Nokia fights for Asia

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The biggest event in the Nokia calendar is rumored to be about taking back Asia with a storm. Nokia Connection 2011.

Nokia Connection 2011 is an annual event held in conjunction with CommunicAsia 2011. The event is an exciting platform for Nokia to showcase the latest and newest devices and services to customers, operators, media and analysts from the region.

At this prestigious annual event, the CEO Stephen Elop intends to get back at cheap Android smartphones and unbranded handsets.

Smartphone shipments to Asia grew 98%, to 37.3 million units, during Q1, with volumes strongest in China, India and South Korea.

Elop will lay out the companys strategy and unveil new models. It will be his first major speech in Asia since the former Microsoft Corp. (MSFT) executive became CEO, spokesman Doug Dawson said.

During his nine months as CEO, Elop has announced more than 8,800 job cuts, including outsourcing agreements, and said the company will replace its Symbian smartphone software with Microsoft?s Windows Phone 7 operating system to revive the world?s largest mobile phone maker by units.

Fending off competition

Elop spent his first months devising plans to fight Apple Inc. (AAPL)?s iPhone and phones equipped with Google Inc. (GOOG)?s Android in Europe and the U.S. The focus is now turning to fending off Samsung Electronics Co. and ZTE Corp. in Asia.

At stake: a region that?s home to the world?s two biggest phone markets and where growth is projected to exceed 40 percent over the next four years.

Asia has long been Nokia’s stronghold but that it has been rapidly changing during the transition from Symbian to Microsoft’s Windows Phone 7 – at a time when Asia is the world’s largest region for smartphones.

?They really forgot Asia,? said Boris Boehm, who helps manage 1.2 billion euros ($1.7 billion), including Nokia shares at Aramea Asset Management in Hamburg. ?Due to their race with Apple, there was so much focus on the developed markets that this idea of producing and selling affordable handsets was really lost.?

Challenge

Since his appointment as CEO in Sept 10, Nokia shares has fallen more than 40% in Helsinki and its trading near 13 year lows.

China has always been the most important Nokia market, in the first quarter sales increased by 30%. However its made to run for its money. It started facing competition from local suppliers in the country driving down prices.

China and the Asia-Pacific region accounted for 45 percent of Nokia?s device sales in the first quarter, the manufacturer said in April.

That hasn?t stopped the slide. Its share in China tumbled to 20.4 percent last year from 31.5 percent in 2009 and in India, Nokia dropped to 30.2 percent from 48.9 percent in one year, according to estimates at Gartner Inc.

Sales of mobile phones in Asia will probably reach 1.27 billion units in 2015, or half of the global market for handsets, according to Anshul Gupta, an analyst at Gartner in Mumbai. Sales this year are forecast to be 900 million units.

Asian importance

Nokia seems to have taken the region for granted. It will be participating in the conference for the first time in a decade, according to the program?s organizers.

?It?s a hugely important market for us,? Executive Vice President Colin Giles said. ?We introduced our first phone specially designed for the Asian market 14 years ago. It was small, had a full graphics display and featured many Asian languages from Chinese to Thai to Bahasa. We have not looked back since.?

Globally, Nokia?s shipments fell 2.3 percent in the first quarter, driving down its market share more than 5 percentage points to 25.1 percent, according to Gartner. Apple boosted its share to 3.9 percent, ZTE to 2.3 percent and HTC to 2.2 percent.

By revenue, Nokia was overtaken last quarter by Cupertino, California-based Apple as the industry leader.

Nokia, which this month won a patent suit against Apple, may ship fewer smartphones than Samsung and the maker of the iPhone this quarter as part of a bigger ?shift in power to Asia,? Nomura Holdings Inc. analysts including Stuart Jeffrey wrote in a report this month.

Slice of the pie

Asian handset makers are also taking a piece of the pie of the $138 billion smartphone market, as 3G data use picks up in China and India, Nomura said.

Samsung, LG Electronics Inc. and HTC Corp. are among companies that use the Android software, which Google provides free to manufacturers.

?Until competitive new products launch, it?s hard to see how management can arrest this decline,? Jeffrey wrote.

Firm hold on Asia

In March, Nokia said it plans to open a plant in Vietnam with an initial investment of 200 million euros to make low-end phones. The company expects to make ?further sizeable investments? in the future, and aims to start the factory next year.

Nokia currently manufactures low-end phones in countries including Brazil, China, India, Hungary, Romania and Mexico. It makes smartphones in Finland, China and South Korea.

The company has also invested in developing money transfer, news and education services specialized for rural users in emerging markets.
?If you lose the emerging markets from your focus, it?s natural that the domestic companies would be able to overtake you in market share,? said investor Boehm

Source: Bloomberg, BBC, Wall Street Journal

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