Nokia's Latest Results Buck The Trend
Earlier in the week, shares of Motorola took a hit after its profits fell, despite rising revenues and shipments of mobile phones. Motorola’s results reflected how the mobile phone business is changing: as emerging market sales continue to increase, selling prices and profit margins are going to drop. But Nokia’s latest quarterly results came out today, and investors like what they see: the company blew away analyst targets, and actually managed to boost its margins despite growing its sales of low-cost devices. What’s interesting to note is that it said average selling prices of its low-end handsets remained steady, unlike at Motorola where they’d been cut in an attempt to stimulate sales. Nokia’s scale gives it a tremendous advantage in low-end devices, because it can operate at lower costs than other manufacturers. But its strength in high-end devices is what’s currently giving it a leg up on Motorola, whose failure to follow the RAZR with a high-priced success is really showing. Nokia has bucked the trend, but its performance is the exception in this market, as nearly every other vendor (bar Sony Ericsson, with limited low-end and emerging-market devices) is getting dragged down by falling prices and margins. The financial realities of the market may be changing, but as long as Nokia keeps performing like this, investors will be looking down on other handset vendors.