Nokia is still by far the number-one mobile-handset maker in the world, but as competition heats up in the smartphone market, it has become increasingly vulnerable to smaller players such as Apple and Research In Motion, which are increasing market share.
New market-share figures released by Gartner on 11 March indicate that the mighty Nokia is losing market share at the high end to Apple, RIM and HTC. No-one expects Nokia to tumble out of first place anytime soon, but the new competition is putting more pressure on the company to address some nagging issues such as improving its software and finally making its high-end products more available in the North American market.
Nokia has already begun working on each of these issues. In fact, last year it bought out the remaining shares it did not already own in its operating-system provider Symbian, and contributed the software and its Series 60 software to a new open-source group known as the Symbian Foundation. The company has also been manufacturing more of its devices for the North American market, and promises to strike deals with US operators later this year to carry some of its more advanced phones.
But the big question is whether Nokia's efforts will be enough to stave off further market-share erosion, or if the company will slowly lose dominance as others, such as Apple, RIM and the upcoming slew of new Google Android phones and updated Windows Mobile phones, will surge ahead.
Losing market share
The biggest problem Nokia faces right now is that it is losing market share in the fastest growing mobile-handset market, while other players are increasing market share in this category. Market research firms IDC and Gartner have each issued reports noting Nokia's decline. Gartner's smartphone report, which was released on Wednesday, has Nokia's market share dipping from 49.4 percent in 2007 to 43.7 percent in 2008.
The fourth quarter was particularly tough for Nokia, according to Gartner. The firm notes that Nokia's smartphone sales declined by 16.8 per cent compared with the same quarter a year ago. Its share for the fourth quarter dipped to 40.8 percent compared with 50.9 percent for the fourth quarter of 2007.
Nokia vs Apple
IDC, which published its market-share numbers earlier, also has Nokia dropping market share between 2007 and 2008 by at least eight percentage points.
Meanwhile, competitors such as Research in Motion, Apple and HTC — which uses both Google's Android operating system and Microsoft's Windows Mobile operating system — are gaining market share. In fact, RIM has steadily been growing its market share during the past three years. The number-two player worldwide in smartphones, RIM, the maker of the popular BlackBerry phones, saw its market share grow from 7.23 percent in 2006 to 9.86 percent in 2007 to a whopping 15.53 percent in 2008, according to IDC.
Apple has similarly impressive growth rates as its product went from zero market share in 2006 (it didn't even go on sale until the middle of 2007) to 9.02 percent market share in 2008. HTC has also had strong growth, with its products barely ranking in terms of market share in 2006, to gaining 4.79 percent of the market in 2008, according to IDC.
This growth comes as the entire smartphone market has exploded, especially in the US. According to IDC, smartphone sales accounted for 10.3 percent of the total handset market in in the US 2006. In 2008, smartphones made up 22.4 percent of all mobile handset sales sold in the US.
On a worldwide basis, North American smartphone sales are outpacing sales of these devices in other parts of the world, according to Gartner. Smartphone sales during the fourth quarter of 2008 in North America grew 69 percent. Meanwhile other regions such as Asia/Pacific saw modest growth of about 2.3 percent from the fourth quarter in 2007 to 2008. And smartphone sales in Europe, the Middle East and Africa were up by only two percent in the fourth quarter of 2008, compared with the same period last year.
Bucking the trends
Even though Nokia outpaces its competitors in terms of total sales volumes, these trends are problematic for Nokia for two reasons. First, it clearly indicates that while the smartphone market is growing in total, Nokia's chunk of the market is shrinking as competitors gobble up more market share. Second, the market is growing fastest in North America, where Nokia has the least brand recognition and virtually has no presence as a carrier-subsidised contender.
Nokia has also been somewhat slow in recognising the importance of software. Apple's iPhone proved that sleek hardware design is important, but that consumers are most interested in the software that allows them...
