. The world number-one mobile handset vendor also indicated it expected that a higher proportion of Nokia smartphones will have touch screens or full QWERTY keyboards over the next year.
Outlook and Implications
- Nokia on the Road to Recovery: Nokia has recently reported its first loss in a decade in the third quarter, of 559 million euro (US$844 million dollars), as the group has cut more than 4,200 job cuts during 2009 as part of a huge cost-cutting operation (see Finland: 23 November 2009: Nokia Cuts Back on R&D with 330 Job Cuts in Finland and Denmark). The Finnish giant is struggling with falling revenues due to a drop in operator and consumer spend as a result of the global economic slowdown, and rising competition particularly in the high-end smartphone market from new forces such as Apple's iPhone and RIM's BlackBerry range, while its Nokia Siemens Networks joint venture is causing a drag on profits (see World: 4 November 2009: Nokia Siemens Threatens 5,700 Job Losses as Cost Cutting Gets Serious). However, Nokia expects that smartphones will amount to a bigger share of its device sales next year, which would slow down the fall of average selling price and lift profitability, although the vendor expects competition to remain fierce. Indeed, Nokia is expecting that some 41% of its mobile device revenues this year will come from smartphones, as it aims next year to increase profitability and aims to boost the profit margin at its key Devices and Services unit to 14% in 2010, from an expected 12% this year. Nokia is shifting its focus towards new technologies and the services sector (see Finland: 26 November 2009: Nokia and Infineon Agree LTE Chipset Collaboration and World: 3 November 2009: Nokia Calls Time on N-Gage Platform as Focus Shifts to Ovi Store), and says while it still faces significant challenges, its direction is now clear.
- Sticking with Symbian: The rivalry between the various mobile OS platforms is becoming increasingly fierce, as each developer vies for a share of the burgeoning global market for smartphones. Nokia says that Symbian will be taken "to a new level" next year, as a new version of the platform is released, and the company drives user experience improvements, giving the OS "reach and flexibility like no other platform". Despite criticism of the clunky interface, Nokia has denied it was any plans to turn its back on the Symbian platform (see World: 31 August 2009: Nokia Claims Maemo is No Threat to Symbian), and will continue to focus on using this OS, alongside its new Maemo and more basic S40 platforms, as it continues its drive on the smartphone market.
- Is the Worst over for the Handset Giants? The global financial crisis has led to dramatic cuts in consumer and operator spend, hitting the handset market hard. Nokia has estimated that around 1.12 billion mobile devices will be sold in the world this year—around 7% down on 2008—but the mobile phone giant is now predicting the overall market will stabilize, with key smartphone growth significantly higher. World number-two Samsung handset volumes were up some 15% in the third quarter compared with the last quarter, translating to a global market share of 20.8%—the first time the Korean giant has seen a share over 20%, as it sees significant growth into lower-end emerging markets. Meanwhile, Nokia's European neighbour Sony Ericsson is also looking to tap into the smartphone market following a significant slump, which has seen its global market share fall from some 8% to 5% in recent years (see World: 4 November 2009: Sony Ericsson Takes on Smartphone Market with Android Handset Launch). In the United States Motorola has been brought low by the continued failures of its handset unit, but the push to return to some of its former glory is just beginning with the launch of two handsets based on Google's Android OS (see World: 30 October 2009: Motorola Pulls Back to Profitability on Operating Expenditure Cuts). Although Nokia has high expectations for next year, the other global handset vendors seem more cautious—but there is little doubt the key growth area will be the smartphone market.