Nokia Targets Motorola in Battle for US Handsets
Apr 21, 2003 (ComputerWire via COMTEX) -- Nokia Corp has reported a sharp increase in profitability and has forecast that with the world handset market set to increase by 10% over the 405 million units shipped in 2002, it expects to record even stronger growth. Much of its ambitions are centered on the US market where it aims to take on Motorola in a battle for the CDMA market.
In the first quarter to March 31, net income rose 13.2% to 977m euros ($1bn) on revenue 3.4% higher at 6.77bn euros ($7.4bn). However, the Espoo, Finland-based telecoms equipment giant said revenue at its networks operation, where it announced a cut of 1,800 jobs earlier this month, fell 15% to 1.2bn euros ($1.3bn), while its mobile phone operation showed 1% growth to 5.5bn euros ($5.9bn).
The high cost of introducing the first implementation of 3G technologies was a big factor in the operating loss of 10.4m euros ($11.3m) recorded by the networks business, and the aim now is to get it profitable on quarterly revenue of 1.4bn euros ($1.5bn), 15% above the current level.
Chief executive Jorma Ollila said there had been "no improvement" in demand for network equipment from wireless operators, and it expects none in the near term. Nokia is also pruning its product range in an effect to return the business to profitability.
The substantial improvement in profit masks deeper problems. Average selling prices of handsets are falling. While unit shipments rose 13% to about 38 million in a market that expanded by just 10%, the value of sales increased by only 1% because much of the growth has been in emerging markets where low prices are important.
The big hope now is that demand will take off for phones with color screens and more sophisticated features. "I don't think we have really seen yet an emergence of upgrades to color displays as well as multiple-featured phones. We are still expecting that to happen, and it will happen," said Ollila.
With a mobile phone market share of 38%, Nokia now has its sights on its nearest competitor Motorola Inc. Seven new CDMA phones have started shipping, together with GSM models tailored for the US market, and Nokia is confident of success. "We expect to gain market share in the US in CDMA in the second quarter and going forward," said Ollila.
Nokia forecasts a 4% to 12% increase in mobile phone sales in the second quarter, and a growing share of the market for high-end devices. It plans to take a charge of 350m to 400m euros ($381 to $436m) in the second quarter for the network restructuring and the write-off of some investments.
ComputerWire News: Issue 4651, April 21, 2003
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