Nokia cuts quarterly forecast, again
Leading handset vendor can’t forecast 2009
December 4 2008 - 1:43 pm ET | Phil Carson | RCR Wireless News
Nokia's stock rose slightly after the company's announcement.
Smartphone battle building
The bright spot in the mobile industry this year has been smartphones, delighting consumers and ramping average revenue per user for network operators due to associated data plans.
But Gartner issued a sobering assessment of that growth today, in tandem with Nokia’s avidly sought guidance on market conditions.
The market analysis firm said that during the third quarter smartphone growth slowed to less than 12% year-on-year. And that was before consumer confidence and spending spiraled downward in October and November.
The news is not good for Nokia, which once held more than half the world’s smartphone share.
In the third quarter, in terms of year-on-year smartphone growth, Nokia was utterly eclipsed by smartphone pure plays Apple Inc., Research In Motion Ltd. and HTC Corp.
Where Nokia saw a 3% drop in shipments from the year-ago quarter, Apple had 328% growth, RIM had 82% growth and HTC had 26% growth. (HTC’s growth was considerably better, but Gartner only counted HTC-branded devices, rather than devices it made for operator branding — a significant but unquantified volume for the company.)
In terms of share, Nokia remained the world’s leading smartphone maker, with 42% of the global market. RIM held 16%, Apple achieved 13% and HTC roughly 5%. Sharp, which makes the Sidekick for T-Mobile USA Inc., had more than 3% of the global market.
Nokia CEO Olli-Pekka Kallasvuo acknowledged that his firm’s smartphone portfolio was being refreshed and that Nokia targeted share gains in 2009 in the smartphone segment, which carries the highest margins.
Nokia Corp. executives told analysts and press today that holiday-quarter handset sales will likely fall short of the company’s last estimate, given less than three weeks ago. Even with its much-vaunted visibility into the global market, however, Nokia declined to give clear guidance for 2009.
The upshot: Market conditions may be changing too rapidly to make a rational forecast worth sharing.
Yet investors appeared relieved by Nokia’s frank assessment of the current quarter, sending the Finnish handset giant’s stock up more than 5% in morning trading.
As recently as Nov. 14, Nokia projected global handset shipments this quarter of 330 million units and today said only that volumes weren’t likely to reach that level, noting slowing demand in emerging markets. In mid-November, Nokia also projected 5% or more negative growth for the industry next year.
Nokia CEO Olli-Pekka Kallasvuo said that some consumers may actually trade down when they replace their current handset, according to Reuters. That’s remarkable, in that the act of replacing one’s handset is typically referred to in the industry as “the upgrade cycle.” The CEO also said the company was cutting costs, but provided little detail.
What struck observers, however, was Nokia’s inability or unwillingness to provide much detail on the year to come.
“What is likely to be concerning to investors is the lack of clear guidance for 2009,” wrote analyst Ittai Kidron at Oppenheimer, in a note to investors.
Nokia did not give specific guidance on its operating margin goals, either, according to Kidron.
Clear as mud
And if Nokia itself is struggling to provide clarity for the year ahead, analysts are toiling, too.
“While 2009 guidance is consistent with our expectations, poor visibility makes forecasting 2009 extremely problematic,” said analyst Maynard Um at UBS.
Still, analyst Mark McKechnie at Broadpoint.AmTech said that despite Nokia’s “limited visibility,” he was somewhat relieved at today’s news.
“We are encouraged that Nokia has taken down the bar, which hopefully will mitigate the industry overbuild effects in 2009,” McKechnie wrote in a note to investors.
Numerous analysts noted today that mobile semiconductor vendors, including Qualcomm Inc. and Texas Instruments Inc., have already dampened their fourth-quarter forecasts. And Taiwan Semiconductor Manufacturing Co., which fabricates a significant slice of mobile chips for multiple mobile chip vendors, just cut its fourth-quarter revenue projection by nearly 30%. That was the first downwardly revised forecast by TSMC in seven years, according to the Wall Street Journal.
Nokia’s Capital Markets Day was held today in Brooklyn, which several observers said was a less costly locale than Manhattan, indicating that even its delivery of a dampened forecast was itself designed to save money.
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