Q2 not in Nokia’s favour

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Nokia, the biggest manufacturer of mobile phones has started to lose market share to Apple Inc. The company has reported its first quarterly loss in 1 1/2 years after handset sales slumped following an accord to shift to Microsoft software.

The net loss was 368 million euros ($521 million), compared with a profit of 227 million euros a year earlier, the Espoo- Finland based company said today in a statement. Nokia had been predicted to report a net loss of 1.44 million euros, according to the average estimate of 16 analysts.

Nokia sold 88.5 million handsets in the quarter, 20 percent less than a year earlier and missing the 96 million-unit estimate by analysts.

Chief Executive Officer Stephen Elop, who joined from Microsoft last September, is struggling to sell phones based on Nokias 10- year-old Symbian software thats being phased out as the company prepares new models based on Microsofts Windows Phones.

Nokia climbed 5.3 percent to 4.30 euros at 1:38 p.m. inHelsinkitrading. Before today, the stock had fallen by about half this year. It has a market value of 16.3 billion euros.

Apple dominance

Nokia became the worlds biggest handset maker in 1998 and fell behind in smartphones after Apple introduced the iPhone in 2007. Apple sold 20.3 million iPhones in the quarter ended June 25, helping the company to more than double profit to $7.31 billion in the period. By revenue, Apple already surpassed Nokia in the first quarter as the largest maker of mobile phones.

As part of its settlements with Apple, Nokia will start receiving royalty revenues from the Cupertino, California-based company.

Struggling to compete with rivalAppleInc. and smartphones that run onGoogleInc.’s Android operating system, Nokia in February decided to dump its Symbian operating system and make smartphones based exclusively onMicrosoftCorp. software.

The transition has so far been challenging. In May, the Finland-based cellphone giant warned that results for its key devices-and-services division could be around “break-even,” sinking the company’sU.S.depository shares 14%.

Nokia’s fortunes could change when it launches its new smartphones running Microsoft’s new Windows Phone 7, code named Mango, analysts say, but the company has so far been mum on exactly when its partnership with Microsoft will produce results.

Mr. Elop has pointed to the fourth quarter for Nokia’s first Windows phone launch, but also indicated that the phones won’t be shipping in volume until next year.

Innovation

The company announced the N9, an all-screen smartphone, scheduled to hit stores later this year, and three lower-priced mobile phones that allow users to maintain two different phone numbers.

So-called dual-SIM phones are crucial for emerging markets such as India, where Nokia has lost market share to unbranded Chinese handset makers.

The smartphone fever

Smartphones are fast replacing traditional handsets. When Nokia was on top of the market, it was the sole top maker of cell-phones. Every mobile phone user was using a make of the best brand Nokia.

Now, things are changing, with the introduction of the ‘smartphone’. Apple Inc., the creator of the iPhone, quickly captured the major share of the market.

Worldwide, smartphones represent 24 per cent of all mobiles sold worldwide between January and March up from 15 per cent a year before. The tipping point, when they make up 50 per cent, may only be a year or so away. And before the end of the decade, every phone sold will be what we would now call a smartphone.

“Smartphones will keep growing in sales, approaching the billion-plus levels of total handset sales before this decade is done,” says Tomi Ahonen, a former Nokia executive who now has his own mobile industry consultancy.

According to a recent survey by Real Opinions, the GCC has the highest incidence of multiple smartphone usage with 41% of users. The industry is going through a rapid growth in the region, it said. Nokia is the leader in the GCC region, but it faces fierce competition from Apple and Blackberry.

Mena countries are finding their logic in their use of Smarthones, contradicting a widespread idea they are restricted to an elite or businessmen. Prices have decreased sharply in recent years application rendering Smartphones appealing to a much broader audience.

Sources: businessweek, WSJ, iloubnan, gulfnews, mediame

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