Nokia Extends Handset Share

When it comes to handset sales, there's no stopping Nokia Corp. (NYSE: NOK), it seems. The Finnish behemoth has increased its global market share in terms of handsets shipped to 37.2 percent in the second quarter, up from 35.4 in the first quarter of 2002, according to Strategy Analytics Inc.

Motorola Inc. (NYSE: MOT) is Nokia's nearest challenger (though hardly within touching distance), with a 17.3 percent share of the 96.7 million units shipped in the second quarter (see table below).

Table 1: Global Cellular Handset Share - Shipments Q1 and Q2 2002

	Q2 2002 (market share %)	Q1 2002 (market share %)
Nokia	37.2	35.4
Motorola	17.3	15.6
Samsung	9.8	10.4
Siemens	8.5	9.1
Sony Ericsson	5.2	6.4
Others	22.1	23.1
Total units shipped	96.7 million	91 million
Source: Strategy Analytics Inc.

With more than a third of the market, can Nokia expect to hang on that kind of share? "I think it will in the short term," says Christopher Ambrosio, director of wireless device strategies at the research company's global wireless practice. "It has new GSM and CDMA products shipping in impressive numbers, and this will carry on into 2003. The key to Nokia's success is in its design innovation and also the number of models it has on the market."

Can Nokia boost its share even further? "Whether it will be able to grow that market share to above the 40 percent mark Nokia is always talking about is another matter," says Ambrosio. "It will need to lead and innovate in a particular market or technology to make that leap."

While Motorola continues to hold up well, thanks to the revamp of its handset portfolio, the other companies in the top five positions lost share, with Sony Ericsson Mobile Communications in danger of slipping out of the top five. Its "focus on profitable mid-range handsets" is leading to an erosion of its market share, according to Strategy Analytics.

So is Sony Ericsson up a mucky creek minus its paddle? "It doesn't need the same level of shipments to be profitable, as it has outsourced its handset production, and both Sony and Ericsson will benefit from combining operations for the Chinese market, which have been separate," Ambrosio tells Unstrung. "But it still needs a serious marketing boost. It needs entry-level products in Europe and some penetration in North America, otherwise it is in danger of becoming increasingly regionalized." Lawks!

Lurking in the pack of 'Others' is LG Electronics Inc., which could soon be ejecting Sony Ericsson from its number-five position, says Ambrosio. "LG is really charging. It has sold as many GSM handsets in Q2 as it did in the whole of 2001. It is strong in CDMA and profitable in Korea. It's driving its GSM products into Europe and could be a real contender to oust Sony Ericsson."

Toshiba Corp. is also making a name for itself in handsets, and is showing strength in the PDA market too, adds the Analytics man.

The research firm is also confident that full-year figures for handset shipments can reach 417 million, a higher figure than those from other analysts and from the vendors themselves (both Nokia and Sony Ericsson expect totals around the 400 million mark). Strategy Analytics believes that handset replacement rates in Western Europe have stabilized, after sequential months of decline, and that sales prospects for the coming quarter and into the Christmas holiday season are looking rosy.

You see, there are some optimists left in the world. How refreshing!

— Ray Le Maistre, European Editor, Unstrung
http://www.unstrung.com