Nokia on mobile industry slowdown: ‘it’s worse than we thought’

5 Dec 2008

Nokia has further revised its mobile industry outlook, saying the slowdown has continued more rapidly than it suggested back in November.

The company yesterday lowered its forecast for mobile device industry volumes.

Nokia now estimates that fourth-quarter 2008 industry mobile device volumes will be lower than the previous estimate of approximately 330 million units, which would result in full year 2008 industry mobile device volumes below the earlier estimate of 1.24 billion units.

“2009 will be challenging for our industry. However, we have a strong, enviable base to build on, and I believe we will continue to strengthen our position on many fronts,” said Nokia president and CEO, Olli-Pekka Kallasvuo.

“Building on our operational flexibility, Nokia is acting to reduce costs appropriately in the current slowing environment. At the same time, we remain fully committed to making the investments to build the future of our exciting industry, and Nokia’s continued competitiveness.”

Nokia CFO, Rick Simonson, emphasised that appropriate cost reductions are being effected now, and are continuing in plans for 2009 and 2010.

“Nokia’s highly variable, low fixed-cost business model allows us to scale to a declining market,” Simonson said.

“We are also acting on all fronts to reduce our costs beyond what may be attributable solely to the scalable aspects of the business model – moving to reduce cost of goods sold even further, reducing operational expenditure appropriately, and scaling back capital expenditure. We expect these strong actions to offset, in part, the negative impact of slowing sales.”

Nokia said the industry continues to be impacted by the effects of a global consumer pull-back in spending, currency volatility and decreased availability of credit. Nokia believes the slowdown is apparent in varying degrees across all markets, while the most recent incremental impact in the emerging markets has been more pronounced than in other markets.

It believes there is insufficient visibility in the marketplace to confirm its prior estimate for its fourth-quarter 2008 mobile device market share, which was expected to be at the same level or slightly up from an estimated 38pc in the third quarter 2008.

Nokia expects that the mobile device market will continue to be negatively impacted by the effects of a slowdown in consumer spending. Nokia also expects that operator and retail distribution channels will go through a period of destocking, resulting in lower sales volumes by manufacturers (sell-in) than purchase volumes by consumers (sell-through) for the industry in the first half of 2009.

While noting the extremely limited visibility, Nokia expects 2009 industry mobile device volumes to decline 5pc or more from 2008 levels.

The company expects the four billion mobile subscriptions mark globally to be reached in the first quarter 2009.

In related news, Nokia announced today that Research In Motion (RIM) has renewed a multi-year patent licence agreement. The agreement covers the worldwide use of standards essential patents for GSM, WCDMA and CDMA2000 technologies. The financial terms of the agreement consist of an up-front payment and on-going royalties payable to Nokia.

Nokia has built one of the strongest and broadest intellectual property portfolios in the wireless industry, and since the early Nineties has invested close to €35bn in R&D. Nokia’s patent portfolio includes approximately 300 GSM, 370 WCDMA and 170 CDMA2000 declared essential patent families.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years