Global Insight Perspective | |
Significance | Nokia has cemented its dominance of the mobile handset market, shipping more units than its three closest rivals combined in fourth-quarter 2007. |
Implications | Having reached the 40% market share, Nokia will have to drive growth from its new operations, such as Ovi and the newly acquired Navteq. |
Outlook | As rivals step up their operations, Global Insight expects Nokia to struggle to hold on to its 40% market share throughout 2008. |
The global handset giant has continued its run of impressive performances, boosting full year sales by 24% year-on-year (y/y) and finally reaching its goal of a 40% mobile handset market share. In its full results released on 24 January, Nokia said full-year sales rose to 51.06 billion euro (US$75.24 billion) compared with 41.12 billion euro in 2006. Fourth-quarter 2007 sales were up even higher, rising 34% y/y to 15.72 billion euro. The group operating profit was also up, rising 46% for the full year and 64% for the fourth quarter, to 5.49 billion euro and 1.52 billion euro, respectively. As evidence of its dominance of the mobile handset market, Nokia announced that it has finally reached the 40% market share mark with volume shipments of 437.1 million in 2007.
Selected Financial Data for Nokia (Q4 2007 and Full-Year 2007) | ||||||
(Millions) | Q4 2007 | Q4 2006 | Change (%) | 2007 | 2006 | Change (%) |
Net sales | 15,717 | 11,701 | 34 | 51,058 | 41,121 | 24 |
Mobile Phones | 7,438 | 7,076 | 5 | 25,083 | 24,769 | 1 |
Multimedia | 3,026 | 2,136 | 42 | 10,538 | 7,877 | 34 |
(Total Mobile Devices) | 10,464 | 9,212 | 13.6 | 35,621 | 32,646 | 9.1 |
Enterprise Solutions | 670 | 305 | 120 | 2,070 | 1,031 | 101 |
Nokia Siemens Networks | 4,583 | 2,184 | 110 | 13,393 | 7,453 | 80 |
Operating Profit | 492 | 1,519 | 64 | 7,985 | 5,488 | 46 |
Mobile Devices Shipments | 133.5 | 105.5 | 26.5 | 437.1 | 347.5 | 25.8 |
Average Selling Price (euro) | 83 | 89 | -7 | |||
Source: Nokia, Global Insight | ||||||
Outlook and Implications
The Holy Grail of 40%: Nokia's announcement that it has reached the 40% mobile devices market share is a testament to the company's strong growth in the face of stiff competition. In a quarter dominated by Apple's iPhone and Motorola's expected fightback, Nokia managed to boost its market share, shipping more phones than Samsung, Motorola and Sony Ericsson combined. Nokia has capitalised on its economies of scale and solid supply chain management to muscle in on rivals' market share. While concerns over margins have led rivals to thread a precarious path when seeking growth in emerging markets, Nokia is comfortable with its 83-euro average selling price (ASP) and has been making massive gains in the emerging markets. During 2007, the company's shipment volumes rose 42.1% in Middle East & Africa, 41.5% in Asia Pacific, 38.6% in China and 17.7% in Europe.
Comparison of Mobile Shipment Volumes Q4 2007 | ||
Unit Shipments (millions) | Market Share (%) | |
Nokia | 133.5 | 40.0% |
Samsung | 46.3 | 13.9% |
Motorola | 40.9 | 12.2% |
Sony Ericsson | 30.8 | 9.2% |
Others | 82.4 | 24.7% |
Total | 333.8 | |
Source: Global Insight | ||
Other Business Units Boom: Although the mobile unit has gained the most headlines, other Nokia business units performed even better. Full-year sales in mobile devices (including phones and multimedia devices) rose 9.1% y/y. However, Nokia's Enterprise Solutions unit saw sales rise 101% in 2007. The company's joint venture with Siemens, Nokia Siemens Networks has also experienced a turnaround, with sales rising by 80%.
Challenges Remain Ahead: Despite achieving its long-desired target of 40% market share, 2008 will prove far more challenging to Nokia. The company already acknowledges that the year ahead poses tough challenges. "Nokia expects industry mobile device volumes in the first quarter 2008 to decline sequentially, reflecting normal industry seasonality, following a strong fourth quarter 2007," the company said in a statement. Crucially for Nokia, a 23.3% sales decline in North America in 2007 is a pointer to the tough times ahead. With Apple knocking on the phone with the iPhone, and Motorola going on full rebound, the year ahead is likely to be markedly different from 2007. Nokia says it still expects to maintain its market share in 2008; but it will have to worry about recent moves by rivals that may lead to a full-scale fight in the emerging market. The company made several moves to diversify its business in 2007, including launching Ovi and buying Navteq, and the market will be watching to see how these develop. As rivals step up their operations, Global Insight expects Nokia to struggle to hold on to its 40% market share throughout 2008.