As Predicted, Nokia Sinks

I think Stephen Elop is onto something.

The recently appointed Nokia (NYSE: NOK  ) CEO summed up this morning's fourth-quarter report thusly: "Nokia faces some significant challenges in our competitiveness and our execution. In short, the industry changed, and now it's time for Nokia to change faster."

That's the cold, hard truth, and it's Elop's job to make it happen. Sales increased 6% to $17.4 billion, or remained flat if you back out the effects of currency fluctuations. However, unit shipments dropped by 3%. The Finnish handset giant saw its global market share dwindle to 32%, down from 34% a year ago.

We're watching Nokia lose its iron-fisted grip on the global handset market, just as predicted yesterday by big-time Nokia component supplier RF Micro Devices (Nasdaq: RFMD  ) .

On the bright side, Nokia is selling more smartphones than ever, which means the volume losses happened in the lower-margin feature phone segment. That trend had a positive effect on average selling prices, which in turn bumped up earnings to levels that would satisfy your average analyst. As nice as that sounds, Nokia's share of the smartphone market actually tumbled precipitously as rivals Apple (Nasdaq: AAPL  ) , a gaggle of Android partners, and even Research In Motion (Nasdaq: RIMM  ) collectively outgrew the Finns -- again.

The trendsetting North American market continues to be Nokia's weakest geographic area by far, and you almost have to assume that Elop will fall back on his lifetime of experience in Canada and America to turn that sad story around. The first order of business should be to establish carrier subsidy deals with leading networks AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) , primarily for high-end Nokia smartphones. Unfortunately, with AT&T dropping plans to carry Nokia's X7 phone, there doesn't seem to be much traction in the North American market.

Until that happens, Nokia's market share will continue to melt away under the concerted onslaught of mostly American smartphones. One look at a long-term stock chart will tell you that Nokia's fortunes turned sour soon after Apple introduced the first-generation iPhone in 2007.

Yep, the industry changed. How fast can Nokia adjust to the new reality?

Add Nokia to your watchlist, and feel free to suggest solutions to Elop's dilemma in the comments below. I'm sure someone at Nokia will read it.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Apple is a Motley Fool Stock Advisor selection. The Fool has written puts on Apple. The Fool owns shares of Apple. The Inside Value team gave up on Nokia two months ago. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2011, at 4:18 PM, Petertwo wrote:

    Last quarter Nokia sold 36 % more smartphones than year ago, totally 124 million mobile phones, 12 % more than 3Q. If we compare the numbers for example the swedish loser Ericsson, that sold totally only 11 million last quarter so we can say that Nokia has increased its sale 14 million from 3Q. Its more than Ericsson did totally, wow that amazing.

  • Report this Comment On January 27, 2011, at 6:39 PM, Petertwo wrote:

    Dear Anders,

    Did you know that Nokia sold over 100 million smartphones last year, the first one in the world. I think that you should eat much more swedish meat balls, it helps a lot and they are very tasty.

  • Report this Comment On March 08, 2011, at 8:36 PM, concernsme wrote:

    DOES ANYONE THINK THAT NOKIA IS FALLING BEHIND AND NOT REACTING FAST ENOUGH TO THE "POPULAR" TECHNOLOGY?

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