BlackBerry‘s Z10 is selling well, and the U.K. launch of the Q10 received phenomenal response as the device sold out within hours of its release. Samsung’s Galaxy S4 is eagerly anticipated around the world. Thus, Lumia is facing tough competition from every side, which creates an uncertain outlook about the device.
Additionally, BlackBerry has a much stronger distribution network. Even during its initial rollout, Z10’s distribution was at par with iPhones and the Galaxy S3, and far better than the Nokia Lumia 920. Such a strong distribution network indicates that the Canadian company can achieve significantly strong sales figures without the need of a large market share at each carrier.
For example, in the U.S.,Canada, and the top five European countries (Germany,France,Spain, the U.K. and Italy), 23 of the 25 carriers offer Z10. And those 23 carriers have 89% of the total subscribers. In contrast, Nokia Lumia 920 is available on only 14 of the 25 carriers that represent less than 56% of the total subscribers in the above seven countries.
Weak financial position
On April 15, Moody’s downgraded Nokia’s short-term and long-term debt ratings to Baa3 from Baa2, just one notch above the junk territory. The credit rating agency has a negative outlook on the company. Nokia’s 3-year average revenue growth rate is (4.94)%, compared to 39.79% of Apple. EPS growth in the same period was (21.92)% against 69.41% of Apple.
At the end of the first quarter, Nokia’s profit margin was (8.54)%, return on average assets was (4.62)% and return on equity stood at (24)%. All the financial indicators create a gloomy picture for the company. Also working against the company is the fact that it has no products in the rapidly growing tablet market.
Nokia is trying hard to return to profitability, but sustaining in the market remains a big challenge for the company. As its sales continue to shrink, Nokia is expected to become a takeover target. Nokia is betting big on Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone OS. If Microsoft Corporation (NASDAQ:MSFT) thinks that Nokia’s survival is questioned, they may acquire the Finnish phone maker and make it their mobile hardware division. The market is getting more competitive with each passing quarter, so consolidation is highly likely.
The article A Look at the Future of This Distressed Smartphone Maker originally appeared on Fool.com and is written by Naomi Warmate-Igwe.
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