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Hit by fall in market share, weak image, Nokia increases R&D in China


Updated at 7:47 on May 21, 2004, EST.


HELSINKI (AP) - In an apparent move to revive its ailing market share, Nokia - the world's biggest cellphone maker - said Friday it will significantly expand its research and development operations in China.


Known for its sleek handsets and mobile innovations and regarded as an industry bellwether, the Finnish company shocked markets last month when it announced a fall in sales and profit and gave a flat outlook, citing increased competition from American and Asian rivals like Motorola and Samsung.

Nokia said the R&D expansion in China will be "significant," including the establishment of a CDMA research centre in Beijing. The company has long said that China, where it employs 4,300 workers, is a major market for it and am important centre of development for expanding its Asian business.

"China is definitely a strategic part of Nokia's global R&D network," said Nokia chairman and chief executive Jorma Ollila. "With increasing depth in China's talent base and an improving regulatory environment for R&D, we see excellent opportunities to expand our collaboration with leading domestic institutions."

Nokia said 40 per cent of the company's global handsets will be designed at the Beijing centre, and it will co-operate with 10 Chinese universities to develop new ideas.

Shares of Nokia were down in trading Friday on the Helsinki exchange, dropping 3.6 per cent to 10.95 euros ($13.07 US).

After last month's earnings report, analysts said Nokia, which had led the industry, had fallen behind recent trends in the mobile market, often set in Asia, like clamshell models.

Also, the company was deemed unable to provide a sufficient range of affordable models, including popular camera phones.

Nokia reported a 15 per cent drop in mobile phone sales during the first quarter, to 4.3 billion euros ($5.2 billion), down from five billion euros a year ago.

Even investors in the United States filed a lawsuit against the company last month accusing it of making "material misrepresentations" about its financial outlook for the first quarter.

Nokia, whose mobile phone sales account for 80 per cent of total revenue, has focused increasingly on the handset market. Last month, it unveiled a new, stripped-down version of N-Gage gaming deck series after the first version was seen as too cumbersome and expensive.

Nokia is still is the handset market leader but earlier this month analysts estimated it had lost as much as 5 per cent market share and now leads with 29 per cent, followed by Motorola with 16 per cent and Samsung with 13 per cent.

Nokia said it is still targeting a 40 per cent market share in mobile phones, and plans to launch 40 new products this year, patching up gaps in its selection of phones. The confident outlook comes despite recent announcements of Samsung increasing its global market share from 10 to 14 per cent.

Based in Espoo, just outside the Finnish capital, Nokia has sales in 130 countries with 53,000 employees.

© The Canadian Press, 2004

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