Nokia losing the ‘trendy phone’ race

15 Apr 2004

Cooling consumer sentiment towards Nokia mobile phones could cost the Finnish manufacturer its number one position in the USD86 billion global handset market, as users turn towards smaller and sleeker models from rivals such as Sony Ericsson Mobile, Samsung, LG Electronics and Siemens. The Espoo-based company recently reported an unexpected fall in sales in the first quarter, with turnover dipping by 2% to EUR6.6 billion, well below its guidance of 3%-7%. Although it plans to introduce up to 40 new models in 2004 to bolster its position, the market is bracing itself for fresh guidance predicting a 3.7% fall in turnover for Q2 amid concerns that Nokia has been too slow to fill the gaps in its product range. Adding to its woes, the company has seen its rival and number three mobile-phone maker, Samsung, raising its own forecast to more than the 65 million units predicted earlier this year in January. At the same time Samsung has leapfrogged it – in terms of market valuation – with a stock valuation of USD79.6 billion compared with Nokia’s USD77 billion. Nokia is believed to be out of step with consumers’ demand for new camera-enabled phones, which accounted for just 6% of its sales in 2003 compared with 30% for Sony Ericsson and 18% for Samsung. Nokia has also been slow to allow network operators to sell its phones under their own brand name or use custom software, resulting in alienation and a subsequent drop in profits.