Ronnie05's Blog

Nokia: Trending upwards

Posted in Mobile Devices and Company Updates by Manas Ganguly on April 17, 2009

nokia-scrip

Over the last year and half, Nokia Scrip price has yo-yo’ed from $ 40 to $ 8 given the slump in the market and demand, its own performance in the smartphone market and its decision to change tacks from device orientedness to internet services focussed approach. Yesterday Nokia declared its 1Q, 2009 results and though a drop in numbers was in line of expectations, a 90% drop in profits was beyond expectations. This was Nokia’s worst quarterly profit in more than a decade. Profits declined to 122 million euros (US$160.7 million), from 1.2 billion euros (US$1.6 billion) a year earlier. Sales fell 27 percent. Nokia sold 93 million phones in the first quarter, 3 million more than analysts had anticipated, the ASP of the phones fell sharply to $85 from $93 in the fourth quarter. Nokia’s Devices & Services unit saw net sales decline 33 percent year-on-year to 6.2 billion euros (US$8.2 billion). Nokia remains the largest mobile-device maker in the world with a market share of 37 percent in this year’s first quarter. However, that’s down from 39 percent in the year-ago period. Nokia expects industry sales to continue to decline this year, estimating a 10 percent overall slide from 2008. Nokia’s sales were mostly based out of the Asia Pacific, followed by Europe and then Americas.

However, these bleak numbers seem to have come with silver lining as far as Nokia is concerned and while this is the worst quarter for Nokia on record, it does look like they have bottomed out and the only way from here is upwards.

While Nokia has taken a beating in Smartphone space in US and North America over the last year and half, it now looks like they are finally ready to take the Operator centric route to consumers. With AT&T putting their weights behind the E 71, May 2009 onwards, Nokia will finally be able to get the operator toehold, which is a critical success factor in North American markets. Read Report

Considering that in Q1, 2009, Nokia’s North American numbers actually grew by 30% and was the only Nokia region to register growth, the AT&T tie up on E 71 can be a big winner.

nokiae71x_230

There seems to be traction on the Economy Smartphone 5800 Xpress Music, with 2.6 million units already shipped. The phone is popular in China, India and other developing countries given its price and feature attractiveness.

Olli Pekka, CEO of Nokia Oyj has indicated that the fall in numbers could also be attributed to channel de-stocking. To be quoting OPK, “Regarding the health of the overall mobile-device market, the inventory already in the sales channels decreased substantially during Q1 due to extensive destocking by operators and distributors. This adversely impacted our sales volumes in the quarter,” Kallasvuo said. “However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter.”
Amongst other strong signs of recovery is the fact that it has retained its 37% market share, and has in fact gained in strength in China and India, whereby Motorola and Sony Ericsson are flopping out. Nokia’s impressive offensive at the low end will make sure that market shares are stable and increasing for sometime.
With N97 Nokia looks to get back at the technology leaders platform, a mantle it has lost to Apple and RIM in the recent times.
Nokia expects industry mobile-device volumes in the second quarter to be at about the same level or up slightly. The company also expects its market share in the second quarter to increase.
The news that sparked a Wall Street rally on Nokia’s stock was the company’s prediction that the decline in the first two quarters this year would be worse than in the second half of the year. What’s more, the company is targeting an increase in market share for the year.
The two aspects, which are slight out of sync in Nokia at this time are its Netbooks foray and The flight @ Ovi, which will need to be accessed independently. The indicators at this point of time may not favour Nokia, but it certainly looks like Future Bright for Nokia.
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