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1/27/2011
10:51 AM
Eric Zeman
Eric Zeman
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Motorola, Nokia Q4 Results Underscore Need For Innovation

Apple's iPhone has snagged market share from both handset makers, a movement that Verizon's addition of the smartphone is likely to exacerbate.

In its fourth quarter results, Nokia CEO Stephen Elop said, “Nokia faces some significant challenges in our competitiveness and our execution. In short, the industry changed, and now it's time for Nokia to change faster."

Motorola Mobility CEO Sanjay Jha had similar words in its fourth quarter reports, “We have seen some slowdown as a result of the [iPhone] announcement at Verizon.”

Nokia managed to ship more than 5 million N8s and other Symbian^3 smartphones during the quarter. It shipped 28.3 million smartphones altogether, though the average selling price dropped by about 16%. Yearly total device sales were 123.7 million, down a bit from 2009.

Motorola said it shipped 4.9 million Android smartphones last quarter, which was short of analyst expectations. It shipped a total of 13.7 million smartphones for the year and 37.3 million handsets in sum.

While both companies managed to do fairly well financially in their respective fourth quarters, the problem is their outlook for 2011. Nokia forecast device sales of between $9.35 billion and $10.04 billion in the first quarter, down from $11.69 billion in the fourth quarter. Motorola said it expects to see a loss in the fourth quarter between $26 million and $62 million, and it hopes to sell between 20 and 25 million Android smartphones and tablets for the year. The share prices of both companies fell in trading today.

By way of comparison, Apple sold more than 16 million iPhones in its most recent quarter, and more than 14 million iPhones in the previous quarter. Apple’s iPhone is a thorn in the side of both Motorola and Nokia, though for somewhat different reasons.

Starting with the smash-hit success of the Motorola Droid, Motorola has been seen as the come-back kid. Nearly destroyed by poor sales in 2007 and 2008, it took on a new CEO, a new focus on Android smartphones, and has revived itself to a degree. Much of that success can be attributed to its successful line of devices being sold with partner Verizon Wireless. Now that the iPhone will be available from Verizon Wireless, Motorola is already seeing a slow-down of Android sales through Verizon. The company desperately needs to extend its high-end devices to other carriers. Smartphones such as the Atrix 4G for AT&T, announced during CES, might help it do just that.

For Nokia, the iPhone has essentially killed off its smartphone hopes in the U.S. market, and has serious curtailed Nokia’s global share of the smartphone market. In 2007, Nokia held 78% of the world’s smartphones with its S60 operating system. Today, the number is less than half that at 31%. (Android’s surge to 300,000 handsets sold per day hasn’t helped Nokia, either.)

Both companies face major challenges in the months and year ahead. Rather than be out-innovated by the competition, they need to be the ones doing the out-innovating. Motorola has done a good job turning itself around from the brink of failure. It needs to keep that momentum moving forward and work harder to create cutting edge hardware. Nokia needs to get on stable ground before it can regain its momentum. A hit phone wouldn’t hurt, either.

Motorola and Nokia may be down, but they’re not out of the game. Not by a long shot.

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