In grim 2009 cellphone market, Nokia seen faring best

HELSINKI - Top cellphone maker Nokia’s 2009 profits are seen falling by around a quarter as the mobile phone market shrinks at an unprecedented pace, a Reuters poll showed.

By (Reuters)

Published: Sun 18 Jan 2009, 9:30 AM

Last updated: Thu 2 Apr 2015, 8:56 AM

With plunging profits and an expected 10 percent fall in 2009 sales, Nokia is still seen doing better than its rivals, who are set to suffer more from the downturn in consumer spending.

Analysts have further cut their market estimates for 2009, with the average forecast now for a 7.9 percent fall in market volumes.

In a similar poll in mid-December analysts on average had forecast a 6.6 percent fall, while Nokia itself said on December 4 its best guess was for market volumes to fall 5 percent or more.

Consumer electronics demand slumped in the key Christmas sales season, triggering the loss of 16,000 jobs at Sony Corp and profit warnings from a number of technology industry heavyweights, including Intel Corp.

Smarter, cheaper

In a shrinking market, handset makers are battling for the only remaining growth business—smartphones—where they face newer rivals such as Apple, with its iPhone, Blackberry maker RIM and Google.

With tech-savvy consumers more reluctant than others to cut their spending, and many buyers of the latest top-end phones relying on operator subsidies, analysts say smartphones should weather the downturn best and continue to grow.

But with all vendors battling for a bigger share of the smartphone business, prices for more advanced phones are also set to fall fast, analysts said.

“Smartphones will be a great segment in a declining market. The mid-tier is already bearing the brunt of the slowdown,” said CCS Insight analyst Geoff Blaber.

Sony Ericsson and Korean vendors Samsung Electronics and LG Electronics have relied most on the success of their mid-range portfolio. Samsung and LG are both expected to struggle as they will have to boost their offering of cheaper phones.

“The outlook for 2009 is anything but rosy,” said Kim Ik-sang, an analyst at HI Investment and Securities. “These companies have to move product, but it will be at the expense of their margin.”

Sony Ericsson Chief Executive Hideki Komiyama said last week the firm was very carefully looking through its product portfolio and would focus on more expensive, higher-margin products.

Sony Ericsson will be the first handset maker to report fourth-quarter profits, on January 16, with Nokia and LG set to report on January 22. Samsung and Motorola have yet to announce their reporting dates.

NOKIA

Nokia is expected to end 2009 stronger than before in terms of market share, raising it to 39.2 percent from 39 percent last year.

“Some companies are taking resources away from the low end, leaving the market wide open for Nokia to take share,” said analyst Pablo Perez-Fernandez from Global Crown Capital.

The Finnish group is expected to report fourth-quarter earnings per share of 0.24 euros, roughly half of its 0.47 euros a year ago, according to the average forecast in a Reuters poll of analysts.

Analysts expect Nokia’s underlying operating profit margins at its core Devices & Services unit to fall to 15.8 percent in the quarter, still superior to rivals; margins at Samsung and LG were 7.3 percent and 11.5 percent in the third quarter, while Motorola and Sony Ericsson made losses.

For 2009 the average forecast is for Nokia’s fully diluted reported EPS to fall to 0.87 euros from 1.14 euros expected last year, with underlying operating profit down 27 percent year-on-year to 5.46 billion euros.