Nokia achieves 40 percent phone market share

January 25, 2008

Bonny Joy, Strategy Analytics

Finnish handset maker Nokia ramped up its device shipments last year despite new offerings from Apple Inc., Research in Motion and Samsung.

Research by Strategy Analytics found that mobile phone shipments grew 12 percent to reach 1.12 billion units in 2007. During the fourth quarter, 332 million mobile phones were shipped globally, with Nokia accounting for a 40 percent share.

“It’s not news that Nokia is dominant,” said Bonny Joy, analyst for Strategy Analytics, Boston. “What it shows is the efficiency in their distribution, better product portfolio and higher cost effectiveness. They have an operating margin of 24 percent and above, and others are operating on loss.”

Japanese-Swedish joint venture Sony Ericsson is operating at a 13 percent margin. South Korea’s Samsung is operating at an 11 percent margin.

Nokia has performed at a 20 percent-plus margin consistently for the last three quarters. Last quarter it shipped 133.5 million handsets.

Coming in second place is Samsung. It had an impressive performance last quarter, shipping 46.4 million handsets. But it needs to build share beyond Western Europe and North America to keep the momentum going, Mr. Joy said.

Motorola, Schaumburg, IL, had a 12.3 percent global share last quarter, down from 22.4 percent in the year-ago period. It shipped just under 41 million handsets. Its failure to replicate past success with the Razr model is the main reason for the drop, per Strategy Analytics’ report.

“Motorola is losing market share,” Mr. Joy said. “Their operating margin is in the negative. They need to do more handset allocation to get it into markets like India, China and Western Europe. Its 3G portfolio pales in comparison to Nokia's N series or Samsung's ultra edition 2 line-up.”

At the Consumer Electronics Show earlier this month in Las Vegas Motorola announced a couple of products that indicate the company’s efforts to regain share. Its recent partnerships with chip maker Qualcomm Inc. will enable the company to roll out devices with enhanced connectivity and multitasking capabilities.

“They are trying to improve with new chip partnerships, but it will take at least a year to bring these new products into the market,” Mr Joy said. “A slowing economy will have significant impact on Motorola's revival plans.”

Apple shipped 2.3 million iPhone units worldwide in the last quarter for a 0.6 percent share. Mr. Joy predicts that it will be among the world’s top 10 vendors by the end of this year.

Sony Ericsson continued on a downward slope, shipping 30.8 million handsets last quarter as it failed to compete with improved handset portfolios from Samsung, South Korea’s LG and Nokia.

In the high-end retail market it is difficult for any company other than Nokia to be profitable because it dominates with economies of scale. However, competition among all these vendors exists in the smartphone market, in addition to the new business models and products from Web 2.0 players.

The main competition is in the feature phone section, Mr. Joy said. The key is differentiation.

“In the feature phone section, everyone is within everyone’s reach,” Mr. Joy said. “They can differentiate and build market share.”