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Nokia feature phones (S40) are losing market more than Nokia smartphones (S60, Symbian)

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and look what entry level Android smartphones are destroying Nokia’s w/w market:
– Huawei’s IDEOS U8150 smartphone for US$86 in Kenya: 350,000 units sold in 8 months [Aug 17, 2011]

Gartner Says Sales of Mobile Devices in Second Quarter of 2011 Grew 16.5 Percent Year-on-Year; Smartphone Sales Grew 74 Percent [Aug 11, 2011]

Table 1
Worldwide Mobile Device Sales to End Users by Vendor in 2Q11 (Thousands of Units)

Vendor 2Q11 Units 2Q11 Market Share (%) 2Q10 Units 2Q10 Market Share (%)
Nokia 97,869.30 22.8 111,473.70 30.3
Samsung 69,827.60 16.3 65,328.20 17.8
LG 24,420.80 5.7 29,366.70 8
Apple 19,628.80 4.6 8,743.00 2.4
ZTE 13,070.20 3 6,730.60 1.8
RIM 12,652.30 3 11,628.80 3.2
HTC 11,016.10 2.6 5,908.80 1.6
Motorola 10,221.40 2.4 9,109.40 2.5
Huawei 9,026.10 2.1 5,276.40 1.4
Sony Ericsson 7,266.50 1.7 11,008.50 3
Others 153,662.10 35.8 103,412.60 28.1
Total 428,661.20 100 367,986.70 100

“Smartphone sales continued to rise at the expense of feature phones,” said Roberta Cozza, principal research analyst at Gartner. “Consumers in mature markets are choosing entry-level and midrange Android smartphones over feature phones, partly due to carriers’ and manufacturers’ promotions.” However, replacement sales in Western Europe showed signs of fatigue as smartphone sales declined quarter-on-quarter.

In smartphones, Nokia’s sales into the channel in the second quarter of 2011 were low. This was partly due to a very competitive market that deflated demand for Symbian [S60], but also to inventory management issues in Europe and China in particular. The channel bought less and worked hard to reduce stock levels, partly by cutting prices on older products. These factors reduced Nokia’s average selling price for smartphones, compared to the first quarter of 2011. “The sales efforts of the channel, combined with Nokia’s greater concentration in retail and distributors’ sales, saw Nokia destock more than 9 million units overall and 5 million smartphones, helping it hold on to its position as the leading smartphone manufacturer by volume,” said Ms. Cozza. “However, we will not see a repeat of this performance in the third quarter of 2011, as Nokia’s channel is pretty lean.”

Before continuing the Gartner press release let’s see a recalculated diagramm based on Gartner data but showing more precisely the change in the market from Nokia point of view (Nokia S60 = Symbian = Nokia smartphones, Nokia S40 = Nokia feature phones):

Gartner Last quarter sales of Mobile Communication Devices -- Aug-2011

Operating System 2Q11 K Units 2Q11 Market Share (%) 2Q10 K Units 2Q10 Market Share (%) Y/Y
Nokia S60 23853.20 5.56% 25386.80 6.90% -6.04%
Nokia S40 74016.10 17.27% 86086.90 23.39% -14.02%
Apple 19628.80 4.58% 8743.00 2.38% 124.51%
RIM 12652.30 2.95% 11628.80 3.16% 8.80%
Android 46775.90 10.91% 10652.70 2.89% 339.10%
Total: 176926.30 41.27% 142498.20 38.72% 24.16%
Others 251734.90 58.73% 225488.50 61.28% 11.64%
Grand total: 428661.20 100.00% 367986.70 100.00% 16.49%

Samsung achieved strong growth in sales of mobile devices. For example, the Galaxy S II sold well, and this model went on to chalk up 5 million sales by the end of July. A strong performance in the smartphone market helped Samsung increase its market share, to become the third-largest smartphone vendor. However, its overall share dropped year-on-year, and grew only marginally quarter-on-quarter, mainly due to Samsung’s weaker presence in more price-sensitive market segments.

Apple continued to exceed expectations, even though the iPhone 4 will soon be replaced by a new model. Part of its growth came from the 42 new carriers and 15 new countries that it entered in the second quarter of 2011, which brought its total coverage to 100 countries. This expansion caused its inventory to grow a little by the end of the second quarter of 2011, when sales to end users stood at 19.6 million units. In mainland China, Apple is the seventh-largest mobile phone vendor and the third-largest smartphone vendor.

