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Finally, some good news from Nokia.
On Wednesday, the world’s largest maker of cell phones said it expects sales volumes of mobile handsets to increase 10 percent in 2010 from 2009, as the market rebounds from a worldwide recession.
“Going into 2010, the overall mobile-devices market is stabilizing, and it is growing more in the areas where Nokia has competitive advantages,” Nokia’s new chief financial officer, Timo Ihamuotila, said in a statement.
Nokia said its worldwide market share of 38 percent would remain unchanged next year but that the company would increase revenue by focusing on stabilizing pricing on handsets. The average selling price of Nokia’s phones had slipped over the past year. In the third quarter of 2009, the company’s average price for a handset was 62 euros, or about $94. That was price was stable, compared with the previous quarter, but it was down from 72 euros during the same quarter a year ago.
This past year has been a tough one for Nokia and the rest of the cell phone industry. Nokia was hit hard by the economic downturn, as consumers put the brakes on spending. And for the fourth quarter of 2008, it saw sales drop 19 percent during the quarter, compared with the same quarter in 2007. And the company’s profit fell about 69 percent.
Nokia slashed its annual forecast for 2009. And to cope with the deteriorating economic situation, it also announced that it would reduce about $905 million from its budget. Much of the cuts resulted in thousands of workers losing their jobs.
Besides the economic downturn, Nokia has been facing increasing competition from companies such as Apple, with its iPhone, and Research In Motion, with its BlackBerry devices. And now the company is facing even more competition in the smartphone market from Google Android phones, which will hit the market en masse in 2010.
Even though Nokia launched a new smartphone in 2009, the N97, the company still managed to lose market share in the high-end smartphone category.
Nokia says it’s made improvements to the Symbian operating system that is used to power its high-end phones. But as the market gets more crowded with devices, it won’t be easy to compete against popular iconic devices such as the iPhone. What’s more, Nokia still hasn’t managed to crack the U.S. market, the fastest-growing one for high-end handsets.
Today only a couple of Nokia’s higher-end smartphones are subsidized and sold through U.S. carriers. This is a major problem, considering that the vast majority of American cell phone users buy subsidized devices in exchange for service contracts. The iPhone is currently selling for as little as $99 with a two-year contract from AT&T. Meanwhile, the Nokia N97 costs more than $500 at full retail.
Nokia has also been focusing a lot of effort on building up its services business. The company is building a marketplace and selling services through its Ovi online portal, which enables cell phone consumers to buy music, videos, and navigational maps.
The company is expecting to generate 2 billion euros in sales next year from its services unit. And it expects to grow this number in 2011, when it’s expected to have more than 300 million active Ovi users. It plans to maintain a focus on applications for its phones, targeting net sales from its services unit of 2 billion euros or more in 2011 from an expected 300 million active users by the end of 2011.
Meanwhile, Nokia’s joint venture with Siemens to sell telecommunications equipment has also been struggling. In October, the company was hit with a 908 million euro goodwill write-down on the business unit.
But Nokia now believes that the Nokia Siemens venture will also gain market share in 2010, even as the communications infrastructure market is expected to be flat in euro terms from the previous year, Nokia said.
