Thursday, April 21, 2011

Nokia (NOK) Results Beat Expectations, But Loses Market Share

For the first time in over 10 years, the global market share of Nokia (NYSE:NOK) dropped below 30 percent, even as the company beat analysts' expectations for the latest quarter.

Net profit for the quarter fell from euro5 million to euro344 million ($499 million) from the same quarter last year. Revenue grew 9 percent to euro10.40 billion.

Revenue and earnings beat estimates, giving the company shares a boost in earlier trading, although it has pulled back on weaker guidance associated with the transformation to Windows Phone 7 (NASDAQ:MSFT) and effects of the earthquake in Japan, which will impact the performance of the company in the current quarter because of parts shortages.

Nokia sold 24 million smartphones in the quarter, a 13 percent increase over 2010, but its market share for the devices fell to 24 percent from 39 percent last year, according to Strategy Analytics market research.

Nokia sold 108.5 million devices in the first quarter, above the Strategy Analytics estimate of 105 million, and the average selling price of its handsets continued its growth to euro65, from euro62 a year earlier, indicating it is selling more top, expensive models.

"Volumes were better than expected and pricing was stronger," said Neil Mawston, an analyst at Strategy Analytics . "But it's clear that competition is still tough."

This is actually better news than most realize, as the market is growing for smartphones and basic mobile phones, and even if Nokia drops in market share, it is gaining by growing along with the overall market.

So to lose market share isn't that relevant for them, it's how they're growing along with the expanding market.

Competition will continue to be tough from Google Android (NASDAQ:GOOG), Apple iPhone's (NASDAQ:AAPL) and Blackberry's (NASDAQ:RIMM). But if Nokia responds as they should, it'll make them a better company and competitor over the long haul.

If Nokia can keep up this type of performance until they release significant volumes of smartphones based on Windows Phone 7, and those phones sell well, the company will surprise a lot of people.

Nokia was trading at $8.60, gaining $0.01, or 0.06 percent, as of 1:41 PM EDT.

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