Wednesday, February 17, 2010

Nokia weathers smart-phone onslaught, maintains industry-leading profitability

EL SEGUNDO, USA: Defying rising competitive pressures in the smart-phone segment, No.-1 mobile handset brand Nokia managed to achieve industry-leading profitability in 2009, according to iSuppli Corp.

The Finnish cell-phone giant finished 2009 with an operating profit of 12.3 percent, compared to an average of 0.7 percent for all the Top-5 wireless handset brands. Samsung came in second with an operating profit of 10.5 percent.

“Facing severe competition from slick rivals including the iPhone and Google Android-based models, Nokia’s leadership position in the global smart-phone market began to erode starting in the second quarter of 2008,” said Tina Teng, senior wireless communications analyst or iSuppli.

“By the third quarter of 2009, Nokia’s share of shipments had declined to 34.5 percent, down from a recent high of 44.2 percent in the first quarter of 2008. However, by the fourth quarter of 2009, Nokia’s share of smart phone shipments recovered to nearly 40 percent, at 39.5 percent.”

Nokia managed to stanch its smart-phone market share losses because of its launch of more compelling models with appealing features like touch-screen displays and QWERTY keyboards.

“Enhanced features like touch screens deliver a better user experience and slick operation, putting the ‘smart’ in smart phones,” Teng said.”

Despite the strong finish, Nokia was not unaffected by the wireless industry’s downturn. Operating profit was still down from 17 percent in 2008. Likewise, Nokia's device and service revenue declined to $27.9 billion, down from $35.1 billion in 2008.

Nokia’s shipment of 431.8 million mobile handsets for all of 2009—down 7.8 percent from 468.4 million in 2008—was also slightly worse than the 6.7 percent decline for the entire handset market. However, Nokia maintained its dominant position in the global handset market with a 37.8 percent share of unit shipments, nearly double that of the second-largest player, Samsung.

The table presents iSuppli ranking of the world’s Top-5 mobile handset brands in order of unit shipments.Source: iSuppli, USA

No.-2 Samsung of South Korea was the star performer in the global mobile handset market in 2009, being the only company among the Top-5 brands to increase both its market share and operating profits. For the year, Samsung expanded its share of unit shipments by 3.8 percentage points and boosted its profit margins by 1.6 points.

Samsung was able to achieve this strong performance because of its deeper penetration into emerging regions with models tailored to local tastes and its diversified distribution channel that was able to reach new areas.

iSuppli expects that Samsung will further improve its profit margins in 2010 as it gradually increases its vertical integration by sourcing more key components from its internal semiconductor business unit.

Similarly enjoying a good year was No.-3 LG Electronics of South Korea as it gained 2.1 percentage points of market share. It also was the top performer among the Top-5 in terms of shipment growth, with a rise of 17 percent in 2009 compared to 2008. However, the company’s operating profit suffered a 4.2 percentage point decline.

No.-4 Sony Ericsson was able to maintain its market share at around 5 percent in 2009, even though the company suffered operational losses throughout the year. Since mid-2008, Sony Ericsson has moved to reduce its workforce and to consolidate resources to cut costs. This has resulted in a 21 percent decline in operating expenses, equal to a $772 million savings.

Nonetheless, the company’s 40 percent drop in revenue—compared to a 10.4 decline for the entire industry—has put Sony Ericsson in a tough financial position.

“Sony Ericsson’s sparse smart-phone portfolio has caused it to miss out on the robust growth in this segment of the industry,” Teng said. “The company’s lack of touch-screen-based devices and its late entry into the low-end handset market limited its capability to capitalize on the growth in some emerging segments.”

No.-5 Motorola, which has been operating at a loss every quarter since 2007, managed a slight improvement in the second half of 2009. The company enhanced its operating margin by 6.7 percentage points in 2009 as a result of $1.5 billion in cost cuts.

Seeking to regain market share and to strengthen its position in higher-profit margins, Motorola has also announced several high-end devices outside of the United States, especially in China. The launch of Motorola’s app store in China will help the company to improve its brand value, iSuppli believes.

Source: iSuppli, USA

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.