Nokia Say WHAT ???
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<< Nokia's margins are somewhat poor. I don't know if its because they have some kind of EU-style inefficiencies in their process, or what. Unless they can get their margins inline with the US smart phone makers this will underscore their ability to compete. It hasn't hit them yet, but will. >>
Lizzie,
That is a rather extraordinary statement from an intelligent and usually very informed investor -- which you most certainly are. Nokia has no "EU-style inefficiencies" and has globally dispersed efficiencies and competencies than no other handset manufacturer (or wannabe handset manufacturer like Apple) can come close to matching.
In this decade, no 1st tier handset manufacturer has come close to matching Nokia's double digit handset margins in any rolling 12 month period. On a quarterly basis the only manufacturer to exceed Nokia's margins in this decade in any given quarter was Samsung, and they did it 3 (or 4) times. They haven't done it since early 2004 however, despite the fact that they have always focused on mid-tier to high end phones with high ASPs while Nokia not only dominates the low end and competes effectively in the mod-range but also totally dominates mid-range and high end smartphones with its Symbian (Nokia a 48% owner) based S60 products produced by their Multimedia division and their Enterprise Solutions Division (but also designed and sold by their Mobile Phones Division. There are currently two niche players focusing on smartphones (RIM and HTC) that are making decent margins on smartphones but getting at RIM's or HTC's handset margins is not particularly easy.
Psylent already commented on this but please allow me to supplement his statement with this Q2 2007 abstract of the 5 major OEMs (which is not simply for smartphones but Nokia's smartphone margins are higher than the blended average shown for them below). The key performance metrics exclude all but mobile devices for each manufacturer with the small exception noted for Nokia ...
Nokia² Motorola Samsung SEricsson LG
=========== ========== ========== ========== ==========
Revenue (USD) $12.315 Bil $4.273 Bil $4.569 Bil $4,189 Bil $2.926 Bil
Revenue (EUR) €9.149 Bil €3.174 Bil €3.394 Bil €3,112 Bil €2.173 Bil
Revenue (KRW) --- --- w4.230 Bil --- w2,709 Bil
Units 100.8m 35.5m 37.4m 24.9m 19.1m
Sell-In Share³ 38.9% 13.8% 14.4% 9.6% 7.4%
ASP (EUR) €90 €89 €112 €125 €114
ASP (USD) $121 $120 $148 $168 $153
Op. Margin 20.9% (8.0%) 8.0% 10.1% 11.6%
Op. Profit (USD) $2.574 Bil ($0.332 Bil) $0.378 Bil $0.424 Bil $0.338 Bil
Op. Profit (EUR) €1.912 Bil (€0.247 Bil) €0.281 Bil €0.315 Bil €0.251 Bil
Op. Profit (KRW) --- --- w0.350 Bil --- w0.313 Bil
Op. Profit Share 69.3% 0.0% 10.2% 11.4% 9.1%
·
¹ Currency conversions at Q2 ending June 29, 2007 Interbank rate
² Nokia combines 3 division's handset sales: Mobile Phones, Multimedia, and
Enterprise Solutions (which is mostly but not all device revenue).
³ Based on Strategy Analytics August 10 updated estimate of 259. 0m Q2 Sell-In
Nokia will deliver some 100 million smartphones globally this year. They have put their smartphones into mass market and delivered pricing into to the mid-range. They have expended extraordinary R&D $$$ in smartphone software development and 3rd party S60 development support (Symbian supports that large development community separately) but early deevlopment is behind them and they are now on cruise control and will gain more operational efficiency under the new organizational structure that combines the 3 handset divisions (and S60 R&D teams) that will be effective January 1.
Best,
- Eric - |
