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Nokia Q1 Market Share Falls to 29%

Posted on: Thursday, 29 April 2004, 06:00 CDT

Nokia Oyj's market share dropped to 29 per cent in the first quarter, the lowest in at least three years, as competitors such as Siemens AG shipped more attractive models, a researcher said.

The market share of Nokia, the world's biggest mobile-phone maker, fell from 35 per cent in the same quarter a year ago, according to a study by Strategy Analytics, a Boston-based researcher. Nokia's five main rivals increased their market shares. Espoo, Finland-based Nokia has said its market share was 35 per cent in the first three months of this year.

The Finnish company's market share is falling as models by Siemens, Samsung Electronics Co and LG Electronics Inc with cameras and colour screens gain in popularity. Nokia, which has a long-term target of 40 per cent market share, has in the second quarter introduced three cheaper models to regain clients.

"Nokia is being challenged from all sides, in cheaper and in more expensive phones," said Marko Alaraatikka, who helps manage 3.6 billion euros (US$4.40 billion) at Evli Investment Management in Helsinki.

"They need to get new competitive models to the market fast."

This is the lowest Nokia's market share has been since Strategy Analytics started compiling mobile-phone market share data in 2001.

Shares of Nokia fell as much as 50 cents (60 US cents), or 4 per cent, to 11.83 euros (US$14.43) and traded at 11.88 euros (US$14.50) as of 12:04 am yesterday in Helsinki. Siemens dropped 0.8 per cent to 61.18 euros (US$74.64) in Frankfurt and Samsung slumped 4.3 per cent to 576,000 won (US$499) in Seoul.

Nokia has been slower than rivals such as Sony Ericsson Mobile Communications Ltd in offering so-called clamshell phones, which flip open to reveal a larger screen. Nokia this month said it has been too slow to fill gaps in its product range and that it'll cut phone prices at the expense of profit margins to regain market share.

"The question is, will Nokia's strategy to sell cheaper phones help it solve the situation?" Evli's Alaraatikka said. "I think it will improve its position with the new models."

Nokia has said it would speed up introductions of new phones in the last three quarters of the year, bringing the number to a record- tying 40 in 2004. Last week it unveiled the 6610i, which will sell for 250 euros (US$296), half the price its predecessor sold, even though it has new features such as an in-built camera.

Nokia's price cuts are "only a short-term solution," Strategy Analytics said in a statement. Its "design portfolio needs to be updated to allow greater product flexibility that will divert share losses over the long term."

Nokia's stumble comes as handset demand is increasing. Sales by all makers may rise 12 per cent to 580 million phones in 2004 as operators add subscribers in countries such as India, and as US and European consumers change to more advanced models, according to researcher Gartner Inc.

Strategy Analytics reiterated it expects 2004 global handset sales of 586 million. That's after first-quarter shipments surged 40 per cent to 153.1 million phones. According to Nokia, 128 million phones were sold worldwide in the first quarter.

No Nokia officials were immediately available to comment.

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