The world’s largest handset makers enjoyed generally plentiful profits and solid shipment numbers in the third quarter, but investors heard a few sirens of caution. Specifically, market-leader Nokia Corp. alarmed Wall Street with its reliance on sales of low-end, inexpensive handsets-and predictions that it would continue to do so in the fourth quarter.
Nonetheless, industry watchers largely were satisfied with the handset industry’s direction. Indeed, the world’s phone vendors sold a record 208 million phones during the quarter, according to research and consulting firm IDC.
“Last year, quarterly mobile-phone shipments didn’t reach 200 million units until the end of the fourth quarter when vendors were keeping the channels’ shelves stocked for the holiday rush,” said Ramon Llamas, a researcher with IDC’s device team. “As vendors announced new products earlier this year and accelerated their time to market, we’ve already reached this milestone.”
First up, Nokia’s net profit popped to more than $1 billion in the quarter, up 29 percent compared with the same quarter last year. However, the company’s stock price fell almost 6 percent to around $16 per share in trading after the news, partly due to the company’s low-end handset sales. Specifically, the average selling price of Nokia’s handsets declined from $126 to $123, and the company indicted the trend would continue.
“The negative data points were to some extent expected, but the lack of clear guidance and variability in operating expenses make for uncertainty and leave us somewhat uncomfortable,” wrote Ittai Kidron with CIBC World Markets. The firm makes a market in Nokia securities. “We believe Nokia could largely maintain share, yet we are not convinced we have seen the worst yet.”
On the bright side, Nokia shipped a record 66.6 million phones in the quarter, figures that give it a solid 32-percent worldwide market share, according to IDC. The firm said Motorola Inc. commanded 18.6 percent of the market in the third quarter, while Samsung Electronics Co. Ltd. scored 12.9 percent.
Companywide, Nokia reported an 18-percent increase in year-over-year sales to $10 billion. In its mobile-phone business, the company reported around $1 billion in operating profit, up 4 percent from the same quarter a year ago. In the company’s networks business, Nokia posted an operating profit of $188 million, a 20-percent drop from the year-ago quarter.
While Nokia spread concern, Motorola’s results sparked enthusiasm. Wall Street leapt on news that Motorola recorded revenues of $9.4 billion, beating most analysts’ expectations and way up from the $7.5 billion it scored in the same quarter a year ago. The company’s net earnings clocked in at $1.7 billion.
“We are very excited about our record third-quarter results and overall performance year-to-date,” said Ed Zander, the company’s chairman and chief executive officer. “Excluding reorganization charges, all four of Motorola’s businesses grew profitably during the quarter-a testament to the hard-working and dedicated talent across the global Motorola organization. We are especially pleased with the record results achieved by our Mobile Devices business for unit shipments, sales and profits.”
Motorola’s handset business owes part of its success to sales of low-end handsets in emerging markets, but also to the continued demand for the company’s tremendously popular Razr phone. Indeed, Motorola said it shipped 6.5 million Razr devices during its third quarter and 12 million total. Research and consulting firm Ovum pointed out that the Razr is now competing with the Nokia 6230 as the best-selling phone ever.
“All eyes are now on the Christmas quarter,” said Ovum analyst Martin Garner. “Motorola will be hoping that its new devices, the Pebl, the Slvr and the Rokr-which have just started shipping-can emulate at least some of the success of the Razr.”
In Motorola’s phone business-its largest division-the company recorded sales of $5.6 billion, up 41 percent from the year-ago quarter. The company’s operating earnings increased to $597 million. Motorola shipped 38.7 million handsets in the third quarter
In Motorola’s networks business, the company posted sales up 7 percent to $1.6 billion and operating earnings of $268 million.
Next up is LG Electronics Co. Ltd., which posted a 48.5-percent year-on-year drop in its net profit but offered a positive outlook for its phone business. LG’s handset operations-which account for around 43 percent of its sales-reported $117 million in operating profit.
LG shipped 15.5 million phones in the third quarter, a number that includes 8.8 million CDMA devices and 1.1 million W-CDMA phones. LG said its sales continue to increase overseas, especially in the North American market, but competition in its home market of South Korea continues to stifle business.
Finally, Sony Ericsson Mobile Communications L.P. posted another solid quarter, with revenues, income and unit shipments all tracking up. The company’s quarterly shipments hit 13.8 million, up from the 10.7 million it recorded in the same quarter a year ago. The company’s revenues also increased to around $2.5 billion while its net income popped to $125 million.
Siemens AG, once the industry’s fourth-largest mobile-phone maker, recently sold its handset operations to BenQ Corp. The new business, BenQ Mobile, is scheduled to report its third-quarter results Oct. 27.
