Nokia flags slowdown in mobile market
The global mobile handset market will shrink in value in euro terms this year for the first time, industry leader Nokia warned Thursday. This unexpectedly bleak assessment sent its shares nearly 13% lower.
The world’s largest mobile phone company reported a 25% rise in net profit to €1,22bn for 2008’s first quarter but said the value of the overall global mobile device market would drop in euro terms in 2008 compared with last year because of the weak dollar and slower global economic growth.
Chief financial officer Rick Simonson told a conference call that 50% of Nokia’s sales were in dollars or dollar-linked. “There is growth in this market in volume and value if you knock out this crazy currency,” he said.
CEO Olli Pekka Kallasvuo insisted Thursday a combination of slower growth and rising labour and raw material costs would have little impact on demand for mobile phones, which he described as “necessity items”. Nokia still expects the number of phones sold industry-wide to grow 10% in 2008 but these sales are expected to generate less revenue for vendors as average sale prices per phone fall.
Despite Nokia’s confidence and strong profitability, analysts have been fretting over Texas Instruments’ comments on 3G order cancellations and Sony Ericsson’s recent warning on handset sales, among other factors. In addition, analysts have expressed concerns over Nokia’s product cycle, particularly its high-end handsets, which face intense competition from Samsung, Sony Ericsson and Apple’s iPhone, according to Citigroup.
Carolina Milanesi, analyst at Gartner, said: “Falling revenues will put more strain on handset vendors. They will have to focus on making low-end devices at a profit and this is not easy. Only Nokia seem to be able to do it at the moment. Samsung have been talking about low-end products but it takes time to learn to cater to this market.”
Companies such as Motorola have struggled in the emerging markets because they have not been able to get their production costs down low enough to make low-cost phones profitably.
news source : http://www.fmtech.co.za/?p=873
The world’s largest mobile phone company reported a 25% rise in net profit to €1,22bn for 2008’s first quarter but said the value of the overall global mobile device market would drop in euro terms in 2008 compared with last year because of the weak dollar and slower global economic growth.
Chief financial officer Rick Simonson told a conference call that 50% of Nokia’s sales were in dollars or dollar-linked. “There is growth in this market in volume and value if you knock out this crazy currency,” he said.
CEO Olli Pekka Kallasvuo insisted Thursday a combination of slower growth and rising labour and raw material costs would have little impact on demand for mobile phones, which he described as “necessity items”. Nokia still expects the number of phones sold industry-wide to grow 10% in 2008 but these sales are expected to generate less revenue for vendors as average sale prices per phone fall.
Despite Nokia’s confidence and strong profitability, analysts have been fretting over Texas Instruments’ comments on 3G order cancellations and Sony Ericsson’s recent warning on handset sales, among other factors. In addition, analysts have expressed concerns over Nokia’s product cycle, particularly its high-end handsets, which face intense competition from Samsung, Sony Ericsson and Apple’s iPhone, according to Citigroup.
Carolina Milanesi, analyst at Gartner, said: “Falling revenues will put more strain on handset vendors. They will have to focus on making low-end devices at a profit and this is not easy. Only Nokia seem to be able to do it at the moment. Samsung have been talking about low-end products but it takes time to learn to cater to this market.”
Companies such as Motorola have struggled in the emerging markets because they have not been able to get their production costs down low enough to make low-cost phones profitably.
news source : http://www.fmtech.co.za/?p=873
