4/30/2008 1:30:00 PM
Manufacturers' results reflect declining handset market
Handset manufacturers’ financial results for the first three months of 2008 reflect the impact of declining economic conditions.
While Nokia posted healthy results, it also warned that it expects the value of the handset market to decline in the coming months.
Sony Ericsson issued a profit warning in March and its results were in line with the negative change expected.
Motorola continues to struggle and losses from its handset business almost doubled since last year, from £117m to £210m.
The manufacturer’s global market share fell from 17.5% this time last year to 9.5%. The decreasing market share was mainly from Motorola’s home market, the US, where it has previously been very strong.
Nokia’s sales in the US also fell both year-on-year and sequentially. The slow sales are likely to be the result of the economic downturn in the country.
Nokia predicted 10% volume growth for 2008, but said it expects the value of the market to decline over the next year, due to the weaker US dollar and slowing US – and possibly European – economy.
Ovum analyst Martin Gardner said: ‘Nokia is better placed than any vendor to ride such a slowdown, and even emerge stronger from it. It has a broader portfolio of competitive products across all segments than any other [manufacturer], and somewhat higher margins as a buffer against harsher price competition.’
Nokia shipped a higher-than-average 115.5 million handsets in Q1, growing 27% over the year; however, the declining value of the devices only resulted in a 13% increase in revenues. The average price of phones fell from £65.27 to £62.11 in the three months.
Sony Ericsson only increased shipments by 2% during the year, and saw an 8% decrease in revenues from one year ago, to £2.1bn. The manufacturer’s operating income was down 48% from last year, to £142.5m.
CEO Dick Komiyama said at the time the company made the profit warning the market demand had softened for Sony Ericsson’s mid and high-end devices in mature markets.
Samsung’s first quarter results were an exception. Sales of handsets increased by 33% as the company shipped 46.3 million units, keeping it on track for selling 200 million units this year.