Nokia Rising: Ericsson Falling
With the first-quarter results on the table, analysts are
having a heyday comparing results and predicting the future
direction of the first and third placed mobile handset
manufacturers, Nokia and Ericsson.
Present standings: According to Gartner Dataquest, Nokia held a
31 percent stake of the phone market during the fourth quarter of
2000, while Motorola came in second at 14.6 percent, and Ericsson
had a 10 percent share.
Gains and Losses:
- Nokia reported that net sales from January to March increased by
22 percent over the same period last year to $7-billion, and net
profit was up 15 percent at $880-million.
- The Swedish company reported a pre-tax loss of 4.9 billion
crowns (336 million pounds), for the first quarter of 2001,
against a market expectation of 5.05 billion.
Units Sold:
- The Finnish company reported selling 128 million handsets, 64
percent more than in 1999. According to the company, it is on
track to meet its targets, with a 20 percent jump in sales of
handsets and 35 percent increase in network products.
- In the first three months, Ericsson sold only 6 million
handsets, marking a 41 percent decline.
Future Outlook:
- Despite the current economic uncertainty, Nokia believes that
many operators will not back away from commercial launches of 3G
services in 2002 and thus is forecasting sales growth of 25-35
percent in 2002.
- For the second quarter 2001, Ericsson foresees a lower growth
rate in systems sales and lower phone sales compared with the
second quarter of last year.
Ericsson sees a continuing decline in handset sales and in
network infrastructure. According to the company’s chief executive
Kurt Hellstrom, "We don’t see any signs of recovery in the
market." He added that the company will continue to see losses
in the second quarter.
With only 10 percent of the market share, and dropping, many
analysts think Ericsson should get out of the mobile handset market
entirely. That said, Ericsson has made moves in that direction.
Earlier this year, it announced a deal to outsource its mobile phone
production to Singapore’s Flextronics and is showing signs of
revenue relief. Just this week, the company announced the
establishment of a joint venture
company with Sony to produce a new brand of mobile phones. Whether
this will be enough to turn the fortunes of the company around, only
time will tell.
For more information:
http://www.nokia
http://www.ericsson.com
Mobileinfo Comments and Advisory: It is well-known fact
that making money out of handset manufacturing and sale by n isolation is
a difficult business. Both Motorola and Ericsson have failed to do it.
Qualcomm tried but decided to license its technology to Samsung. Out of
the big league, only Nokia has been successful. While the design of the
smart handsets does require deeper R&D, manufacturing requires nimble
organization of Japanese, Korean and Taiwanese companies. That shows
aggressive, and focused management of Nokia as against being involved in
too many business segments of cellular market. We think, Ericsson-Sony
alliance is a good one. It will bring together manufacturing prowess
of Sony with engineering talent of Ericsson.
