Nokia Q4 results reflect market conditions
Published by Rafe Blandford at 12:37 GMT, January 22nd 2009
Nokia today released its Q4 2008 results. Nokia net sales of EUR 12.7 billion, down 19% year on year and up 3% sequentially (down 18% and up 1% at constant currency). Nokia sold 15.1 million converged (S60) devices, down from 15.5 million in Q3 and 18.8 million in Q4 2007, of these 8 million were Nseries and 3 million were Eseries. Nokia's industry outlook for 2009 estimates mobile device volumes to decrease by 10%. The results are set against the background of the global economic slow down.
Olli-Pekka Kallasuvo, Nokia CEO, said:
"In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry. We are taking action to reduce overall costs and to preserve our strong capital structure. This is clearly our top priority in the current economic environment. However, it is important for Nokia to continue investing at the proper pace in future growth. We believe Nokia has a tremendous opportunity to capture value as the Internet services market evolves and grows. Being a catalyst for change has been our heritage and it will be our future."
Points of interest:
- Net income was EUR 576 million, down from 1,825 million in Q4 2007. Analysts had expected income of around EUR 970 million and sales of around EUR 13 billion. Thus results were poorer than expected, albeit within the range of some estimates.
- Nokia mobile device volumes were 113.1 million units, down 15% year on year and down 4% sequentially. This is set against estimated industry volumes of of 305 million units, down 9% year on year and down 2% sequentially. Nokia's market share was esitmated at 37%, down from 38% in Q3 and 40% in Q4 2007. Nokia expect a similar market share in Q1 2009, but is targeting an increased market share for later in the year.
- Services and software net sales of EUR 158 million, up 37% sequentially. This sends a positive message about Nokia's service strategy, although it is early days given the amounts of money being invested in this area.
- Eseries sales were good (same as previous quarter), especially given a 12% decrease of Nseries device from last quarter. This is a reflection of the success of the Nokia E71 for which Q4 was its first full quarter. Falling Nseries sales probably reflect increased competition from Apple, HTC and others in addition to the market conditions.
- There's a note of a EUR 1.7 billion one-off payment to Qualcomm relating to the patent and license agreements that were recently reached.
- Nokia's reduced sales and market share was largely driven by the Middle East and Africa, Greater China and Asia-Pacific markets. This was partly offset by increased market share in Europe and Latin America.
Nokia noted that 'due to extreme currency volatility, our market share in the fourth quarter 2008 in some geographic areas may have been affected by products being re-routed by the distribution channels for sale to consumers in other geographic areas, particularly in Europe and Middle East & Africa'.
Nokia Mobile Device Volume by Geographic Area:
(million units) Q4/2008 Q4/2007 YoY
ChangeQ3/2008 QoQ
ChangeEurope 34.7 37.2 -6.7% 27.4 26.6% Middle East & Africa 18.2 23.6 -22.9% 21.5 -15.3% Greater China 12.9 20.2 -36.1% 19.8 -34.8% Asia-Pacific 29.9 34.0 -12.1% 33.6 -11.0% North America 4.1 5.1 -19.6% 4.5 -8.9% Latin America 13.3 13.4 -0.7 11.0 20.9% Total 113.1 133.5 -15.3% 117.8 -4.0% - The average device selling price was EUR 71, down from EUR 72 in Q3. Devices and Services gross margin was 33.8%, down from 36.5% in Q3 2008. These reflect a greater proportion of lower cost devices being sold.
You can read the full results here.
Categories: Links of Interest, Industry
Platforms: General, S60 3rd Edition, S60 5th Edition
News Discussion
Unregistered
No great surprise, considering. The North America numbers have got to be a worry though. Could a bad year see Nokia disappear from the US altogether?
Unregistered
How do Apple compare?
They seem to be doing well.
They seem to be doing well.
Unregistered
YLE news (YLE="finnish BBC") is saying that Nokia might cut as many as 13 000 jobs this year.
Rafe
Its difficult to compare Nokia and Apple directly because there business areas don't overlap.
Apple reported iPhone sales of 4.4 million for Q4, which is up 88% on last year but down 38% from the last quarter. Its inevitably up from the previous year given the increased availability, and inevitably down because there's only one product... Possibly more worrying for Apple in the longer term is the fact that about 1.9 million of those sales are estimated to be US meaning the iPhone isn't ding that well otide its home market. Apple as a whole had a very good Q4 and 2008 although there were some signs of slow down.
