Must all things pass?

Nokia’s first-quarter performance reveals that it is suffering in the smartphone space, which is nothing new. Perhaps more worryingly for the firm, it now faces the grim reality that its dominance in the feature phone space is also in serious peril.

The Finnish mobile phone veteran was always taking a gamble by teaming up with Microsoft to develop its own range of Windows Phone smartphones—WIndows Phone was an operating system that had seen limited success in the smartphone space. Looking at the firm’s performance for 1Q12, popular opinion seems to be that the gamble hasn’t paid off.

In a disappointing quarter It shipped just 12 million smartphones; less than half of the 24.2 million it shipped in 1Q11. Just two million of that number were Lumia handsets. In the same quarter, Samsung managed to shift five million of its Android-based Note; a device form factor for which there is little or no established demand.

The average selling price to operators of Nokia’s smartphones also dropped year-on-year for the same quarter – from €147 to €142. This is not encouraging form.

In happier times Nokia might have the breathing space to make serious progress in the high end. The Lumia phones are great products, for my money, and operators are very keen to see a third OS ecosystem established and successful. The firm’s exclusive position in the Windows Phone space—and this is an OS so much improved as to be almost unrecognisable from previous iterations—could be a great opportunity.

But that would require a solid performance at the volume end of the market to keep Nokia ticking over while it perfected the smarpthone play. Nokia has a strong history in feature phones and boasts a great presence in developing markets where such handsets are still popular. However, that power is beginning to wane.

Shipments of Nokia’s feature phones dropped significantly for the firm this quarter, from 84.2 million units in 1Q11 to 71 million in 1Q12. The firm has been dealt a massive blow in China where sales have plummeted and Asian manufacturers are taking volume from the Finnish vendor in all markets. This has forced Nokia to lower the average selling price of its feature phones to operators to reflect this – from €42 in 1Q11 to €32.4 in 1Q12.

To address either the top or bottom end of the market is difficult enough. To address both simultaneously is a task that might well be beyond the new management team that Stephen Elop has assembled. There aren’t many people out there in the industry that want to see Nokia fall any further, but success is not built on widespread well wishing. It may simply be that Nokia’s time has come.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.