Mobile giant Nokia has reported a 7.9% fall in Q4 profits.
Nokia has made an operating profit for Q4 2001 of E1.63 billion, down 7.9% on Q4 2000. Sales fell 5% to E8.79 billion. The full year profit was E5.2 billion, a 10.6% fall on 2000. The figures were significantly above Wall Street expectations. Nokia shares rose 5% in New York on the news.
Nokia is undisputed king of mobile handsets, with a margin of 22% where many barely make a profit. Its 37% market share is an advantage, bringing serious economies of scale. And despite Nokia’s prevalence, consumers perceive its handsets as premium items – especially important in a market where 55% of new handsets will be replacements.
The handset business faces competition from revitalized rivals Motorola, whose handsets were a bright spot in Tuesday’s gloomy results, and Sony Ericsson, whose color T68 was a smash hit pre-Christmas. However, Nokia is reacting quickly to innovations, launching over 20 new models in the first half of 2002.
Although the delayed roll-out of 3G in Europe (which accounts for 49% of Nokia’s sales) will slow handset market growth, it could help Nokia: many Asian players will only prove a serious threat once 3G launches. In the meantime, Datamonitor expects 27 million GPRS handsets will be sold this year. Together, these factors give Nokia a strong chance of meeting its 15% handset sales growth target.
The company also expects over 10% growth in its network infrastructure business, following a 16% fall in sales this year. Although Nokia is a major infrastructure player, its advantages here are smaller: an operator is unlikely to pay more for Nokia’s kit than Ericsson’s because it looks pretty. This makes it harder to outperform the market – which even Nokia expects will remain flat.
TDMA to GSM/EDGE conversion in the US is both a Nokia stronghold and a major growth industry, and growth in the mobile infrastructure market is expected to outstrip fixed-line infrastructure. But even so, Nokia will need to work hard to meet this target.
