Behind the spin: Nokia

THE DILEMMA

by
Last Updated: 31 Aug 2010

Di-di-dee-dee, di-di-dee-dee, di-di-dee-dee-deee. 'Hello? Hello!' shouts Dom Joly into his oversized Nokia. Which other mobile phone-maker can claim to be the inspiration for a comedy sketch? It comes as a surprise to learn that Nokia, the world's largest mobile phone-maker, is having a tricky time. Last month, it issued a profit warning for the second quarter in a row - an unprecedented move for a business feted for its innovation. To pile up the woes, Nokia warned that sales over Christmas, normally its busiest time, will be down on last year. Analysts have predicted that handset sales could slip by as much as 27% in 2009. Nokia shares have fallen by 61% this year.

THE SPIN

We're all in it together, is the line. 'In the last few weeks, the global economic slowdown, combined with unprecedented currency volatility, has resulted in a sharp pull-back in global consumer spending,' said Nokia last month. Chief executive Olli-Pekka Kallasvuo is confident the firm can weather the storm: 'Nokia believes that its scale, leading brand, superior logistics, low cost and broad product portfolio are competitive advantages that will enable us to distinguish ourselves from the competition in a challenging 2009.' So there.

THE STRAIGHT TALK

Market conditions are rough. In saturated markets, cash-strapped consumers are reluctant to upgrade their phones, while in emerging markets it's inflation that holds back demand. But you can't blame the market for everything, say critics. Once ahead of the game, Nokia has been slow to respond to competition from Apple and BlackBerry-owner Research in Motion, and it lagged behind rivals in developing its touch-screen smartphone - the 5800 won't be out till next year. It was only in October that Nokia finally launched its 'Comes with Music' service, giving access to two million-plus tracks.

THE VERDICT

The boom time for mobile makers is over. They've enjoyed enviable growth for 15 years, with only one drop in handset sales, in 2001. Nokia, which started as a paper mill in 1865, has long been admired for its innovation, but its mantle is slipping and the recession brings its biggest challenge yet. Nokia's market share was 38% in the third quarter of 2008, compared with 39% during Q3 last year. Early last month, the company unveiled a range of cheap handsets for the emerging markets, including internet and e-mail-enabled devices for under $100. This should boost its bottom line. But next year is going to be a hard one for Nokia if it is to retain market leadership.

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