15 June 2004 Nokia, the world’s largest mobile phone manufacturer, has announced plans to cut prices and limit the release of new products in the next two quarters in an attempt to arrest its declining sales and market share.
Nokia CEO Jorma Ollila unveiled the strategic shift yesterday at the annual Nokia Connection Conference: “Our strategy remains the same, with some shifts in timings and focus and a pruning of our portfolio. We have even killed some product lines.”
Nokia’s strategy of relentless product releases helped it pummel slower moving competitors in the 1990s to become the runaway market leader in the mobile phone handset market. At the same time, it is also one of the world’s biggest suppliers of telecoms infrastructure products.
But according to analyst group Gartner, Nokia’s share of the mobile phone handset market fell sharply in the first quarter of 2004, from 38% to around 29%.
Ollila was reticent about disclosing forecasts for the remaining quarters of the year. But he said that a market share of 40%, which was predicted by analysts earlier this year, was an optimistic target to aim towards, although the results for the second, third and fourth quarters of this year would speak for themselves. He added: “We are working very hard and I’m sure the results will be there.”
As part of the recovery plan, Nokia will scale down its new mobile phone range from 40 to 35 for the remainder of 2004. Ollila also acknowledged that the company was reducing its margins on certain handsets, but denied that there was a price war developing. He commented that the reduction would simply give Nokia “a better traction within the market place.”
Ollila forecast that growing markets in China, India, Brazil and Russia would help keep the company financially buoyant and has revised forecasts for the global market to 600 million units this year. A total of 141 million mobile phones were sold in the first quarter.
At the conference on Monday, the Finnish company also announced the release of five new mobile phone models. In direct response to customer, investor and analyst demands, three of the products were in the ‘clamshell’ design, an area that Nokia has neglected. In addition, Nokia unveiled the world’s smallest third-generation (3G) phone; it’s third. Ollila says Nokia has evidence that 2004 will mark the start of 3G services for the mass market.
Juha Putkiranta, senior vice president in the multimedia division, also said Nokia would seek a dominant position in the smartphones market. These mobile phones offer limited computer functions such as email. He forecast that smartphones will soon replace handheld computers.
Although its share has fallen, Nokia still outsells its closest competitor, Motorola, by almost two-to-one.