IDC Comments
by Francisco Jeronimo, Research Manager, European Mobile Devices, IDC EMEA
Palm's acquisition by HP
HP
has agreed to acquire PALM for $1.2 billion. This is a good move for
both companies. HP always struggled to grow its smart phone business
unit because it never knew how to make mobile phones. The iPAQ devices
never were successful, and HP only achieved 0.1% market share in 2009.
On the other hand, PALM developed a good operating system but was
struggling to sell its new WebOS devices, Palm Pre and Palm Pixi,
because money makes the difference at point of sale. PALM's worldwide
market share was 1.5% in 2009. If HP didn't have the right products to
become a smart phone player, Palm didn't have the money to compete with
Apple and RIM in the US market and to make the brand known outside its
home market. This deal takes a good operating system (because that's
what it's all about here) to the right hands and to the next level. In
the short-term, the impact of this deal will be felt in the US market
and Nokia will be one of the most affected players. When a company has
a good product and the money for marketing activities, it creates a
problem for its competitors. With money to invest, Palm will be able to
leverage its brand, broaden its portfolio, and provide carriers with
the money they need to sell devices. The pressure on Nokia will be even
stronger in the US as carriers will be more confident in PALM's future
outlook. Due to the wrong portfolio and a lack of carrier support,
Nokia never moved from its eighth position, with market shares between
2% and 3% in the smart phone segment. This deal also puts pressure on
Motorola and HTC. Again, money brings success if you have the right
product, as PALM has. Motorola and HTC don't have as much money as HP,
and they will feel the pressure in this market.
With a wider portfolio, and the right distribution and marketing
campaigns, PALM will also be able to grow in other regions, such as
Western Europe, where the lack of money and low brand awareness have
been a clear problem getting carriers to launch their devices. Although
the pressure on other players will not be significant.
PALM's survival no longer seems to be a problem, for the time being,
but one question remains: will HP allow PALM to drive the business the
way it wants and back it up with cash? To HP, smart phones are not new
— it always had money, but it never succeed. Will things be different
this time? Yes, if HP takes advantage of the convergence with mobile,
but sticks to the business it knows best — printers.
Some data on the smart phone market:
The US smart phone market grew 35% in 2009 to 46 million units from 34
million units in 2008.
US market shares in 2009 (smart phones only):
RIM 47%
Apple 22%
HTC
7%
Motorola 6%
Palm
5%
Nokia
3%
Samsung 4%
The worldwide smart phone market grew 15% in 2009 to 174 million units
from 151 million units in 2008.
Nokia posts Q1 2010 results
Nokia released its first quarter 2010 results on April 22. Mobile phone
shipments went up 16% year-on-year to 107.8 million units, but declined
15% sequentially. Smartphone volumes and mobile computers went up 57%
to 21.5 million units from 13.7 million units in 1Q2009 and 3% up
sequentially. Traditional phones went up 6.4% to 85.3 million units.
Devices and services net sales increased 8% from previous year. The
average selling price (ASP) declined 7% to €62 from €66 in the previous
quarter.
During the quarter Nokia has benefited from an improvement to the
economic environment and sales results can be considered good, but
below expectations. Despite Nokia's positive growth we need to bear in
mind that last year's first quarter was the worst quarter in the
history of the mobile phone industry with the strongest decline ever.
Therefore Nokia's results are aligned with the expected overall market
growth. However IDC estimates over performances from its direct
competitors, which weakens Nokia's market position. Emerging markets
continue to play an important role on Nokia's growth, but it is in the
mature markets that Nokia continues to struggle against Samsung, RIM
and Apple’s successful devices, with price cutting being the main
strategy to keep sales up.
Particularly important this quarter was the rise in smartphone volumes
with shipments increasing over 50% from previous year, which shows good
improvement in terms of product-mix. The release of the turn-by-turn
navigation for free had a positive impact as well. Although Nokia still
faces a challenge in terms of user experience when it comes to their
smartphones and a new version of Symbian^3 is expected to be released
during the year to overcome the problem. Nokia has traditionally taken
some time to react to new trends. It happened with the clamshell
devices in the past and it has been happening again with the
touchscreen devices. This impacts both traditional phones and
smartphones segments, but it is the former segment that will be the
more affected if the new version of Symbian is launched later than
expected.
Despite the challenges and the strong competition, Nokia showed again
this quarter its strengths and capability to improve results with
higher volumes, higher operating profits, higher operating margins and
higher EPS being delivered from a year ago.
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