Nokia's Kallasvuo apologises to Germans

Nokia President and CEO Olli-Pekka Kallasvuo apologised to the people of the German city of Bochum on Thursday for the problems caused by the planned closure of Nokia's mobile telephone factory there.
      Speaking to journalists gathered to hear Nokia's announcement of its result for last year, Kallasvuo conceded that the decision to close the factory causes pain, sorrow, and even anger, but he emphasised that it also means that Nokia as a company will suffer the consequences.
      Although the result posted by Nokia was impressive, Kallasvuo did not take a triumphalist tone, especially as there were a large number of journalists and television crews from Germany.
     
There certainly would have been much to boast about in the phenomenally good fourth quarter result announced by Nokia on Thursday. Nokia finally reached its goal of a 40-per cent market share in mobile handset sales. Profitability of all mobile phone units was dazzling, and even the mobile network company Nokia-Siemens Networks overcame a difficult market situation to break even.
      Without the extensive reorganisation measures that it implemented, NSN would also have been comfortably in the black, which is a good achievement, considering the difficulties of Nokia's worst competitors.
     
This year Nokia expects growth in the mobile phone market to slow down to ten per cent. It also anticipates a good year for its own operations. It expects the market share at least to stay at its present level.
      From the beginning of this year Nokia has operated in a new organisation in which all mobile phone networks have been combined into one whole. Internet services and programming have been collected in a separate unit. However, their results are reported together. Kallasvuo insisted that the aim of this is not to hide the inevitable losses of the Internet services in its early phases.
      Late this year Nokia will bring telephones onto the market which give the user access to a big music library.
      Nokia promises that the combined profit margin of telephones and services will reach about 20 per cent, even though the development of the service business will require considerable investment.
     
On the handset market, Nokia sees no cause for concern. The company's market share in smart phones has declined slightly from the 50 per cent it used to have - apparently because of the growing popularity of competitors' Blackberry and iPhone models.
      Just over a year ago, Nokia lacked a sufficient range of thin models and other popular styles of handsets. Now there are plenty of those.
      The N95 multimedia phone is the company's most successful earner at the moment. Called the Barracuda, this low-cost model rose to among the ten most sold models in just a couple of months. Seven million of the 6300 model with a steel structure were sold in October-December. Sales volume of the cheapest models can be calculated in the tens of millions.
      Even the E90 Communicator has achieved great popularity, Kallasvuo says.
      He noted that traditionally, Communicators are the most popular in Finland and Indonesia, but that the E90 has been successful in other markets as well.
     
Samsung has promised to challenge Nokia in the market for cheaper phones. However, Kallasvuo was not particularly worried.
      "How low can they go?" Kallasvuo asked in a telephone call with market analysts. The market for handsets that sell for less than EUR 30 is very tough, requiring massive volumes if profits are to be made.
      Motorola wrecked its profitability in an equivalent attempt in 2006. The U.S. company is still trying to deal with the aftermath.

More on this subject:
 Impressive Nokia result helped boost stock markets

Previously in HS International Edition:
  Anti-Nokia sentiment unites Ruhr region in massive protest (23.1.2008)
  Announcing record result, Nokia reiterates faith in Siemens deal (26.1.2007)
  Nokia market share breaks 40 per cent threshold (24.1.2008)
  Nokia CEO Kallasvuo: "No lifetime jobs in open competitive market" (24.1.2008)
  Nokia shutting down plant in Germany, moving manufacture to Romania (16.1.2008)
  Nokia Q3 result exceeds all expectations; net sales of EUR 12.9 billion and EPS of EUR 0.40 (19.10.2007)
  Nokia stock buoyant on announcement of new music & games portal and N81 handset (30.8.2007)
  Nokia seeks 40% market share after posting high quarterly result (3.8.2007)

Links:
  Nokia 4Q and 2007 results press release