Apple tops phone chart as Nokia, Samsung step up

HELSINKI Tue Nov 10, 2009 5:16pm EST

An advertisement for the Apple iPhone is shown at a retail store of an Orange mobile phone network provider in Bordeaux, southwestern France, October 23, 2009. REUTERS/Regis Duvignau

An advertisement for the Apple iPhone is shown at a retail store of an Orange mobile phone network provider in Bordeaux, southwestern France, October 23, 2009.

Credit: Reuters/Regis Duvignau

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HELSINKI (Reuters) - The world's two largest cellphone makers, Nokia and Samsung Electronics, unveiled on Tuesday their latest rivals to the iPhone as Apple became the top profit generator in the handset industry.

Apple Inc overtook Nokia in the September quarter as the cellphone maker generating the highest total operating profit in the industry, research firm Strategy Analytics said.

Nokia said on Tuesday it had started deliveries of its top- of-the-range N900, while Samsung Electronics Co Ltd announced it would launch its own open mobile platform, bada, in December as it tries to make up for a late start in the smartphone market.

Nokia and Samsung together sell around 60 percent of all cellphones globally, but they have lost some ground to Apple and Research In Motion Ltd, maker of the Blackberry.

The N900 model is the first Nokia phone to run on the Linux Maemo operating system, which analysts see as key for Nokia to regain ground in the coming years.

"The Maemo platform, which powers the N900, reflects Nokia's need to replace its legacy software platforms with something more powerful to compete with Apple and others," said Ben Wood, head of research at British consultancy CCS Insight.

"Samsung's announcement of bada shows it has also identified the same requirement. The big question is, does the mobile phone world need yet another operating system?"

While Nokia has lost ground in the smartphone business, it is still the world's largest smartphone maker by volume. Samsung's volumes are well behind Apple, RIM and HTC Corp.

But measured by profits, Nokia lost in the third quarter against Apple, which entered the cellphone market only in mid-2007.

Apple does not unveil profits per business line, but Strategy Analytics estimated Apple's operating profit for its iPhone handset unit stood at $1.6 billion in the third quarter, compared with Nokia's $1.1 billion.

"With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years," said Alex Spektor, an analyst at Strategy Analytics.

Apple sold 7.4 million iPhones during the July-September quarter, generating sales of $4.5 billion. Nokia sold 108.5 million phones in total in the same quarter, generating sales of 6.9 billion euros ($10.36 billion), but its profits were hurt by the economic downturn.

WORRIES OVER SMARTPHONE BOOM

Global sales of mobile handsets will snap a four-quarter losing streak in the last three months of the year as the industry is buoyed by economic recovery, a Reuters poll of analysts showed on Tuesday.

Sales are expected to rise 3 percent in the fourth quarter as the Christmas period brings a brighter end to a year in which sales are forecast to fall 6.9 percent, the poll of 31 banks, brokerages and research firms showed.

While the broader handset industry has struggled, smartphones sales have boomed and analysts have forecast the smartphone market will grow 20 percent to 30 percent this year.

But there are signs that increased competition is starting to put pressure on margins and put some companies on the defensive.

This week, the world's No. 4 smartphone brand, HTC, said it expected fourth-quarter revenue to fall almost 15 percent from the same period a year earlier, as the intense rivalry forces prices down.

Strategy Analytics said growth in the smartphone market slowed to just 5 percent in the third quarter from 17 percent in the second quarter.

"On the supply-side, a weak lineup from Nokia, the industry giant, has helped to keep a cap on growth," said Neil Mawston from Strategy Analytics.

"On the demand-side, consumers have been buying huge volumes of high-end feature phones with touchscreens from Samsung and LG and many consumers seem happy for now to go without full app-store support," Mawston added.

(Reporting by Tarmo Virki; additional reporting by Brett Young in Helsinki and Marie-France Han in Seoul; editing by Joel Dimmock, Will Waterman and Andre Grenon)

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