Nokia reaching for unassailable market share in Q2

Nokia Corp. has time on its side.
With its closest competitor receding in the rear-view mirror, Nokia said during the second quarter that it would realign its business structure to become more nimble and responsive to market demands and opportunities-a change made from a position of strength as the global leader in handsets reaches for its long-sought goal of 40% of the market.
“Nokia has been the most proactive vendor in positioning itself for market opportunities,” said Chris Ambrosio, analyst at Strategy Analytics. “The recent reorganization is not surprising, with a new guy at the top.”
Olli-Pekka Kallasvuo, Nokia’s CEO, has been at the helm for just over a year and it is “his” Nokia that will report its second-quarter results this Thursday. The company is widely expected to post a modest gain in market share from the 36% achieved in the first quarter.
The company may achieve its stated goal of 40% global market share this year, if it manages to grow its position both in 3G and emerging markets, Ambrosio said.
Yet challenges remain for the market leader, according to the analyst. Nokia must continue to convince existing customers in developed markets to choose its new mid- and high-tier handsets over those offered by a raft of innovative competitors to maintain the high-margin end of its business, Ambrosio said.
In emerging markets, the company faces a similar task on its volume-based business, the analyst said. It must offer legions of first-time handset buyers an attractive upgrade path to realize the long-term benefits of its leading position in, for example, India and China.
“If Nokia’s mid- and high-tier products don’t catch on in the replacement cycle, its traditional consumers could switch brands,” Ambrosio said. “We call that the ‘upgrade risk,’ and that’s Nokia’s greatest exposure. I think it’s unlikely Nokia will fail at this.”
UBS analyst Maynard Um also is positive on Nokia’s portfolio development.
“While Motorola continues to struggle, we believe Nokia is benefiting from continued product portfolio improvement,” Um wrote in a note to investors a week ago.
According to Um, Nokia is likely to report higher unit shipments this Thursday than the 98 million expected by analysts. The Nokia Siemens Networks joint venture is likely to be a downside in the second quarter, Um said.
Ambrosio said he would be interested to see from Thursday’s results whether the company’s price cuts in emerging markets-imposed, in part, to deliver a body blow to competitors such as Motorola-would impact Nokia’s margins. Also, Nokia’s WCDMA share dropped in the first quarter and the analyst said he would watch the company’s metrics in that area.
If Nokia is a world beater, however, it has struggled in the carrier-controlled U.S. market. By the first quarter of this year it had lost half its minimal market share from the prior year and that sliver of business may continue dwindling, according to a forecast from Strategy Analytics. Nokia, however, is pursuing a long-term strategy to reach U.S. consumers directly through its branded retail outlets and through recently announced sales channels such as Dell and Gateway and other online retailers.
The delay of two weeks from the company’s typical quarterly reporting cycle-from the third week of July to the first week of August-is due to integrating the results of the Nokia Siemens Networks JV into its overall financial reporting structure, according to company spokesman Keith Nowak.