Nokia shamed by Sony Ericsson in battle for margins

Nokia (NYSE: NOK)’s CEO Olli-Pekka Kallasvuo said the strong growth in entry level phones coupled with a lower percentage of sales in higher-end products impacted Nokia’s margins. Taking a longer term view, this should be setting the Finnish giant up for strong market share in key markets like India, where rapid economic growth in many regions should lead in the five-year time span to strong upgrade demand for more expensive phones. But the short-term impact on margins in Nokia’s largest business unit, Mobile Phones, worried shareholders, even while it was balanced somewhat by strong performance in Nokia’s two advanced device divisions which are the focus of many of the company’s growth plans – the Multimedia unit, which sells advanced media devices, saw sales rise 45% year-on-year to €2.09bn; while Enterprise Solutions sales advanced 27% to €257m. Sales at the Mobile Phones unit rose 14% to €5.95bn.

This shows that Nokia is weakest in the mid-range sector, a fact that Kallasvuo acknowledged in an analyst call. "The product portfolio needs continued improvements. We’re making those improvements," he said.

One of Nokia’s key aims in the coming quarters is to wrest back the US number one spot from Motorola (NYSE: MOT), and it will have taken some hope from a patchy performance from its main rival. Motorola reported a 45% decline in profit amid disappointing handset sales, which fell 1.3 million units short of its goal of shipping 55 million units in the quarter, and will need to act quickly to see off an expected major challenge in Q4 from Nokia’s revamped line-up, especially its N Series of music and media phones.

Source: Arc Chart

Here’s hoping that Nokia doesn’t turn into the Dell of mobile phones. You want to know why Nokia isn’t number 1 in America? Huge lack of advertising. I see a RAZR and Motorola Q commercial every single day. I honestly don’t even remember seeing a Nokia commercial on television, but then again I don’t watch that much, and when I do people usually snip the commercials out.