To be honest there's not that much to be drawn here, except to say some of the more ridiculous iPhone forecasts are not going to come true.
Apple reported iPhone sales of 4.4 million for Q4, which is up 88% on last year but down 38% from the last quarter. Its inevitably up from the previous year given the increased availability, and inevitably down because there's only one product... Possibly more worrying for Apple in the longer term is the fact that about 1.9 million of those sales are estimated to be US meaning the iPhone isn't ding that well otide its home market. Apple as a whole had a very good Q4 and 2008 although there were some signs of slow down.
To be honest there's not that much to be drawn here, except to say some of the more ridiculous iPhone forecasts are not going to come true.
Rafe
Ouch - 13,000 jobs.
Though I'd be suprised if we didn't see some cuts.
See http://translate.google.com/translat...2F%2Fyle.fi%2F for the article mentioned above (via Google Translate).
Though I'd be suprised if we didn't see some cuts.
See http://translate.google.com/translat...2F%2Fyle.fi%2F for the article mentioned above (via Google Translate).
Jeppis
OPK also said that Nokia Tube sold 500 000 units on December (just 30 days) and demand is still greater than supply. Let's see what happens now when the sale is starting also in UK etc..
Unregistered
When considering thet 13000 jobs, remember that Smartphones, and non Smartphones are only part of Nokia business. They are massively into infrastructure and comms. With 3G largely in place in Europe, no massive infrastructure projects are happening until a new network technology appears.
Jenny Talia
Apple need more products, starting with a smaller more portable version of the iPhone. It's enormous.
Unregistered
Quote:
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Originally Posted by Unregistered
When considering thet 13000 jobs, remember that Smartphones, and non Smartphones are only part of Nokia business. They are massively into infrastructure and comms. With 3G largely in place in Europe, no massive infrastructure projects are happening until a new network technology appears.
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So that 13k figgure concerns handsest and services. Seems like a big figure, but Nokia employs about 130,000 people. That 10% cut would be much smaller than what has been forecasted for Sony Ericcsson and Motorola, for example.
Tzer2
Amidst the doom and gloom, interesting to see numbered (i.e. not Nseries or Eseries) devices making up such a large share of S60 sales. Could that be because of the 5800 released in selected markets late last year?
I suspect numbered devices will make up an even larger proportion of S60 sales in 2009 thanks to the 5800. Even after the N97 comes out, the 5800 will still be a much cheaper and more mass-market alternative.
It depends what Apple really wants. Historically they've tended to stay in expensive niches, which mean smaller sales but higher profits per sale. Of course if the economic downturn worsens Apple may reconsider this strategy, if people start buying cheaper devices instead of expensive high end ones.
This is why Rafe was saying comparisons with Nokia are difficult, because they're really two totally different companies. Nokia's profits and sales come mostly from cheap feature phones, while Apple doesn't even sell cheap feature phones. The average Nokia phone sells for about 70 euros SIM-free, whereas Apple's phones sell SIM-free for about 500 to 600 euros, so they're in totally different parts of the market.
It would be like trying to compare Toyota and Rolls Royce, they both make cars but they're not really going after the same customers.
On the subject of touchphone sizes, one of the things I'm appreciating about the 5800 and S60v5 is that it really can be operated with one hand. I think it's because Nokia is essentially a phone company, while Palm, Apple etc are essentially computer companies, so Nokia's devices tend to be more centred around actually making calls.
I think this is one of the big red herrings, Nokia's North America numbers have been tiny for about five years now yet globally Nokia has grown very well. If they've managed to get this far without the US, it's hard to see why the US really matters on a global scale.
Conversely, Apple's iPhone has done much better in the US than it has elsewhere.
This could be an example of what some journalists have said about the difference in the US and other phone markets, that Americans seem to want pocket computers with phones attached while others want phones with pocket computers attached. It could be that different markets have such different tastes in phones that no manufacturer or model will ever do well in every country.
I suspect numbered devices will make up an even larger proportion of S60 sales in 2009 thanks to the 5800. Even after the N97 comes out, the 5800 will still be a much cheaper and more mass-market alternative.
