Nokia practiced a clever bit of sleight of hand yesterday when it seduced the market into nodding approvingly at its hand-tinted rosy picture of the future whilst it tried to hide from view the harsh reality - which is that the Finnish mobile phone company actually posted its first quarterly loss in ten years. Martyn Warwick reports.
Not that you'd have noticed though, so successful was Nokia's team of spin doctors in drawing attention away from the real story. As illusionists have known for thousands of years, and as punters have found to their cost ever since, the quickness of the hand deceives the eye.
According to Nokia's press release, the company is so bullish about its prospects that it has upped its earlier doom-laden full-year forecast for the global mobile market "after seeing stronger demand in the third quarter."
Earlier this year Nokia rooted through the entrails of a troll and declared that sales of mobile handsets worldwide would decline by at least 10 per cent over the course of 2009. However, even as the autumnal Nordic gloom descends on Helsinki, Nokia claims that the green shoots of recovery are so evident that it has revised its prognostications and now believes that the decline will now be "no more than seven per cent". Resounding cheers all round. Mine's a vodka.
Nokia now says global handset sales will be at about the 1.12 billion units mark. The company bases its revised estimate on "improved demand in several markets that resulted in sales in Q3 showing a seven per cent improvement over Q2. The company says it "expects further sequential growth in Q4."
So, everything in the garden's lovely then? Err, no, afraid not.
The truth of the matter is that between July and September this year Nokia's handset sales fell by more than 19.9 per cent resulting in the company posting a net loss of €913 million.
To put things into perspective, Nokia made a profit of €1.1 billion in the same quarter in 2008.
OK, so the loss does include a one-off writedown of €918 million in the value of Nokia Siemens Networks, but a loss is a loss and this is a case of reality biting Nokia where it hurts - on the bottom line.
Nokia's CEO, Olli-Pekka Kallasvuo claims that sales "were constrained by component shortages" but analysts say the company has taken a hit because others (including Apple, (natch), and Palm and HTC) have been quicker off the mark in developing and popularising smartphones.
Although the drop is sales has been dramatic - or even traumatic - for a company so used to being at the very top of the greasy pole, Nokia insists it is maintaining its overall share of the global handset market at 38 per cent. Not only that but Nokia also managed to increase its market share in Africa, Europe, Latin America and the Middle East, although "this was offset by lower market share in Greater China, Asia-Pacific and North America." The average selling price of a Nokia phone was the same over Q3 as it a was in Q2 - €62 per handset.
It's in the smartphone arena that Nokia is suffering. In Q3 the company shifted 16.4 million devices (including 4.5 million Nseries and 4.4 million Eseries) as compared to to 15.5 million in the same period last year and the 16.9 million achieved in Q2.
Total shipment of smartphones by all the world's manufacturers for the quarter is estimated at 47.0 million and this means Nokia's share of the market was 35 percent, down from the 41 percent achieved in Q2.
Commenting on the curate's egg of a quarterly report, Kevin Burden, the analyst in charge of the mobile devices practice at ABI Research said, "This is not a trend you would expect during a time when consumers are finally recognising the value that smartphones can deliver. Nokia's decade-old legacy in smartphones is clearly not helping it hold up against consumers' new expectations about how a smartphone should look and function."
So, behind the legerdemain and the smoke and mirrors, the underlying trend is not good. Nokia is showing a year-on-year downturn in total handset volumes in every geographic region where it operates.
The question is, is this a one-off blip or the start of a slippery slope? Time will tell.
UPDATE: This morning Nokia has announced that Rick Simonson, who is currently the company's CFO, will take over as the new supremo of mobile phones with effect from 1 November. Significantly, he will also be in charge of "strategic sourcing" for the entire unit.
Timo Ihamuotila, currently Nokia's head of global sales, will take over as the new CFO.
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