The mobile phone market slowed dramatically in recent weeks, according to the world's largest handset manufacturer, Nokia, as cash-strapped consumers cut their spending.
Nokia, which makes four out of every 10 mobiles sold worldwide, is looking to slash costs in its mobile phone division by more than €700m (£660m) by the end of 2010 as it struggles to maintain its dominance in the face of aggressive price competition from its rivals.
Announcing worse than expected results today, Nokia dropped its forecast for the number of phones the industry will sell in 2009 for the second time in seven weeks. The Finnish company reckons the handset market will be down 10% in 2009, to just over a billion phones. In early December, Nokia said the mobile phone market would decline by 5%, having initially warned that growth had stalled on 14 November.
Nokia made an operating profit of €492m for the fourth quarter of 2008, down 80%, with sales of €12.7bn, down 19% year on year.
"In recent weeks, the macroeconomic environment has deteriorated rapidly," confirmed president and chief executive Olli-Pekka Kallasvuo, "with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry."
The slowdown is being felt across the industry, with Motorola and Sony Ericsson having recently announced quarterly losses. Even Apple has seen sales of its iPhone slow in recent weeks. It sold 4.3m in the last quarter of 2008, when analysts had been expecting 5m. But over the year as a whole, Apple sold 13.7m, better than its 10m target, although that was always seen as rather conservative.
Nokia, however, does appear to have been losing market share. It estimates that the entire industry shipped 305m phones in the last three months of 2008, down 9% on the previous year and 2% lower than the third quarter of 2008. But it shipped 113.1m phones, down 15% year on year and down 4% on the previous quarter. Instead of grabbing 40% of the market as it had done in the fourth quarter of 2007, Nokia had 37% in the last three months of 2008.
In an attempt to drum up trade the firm has been discounting the price of handsets, hurting its profits. Margins have also been hit by a higher proportion of sales of cheap lower-margin devices in the fourth quarter of the year.
