Nokia and Motorola see tough Q1 ahead
MOT Mobility reports first results as a separate firm, Nokia negative on margins
Published: 27 January, 2011
It was like old times for Nokia and Motorola, in a head-to-head on their results reports. Once the only handset makers that really mattered, the old enemies have recently been engaged in a common fight against new upstarts with stronger software offerings. The two firms announced their results almost simultaneously, and there were some interesting similarities - growth in smartphones, pressure from Apple, a difficult Q1 ahead, and a frustrating wait for the next wave of high end devices.
Nokia's results showed some familiar patterns. It increased smartphone sales (up 7% in the quarter) but not market share, highlighting its struggle to defend its lead from Apple and Android. Against more traditional rivals in the cellphone arena as a whole, it took share from Sony Ericsson and LG, but saw some fallback in its native Europe, largely, it seems, to Samsung. Chinese growth of 2% was lackluster and there are signs of Nokia's emerging markets stronghold coming under siege from low cost suppliers, though its market share remains huge (about 75% in India). Featurephone shipments fell by 5% year-on-year.
Net income for the fourth quarter was €745m, down 21% year-on-year and the third consecutive period of reduced profit. Earnings per share were down 31% to two eurocents while sales were up 6% to €12.7bn. These figures were better than admittedly pessimistic analysts had expected, but Nokia's shares still dropped by about 5.5% on the announcement, because of two key concerns - the slow smartphone progress, despite the launch of the new Symbian platform and the flagship N8 during the quarter; and a weak Q1 outlook, especially in terms of operating margins, which Nokia expects to be between 7% and 10% in Q1, compared to 11.3% in Q410 and 15.4% in Q409.
New CEO Stephen Elop admitted there were "significant challenges" ahead. He has scarcely appeared in public since taking over, but is expected to outline a comprehensive strategic review at Nokia's investor day on February 11 in London.
Smartphone share, by Nokia's own calculations, was 31% in Q4, compared to 40% a year earlier, as Symbian's entrenched base was eroded by Android and iPhone, and to some extent a broader reach for BlackBerry devices. For the full year, Nokia saw smartphone unit sales rise by 13% but share fall from 34% to 32%.
Elop pointed to a "solid performance", particularly in cash generation, in the quarter but said in his statement: "Yet, Nokia faces some significant challenges in our competitiveness and our execution. In short, the industry changed, and now it's time for Nokia to change faster." One of the changes must be to reduce reliance on the essentially midrange Symbian and accelerate the much anticipated MeeGo devices - or opt for another OS altogether.
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