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Nokia, Motorola win smartphone share; outlook weighs
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HELSINKI/NEW YORK (Reuters) - New models are helping Nokia and Motorola Inc recapture market share in smartphones but while Nokia is able to profit from the gains, Motorola predicted a loss in the current quarter.
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Shares in top phone maker Nokia posted their biggest one-day gain in nine months on Thursday after it reported forecast-beating earnings, while Motorola shares fell more than 11 percent on its disappointing earnings outlook.
Nokia Oyj and U.S. Motorola -- who together dominated the mobile industry just a few years ago -- have been hurt by Apple's iPhone and Blackberry-maker Research in Motion eating a major share of this fatter margin business.
Both firms have responded by shrinking their phone portfolios: Nokia has halved its smartphone launch plans for 2010, and Motorola co-chief executive Sanjay Jha is betting that Android smartphones will turn around the company.
Analysts said the only clear market share loser among top smartphone vendors was Apple, which sold 8.7 million iPhones in the quarter, missing analysts forecasts. Shares in Apple slipped 3.6 percent.
Motorola turned to a small quarterly profit in the holiday sales-fueled fourth quarter versus a deep loss a year earlier, helped by sales of 2 million smartphones.
The U.S. firm's new models include a Droid phone, based on Google Inc Android software, which was marketed heavily by top U.S. mobile service Verizon Wireless.
Motorola forecast a first-quarter loss of 1 cent to 3 cents a share compared with analysts' average estimate of a 3-cent profit, according to Thomson Reuters I/B/E/S. Co-Chief Executive Sanjay Jha said the company would be hit by heavy expenses to launch new smartphones.
"They almost have to do what Palm did 2 years ago - a complete revamp of their portfolio," said Alan B. Lancz, president of wealth management firm Alan B. Lancz & Associates, which holds Nokia stock.
The weak outlook sent Motorola shares 11.5 percent lower at $6.55 by 1645 GMT, while Nokia shares closed 9.9 percent higher -- its biggest one-day gain since April 2 last year -- at 9.91 euros in Helsinki. Over the last 12 months Motorola stock has gained 60 percent while Nokia has shed 6 percent.
"Expectations (for Nokia) were so low most of the risk was taken out of it," Lancz added.
Nokia said its market share in smartphones rose to 40 percent from 35 percent in the previous quarter, as it rolled out models like the N97 mini, flagship music phone X6, and a Linux-software based N900.
NOKIA BEATS FORECASTS
Nokia said the cellphone market returned to growth, after four straight quarters of shrinking, up 8 percent from a year ago.
Nokia's underlying fourth-quarter earnings per share of 0.25 euros beat all expectations in a Reuters poll, which ranged from 0.15 to 0.24 euros.
"In the fourth quarter the demand environment for handsets ended up being better than we anticipated and we took advantage of this upside," Nokia Chief Executive Olli-Pekka Kallasvuo told investors.
Stong demand from emerging markets helped Nokia to sell 127 million phones in the quarter, above all analysts forecasts.
S&P Equity Research upgraded Nokia stock to buy from hold.
"These are really mind-blowing results," said analyst Thomas Langer from WestLB.
"However, I think there is definitely a risk one gets over excited -- the challenges in the smartphone markets will become obvious to everybody, and we think the competition will intensify throughout the year," Langer said.
Nokia said revenues from smartphones jumped 26 percent from the previous quarter to 3.9 billion euros. Average smartphone prices dipped to 186 euros from 190 euros in the third quarter as the firm tries to win back customers with simpler, cheaper smartphones.
The results cap a tough year for the cellphone makers, which have been hammered as consumers cut spending in the recession.
Nokia Chief Financial Officer Timo Ihamuotila told Reuters TV there was still reason for cautiousness.
"Regarding (the) economy we are not out of the woods yet... consumer confidence is still fragile," he said.
Nokia forecast for its phone unit operating profit margin to fall toward 12 percent in the first quarter, from 15.4 percent in the December quarter.
Last week, Sony Ericsson warned a recovery in the cellphone market could be slower than many expected as it reported its seventh straight quarterly operating loss.
Samsung Electronics, the world's second-biggest mobile phone maker, is expected to report on Friday higher phone sales, but lower margins than in the previous quarter.
Higher marketing costs likely weighed, and uncertainties remain as to how it will compete with smartphone leaders.
(Additional reporting by Brett Young, Terhi Kinnunen and Eva Lamppu in Helsinki Rhee So-eui in Seoul; Editing by Andrew Callus and Elaine Hardcastle)
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Jan 28, 2010
No wonder Nokia has increased its profit margins. Nokia pays only 1400 INR( about 26 euros)/ month as salary to 4000 of its workers at its plant in Chennai, India. Nokia refused to increase their salary to 2000 INR/ month claiming that recession was hurting its business in India! Now, we know why the workers went on strike at that Nokia factory twice in the past half year. Today’s results show that Nokia sold more phones than ever in India last quarter.Its market share is 60% in India.
Profit maximization seems to be the sole guiding principle of this mobile giant. Even if this is done at the expense of paying its workers in India a monthly salary that is equivalent to roughly one hour’s salary to its workers at Nokia’s plants in Finland. It is ironical, that Nokia’s motto is “Connecting People”. It seems to be connecting only those people, who have the extra cash to invest in Nokia stock. Nokia is really not interested in the welfare of those 4000 workers at its Chennai plant, of whom 70 % are women.
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