Nokia is expected to announce comparatively strong Q3 results on Friday.
Nokia, the world’s largest mobile handset maker, will announce its Q3 results on Friday. Analysts expect them to be in line with Nokia’s forecasts. Overall revenues are expected to be down 5% on last year at around E7.2 billion, while pretax profit is expected to be E1.0 billion.
Breaking down the expected results into Nokia’s two major business divisions, handset sales are expected to remain flat compared to Q3 2000, while the network infrastructure unit is expected to show a double-digit decline. This is unsurprising.
Network infrastructure and mobile handsets are both struggling businesses at the moment. In network infrastructure, Nokia is one of the major players, but there are few compelling reasons for an operator to buy Nokia kit over Ericsson’s or Alcatel’s. The market slump has hit it as hard as everyone else.
In the handset industry, on the other hand, Nokia is expected to achieve 15% margins in an industry where others struggle even to make a profit. This is partly because it has achieved economies of scale. But more importantly, it is seen as a premium brand. Rather than simply being a tool, a Nokia handset is seen as a fashion item and thus an identity statement.
The future should see improvements in the infrastructure market, and thus Nokia’s infrastructure business, as overcapacity is eliminated and as operators’ inventory levels fall. The future for the handset business is more interesting. New players such as Sony Ericsson and the mooted Motorola/Siemens alliance, not to mention white label manufacturers selling third-party branded devices, could present a threat to Nokia’s dominance.
But Nokia stands a good chance of fighting off this competition. Its new 5510 multimedia handset shows it is still producing innovative consumer-focused designs, and its long-delayed GPRS handset is set to hit the mass market by the end of Q4. If it can keep producing devices which attract the same buzz as the 5510, Nokia’s rivals may find it hard to topple.
