Nokia lowered its second-quarter outlook for sales of mobile Relevant Products/Services devices and services Wednesday, citing factors such as competitive pressures at the high end of the market and shifts in product mix. For all of 2010 Relevant Products/Services, Nokia said it now expects a lower market value than the company held last year.
It appears Nokia has little confidence that the new devices it plans to bring to market later this year will be enough to overcome the inroads that rivals have made at the high end of the mobile-product spectrum, noted Gartner Research Director Carolina Milanesi.
"Android has come up very quickly as a viable platform, and vendors such as Samsung and Sony Ericsson are stepping up their smartphone portfolio offerings," Milanesi said in an e-mail. "This will make Nokia's home market in Europe even more competitive than in 2009 -- not only in the high end but also in the mid-tier segment," she added in a blog.
High-end Weakness
One reason Nokia cited for its revised outlook is the shift in the company's product mix toward somewhat lower gross margin products -- a trend that Milanesi noted has been under way for almost a year now.
"Since the N95, Nokia has been missing a cutting-edge high-end device that drives brand value through the portfolio," Milanesi explained. "Sales in the mix are more and more into the low end where margins are lower."
Nokia also noted that the recent depreciation of the euro is affecting the cost of goods it sells, as well as the company's operating expenses and global Relevant Products/Services pricing tactics. Though Gartner expects handset prices to be under stronger pressure for those vendors buying in U.S. dollars and selling in euros, the research firm doesn't think currency issues are the main reason for Nokia's financial revisions.
Lower-tier smartphones and non-smartphone products continue to remain Nokia's strength, Milanesi noted in a blog Wednesday. "Although these segments help to drive volume share, they have a lower impact on value share and Nokia will have to continue to find a solution for its high end," she wrote.
OS Challenges Ahead
Nokia said it continues to expect mobile-device volumes for the industry overall to rise about 10 percent this year in comparison with sales in 2009. The handset maker also indicated it believes its own global market share growth will remain flat in 2010, but the value of that market share will be slightly lower than last year.
In the current quarter, Nokia now expects its net sales of mobile devices and services to fall at the lower end of -- or even slightly below -- the company's previous forecast of $8.25 billion to $8.87 billion. To return to sales growth, Milanesi said, Nokia will need to follow through on corrective efforts under way at the company -- particularly smartphone OS development.
The Symbian OS long championed by Nokia remained the world's number-one smartphone platform during the first quarter, but Symbian's share of the global market was down 4.5 percentage points from a year earlier, according to Gartner. Under an agreement announced last February, Nokia and Intel are working together on MeeGo, a Linux Relevant Products/Services-based OS that combines elements from the Maemo and Moblin platforms developed by the two companies.
"Nokia needs to deliver on MeeGo and Symbian 4 to address the high end," Milanesi said. "Unfortunately, however, Symbian 4 has been delayed and we only expect one or two products this year on MeeGo."
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