The tone had been set for Nokia’s results by those from Motorola and by Samsung’s declining market share, and the reaction to drive up the stock by 6% to a value of $85 billion as Nokia confirmed its performance, was as much a correction for tarring Nokia with the same brush as the second and third largest phone makers in the world, as much as a good mark for a creditable performance.
This set of figures sets Nokia, and fourth placed player Sony Ericsson with similar results, apart in the race for control of the handset, and sweeps aside previous notions of the rich getting richer and the smaller market share players being swept aside. Instead the new game appears to be about margin.
Nokia shipped 25% more devices than the fourth quarter last year growing its market share by two points to 36%, while total revenues were up by 13%. Its gross margin was up to 32.4%, from 30.9% in Q3 2006, and sequentially up over last quarter, with a minor drop in average selling price. While Nokia networks saw a fall away in profits, the overall business drove a profit of €1.273 billion ($1.652 billion) up 19% over the fourth quarter last year.
Sony Ericsson is the only one of the big five to spurn the fast growing, ultra-low cost sector and concentrate on premium models, and it showed that its strategy is working for both profit and volume with a net profit that trebled on shipments up 61%.
By comparison, Motorola had record revenues but a 48% year-on-year nosedive in profits, sparking a major cost cutting exercise in the handset division.
Sony Ericsson increased its share by a single market percentage point, to 9% and while that is well behind Motorola’s 23% and Nokia’s 36%, it is creeping up on Samsung and leaving LG behind.
Sony Ericsson had a net profit of €447 million ($580 million), on unit shipments of 26 million. Revenue rose to €3.78 billion ($4.9 billon) from €2.31 billion a year earlier and its average handset selling price was €146 ($190), up slightly on last year. Over the full year, the company sold 74.8 million handsets, up from 51.2 million in 2005.
Motorola reported sales of $11.8 billion in the fourth quarter, up 17% from $10 billion a year earlier, but profits fell to $624 million from $1.2 billion.
Nokia CEO Olli-Pekka Kallasvuo predicted that next year the industry’s unit volumes will grow by 10% to over 1.05 billion units
The average selling price of Nokia’s mobile devices declined in the fourth quarter 2006 to €89, compared to €93 in the third quarter affected by a lower percentage of sales from higher end products.
The biggest disappointment for Nokia is that its Multimedia business group grew revenues only 6% to $2.13 billion, attributed to the delay in ramp up of new products.