Contrasting fortunes for Motorola and resurgent Nokia
Published: 29 January, 2010
READ MORE: Financial | Nokia | Motorola | Handset
Nokia and Motorola have spent most of the mobile era locked in close combat, but recently the gap between them has widened hugely as the US firm has slipped to the bottom of the big five handset makers. Although Motorola has shown some signs of an incipient comeback, their fourth quarter results showed that their fortunes remain very different. Both have fumbled the ball in the smartphone segment and vowed to get it back, and both have had only a quarter or so to push their new high end flagships. But Nokia's scale and broad reach gained it an impressive earnings leap in its fourth quarter, while Motorola managed only a small profit and a downbeat outlook.
Nokia had a bad time in the middle portion of 2009, especially because of losing ground in smartphones, and seeing the pressure on margins from a major dependence on low end devices. But it stormed back in Q4, winning back 40% share - its own benchmark - in smartphones and seeing profits rise 65% year-on-year to $1.3bn. This was a radical turnaround after the $834m shock loss it suffered in Q309. Sales were up 22% from that quarter, but still down 5% year-on-year amid lower average sales prices. The sales figure was $16.74bn, $11.4bn of this from the core devices and services business, up slightly year-on-year.
The biggest leap was in the segment it calls 'converged devices', which consists of smartphones like N97 and E72, 'mobile computers' like Booklet 3G, and products like the new N900 that fall somewhere in between. This unit sold 20.8m, compared with 15.1m units in the fourth quarter of 2008 and 16.4m units in the third quarter of 2009. This delivered Nokia a smartpone market share of 40%, up from 35% a quarter before, indicating the huge success of its holiday period campaign to boost its high end fortunes. The N Series handsets sold 4.6m phones and the business oriented E Series 6.1m devices, up from a combined total of 8.9m in Q309.
Nokia's next strategy to increase its smartphone presence further is to build up its nascent software offering. Its Ovi Store now boasts one million downloads and Nokia recently made a bold move against Google by making its mapping and navigation services - bought at a huge $81.bn price tag with Navteq - free to end users.
Much of Nokia's strength comes from its unparalleled global distribution reach and the economies of scale that generates. It is busily adapting its smartphone designs and the Ovi Store to create integrated devices suited to emerging markets, where it faces scarcely any competition from the smartphone specialists. However, it is under pressure in all its territories from a rampant Samsung, which also has broad geographic reach and is, for the first time, pressurizing Nokia in its heartlands. Figures from Germany recently revealed that the Korean vendor has almost caught up with the Finn in market share terms.
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