updated 08:45 am EDT, Thu October 16, 2008
Nokia Q3 2008 Results
Nokia today reported mixed results for its summer quarter that show an increasing shift away from the company's high-end devices. The cellphone maker saw modest gains and shipped 117.8 million devices of any kind between July and September, which was down three percent compared to the spring but up five percent over summer the last year. However, the company also reversed course versus the industry and predicts the wider cellphone business will have climbed two percent from the spring to 310 million units, dropping Nokia's market share to 38 percent from 40 percent at June's end.
The company's greatest market share loss occurred in smartphones, however. Labeling them "converged" devices, Nokia notes that its own shipments dropped from 16 million to 15.5 million from year to year; the smartphone market itself had grown much larger over the same time, jumping from 31.7 million handsets in summer 2007 to 44.2 million for summer 2008. The difference marks a steep drop for Nokia's market share from a full 50.4 percent a year ago to just 35 percent today.
In explaining the drop, the company again repeats its advance warning by claiming that it made a "tactical decision" not to lower its prices to match those competitors in the summer, which most observers believe include the iPhone 3G as well as RIM's BlackBerry devices. Apple's device is heavily subsidized by carriers to reach its roughly $199 world price; some Nokia smartphones are available for little or or for free on some European carriers when attached to plans but are typically more expensive than iPhones without the subsidies.
The company's most direct attempt at competing with the iPhone, the touchscreen 5800 XpressMusic, was only just launched in early fall and won't sell to Nokia's most important markets until 2009; the company doesn't mention it by name but does say that it had trouble ramping up production of an important "mid-range device" that also hurt the firm's performance.
The bulk of Nokia's smartphones were its Nseries, which compete more directly with the iPhone, at nine million devices. The business-friendly Eseries accounted for three million, with other hardware making up the remaining 3.5 million.
Average selling prices for its phones also suffered a sharp decline, dipping only slightly from spring's 74 Euros to 72 Euros this summer but plunging year-over-year from a much higher 82 Euros as customers shifted towards lower-cost devices.
Nokia nonetheless hopes to reassure investors and forecasts that its market share should hold or grow slightly in the fall and should be joined by the rest of the industry in spite of a weak world economy; as many as 1.26 billion phones will have shipped in all of 2008, the company says.
Financially, Nokia explains that its net sales dropped five percent from year to year to just over 12.24 billion Euros ($16.47 billion) and that its actual operating profit dropped more significantly, down 21 percent to 1.47 billion Euros ($1.98 billion).