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Nokia sees smartphone share slip

Nokia beats market expectations in Q1, but faces tough competition in smartphones and feature phones

Nokia sees smartphone share slip
Elop said that Nokia has begun execution of its strategy with Microsoft.

Nokia has reported better than expected profits for Q1 2011, although the company saw its share of the smartphone market slip.

The company posted profits of 344m euros, ($501m) for the first quarter, down 1% from 349m euros ($508.6m) a year earlier.

Net sales were up 9% year-on-year, to 10.4bn euros ($15.1bn), but Nokia's market share in the key smartphone sector fell by 4% to 29%, the first time in a decade the company has had less than 30% market share in that segment.

Stephen Elop, CEO of Nokia said: "Following a solid first quarter, we expect a more challenging second quarter. However, we are encouraged by our roadmap of mobile phones and Symbian smartphones, which we will ship through the balance of the year. We are fully focused on delivering the needed accountability, speed and results to positively drive our future financial performance."

Elop also announced that Nokia has finalised its agreement with Microsoft, to jointly develop solutions, and that the company had made good progress in developing the first Nokia handset to run the Windows Phone OS.

"In the first quarter, we shifted from defining our strategy to executing our strategy. On this front, I am pleased to report that we signed our definitive agreement with Microsoft and already our product design and engineering work is well under way," Elop added.

The company warned that the Japan disaster would likely have a negative impact going into the third quarter, with problems around component supply visibility and other logistics disruptions related to suppliers in Japan.

Analyst company IDC said that Nokia was being outperformed in the smartphone segment by competitors such as Samsung, Apple, RIM and HTC, and had significantly lower growth than the 74% year-on-year that IDC estimates for the market in Q4.

IDC also believes that Nokia suffered in the feature phone market, particularly to Samsung. IDC estimates a 32% market share for Nokia, similar to the previous quarter and 2% lower than in the first quarter of 2010, with the gap with Samsung's share now less than 6%. Nokia acknowledged it had lost ground in the dual-SIM sector, where it lacked products.

Francisco Jeronimo, research manager European Mobile Devices said: "These results show that Nokia is still facing strong challenges in both the feature phone and smartphone segments. Nokia is still being affected by the strong Android momentum and popularity in the midtier, and by the high-end iPhone, Research in Motion, HTC, and Samsung devices.

"Moreover, Nokia faces an even bigger challenge over the coming quarters. The new alliance with Microsoft may prove particularly successful in the long term as IDC estimates, but migrating the current Symbian users to a new platform may lead to a significant percentage of the installed base moving to more popular and less expensive devices running Android or mid-tier BlackBerrys," he added.

"The execution of the new strategy will be particularly important to sustain Nokia's market leadership. Nokia needs to deliver the new Windows Phones within estimated and announced timeframes so as not to disappoint the market, as has happened in the past with the improvements announced, but not delivered, to Symbian," Jeronimo said.

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