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Mobile handset producers continue to struggle for market share

Thursday 28 April 2011

Companies announced their Q1/2011 results. According to them, Nokia’s total shipments increased 1% year on year to 108.5 million units. Smart phones rose 13% to 24.2 million units. Feature phones fell 2% year on year to 84.3 million units with average selling price (ASP) increased 5% to EUR 65. And Nokia’s net income fell to EUR 344 million, compared with EUR 349 million a year earlier.

Apple’s fiscal results are more inspiring. For the quarter ended March 26, 2011, Apple posted a profit of US$ 6 billion (EUR 4.12 billion), up 95.1% year-on-year from US$ 3.07 billion (EUR 2.1 billion) a year earlier. Revenue surged 83% to US$ 24.67 billion (EUR 16.9 billion), with 41% of the top line coming from the U.S. The company noted two areas where sales of the iPhone were “off the chart”: the U.S. grew by 155% year-on-year, thanks to the launch of the CDMA version by Verizon Wireless with existing supplier AT&T also doing well during this period, and in Greater China, where iPhone sales were up by almost 250%.

The iPhone shipped 18.7 million units, up 113% from last year’s 8.8 million units in the same period, and the iPad shipped 4.7 million units. Moreover, iPhone handset division stood at US$ 11.9 billion (EUR 8.16 billion), whilst Nokia recorded a lower US$ 9.4 billion (EUR 6.45) of wholesale handset revenues.

Nevertheless, Strategy Analytics, a Boston-based cabinet, noted that it expects the number of phones sold with Android to overtake those with Apple’s system by late 2011. According to Gartner, Android will run on 38.5% of smart phones sold this year. The Google software is moving into cheaper hardware and starting to compete with the high-volume, low-margin phones business that made up half of Nokia’s handset revenues and 78% of its unit sales in Q1/2011.

 

At the same time, Nokia struggles to regain its positions with its new Windows Phone-based strategy. To support transition period to the new platform until the first devices running Windows Phone, Nokia released new Symbian X7 and E6 (cf. Smart Insights Weekly #11-16). IDC also estimates that moving the current Symbian users to a new platform may lead to a significant percentage of the installed base migrating to more popular and less expensive Android-running devices or mid tier BlackBerrys. Moreover, starting this month, Stephen Elop, CEO at Nokia, splits Nokia’s handset operations into a smart phone division and a low-end phones division, each with separate financial and reporting responsibilities.

The company also highlighted a number of factors which will impact its performance in the second quarter. It projects an impact of “competitive industry dynamics and planned tactical pricing actions” with a greater impact from the Japanese disaster related to component supply; a lower contribution from new products, due to the fact that most new products will begin shipping in the second half of the year, and a greater impact from the lack of dual-SIM devices in its portfolio that it has previously seen where Nokia continues to lose market share to Samsung.

IDC estimates that the handset market share of Nokia stands at 32%, compared to Apple’s 18%, that increased by 2% quarter-on-quarter. Thus, Apple consolidated its market position as the second biggest smart phone manufacturer and has closed the gap with the Nokia, which is now estimated to be less than 10% in the segment.

Sony Ericsson that previously moved from Symbian to Android-based platform also published its Q1/2011 results. Total shipments declined 23% year-on-year to 8.1 million units. The company’s strategy in smart phones was successful enough to become profitable. Smart phones went up 819% to 4.9 million units and represented 60% of its shipments. Average selling price (ASP) increased 5% to EUR 141. Total market share is expected to come down to 2% in Q1/2011 from 3% in Q4/2010. Smart phones market share is expected to stay unchanged at 5%.

Meanwhile, all companies’ shipments were impacted by the earthquake in Japan. Tim Cook, COO at Apple, also addressed concerns that the Japanese disaster would impact Apple’s supply chain on a longer-term base, due to the fact that Samsung is a large component supplier to Apple.