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WIKI ANALYSIS
This article refers to the phone manufacturer. For the currency Norwegian krone (NOK), see Norwegian Krone (NOK).
Nokia is a designer, manufacturer, and service provider of mobile devices, creating the world's first handheld mobile phone in 1987, as well as an active player in the internet and communication industries[1]. In 3Q09, Nokia stood as the largest vendor of telephone handsets in the world, with 38% of the global market share for mobile devices and €9.8 billion in quarterly net sales[2][3]. Since the 1970's, the company has pioneered much of the technology used in handsets throughout the world, especially the Global System for Mobile Communications[4].
As of late, Nokia has made an aggressive push into the online services and applications market. It has invested heavily in its Ovi applications platform, an initiative to draw users away from the established application platforms of Apple and Google. In July 2009 Nokia acquired Cellity, a mobile social networking service that allows users to store their contacts online and access them through their mobile phones[5]. In September 2009, Nokia then acquired privately-held international mobile service provider Dopplr to further penetrate the mobile social networking space[6].
Company Overview
Nokia began as a Finnish pulp mill in 1865 and has since undergone numerous transformations, becoming Finland's largest company and the largest producer of mobile phones in the world. Nokia began producing telecommunications equipment in the 1970's, and since the early 1980's on mobile phones have comprised the core of its business.
Business and Financial Metrics
In 3Q09, Nokia reported net sales of €9.8 billion, a 20% YoY decrease from 3Q08's €12.2 billion[2]. This could be attributed to constrained component shortages from across Nokia's handset portfolio, as well the global economic downturn, which resulted in poor performances from its two largest segments, Devices & Services and Nokia Siemens Network. Despite a 20% YoY decrease, Devices & Services witnessed a 5% sequential increase as a result of increased demand for mobile devices, elevating total mobile device volumes to 108.5 million units . Nokia estimated its global market share after 3Q09 to be 38%, the same as 3Q08 and 2Q09[2].
| Annual Financial Data, in millions[7] | FY2005 | FY2006 | FY2007 | FY2008 | FY2009 |
| Revenue | $42,938.1 | $51,493.8 | $69,786.9 | $74,399.3 | $ |
| Gross Profit | $15,047.7 | $16,753.4 | $23,651.4 | $25,489.5 | $ |
| Operating Income | $5,825.5 | $6,872.4 | $10,913.6 | $7,286.3 | $ |
| Net Income | $4,541.6 | $5,392.2 | $9,847.5 | $5,851.1 | $ |
Business Segments
Devices and Services (70% of sales in 3Q09[2])
- This segment develops and produces Nokia's mobile devices. In FY2008, this segment completed its $410 purchase of Symbian Limited, a smartphone operating system developer, in an effort to compete against other mobile operating systems such as Google's Android[8][9]. In February 2009 it then launched the Ovi Store, providing Nokia users access to applications, music, and games in fashion similar to that of Apple's Apps Store. An internal problem resulting in component shortages across its portfolio has resulted in recent sequential decreases in handset shipment; in 3Q09, Nokia shipped 4.5 million Nokia Nseries and 4.4 million Nokia Eseries devices, down from the combined 9.3 million Nseries and Eseries devices shipped in 2Q09[2].
NAVTEQ (2% of sales in 3Q09[2])
NAVTEQ was a Chicago-based web and mapping company acquired by Nokia in FY2008. More specifically, it provides digital map information and location-based content and services for navigation and mapping applications.
Nokia Siemens Network (28% of sales in 3Q09[2])
Nokia Siemens Networks is a joint venture by Nokia and Siemens, combining Nokia's former Networks business with Siemens' carrier-related operations for telephony networks.
Trends and Forces
Acquisitions and Joint Ventures
NAVTEQ, one of the two primary global electronic mapping companies, was acquired by Nokia for $8.1 billion. NAVTEQ generates income by licensing its databases to GPS in-car navigation system companies and other technology companies such as Google, Microsoft, and Yahoo! . Through this acquisition, Nokia can integrate location-based programs and products into their mobile technology. By introducing GPS information through primary service rather than through third party companies, Nokia can effectively lower the costs of providing GPS navigational equipment to the end-user, establishing itself as leader in the market.
- Siemens AG Joint Venture
In 2006, Nokia and Siemens AG announced a joint venture whereby the two would merge business operations in mobile communications and telecommunications. The JV should generate about €15.8 billion in revenue per year. The joint venture should considerably enlarge Nokia's operations, especially in cell phones, and lead to further economies of scale. However, it requires Nokia to take on Siemens' business in telecommunications, an area in which Nokia has had little experience or business.
- OZ Communications, Inc.
In November 2008, Nokia acquired OZ Communications Inc, which provides mobile phones with the technology for mobile messaging and emailing[10].