Research In Motion’s (RIM’s) share of the smartphone market declined to 12 percent in the second quarter of 2011, from 19 percent a year ago. Also, the company lost its No. 5 position in the worldwide ranking of mobile device vendors to ZTE. Demand for RIM’s devices in the second quarter was impaired by an ageing portfolio and delays in shipping products. In the coming quarters RIM will have to deal with increased competition to its messaging offering and manage a platform migration from BlackBerry 7 to QNX.

Google and Apple are the obvious winners in the smartphone ecosystem. The combined share of iOS and Android in the smartphone operating system (OS) market doubled to nearly 62 percent in the second quarter of 2011, up from just over 31 percent in the corresponding period of 2010 (see Table 2). Gartner analysts observed that these two OSs have the usability that consumers enjoy, the apps that consumers feel they need, and increasingly a portfolio of services delivered by the platform owner as well.

Table 2
Worldwide Smartphone Sales to End Users by Operating System in 2Q11 (Thousands of Units)

Operating System 2Q11 K Units 2Q11 Market Share (%) 2Q10 K Units 2Q10 Market Share (%)
Android 46775.90 43.4 10652.70 17.2
Symbian 23853.20 22.1 25386.80 40.9
iOS 19628.80 18.2 8743.00 14.1
RIM 12652.30 11.7 11628.80 18.7
Bada 2055.80 1.9 577.00 0.9
Microsoft 1723.80 1.6 3058.80 4.9
Others 1050.60 1 2010.90 3.2
Total 107740.40 100 62058.10 100

Nokia’s own report is first shown in a diagramm form:

Nokia Q2 2011 net sales EUR 9.3 billion, non-IFRS EPS EUR 0.06 (reported EPS EUR -0.10) [July 27, 2011]

Devices & Services5

EUR million Q2/2011 Q2/2010 YoY  Change Q1/2011 QoQ  Change
Net sales  5 467  6 799 -20%  7 087 -23%
 Smart Devices net sales 2 368  3 503 -32% 3 528 -33%
 Mobile Phones net sales 2 551  3 190 -20%  3 407 -25%
 Mobile device volume (million units) 88.5 111 -20% 108.5 -18%
 Smart Devices volume (million units) 16.7 25.2 -34% 24.2 -31%
 Mobile Phones volume (million units) 71.8 85.8 -16% 84.3 -15%
 Mobile device ASP6 62 61 2% 65 -5%
 Smart Devices ASP6 142 139 2% 146 -3%
 Mobile Phones ASP6 36 37 -3% 40 -10%

Note 5 relating to Devices & Services reporting structure: Effective from April 1, 2011, our Devices & Services business includes two new operating and reportable segments – Smart Devices, which focuses on smartphones, and Mobile Phones, which focuses on mass market mobile devices – as well as Devices & Services Other.  Prior period results for each quarter and the full year 2010 and Q1 2011 have been regrouped (on an unaudited basis) for comparability purposes according to the new reporting format. The regrouped financial information can be accessed at: http://www.nokia.com/investors

Note 6 relating to average selling prices (ASP): Mobile device ASP represents total Devices & Services net sales (Smart Devices net sales, Mobile Phones net sales, and Devices & Services Other net sales) divided by total Devices & Services volumes. Devices & Services Other net sales includes net sales of Nokia’s luxury phone business Vertu and spare parts, as well as intellectual property royalty income. Smart Devices ASP represents Smart Devices net sales divided by Smart Devices volumes. Mobile Phones ASP represents Mobile Phones net sales divided by Mobile Phones volumes.

– In Smart Devices, those who already have viewed our early Windows Phone work are very optimistic about the devices Nokia will bring to market and about the long-term opportunities. Step by step, beginning this year, we plan to have a sequence of concentrated product launches in specific countries, systematically increasing the number of countries and launch partners.

– In Mobile Phones, early results of the Dual SIM product launches are very encouraging, and we are on track to deliver more products this year.

At the end of the first quarter 2011, our sales channel inventories were slightly above normal levels given then anticipated volumes. During the second quarter 2011, distributors and operators purchased fewer of our devices across our portfolio as they reduced their inventories of Nokia devices. The second quarter 2011 ended with our sales channel inventories near the midpoint of our normal range of 4-6 weeks.

