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Nokia: Twelve Phones Per Second

August 10, 2007 | 2 Comments

Nokia have a long-stated goal of capturing 40% of the worldwide market for cell phones. The biggest obstacle has been the US. US carriers have tight control over their market, as I may have pointed out before, and they are not about to give the farm away to some Finnish former footwear factory. In the last quarter, Nokia sold just 4 million handsets in the US, far behind Motorola, Samsung, and LG, and down 21% year-over-year.

That makes it all the more remarkable that Nokia are very close to achieving their goal of 40% of the global market. In Q2 they hit 38%; how?

The most important reason - and this has implications far beyond mobile phones - is that the US market doesn’t matter as much anymore. Global economic growth and the rise of China and India in particular mean that a company could theoretically own 90% of the global market for mobile phones this year without selling a single handset in the US. Actually addressing all these different markets is very difficult, but somehow Nokia has figured out how to sell ‘multimedia computers’ to China’s new millionaires and no-nonsense phones to Africans with microloans.

Companies that grow this big usually sacrifice profits. Nokia now makes twelve phones every second. But they made more money from each handset they sold last quarter than Motorola, Sony Ericsson, or Samsung, while selling more units than the three of them put together.

Ironically, they are profitable internationally for the same reason that they have been shut out of the US market. Nokia sell most of their phones directly to consumers rather than through carriers. That gives them much more control over pricing and protects their margins.

We’re paying very close attention to Nokia’s US strategy. They are opening flagship stores in major cities. They are selling phones through new channels like Dell. They are creating versions of their most popular handsets for the US market with or without carrier distribution. They are buying content and application companies, developing applications of their own, and building research facilities in Silicon Valley. And they are not afraid to call for open access.

Posted by: Jason
Categories: Mobile Market