Nokia Corporation (ADR) (NYSE:NOK), a long-time titan of mobile phone industry, is currently in a now-or-never situation to revive its business. The company is facing stiff competition, its sales are declining and the stock is tumbling. When the company announced its first-quarter earnings, investors wanted a reason to believe in the stock. But there was only despair, and shares declined 11.45% on the same day to $3.02.
Though Lumia shipments jumped 27% QoQ to 5.6 million units in the first quarter from 4.4 million 4Q2012, it had little impact on the company’s overall sales. That’s because Lumia makes up for only about 9% of Nokia Corporation (ADR) (NYSE:NOK)’s total mobile phone sales. The shipment of feature phones, which account for about 90% of its unit sales, declined 21% year over year to 55.8 million units. That’s an alarming rate. Moreover, an IDC survey reveals that smartphone sales will soon exceed feature phone sales, which will further weaken Nokia Corporation (ADR) (NYSE:NOK)’s stronghold. The decline in volume sales hurt revenue. As a result, quarterly revenue fell 32% to 2.9 billion euros.
Nokia Corporation (ADR) (NYSE:NOK) was the global leader until the emergence of Apple Inc. (NASDAQ:AAPL)‘s iPhone and Android-based smartphones. Then the Finnish mobile phone maker wanted to focus on low-cost feature phones. But, Indian and Chinese OEMs have started manufacturing entry-level Android smartphones that are priced so low that customers prefer to go for those smartphones rather than a feature phone.
Nokia Corporation (ADR) (NYSE:NOK)’s Asha lineup is facing direct competition from Samsung’s Rex series that targets the same market segment. Since the Korean electronics giant is far too aggressive with its marketing campaigns, Rex is highly likely to snatch market share from Nokia Corporation (ADR) (NYSE:NOK) Asha.
In the top-end market, the competition is even greater. Apple Inc. (NASDAQ:AAPL) sold 37.4 million iPhones in the January-March quarter of this year, compared to Nokia’s 5.6 million units. Apple Inc. (NASDAQ:AAPL) is rumored to launch low-priced iPhones by the end of this year.
With the launch of the low cost iPhone, Apple Inc. (NASDAQ:AAPL), which has made a name for itself in the high-end gadgets market, should also become popular in the emerging markets as it moves down-market. Available data shows that Apple Inc. (NASDAQ:AAPL) is selling more iPads and iPhones; and business from software and iTunes is still growing rapidly.
Some people are of the belief that with the launch of the low cost iPhone, it would spell trouble for Nokia. This is far from the truth because this launch means brand dilution for Apple Inc. (NASDAQ:AAPL), and as such, an opportunity for Nokia to garner more market share through its premium phones.