Nokia market share and profits decline alarmingly

Stan Beer
Friday, 23 January 2009 10:38

IT Industry - Strategy

The world's largest mobile handset maker Nokia has suffered a devastating drop in earnings and market share in the fourth quarter of 2008, blaming its dismal set of figures on the global downturn.

Net sales of €12.662 billion in Q4 2008 was a hefty 19.4% drop on sales for the corresponding of 2007, with Nokia's bread and butter devices and services business, which includes mobile handsets, responsible for most of the decline. The number of mobile devices sold for the quarter - 113.1 million - was down 15% on the previous corresponding quarter.

Devices and services was also responsible for most of a massive 80.3% year on year decline in operating profit, which dropped from €2.492 billion in Q4 2007 to just €492 million in Q4 2008.

The annual figures did not give much cause for cheer either, with sales of €50.71 billion in 2008 down 0.7% on the previous year and operating profit of €4.966 billion down 37.8% on 2007.

Nokia's dismal set of numbers for the final quarter of 2008 add up to a marked decline in market share from 40% in Q4 2007 to 37% in 2008.

The explanation given by the company for Nokia's poor final quarter largely hinged on the global economic downturn.

Olli-Pekka Kallasvuo, Nokia CEO said:

"In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry. We are taking action to reduce overall costs and to preserve our strong capital structure.

"This is clearly our top priority in the current economic environment. However, it is important for Nokia to continue investing at the proper pace in future growth. We believe Nokia has a tremendous opportunity to capture value as the Internet services market evolves and grows. Being a catalyst for change has been our heritage and it will be our future."

However, global downturns which hit all companies playing the same space don't necessarily always translate to declining market shares. Some market watchers have pointed to Nokia's inability to compete successfully with handset products in the high end of the market, where smartphones like Blackberry and iPhone play.

Of note, however, is the marked sequential drop in iPhone sales in Q4 2008 from Q3 2008, indicating that Q4 was a disastrous quarter for high end discretionary purchases in the mobile handsets space overall.

	Reported fourth quarter 2008 results1						Reported full year 2008 results1,3
EUR million	Q4/ 2008	Q4/ 2007	YoY Change	Q3/ 2008	QoQ Change		2008	2007	YoY Change
Net sales	12662	15717	-19.4%	12237	3.5%		50710	51058	-0.7%
Devices & Services	8141	11141	-26.9%	8605	-5.4%		35099	37705	-6.9%
NAVTEQ	205			156	31.4%		361
Nokia Siemens Networks	4338	4583	-5.3%	3503	23.8%		15309	13393	14.3%
Operating profit	492	2492	-80.3%	1469	-66.5%		4966	7985	-37.8%
Devices & Services	766	2594	-70.5%	1602	-52.2%		5816	7584	-23.3%
NAVTEQ	-73			-80	-8.8%		- 153
Nokia Siemens Networks	-179	0		-1			- 301	-1308	-77.0%
Operating margin	3.9%	15.9%		12.0%			9.8%	15.6%
Devices & Services	9.4%	23.3%		18.6%			16.6%	20.1%
NAVTEQ	-35.6%			-51.3%			-42.4%
Nokia Siemens Networks	-4.1%	0.0%		0.0%			-2.0%	-9.8%
EPS, EUR Diluted	0.15	0.47	-68.1%	0.29	-48.3%		1.05	1.83	-42.6%