Nokia Crashing in China, Distributors Refusing Nokia Products [Aug 15, 2011]

Nokia faces challenge in China market [China.org.cn, Aug 15, 2011]

Nokia has a crisis on its hands as vendors in China, its biggest market, are facing a huge pile-up of inventory and have refused to place new orders, Caixin Century reported Monday.

Our (sales) channels collapsed in the second quarter because of the inventory overhang,” said a mid-level sales manager with Nokia China. Nothing like this has ever happened before, said the manager, who refused to be identified.

Nokia shareholders clamour for answers on Microsoft cooperation [HELSINGIN SANOMAT, May 4, 2011]

The Annual General Meeting of Nokia saw a record turnout on Tuesday.
More than 3,000 shareholders appeared at the Helsinki Fair Centre to listen to President and CEO Stephen Elop address the shareholders for the first time, in what many of them said was an inspiring speech.
The meeting chose a number of new members for the company’s Board of Directors, including paper manufacturer Stora Enso CEO Jouko Karvinen, Finance Company Sampo CEO Kari Stadigh, oil company Statoil CEO Helge Lund, as well as Stephen Elop himself. Chairman Jorma Ollila said that the search is already on for his successor. Ollila has said that he will leave the post at next year’s AGM.

: Nokia’s Windows phones are very important. How does Nokia plan to press the gas pedal and change engines at the same time?
“Our cooperation has gone well. We are very enthusiastic about our family of products, which we will publish soon. With the help of our cooperation with Accenture we will see to it that we will have the Symbian operating system available after the change. We are increasing investments into the operating system of cheap phones, and in technologies of the future”, says Nokia CEO Stephen Elop

Analyst Ben Wood says that Nokia has been wandering aimlessly for years as in a dream, and done only what it has done before. Why is this?
“First of all, Nokia’s management has not wandered in a dream. Nokia’s strategy has been quite clear, because we saw this change, and we have the steps for how to move ahead. As far as Symbian is concerned, we saw the forthcoming change on the basis of the demands of our customers, but we are not able to influence it as quickly as we should have”, says Chairman of the Board Jorma Ollila.

Did you consider using the Meego operating system along with other manufacturers?
“We discussed Meego with HTC, RIM, Samsung, LG, and Motorola. One manufacturer was fairly interested in Meego and the others have their own plans, and they were not particularly interested in Meego. They were afraid that Nokia had too much power in Meego”, Elop says.

There have been extensive reports in the media about the security breach affecting the Sony PlayStation. Microsoft Windows has been very vulnerable in data security. How will Nokia protect its telephones and its services with many credit card transactions?
“Data security and privacy are very important for us, and we need to take care of it in all of our business activities. We have comprehensive means for securing the privacy and data security of our consumers. Our phones have a completely different operating system than the Windows that is in a computer.”

Nokia pays Microsoft for the use of Windows, and gets payments in return. Can you say how many billions in profit are involved, and what is the schedule for payment?
“We do not give any details on compensations and fees. If we would tell them now, our competitors would get information which would cause problems for all of us. The payments [software licences] that we pay to Microsoft are very competitive, because we aim to sell a significant number of Windows phones.”

Will the Meego product that comes on sale at the end of the year be a touch-screen computer?
“No, it is not a tablet computer. There are 200 touch-screen computers on the market, and the only one that is a financial success is the Apple iPad. There is no point in us imitating it, like all of the others are doing without success. We need to make different kinds of products.”

Competition in China is intense, and they copy almost anything there. How can Nokia secure its competitiveness in China?
“Our industrial rights are our most important asset right after our personnel. It has long been predicted that officials in China would start taking a more serious attitude toward industrial rights, now that their own industry is starting to produce patented inventions. We are approaching this moment, and we are starting to defend industrial rights in China.”

When Nokia announced its new strategy, investors were not immediately excited. The share price fell sharply. Is this because Nokia has failed in assuring investors or is this cooperation simply bad news?
“Big investors understand and support our strategy. The first reason for the uncertainly was that in February we had no binding contract. In addition, we could not initially report on savings in costs, and we have still not revealled precisely when the first Windows phone will be available. The message from investors was clear to us: Nokia needs to show that changes will be implemented, and that they will bring results.”


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