Nokia Sees Mobile Markets Fall 5% in 2009, CDMA Markets Plunge

Nokia has cut its handset sales forecasts for the second time this quarter and warned it expects a general decline in the global mobile market of 5% in 2009. The world's number one handset manufacturer estimates that mobile phone market volumes in the fourth quarter of 2008 will likely be lower than previous estimates of 330 million units, meaning full-year 2008 mobile phone volumes would be below earlier estimates of 1.24 billion units. The company added that it is no longer able to adhere to its previous estimate of maintaining a 38% share of the mobile phone market this year, citing "insufficient visibility in the marketplace". However, Nokia continues to target an increase in market share next year, including further inroads into the smartphone sector.

Nokia's equipment maker, Nokia Siemens Networks (NSN), also warned the network equipment market for CDMA technology could fall by more than 20% in 2009 as network roll-out slows and demand for the technology in developed markets trails off.

Outlook and Implications

• The Future's Not Bright: Nokia gave the reason for its most recent warning as a more rapid slowdown in the mobile phone market than the company previously expected in its third-quarter 2008 update in November (seeWorld: 17 November 2008:Nokia Cuts Q4 Outlook, Warns of Falling Industry-Wide Sales in 2009). The Finnish giant stated: "The industry continues to be impacted by the effects of a global consumer pullback in spending, currency volatility and decreased availability of credit," warning ominously that the slowdown is more pronounced in emerging markets.This week, manufacturing giant Research in Motion (RIM) made similar cuts to its forecasts (seeWorld: 4 December 2008: RIM Latest to Cut Forecasts, Bids US$52 mil. for Certicom). Nokia's grim predictions represent one of the clearest warnings yet that the mobile market is approaching its first real decline after exceptional growth for more than a decade.

• Cost-Cutting to Stay Lean: While Nokia Chief Executive Officer (CEO) Olli-Pekka Kallasvuo has warned that 2009 will be a challenging year for the industry as a whole, he said he still expects Nokia to strengthen its position as market leader. The company has already embarked on a number of cost-saving actions, including a slew of recently-announced job cuts, although these have been attributed to long-term strategies rather than in direct response to the economic climate (see Germany-Finland: 12 November 2008:Nokia Siemens Slashes 1,250 Jobs across Finland and Germany and World: 5 November 2008: Nokia Restructure Will Cost 600 Jobs). "Nokia is acting to reduce costs appropriately in the current slowing environment," the CEO said in a statement. "At the same time, we remain fully committed to making the investments to build the future of our exciting industry and Nokia's continued competitiveness."Indeed, Kallasvuo said only this week that he believes the global financial crisis could actually benefit Nokia as the handset giant is better positioned than its rivals to weather the coming storm (see World: 2 December 2008:Nokia Could Benefit From Global Financial Crisis—CEO).

• Keeping Ahead of the Market: Earlier this week, Nokia announced it would launch a new touchscreen handset next year to compete with Apple's iPhone and RIM's BlackBerry at the high end of the market (see World: 3 December 2008: Nokia Closes Symbian Acquisition, Releases New Services and Touchscreen Device). The launch will follow up on Nokia's relatively late entry to the touchscreen format with a more mass-market-oriented entry than most of the iPhone competitors (see World: 3 October 2008: Nokia Takes On the iPhone with Touchscreen Handset). However, Nokia's stable of value-added services—such as mapping, music and entertainment—where the company had hoped to create new revenues as core handset sales slow down, will also face a tougher time in gaining market acceptance and generating revenues in this less-frivolous or experimental period.

• World Markets in Flux: Nokia has recently announced it has given up on efforts to penetrate the difficult Japanese market (seeWorld: 27 November 2008: Nokia to Exit Japanese Handset Market). Elsewhere, as handset makers suffer from the sharp downturn in U.S. consumer spend, Nokia still believes in the importance of growth in the region, with Kallasvuo stating, "New business models and form factors have spread from the United States to other markets. Having a meaningful position has strategic importance." However, Nokia faces significant challenges across the pond, including weak carrier relationships and little recognition of its brand strength, coupled with an economic crisis, meaning that it will have to work harder for every handset sold. Nokia has also highlighted key emerging markets as areas of growth, but it is likely that these economies will shortly be experiencing the sharp end of the global economic crisis, meaning their anticipated vast potential may not be as fruitful as anticipated (see World: 4 November 2008:Nokia Launches New Services and Handsets for Emerging Markets and China: 22 October 2008: Nokia Looking to China, Emerging Markets for Growth).

• NSN Sees Huge Decline in CDMA Market: NSN has warned of a decline in the CDMA network-equipment market in 2009, with the GSM market also falling more than Nokia's average predicted decline of 5%. NSN CEO Simon Beresford-Wylie said, "GSM is now in decline, but not as much as CDMA, which is coming down big time ... we expect it to come down by more than 20%." Joint venture NSN is aiming to merely keep its market share level, the company said. The difference between subscribers' levels for GSM and CDMA-based technologies is growing and the market is moving towards the Long Term Evolution (LTE) standard rather than the Ultra Mobile Broadband standard backed by Qualcomm for the evolution of CDMA networks (see World: 14 November 2008: Qualcomm Admits Defeat over UMB and Canada: 13 October 2008: Nokia Siemens Tapped for Telus and Bell Canada HSPA Overlay). LTE equipment is planned for release in 2009 by Motorola, and Verizon has noted that it plans to begin LTE-based services as early as 2010, which will begin the move away from the CDMA standard for one of the largest and most valuable operators in the world, while NTT DoCoMo also intends an early launch of an LTE-based network, targeting deployment as early as the end of 2009 (see United States: 7 April 2008: Verizon Details Spectrum Position and Japan: 12 February 2008:NTT DoCoMo Selects Ericsson for LTE Base Station Development Project). Capital expenditure has been hit by the credit crunch, which could affect these plans, although the strong cash-flow of these carriers will more than likely make any delay to deployment less likely.