Nokia Sees Flat Market Share as Apple Gains

Nokia (NOK), the world's biggest maker of mobile phones, expects its share of the global handset market to remain flat next year, amid mounting competition from Apple's (AAPL) iPhone and lower-end Chinese devices. Volumes in the mobile-phone industry will rise by about 10% in 2010, the company forecast at its investor day today in Espoo, Finland, where it is based. Nokia's share of the smart-phone market, the industry's fastest-growing piece, slid to 39.3% in the third quarter from 42.3% a year earlier, while Apple and BlackBerry maker Research In Motion (RIMM), gained, according to researcher Gartner (IT). "The goal of flat market share was surprisingly modest, tepid, I would say," said Tero Kuittinen, an analyst with MKM Partners in Greenwich, Conn. &quot"They are quite likely losing market share a bit in India and China. If they can offset that by an increase in North America and Western Europe, it would be welcome." The company is releasing new touch-screen phones and improved applications to compete with Apple's iPhone, which has made the U.S. company the world's most profitable handset vendor, according to market researcher Strategy Analytics. Nokia lags behind Apple in applications, the new battleground for handset makers. The company's main business of mid- and low-end handsets, which accounts for 55 percent of devices revenue, is also being eroded by Chinese and emerging market rivals. Nokia fell as much as 15 cents, or 1.7 percent, to 8.76 euros and was down 0.6 percent as of 2.47 p.m. in Helsinki. The stock has dropped 20 percent this year, valuing the mobile-phone maker at 33.2 billion euros ($50 billion). Financial Outlook Nokia said in a statement that it will focus next year on expanding its services business, improving margins and pushing smart phones globally. "I see great opportunity for Nokia to capture new growth in our industry," Chief Executive Officer Olli-Pekka Kallasvuo said in the statement. "We have measures in place to push smart phones down to new price points globally, while growing margins." The Finnish company is targeting an operating margin at its devices and services business of between 12 percent and 14 percent in 2010. That compares with 11.4 percent in the third quarter, down from 18.6 percent in the year-earlier period. Nokia also expects operating expenses in the unit to be 5.7 billion euros in 2010. "The targets are reasonably optimistic," said Pierre Ferragu, an analyst with Sanford C. Berstein Ltd. in London. "The 12 to 14 percent adjusted operating margin in devices is fairly conservative and I expect they will deliver close to the high end of the range." 'Product Milestone' Nokia has lowered its margin guidance for the devices and services unit twice in the past year as it lost buyers to the iPhone. In the third quarter, the company said its average selling price declined to 62 euros in the quarter from 72 euros a year earlier. Today, Nokia said it sees lower average selling prices for devices in 2010. The company said it predicts net sales in services of 2 billion euros or more in 2011 and that it expects to deliver a "major product milestone" that year. Nokia began shipments this quarter of its N900 top-of-the-line handset, based on a new Linux-based software platform; and its X6 music phone, which comes with unlimited track downloads and has a more responsive touch-screen than previous models. Nokia has announced more than 45 new phone models and variants this year, including phones designed for the U.S. and China. Nokia posted a third-quarter loss of 559 million euros as it took a writedown of 908 million euros on its Nokia Siemens Networks joint venture with Siemens AG.

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