Nokia Corp.’s longtime stranglehold on the U.S. mobile-phone market appears to be broken-at least for now-by a major surge in sales from Motorola Inc.
“Motorola products are really just more appealing right now,” said Mark Bremer, an analyst with research and consulting firm Stax Inc.
According to Stax’s numbers, Motorola managed to increase its market share in the United States by almost 10 percent last year-from a September low of 17.3 percent to a market-leading 27.1 percent in December-a significant increase in a hotly contested industry. Motorola’s gains largely came at the expense of Nokia; during the same period Nokia’s U.S. market share dropped from 28.7 percent to 22.1 percent.
Motorola’s success in the United States is even more impressive when considered on a global scale. Although Nokia lost share in the United States, the company managed to increase its worldwide market share from 30.7 percent in the third quarter to 33.1 percent in the fourth quarter, according to Strategy Analytics. Nokia said the gains were largely due to sales in China, Europe, the Middle East and Africa.
Motorola’s performance in the U.S. market is likely due to a coalescence of factors. First, the company managed to introduce almost 20 new products worldwide in the critical fourth-quarter shopping season, and several models made their way to the United States. The most notable of these is Motorola’s clamshell-style Razr V3, a super-thin metallic phone that scored almost universal accolades from users and industry observers. Motorola officials have said that the company is struggling to meet demand for the $500 phone, which is available through Cingular Wireless.
“It looks like people are willing to pay more out of pocket for Motorola products,” Stax’s Bremer said.
According to Stax’s numbers, 20.5 percent of those users who bought Motorola phones during the fourth quarter did so because “they knew the phone they liked, and then went with the provider who offered that phone.” Meaning, 20.5 percent of Motorola phone buyers specifically wanted Motorola phones rather than just whatever phones were free at the time they purchased their handsets. Comparatively, only 8.8 percent of Nokia phone buyers specifically picked Nokia phones. Indeed, Motorola leads the U.S. market in this particular metric: Siemens comes in second with 20 percent, Sony Ericsson Mobile Communications third with 11.5 percent, and LG Electronics Co. Ltd. fourth with 11.2 percent. According to Stax, more than 60 percent of U.S. mobile-phone buyers first selected a carrier, and then chose their new phones from among the phones offered by that carrier. Stax’s research is based on monthly interviews with more than 2,000 wireless subscribers.
Motorola’s surge in the U.S. market could also be attributed to its extensive carrier agreements. According to Stax, almost 22 percent of Motorola’s business goes through Verizon Wireless, the industry’s second-largest carrier. Nokia’s business through Verizon between October and December accounted for only 9.6 percent of the company’s U.S. sales. Nokia had a slight edge with Sprint though, with 8.9 percent of its business going through the carrier compared with Motorola’s 3.7 percent. Motorola also enjoyed its continued near monopoly on Nextel Communications Inc.’s handset business.
Nokia has long been criticized on its lackluster CDMA efforts, a situation the company has been working to rectify. Nokia spokesman Keith Nowak said the company plans to offer a variety of CDMA phones in the coming months. He also said Nokia plans to get in “deeper” with its carrier partners to develop handsets customized to carrier specifications. Indeed, Nokia during the 3GSM trade show announced a GSM handset the company said could be reconfigured-both from a software and a design aspect-based on carrier requests.
“We’re now in an era where we have fewer, bigger carriers,” Nowak said, adding that Nokia plans to team with the market’s major players.
Others appear to agree with Nokia’s upbeat assessment.
“While we are not expecting a quick turnaround in its North American market share, we expect several product introductions over the next several months that should position Nokia for stronger North American share during the second half of 2005,” wrote research firm Piper Jaffray, according to reports.
In other metrics, Stax research showed that almost 50 percent of mobile-phone shoppers purchased handsets as upgrades to their previous phones. Only 13.5 percent of shoppers did not own mobile phones prior to their phone purchases. Further, 27.8 percent of shoppers paid between $1 and $50 for their phones, while 24.7 percent got their phones free. Twenty-two percent paid between $50 and $100 for their phones, 11.8 percent paid between $100 and $150, and only 6.5 percent paid between $150 and $200 for their new phones.
