Nokia has announced lower-than-expected mobile handset sales for 2000.
Nokia, the world’s largest mobile phone manufacturer, yesterday announced sales for 2000 of 128 million units. Even though this was a substantial rise on last year and even though market share rose from 30.6% in Q3 2000 to 31.6% for the year, the figures were still disappointing. Sales had been expected to reach between 130-140 million. Unsurprisingly, Nokia shares fell by 8.9%.
The problem is that in developed markets penetration rates are generally above 50%, so growth on the scale seen in recent years is unfeasible. At the same time, Nokia is more heavily exposed to the handset retail market than any other manufacturer. Around 50% of its revenues come from mobile handsets, compared with less than 25% of Ericsson’s.
The advent of 2.5G and 3G mobile Internet technologies will drive increased uptake in developed markets. To use mobile Internet services, consumers will require a 3G handset, which will also be usable on 2G networks. At the same time, replacement sales are likely to account for a larger proportion of mobile phone sales. The lifecycle of a mobile phone is estimated at one to two years in Europe. Given the high penetration rates, this will create an enormous market. However, Nokia may not be able to maintain its current market share.
There is a trend for handset provision no longer to be bundled with service providers. So someone who signs up with T-Mobil will be able to choose almost any handset, rather than a limited range from companies that deal with T-Mobil. 3G handsets are also completely different from 2G mobile phones; they are closer to consumer electronics products. These factors mean that major Asian consumer electronics players such as Matsushita, Hitachi and Samsung will be targeting the market with products as good and innovative as those from traditional mobile manufacturers, providing Nokia with fierce competition.
Nokia still has one major advantage in its brand name: it is synonymous with high-quality mobile telecoms products. However, it will need to capitalize on this by continuing to produce highly innovative products and marketing them extremely well. Times are certain to get tougher.