Emerging and Developed Markets
While Nokia's overall sales are roughly even between the emerging and developed markets, the global market for cell phones is not homogeneous. Emerging markets are characterized by a large volume of customers purchasing their first handset, while repurchases and upgrades are common in the developed market. Mobile phone adoption rates in China, India and part of Africa have been in the mid to high double digits in recent years, and are expected to remain robust in the near future. Increasingly, mobile devices are being used for money transfers in developing areas that do not have established banking systems[11]. In 3Q09, Nokia announced the release of Nokia Money, a new mobile financial service giving mobile device users access to basic financial services. Nokia expects the service to be available early in 2010 in selected markets and to operate alongside Obopay, an Indian developer of mobile payment solutions and Nokia investee[2].
| Market Region | Mobile Device Volume (million units, 3Q09)[2] | Percent of Total Volume |
| Europe | 27.1 | 25.0% |
| Middle East & Africa | 19.6 | 18.1% |
| Greater China | 18.5 | 17.1% |
| Asia-Pacific | 30.5 | 28.1% |
| North America | 3.1 | 2.9% |
| Latin America | 9.7 | 8.9% |
Legal Issues
Nokia's dispute with Qualcomm highlights the growing legal complexities in the industry, which fall into two categories:
- Patents and technology: Much of the technology in mobile phones is developed imitatively and widely shared, so that intellectual ownership is often unclear, and thus there are many opportunities for copyright infringement. In May 2007, Nokia was sued in the United States by an Australian company alleging Nokia had used its patents without notice.
- Health risk and regulation: Some consumer advocates allege that cell phones can cause cancer. Although unfounded, this notion could lead to lawsuits against Nokia and other handset producers. Moreover, in the United States, many states have prohibited the use of cell phones while driving.
Competition
Nokia occupies a dominant position in the global handset market, contributing over 37% of the global market's wireless handsets. In 3Q09, Nokia shipped more than 108 million handsets, a 5% sequential increase. Samsung and LG Electronics continue to gain ground, representing 20.7% and 10.9% of the 3Q09 mobile handset market. These three companies have gained market share at the expense of Sony-Ericsson and Motorola, who have suffered as part of the secular consumer trend towards more advanced mobile technology[12]..
Aside from the competitors mentioned above, Nokia faces fierce competition from smartphone makers such as Apple and Research in Motion, who are quickly snapping up industry profits and market share with their offerings, the iPhone and Blackberry. While Nokia remains the dominant player, the recent developments in the industry show how quickly fortunes can change in such a competitive and innovative market as the handheld market. Nokia must continue to roll out new technologically advanced products which appeal to the mass consumer market to maintain their market position.
| Global Handset Shipments (Millions of Units)[12] | 3Q08 | 2Q09 | 3Q09 | Q/Q Change |
| Nokia | 117.8 | 103.2 | 108.5 | 5.1% |
| Samsung | 51.8 | 52.3 | 60.2 | 15.1% |
| LG | 23.0 | 29.8 | 31.6 | 6.0% |
| Sony-Ericsson | 25.7 | 13.8 | 14.1 | 2.2% |
| Motorola | 25.4 | 14.8 | 13.6 | -8.1% |
| Others | 60.1 | 58.9 | 62.5 | 6.1% |
| Total | 303.8 | 272.8 | 290.5 | 6.5% |
| Global Handset Vendor Market Share[13] % | 3Q08 | 2Q09 | 3Q09 | Q/Q Change |
| Nokia | 38.8 | 37.8 | 37.3 | -1.3% |
| Samsung | 17.1 | 19.2 | 20.7 | 7.8% |
| LG | 7.6 | 10.9 | 10.9 | 0.0% |
| Sony-Ericsson | 8.5 | 5.1 | 4.9 | -3.9% |
| Motorola | 8.4 | 5.4 | 4.7 | -13.0% |
| Others | 19.8 | 21.6 | 21.5 | -0.5% |
References
- ↑ You must specify title = and url = when using {{cite web}}..
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 "Nokia Q3 2009 net sales EUR 9.8 billion, non-IFRS EPS EUR 0.17," Nokia Corporation Investor Relations, 10/15/09
- ↑ You must specify title = and url = when using {{cite web}}. (December 31, 2008).
- ↑ You must specify title = and url = when using {{cite web}}. (March 31, 2009).
- ↑ "Nokia Buys Assets of Social Startup Cellity" Computerworld 7/25/2009
- ↑ "Nokia buys social travel firm Dopplr", ZD Net Asia, 9/29/2009
- ↑ "Nokia," Morningstar Investment Research
- ↑ "Company Overview" Reuters
- ↑ "Nokia acquires Symbian LTD; Symbian Foundation Closer to Launch" Mobile Burn, December 2, 2008
- ↑ Nokia completes OZ Communications acquisition, November 4, 2008
- ↑ Marcel van de Hoef and Sarah McGregor (July 20, 2009). World Poor Spell $7.9 Billion in Mobile Cash for Vodafone, MTN. Bloomberg.
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