IDC comment on Q1 2010 Nokia results

Nokia released its first quarter 2010 results yesterday. Mobile phone shipments went up 16% year on year to 107.8 million units, but declined 15% sequentially. Smartphone volumes and mobile computers went up 57% to 21.5 million units from 13.7 million units in 1Q2009 and 3% up sequentially. Traditional phones went up 6.4% to 85.3 million units. Devices and services net sales increased 8% from previous year. The average selling price (ASP) declined 7% to €62 from €66 in the previous quarter.

During the quarter Nokia has benefited from an improvement to the economic environment and sales results can be considered good, but below expectations. Despite Nokia’s positive growth we need to bear in mind that last year’s first quarter was the worst quarter in the history of the mobile phone industry with the strongest decline ever. Therefore Nokia’s results are aligned with the expected overall market growth. However IDC estimates over performances from its direct competitors, which weakens Nokia’s market position. Emerging markets continue to play an important role on Nokia’s growth, but it is in the mature markets that Nokia continues to struggle against Samsung, RIM and Apple’s successful devices, with price cutting being the main strategy to keep sales up.

Particularly important this quarter was the rise in smartphone volumes with shipments increasing over 50% from previous year, which shows good improvement in terms of product-mix. The release of the turn by turn navigation for free had a positive impact as well.

Although Nokia still faces a challenge in terms of user experience when it comes to their smartphones and a new version of Symbian^3 is expected to be released during the year to overcome the problem. Nokia has traditionally taken some time to react to new trends. It happened with the clamshell devices in the past and it has been happening again with the touchscreen devices. This impacts both traditional phones and smartphones segments, but it is the former segment that will be the more affected if the new version of Symbian is launched later than expected.

Despite the challenges and the strong competition, Nokia showed again this quarter its strengths and capability to improve results with higher volumes, higher operating profits, higher operating margins and higher EPS being delivered from a year ago.

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