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Nokia, Motorola win smartphone share; outlook weighs
January 29, 2010 / 7:02 PM / in 8 years

Nokia, Motorola win smartphone share; outlook weighs

HELSINKI/NEW YORK (Reuters) - Nokia and Motorola Inc are regaining some market share in smartphones but while Nokia has profited from the gains, Motorola predicted a loss in the current quarter.

<p>A man takes a photo with a Motorola Milestone smartphone, sister phone to the Motorola Droid, during the 2010 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 8, 2010. REUTERS/Steve Marcus</p>

Shares in top phone maker Nokia posted their biggest one-day gain in nine months on Thursday after it reported earnings that beat estimates, while Motorola shares fell more than 12 percent on worries its turnaround will take too long.

Finland’s Nokia and U.S.-based Motorola dominated the mobile industry just a few years ago, but they have lost ground to Apple’s iPhone and Blackberry-maker Research in Motion in the lucrative smartphone market.

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 his company’s future on smartphones based on Google Inc’s Android software.

Motorola turned a small quarterly profit in the holiday shopping-fueled fourth quarter versus a deep loss a year ago. Sales of 2 million smartphones helped, including its Droid phone, which was championed by top U.S. mobile service Verizon Wireless.

But after Jha warned that smartphone sales would fall this quarter, some investors worried that Motorola’s ascent in smartphones was slow alongside a sharper-than-expected drop in sales of cheaper feature phones, its biggest seller.

”Motorola is pointing to breakeven for its mobile devices division by the fourth quarter, but it won’t be pretty getting there,“ RBC analyst Mark Sue said in a research note.”

Jha said Motorola is spending a lot on developing new smartphones this quarter, a period that typically sees fewer phone sales than the busy fourth quarter.

As a result, Motorola forecast a first-quarter loss of 1 cent to 3 cents a share, missing analysts’ average estimate of a 3-cent profit, according to Thomson Reuters I/B/E/S.

The weak outlook sent Motorola shares down 12 percent, while Nokia shares closed 9.9 percent higher at 9.91 euros in Helsinki -- its biggest one-day gain since April last year -- . Over the last 12 months, Motorola stock has gained 60 percent while Nokia has shed 6 percent.

“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.

Still, Jha said he is forging ahead with plans to separate the phone unit from the rest of Motorola, emboldened by Droid’s popularity and improving mobile market conditions.

Nokia said the cellphone market returned to growth in the quarter after a year of shrinking.

It said its market share in smartphones rose to 40 percent from 35 percent in the previous quarter.

Despite hype around Apple’s iPhone, analysts said it was a clear market share loser among top vendors in the quarter. Its 8.7 million iPhone sales missed analysts forecasts. Shares in Apple fell 3.6 percent.

NOKIA BEATS FORECASTS

Nokia’s underlying fourth-quarter earnings per share of 0.25 euros beat all expectations in a Reuters poll that ranged from 0.15 to 0.24 euros. S&P Equity Research upgraded Nokia stock to buy from hold.

Strong demand from emerging markets helped Nokia sell 127 million phones in the quarter, above expectations.

“These are really mind-blowing results,” said analyst Thomas Langer from WestLB. “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 revenue 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 tried to win back customers with discounts.

The results cap a tough year for cellphone makers, which have been hammered as consumers cut spending in the recession.

Nokia forecast a first-quarter phone operating profit margin closer to 12 percent than last quarter’s 15.4 percent.

Last week, Sony Ericsson warned a cellphone market recovery may be slower than expected as it reported its seventh straight quarterly operating loss. Samsung Electronics, the world’s No. 2 mobile phone maker, is expected on Friday to post higher phone sales, but lower margins than in the previous quarter.

Additional reporting by Brett Young, Terhi Kinnunen and Eva Lamppu in Helsinki Rhee So-eui in Seoul; Editing by Andrew Callus, Elaine Hardcastle and Robert MacMillan

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