Low-End Line Holds at Nokia

The Asian low-end market has been the graveyard of non-Finnish handset ambition for a decade. From Philips to Matsushita to Ericsson (ERIC Quote), this product sector has helped bury the global ambitions of phone divisions since the mid-'90s.

It will be extremely interesting to see whether Motorola truly intends to go ahead with a full-frontal attack on Nokia in the sub-$80 segment in developing markets in 2007. If Nokia really can deliver an overall ASP below $90 with these kinds of operating margins, what will happen if it actually decides to get aggressive?

Bitter Top Notes

The high-end market is a bit of a disaster zone right now. We've gotten negative comments about the handset mix, slanting surprisingly steeply toward cheaper models, from Motorola. Nokia is now delivering some fairly alarming signs about the same issue.

First, Nokia's fourth-quarter North American mobile-device volume tanked to 5.9 million from 9.8 million a year earlier. This happened after an ambitious launch of the E-62 last summer and some nifty business models for Cingular, which had a gangbuster quarter in subscriber additions.

The interest in Nokia's email campaign in the U.S. market seems to be roughly zilch. Judging from Motorola's sudden silence regarding its rival model, the Motorola Q, consumer demand for email phones may be much more tepid than expected. This is a problem, because mobile email was supposed to be a major driver for midrange upgrade sales in 2007.

Second, enterprise-device sales grew 99% to 305 million euros, and multimedia device sales grew 6% to 2.14 billion euros. Both units look softer than expected. Enterprise-sales growth should be well into triple digits; several key E-series models launched last summer. Multimedia sales growth should have remained in double digits.

There's the usual defense of delayed launches, but I'm not buying it. There are enough enterprise and multimedia models out there to gauge consumer interest, and something is not clicking. It's just strange that the division saturated with low-end phones is now showing twice the sales growth as the multimedia division, with its new product concepts and widening W-CDMA portfolio.