Nokia has Decent First Quarter, but Market Share Drops Below 30 Percent

By Tracey E. Schelmetic April 21, 2011

Nokia has sure been having trouble finding its footing as of late. The bad news isn't over for the Finnish mobile device company, however, even if it comes mixed with good news. While Nokia reported better than expected first-quarter profits today, it is also facing news that its global market share has dropped to below 30 percent for the first time in over a decade. With increased competition from rivals such as Apple and Google's Android, the company appears to be losing ground to its competition, reported the Associated Press.

The company's switch from using the Symbian platform for its phones to Microsoft's Windows Phone platform – announced in February – isn't expected to happen until next year.

Nokia's net profit in January through March fell by five million euro to € 344 million ($499 million) from a year earlier. Revenue grew nine percent to € 10.40 billion, Nokia said today during its earnings report.

Markets had anticipated a greater fall in profits and lower sales, so the results were a pleasant surprise, pushing Nokia's share price up more than two percent to € 6.07 ($8.81) in Helsinki.

Nokia has faced increasing competition over the last few years, particularly in the smartphone arena. Though its smartphone sales were up six percent at € 7 billion in the first quarter, the company showed further signs of suffering against stiff competition not only from Apple and Android, but also Research in Motion's Blackberry.

Nokia said it sold 24 million smartphones, 13 percent more than in the same period in 2010, but its market share for the devices plunged to 24 percent from 39 percent a year earlier, according to Strategy Analytics.

The Finnish company said its overall global market share also fell — to 29 percent, from 33 percent a year earlier and 31 percent in the previous quarter. Nokia hasn't seen such low market share levels since the late 1990s.

The average selling price of Nokia handsets was up at € 65 from € 62 a year earlier, indicating the company is selling more high-end cellphones. Nokia sold 108.5 million devices in the first quarter, above the Strategy Analytics estimate of 105 million.

“Volumes were better than expected and pricing was stronger,” said Neil Mawston, an analyst at Strategy Analytics . “But it's clear that competition is still tough.”

Mawston said Nokia can expect “bumpy revenues and profits for the next couple of quarters,” as its recently-announced link-up with Microsoft Corp. comes onstream.

CEO Stephen Elop said Nokia has now signed a “definitive” deal with Microsoft Corp. to develop software for smartphones and that product design and engineering work was “well under way.”

The partnership, first announced in February, will make Windows Phone software the main platform used in the Finnish company's smartphones. Elop has said boldly stated that once the switch happens, the company will outpace Google's fast-growing Android market share.

“In recognition of the unique nature of Nokia's agreement with Microsoft and the contributions that Nokia is providing, Nokia will receive payments in the billions of dollars,” Nokia said.

Elop did not say when the Nokia Windows phone would be launched, but added that “devices that take advantage of the Windows phone platform will be shipping in volumes in 2012.”

Describing the first quarter as “remarkable,” he said the company will face “a more challenging second quarter,” as it goes through a restructuring period with Microsoft.

Tracey Schelmetic is a contributing editor for TechZone360. To read more of Tracey's articles, please visit her columnist page.

Edited by Jennifer Russell

TechZone360 Contributor

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