Nokia's shock

17 Nov 2008

A seminal moment: handset sales look set to decline for the first time in the history of the mobile industry.

Mobile phone leader Nokia, with approximately 40% market share, cut its forecast for Q4 and said it expects full-year sales to fall in 2009.

In its second profit warning in as many quarters, Nokia said the global economic slowdown and "unprecedented currency volatility" had caused a "sharp pullback" in consumer spending.

Nokia says it expects to sell 330 million devices for the quarter, down 6% on forecast. It anticipates full year shipments of 1.24 billion, as against its previous guidance of 1.26 billion. It sold 1.14 billion phones in 2007.

Market share will likely hold in Q4, but profitability will be affected, Nokia said.

With its strong brand and unequalled economies of scale, Nokia is better-placed than any handset firm to survive the recession and perhaps even improve market share.

But the downturn will severely challenge its rivals. Motorola, who has just been pipped by Samsung as no.1 in the US market, has not made a profit for two years. In its recent guidance it delayed its recovery until at least 2010. Sony Ericsson, also in the red and also lacking a smash hit new device, could be in the same position.

The recession should force a shakeup in China's over-supplied handset sector, with 50-plus manufacturers. The interesting question will be which of the bigger ones - such as ZTE, TCL and Huawei - will be allowed to acquire their assets.

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