Nokia Q4 phone sales climb, gain U.S. share

Nokia produced another record three months of handset sales in the fourth quarter, taking a third of a global cell phone market that surged upwards an astounding 24% in 2005.

Nokia shipped 84 million handsets in the fourth quarter, an increase of 26% over the third quarter and 27% year-over-year. Though its growth was impressive, Nokia was just barely able to keep ahead of overall growth in the global market. Nokia estimated 244 million units were shipped worldwide in those three months, an increase of 25% year-over-year, due mainly to skyrocketing sales of low-end devices in emerging markets such as India. Due to those cheaper devices, revenues didn't boom quite so much as unit sales. Nokia drew euro 6.22 billion (U.S. $7.61 billion), only a 6% increase year-over-year. Nokia maintained its global fourth-quarter market share of 34%, and it managed to increase that share 1% over the third quarter.

Meanwhile, Nokia's nearest competitor, Motorola, managed to close the significant market share gap between the two companies a little further, announcing last week a 40% increase in phone shipments year-over-year, compared to Nokia's 25%. But while much of Nokia's growth was driven by low-end handset sales, Motorola's growth was buttressed by sales of the high-end RAZR line. The average selling price for a Nokia phone fell to 99 euros (U.S. $121) from 102 euros in the third quarter and 111 euros last year. According to Telecom Trends International global, Nokia had a 2005 global market share of 33.3% compared to Motorola's 18.3% and Samsung's 12.9%.

Nokia, however, made gains in Motorola's traditional territory. Its market share in North America increased to 20% off 9.8 million GSM and new CDMA phone sales. But Nokia's biggest growth regions were in Asia. Handset sales in China increased 64% year-over-year in China to 9.5 million, making it a market equal to North America. In the rest of the Asia Pacific region, Nokia shipped 14.8 million handsets, an increase of 42%. Nokia also had significant gains in its home territory, Europe. Unit sales increased 23% there driven by newer 3G phones.

Chairman and CEO Jorma Ollila said Nokia tripled its market share for Wideband CDMA phones, higher-cost and higher margin devices Nokia is counting on to balance out its portfolio in coming years. Ollila said 16 million handsets were shipped globally in Q4, an increase of 45% quarter-over-quarter. Furthermore, Ollila said he expects overall industry annual sales of W-CDMA handsets to double to 88 million in 2006.

"This is not a one off," Ollila said at the company's earnings call. "We are well-placed to continue that momentum based on our discussions with carriers both in GSM and wideband CDMA."

Financially Nokia hit its targets, recording euro 10.3 billion (U.S. $12.6 billion) in total Q4 revenues, a 9% increase year-over-year. Its net profit declined 1% to euro 1.1 billion (U.S. $1.3 billion), which was within Nokia's projections but lower than some analysts expected. Ollila said overall Nokia had a "really respectable quarter" that Nokia would capitalize on further in 2006. But Nokia also projected that despite increased 3G handset and smartphone sales, average handset prices would continue to decline.

Nokia's networks division also continued to suffer. Sales fell 4% to Euro 1.95 billion (U.S. $2.39 billion), leading to a 12% decline in operating profits to Euro 268 million (U.S. $328 million). Nokia said network infrastructure sales in North America and China are on the decline, but those losses were offset by increased sales in Latin America. Its other markets remained virtually unchanged.