The 2007 Nokia 20-F: QUALCOMM IPR Litigation and IPR Infringement Provisions
Art,
<< If you look at the WCDMA market, you also have to wonder where Nokia would be in terms of handset pricing, if it was paying royalties to QCOM. ... Regarding "contingent liabilities," I believe Nokia's set aside is only for legal fees plus the $20 million/quarter, and nothing else, since it does not admit owing anything else, nor has QCOM filed a claim for a specific amount owed. Contingent liabilities mean potential loss stemming from a specific event or claim. So, as I wrote earlier, Nokia is pricing its handsets that contain QCOM IP at levels that make its products competitive and profitable--before adding in the royalties that they may eventually have to pay. >>
With all due respect, and that respect is ample, you believe wrong.
In case you don't have Nokia's US SEC 20-F filing handy, and have a short memory since this board has been over this matter several times, these are the specific Nokia Group Provisions for potential IPR Infringements (not contingent liabilities) for 2007 v. 2006 ...
>> §27. Provisions: Nokia 2007 SEC 20-F Provisions for IPR Infringements
[Nokia 2007 20-F page F-56]
EUR USD
============ ============
At January 01, 2007 €284 million $375 million
At December 31, 2007 €545 million $803 million
"The Group provides for the estimated future settlements related to asserted and unasserted past IPR infringements based on the probable outcome of potential infringement. Final resolution of IPR claims generally occurs over several periods. ..." <snip>.
Nokia increased its IPR Infringement Provisions by €261 ($428 million USD) in 2007. Presumably the increase is primarily intended to cover 3 Quarters potential payments to QUALCOMM. <<
nds1.nokia.com
tinyurl.com [HTM]
Rather obviously, Nokia is accruing significantly more than "legal fees plus $20 million/quarter."
Unmatched economies of scale, coupled with the broadest segmented product range from entry level through the crowded mid-range feature phone tier and on to high end high end smartphones (60.5 million units or 54% of the smartphones sold in 2007), their global manufacturing base in 9 countries on 3 continents, unparalleled global distribution, logistics and supply management, and brand, as well the sectors highest R&D spend ($8.3 Billion USD in 2007) allow them to be both "competitive and profitable" -- and then some, mythology bred here, aside.
<< They [Nokia] have demonstrated over the past year that they can't compete with companies such as LG and Samsung, which keep increasing market share. >>
Nokia shipped 2.5x their next nearest competitor (Samsung) in Q1 and by shipping 115.5m units almost outshipped their 4 next nearest competitors (Samsung, Moto, LG, Sony Ericsson) combined 120.7 million units. This despite a weakening Won and strengthening Euro which does have an impact on price and margin, but one that can reverse quickly.
In the last year while increased both its industry leading gross margins and operating margins Nokia increased its global unit share by almost 4 full percentage points v. Samsung's 2.3% and LG's +2.2% ...
Mobile Phone Vendors, Q1 2008 Unit sales and Share Results (IDC)
·
1Q'08 1Q'08 1Q'07 1Q'07 YoY Unit YoY Share
Units Share Units Share Growth Growth
====== ====== ====== ====== ====== ========
Nokia 115.5m 39.6% 91.1m 35.7% +26.8% +3.9 ppt.
Samsung 46.3m 15.9% 34.8m 13.6% +33.0% +2.3 ppt.
Motorola 27.4m 9.4% 45.4m 17.8% -39.7% -8.4 ppt.
LG Electronics 24.4m 8.4% 15.8m 6.2% +54.4% +2.2 ppt.
Sony Ericsson 22.3m 7.6% 21.8m 8.5% +2.3% -0.9 ppt
Others 55.7m 19.1% 46.1m 18.1% +20.8% +1.0 ppt.
====== ====== ====== ====== ====== ========
Total 291.6m 100.0% 255.0m 100.0% +14.3% ---
<< Nokia's market share has been increasing especially in low end handsets, but other competitors are gaining on Nokia in handsets with advanced features, especially where WCDMA phones are concerned. >>
'Others' as a whole, are NOT gaining on them. According to Gartner and Lehman Brothers data published last week, Nokia's 2007 38% WCDMA/HSPA share represents 66 million handset units shipped v. 27 million (16% global share) for Samsung. This out of their global handset estimate of 174 million (15% of total global units).
To Samsung's credit they did increase WCDMA market share by 6 ppt. (compared to Nokia's +2 ppt.) to 16% last year but Nokia increased 2007 WCDMA unit shipments by 31 million units while Samsung only increased them by 16 million, and Samsung was number 3 behind Sony Ericsson who shipped 35m units (up 22 million units YoY) for 20% global share. Samsung is very likely to close that gap this year, but the question becomes whether they can hold that increased share as Sony Ericsson recovers and refreshes, and if Motorola recovers, which it should once it completes its 3G WCDMA replatformazation around QUALCOMM and TI silicon.
<< Nokia has gained market share by pushing GSM but, facing tougher competition in 3G, responds mainly by trying to expand demand for 2G. Just like GM! >>
Nokia has increased market share by pushing BOTH the GSM and 3GSM 3GPP technologies just as Samsung has, and in the 3GSM instance Nokia has pushed it to the maximum the market has allowed. Gating factors are of WCDMA growth are 3GSM coverage, handset cost, and operators commercial terms. In 3GSM UMTS (WCDMA) Nokia took the global share lead in Q2 2005 and has grown it steadily ever since while share of 'others' has fluctuated up and down, or in the case of the Japanese, down. Today that Nokia share is almost directly proportional to its overall global share for combined GSM/3GSM/CDMA2000.
While Nokia has increasingly led the implementation of advanced hardware and software based features and functionality in its EDGE and WCDMA/HSPA handsets, Nokia's real product differentiator has been its software platforms and UI, and increasingly it will be content, services, and software (music, navigation, gaming, search, sharing) where they are well ahead of any direct top tier handset competitor, and that was the reason for the major reorganization that became effective January 1. With handset unit growth slowing, and ASP's dropping, this will become the real growth engine for Nokia and its competitors in the next decade. RIM especially and Apple to a lesser extent, have already given us a hint of that.
Not very GM like (in the context and with the implication that you use GM) at all, to my eye.
<< I've been monitoring several reports of Nokia market share on this thread as well as the data from financial reports and trade publication commentary. >>
Perhaps you should consider expanding and diversifying your "monitoring" base. <ggg>
You might also want to checkout the features and functions of Nokia's S40 WCDMA feature phones and particularly their S60 WCDMA/HSPA Symbian based smartphones, in the device specifications section of Forum Nokia and in the datasheets for them, then compare them to what's available from competition in various price tiers. GSM Arena is a good place to do this, and Moscow's Mobile-Review has great comparative reviews.
Best,
- Eric - |
