Nokia posts negative quarter results: Can it maintain smartphone leadership?

Nokia registered an operating loss in its third quarter 2009 results, compared with a profit in the same period last year. Nokia shipped 108.5 million units in the quarter, down 8% from the third quarter of 2008, but up 5% from the second quarter of 2009. Total smartphone shipments rose 6% to 16.4 million units from the 15.5 million shipped in 3Q08, but fell 3% compared with second quarter 2009.

When compared with the first and second quarters this year, year on year growth is showing some improvement, stated IDC, a research comapny. During this quarter, Nokia’s traditional mobile phone shipments declined 10% year on year, which was better than the 19% year on year decline in 2Q09, and significantly better than the 21% year on year decline in 1Q09.

Smartphone shipments increased 6% in 3Q09, which is an improvement on the 7% year on year decline during the first quarter this year. Overall, Nokia’s shipments declined 8% year on year, slightly better than the 15% decline in 2Q09 and the 19% fall in 1Q09.

IDC stated that while these results show a steady improvement throughout the year, they are far from good, and are evidence of the challenging period that Nokia is experiencing. Samsung, Apple, and Research in Motion are doing significantly better than Nokia, and better than the market in general. Apple and Research in Motion are expected to take a significant part of Nokia’s smartphone market share in 3Q09, and Samsung and LG are challenging Nokia in the traditional mobile phone segment, where Samsung overtook it last quarter in Western Europe and is expected to maintain its leader position in 3Q09.

During the earnings call, Nokia President and CEO Olli-Pekka recognized the need for more and better operating systems for smartphones, and announced the launch of a new OS called Maemo. User experience is a key success factor in terms of smartphones, and Nokia needs to notably improve the Symbian user interface to regain market share, noted IDC.

Meanwhile, the partnership with Microsoft involving Microsoft Office and Nokia’s Booklet may be the first result of a much bigger partnership involving Windows Mobile and Nokia devices, which could be beneficial for Nokia in the future, IDC said.

Looking ahead, IDC believes that Nokia will continue to improve shipments in the coming quarters, with new device launches — in particular the Nokia 5230 and new low-end phones — along with the continued success of Nokia music phones. Its strengths in terms of supply chain and the strong partnerships with operators will be important to make these products successful during the Christmas season.

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