Nokia Cuts Price to Get Market Back

Nokia Oyj, whose mobile-phone market share slid to a five-year low earlier this year, gained ground in the third quarter after the Finnish company cut prices and introduced cheaper models.

The world’s largest handset maker’s market share grew to 31 per cent in the third quarter from 29 per cent in the previous three months, said Strategy Analytics, a Boston-based researcher. Samsung Electronics Co, the No 3, closed in on second-placed Motorola Inc, and LG Electronics Inc passed Sony Ericsson Mobile Communications Ltd to become No 5.

Espoo, Finland-based Nokia slashed prices and sacrificed some of its profitability to increase volumes, helping lift its market share in Western Europe and Asia. Global handset sales by all makers may surge 30 per cent this year, before cooling in 2005, Strategy Analytics said.

“Nokia rebounded above the psychologically important 30 per cent market share level,” said Neil Mawston, an analyst at Strategy Analytics. Price cuts reduced profit margins, though helped volume growth, he said.

Nokia, which has a long-term target of 40 per cent market share, this month said third-quarter profit fell 20 per cent to 660 million euros (US$842 million) and predicted earnings will drop for a second straight quarter as the company boosts spending on marketing.

Clamshells, cameras

Nokia was slower than rivals such as Sony Ericsson, Samsung and LG in offering so-called clamshell phones, which flip open to reveal a larger screen and usually include a camera. After its market share started sliding earlier this year, Nokia cut prices, focused on fewer products than it earlier planned and also introduced new clamshell models.

Shares of Nokia have fallen 16 per cent this year. Motorola has gained 21.5 per cent and LG has advanced 3.1 per cent, while Samsung has dropped 5.1 per cent.

Three out of the top six mobile-phone makers increased their shipments by more than 50 per cent in the third quarter from a year earlier, with Samsung and LG increasing their market shares the most.

Samsung “maintained pressure on Motorola,” Mawston said. Motorola’s lead over Samsung is “indiscernible.”