Friday, October 21, 2005

Fri - Nokia sees solid sales growth & lifts forecast

Nokia's 3rd quarter results beat expectations. They also lifted their forecast of worldwide mobile phone sales to 780M. Last month the mobile industry passed a major milestone with more than 2bn subscribers.

None the less their shares fell due to stagnant market share which seems stuck at 33%. With stronger competition from a resurgant Motorola and the Asian trio of Samsung, LG and BenQSiemens snapping at their heels it may be hard for Nokia to increase market share going forwards.

The results showed an average handset margin of 16% compared with 13% in the last quarter, which was good given the pummelling that average selling prices have been taking. Investors seem particularly concerned about this trend. But, Nokia has a whole raft of advanced multimedia handsets coming out that could address some of these issues. It will be interesting to see the uptake of such advanced 3G devices this Xmas, the key buying season.

Apparently a lot of Nokia's strentgh in the last quarter came from solid progress in Asian markets and China in particular.

The big questions for investors is is the mobile handset market starting to behave like all mature consumer electronics industries where price erosion and commoditisation become dominant themes. Probably. Scale is therefore everything and lower margins here to stay.

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