Quote:
| Apple need more products, starting with a smaller more portable version of the iPhone. It's enormous. |
This is why Rafe was saying comparisons with Nokia are difficult, because they're really two totally different companies. Nokia's profits and sales come mostly from cheap feature phones, while Apple doesn't even sell cheap feature phones. The average Nokia phone sells for about 70 euros SIM-free, whereas Apple's phones sell SIM-free for about 500 to 600 euros, so they're in totally different parts of the market.
It would be like trying to compare Toyota and Rolls Royce, they both make cars but they're not really going after the same customers.
On the subject of touchphone sizes, one of the things I'm appreciating about the 5800 and S60v5 is that it really can be operated with one hand. I think it's because Nokia is essentially a phone company, while Palm, Apple etc are essentially computer companies, so Nokia's devices tend to be more centred around actually making calls.
Quote:
| No great surprise, considering. The North America numbers have got to be a worry though. Could a bad year see Nokia disappear from the US altogether? |
Conversely, Apple's iPhone has done much better in the US than it has elsewhere.
This could be an example of what some journalists have said about the difference in the US and other phone markets, that Americans seem to want pocket computers with phones attached while others want phones with pocket computers attached. It could be that different markets have such different tastes in phones that no manufacturer or model will ever do well in every country.
viipottaja
Worrying for Nokia is that they are losing market share, when OPK has tried to assure the markets that Nokia can weather the economic downturn better than others due to its wider portfolio of products than competition.
nj7
Their fall was bigger then market fall, because they lost market share... seems natural for me, after 2 years of more of the same without any innovation at all. After N95, only little things, with the same little screens. Maybe this year, with 5800 (not a very user friendly device for now:frown:) and others with bigger screens, they can gain some more market share, but for 2008 itīs a fair result! The market have always reason! ;)
Unregistered
Apple just posted biggest profits EVER. How does this reflect "Market conditions"?
FairMan
Reply to unregistered above.
Lets just say AAS takes an optimistic view while some other news/tech sites report doom and gloom for Nokia. It's probably somewhere in the middle...
I can see Nokia losing a bigger marketshare in 2009. Other manufactures have caught up with bringing out devices which can compete with Nokia in the high end smartphones and will probably surpass them.
HTC, RIM, Apple (iPhone), Palm and Samsung are all making good progress.
Lets just say AAS takes an optimistic view while some other news/tech sites report doom and gloom for Nokia. It's probably somewhere in the middle...
I can see Nokia losing a bigger marketshare in 2009. Other manufactures have caught up with bringing out devices which can compete with Nokia in the high end smartphones and will probably surpass them.
HTC, RIM, Apple (iPhone), Palm and Samsung are all making good progress.
Rafe
We do try and report accurately and I think in any recent set if financial results you can find doom and glooom. In this instance, as I mentioned in the story, Nokia's results were a bit lower than expected, but not by that much.
Apple did to a certain extent buck the trend, but they too had slower growth and forecast a gloomy outlook for 2009. See also the comments above about iPhone sales. I certainly wouldn't post something like 'iPhone sales crash 38% from Q3' because clearly that is a simplification.
I agree with FairMan that I can see Nokia losing market share, but a year is a long time and equally I can see it going the other way too. Incidentally I think the place where Nokia has most problems is the high end of the market (especially with tablet/touch like devices). However that's only part of the market. Devices like the E63 and 5800 have relatively little competition in their segments (look at cost especially).
Anyway all feedback appreciated.
Apple did to a certain extent buck the trend, but they too had slower growth and forecast a gloomy outlook for 2009. See also the comments above about iPhone sales. I certainly wouldn't post something like 'iPhone sales crash 38% from Q3' because clearly that is a simplification.
I agree with FairMan that I can see Nokia losing market share, but a year is a long time and equally I can see it going the other way too. Incidentally I think the place where Nokia has most problems is the high end of the market (especially with tablet/touch like devices). However that's only part of the market. Devices like the E63 and 5800 have relatively little competition in their segments (look at cost especially).
Anyway all feedback appreciated.
svdwal
Quote:
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Originally Posted by Tzer2
Amidst the doom and gloom, interesting to see numbered (i.e. not Nseries or Eseries) devices making up such a large share of S60 sales. Could that be because of the 5800 released in selected markets late last year?
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