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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]. Nokia is the largest vendor of telephone handsets in the world, with 38% of the global market share for mobile devices[2]. In fiscal year 2010, Nokia recorded revenues of €42.4 billion and net income of €1.9 billion.
With increasing competition chipping away at its profitability, Nokia has made an aggressive push into new initiatives to differentiate itself, if not keep up with, other handset makers. It launched online services and applications market through Ovi applications platform, which has gained traction and has reached 3 million app downloads a day from over 165 million users in 2010[3] .
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 Segments
In FY2010, Nokia reported net sales of €42.4 billion and net income of €1.9 billion. Nokia’s improved net sales and profitability was due to improved economic and financial conditions following the significant deterioration in demand during the recession. Nokia's business is organized in three units: Devices and Services, NAVTEQ, and Nokia Siemens Networks.
Devices and Services (67.2% of net sales in FY2010[4])
This segment develops and produces Nokia's mobile devices. The segment has taken many initiatives to keep pace in the competitive smartphone market. The Ovi Store provides Nokia users access to applications, music, and games. One of Nokia's most popular smartphones, the N8, integrates Symbian 3 OS and offers unique features including a 12 megapixel camera, HD video editing, live Facebook feeds, free turn-by-turn navigation software, fast flip scrolling, and more[5].
NAVTEQ (2.4% of sales in FY2010[4])
NAVTEQ was a Chicago-based web and mapping company acquired by Nokia in 2008. More specifically, it provides digital map information and location-based content and services for navigation and mapping applications.
Nokia Siemens Networks (31.3% of net sales in FY2010[4])
Nokia Siemens Networks (NSN) is a joint venture by Nokia and Siemens AG, combining Nokia's former Networks business with Siemens' carrier-related operations for telephony networks.It sells telecommunication infrastructure equipment to mobile phone operators, and holds roughly 21% of the $82 billion global telecommunications equipment market, second only to Ericsson[6].
NSN announced that it would purchase Motorola's telecom network equipment business for $1.2 billion, strengthening its positioning in North America and resulting in WiMAX market leadership. The segment makes set-top boxes, cellular infrastructure systems, wireless broadband systems, analog and digital two-way radios, and voice and data communication products for cable and phone companies. The deal also grants the joint venture relationships to more than 50 wireless operators, as well as access to 30 active CDMA networks in 22 countries and 80 active GSM networks in 66 countries[7][8].
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
Nokia and Siemens AG participates in a joint venture whereby the two merged business operations in mobile communications and telecommunications. The joint venture considerably enlarged Nokia's operations, especially in cell phones, leading to further economies of scale.
- OZ Communications, Inc.
In November 2008, Nokia acquired OZ Communications Inc, which provides mobile phones with the technology for mobile messaging and emailing[9].
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. While many other handset makers rely on "one-size-fits-all" product line, Nokia's ability to cater to consumers across income segments is part of its value proposition. Emerging markets are characterized by a large volume of customers purchasing their first handset, while repurchases and upgrades are common in the developed market. In fact, China and India represent Nokia's largest markets. Increasingly, mobile devices are being used for money transfers in developing areas that do not have established banking systems[10]. Nokia's release of Nokia Money, a new mobile financial service giving mobile device users access to basic financial services. Nokia expects the service to operate alongside Obopay, an Indian developer of mobile payment solutions and Nokia investee[11].
Competition
Nokia occupies a dominant position in the global handset market, contributing over 38% of the global market's wireless handsets. Samsung and LG Electronics continue to gain ground, representing about 21% and 11% of the 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, 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.
References
- ↑ "Story of Nokia," About Nokia-Company Website
- ↑ "Nokia Q4 2010 net sales EUR 12.7 billion," Nokia Investor Relations, 01/27/11
- ↑ "Nokia: Three Million Apps Downloaded Daily, 165 Million Ovi Users," Robin Wauters, TechCrunch, November 18, 2010
- ↑ 4.0 4.1 4.2
- ↑ "Could a Hot New Smartphone Lift Nokia’s Stock?," Trefis Investment Research, 09/14/2010
- ↑ "Ericsson market share jumps in Q4: Dell'Oro," Reuters, 02/16/2010
- ↑ "Nokia Siemens buys Motorola network ops for $1.2 billion," Reuters, 07/19/2010
- ↑ "Nokia Siemens snags Motorola’s wireless equipment unit for $1.2B," MobileBeat, 07/19/2010
- ↑ Nokia completes OZ Communications acquisition, November 4, 2008
- ↑ "World Poor Spell $7.9 Billion in Mobile Cash for Vodafone, MTN" Bloomberg, 06/20/2009
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