A Fair Knock on NOK

More than 80% of TXN revenues come from outside North America, so the numbers give some real insights on the European and Asian consumer electronics outlook. And it is the European handset upgrade market that is now the topic of much debate in the phone industry. The consumer confidence in the two biggest phone markets, Germany and the U.K., has tumbled since the fourth quarter of 2007. A flow of warnings from fashion retailers and consumer electronics outlets in Europe has been steady since February - but mobile operators have continued issuing notably confident guidances. In the meanwhile, something weird is happening with the heart of Nokia's high-end range -- the N-series.

Mind the Gap

Nokia launched two massive high-end hits in the first quarter of 2007: the N-95 and the 6300. One of the biggest surprises of February 2008 is how these two relative old-timers are still dominating Nokia's upgrade sales in key European markets. The autumn Nokia models like 6500 Classic and the N-81 simply haven't clicked with consumers the way their older siblings did. The year-old N-95, its 8 GB memory upgrade and the steeply discounted 6300 are still the lead models for Nokia. The problem with this is that the expected top-up orders for the newer models may not have materialized in the first quarter this year.

It is never a good sign when a brand depends on models launched 12 months ago, but over the past couple of months, Nokia's European model range has remained heavily dependent on leftovers from the first quarter of 2007, now likely sold with big price breaks to leading operators.

The global unit growth of smartphones has been rock-solid over the past four quarters. In 2007, unit volumes of smartphones vaulted effortlessly to 120 million units, and in 2008, that is projected to increase by 30% to 50%. Nokia accounts for more than half of the smartphone demand, and its key models continue to be priced aggressively above 500 euros.

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At time of publication, Kuittinen had no positions in the stocks mentioned, although holdings can change at any time.

Tero Kuittinen is managing director and senior analyst for Avian Securities, a brokerage firm specializing in technology companies. Although Kuittinen is an employee of Avian Securities the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Avian Securities, nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback; click here to send an email.