Nokia’s Q3: Dominates incumbents, fends off Apple

Nokia Corp. inched toward its long-held goal of 40% global market share in the third quarter, shipped more phones than its three largest rivals combined and earned revenue and profit to match.
With near-complete dominance over incumbent handset makers, Nokia is moving to address Apple Inc.’s challenge at the high-end of the market, recapture related mind-share and position itself as the leader in the mobile Internet space.
Nokia’s ambitions are sky high, while ironically it continues to make its bread-and-butter on low-cost devices in emerging markets.
Total revenue for the company’s four units-mobile phones, multimedia devices, enterprise solutions and Nokia Siemens Networks-reached $18.4 billion, up 28% over the year-ago quarter. Total operating profit reached $2.7 billion, a 69% jump over the year-ago quarter.
Investors rewarded the Finnish giant by sending its shares up 3% to $37.56 by mid-morning.
But analyst Tero Kuittinen at Avian Securities LLC said that despite prodigious growth and profitability, investors did not respond in kind due to lingering doubts about Nokia’s momentum, given fierce competition over new phone models and prices.
Nokia shipped nearly 112 million handsets during the third quarter, up 26% over the year-ago quarter. That gave Nokia estimated market share of 39%, up from 36% in the year-ago quarter and up sequentially from 38%.
The company said much of its growth came from a surge in sub-$43 handset sales. Average selling prices fell accordingly to $117 from $129.
Nokia’s handset business continues to dominate its revenue and profit picture. The company’s primacy in emerging markets and disciplined cost controls were credited with delivering strong profit margins.
According to Kuittinen, Nokia’s strength at both the high- and low-end of the market is unparalleled.
“It’s like turning out Hugos and Rolls Royces at the same time,” Kuittinen said. “No other manufacturer is doing this.”
Nokia’s market-share dominance, however, may be stalling as global operators reward its rivals with large orders, particularly in Europe, Kuittinen said. Further, both Nokia and Motorola Inc. are late to market with large, display-centric handsets and that’s a vulnerability for them, according to the analyst.
Kuittinen discounted the competitive threat represented by Apple, but clearly Nokia does not.
Nokia is going head-to-head with its new rival, Apple, as the latter’s iPhone launches Nov. 9 in the United Kingdom. Nokia is launching a public-relations blitz to counter the iPhone’s landing on European shores by launching its new music service in London and opening a new flagship store on London’s Regent Street cheek-by-jowl with Apple’s own store there, according to today’s Wall Street Journal.
Nokia is also conducting a national advertising campaign in the United States touting its top smartphones-it calls them “multimedia computing devices,” a ponderous though accurate tag-that calls attention to its open S60 operating system, a pointed contrast to the iPhone’s closed system. Apple, perhaps acknowledging the leading incumbent vendor’s thrust, parried by announcing this week that it, too, would open its iPhone to third-party applications by February.