Nokia (NOK) Forecast, A Killer For Motorola (MOT)

Nokia (NOK) issued its annual forecast. Much of it could be predicted. Smartphone sales will be up. Margins will be OK at about 16%. But, total handset sales will rise only 10% worldwide for the industry next year.

That forecast may be fine for Nokia. It has a market share close to 40% and believes that it can move that up. But, for Motorola, the forecast, if correct, means that a turnaround is almost impossible. Not only is Nokia doing well, but the two other huge handset companies, Samsung and Sony Ericsson, both have been growing faster than the overall market.

The difficulties in Motorola’s handset market share might be offset to some extent if cell phone sales were moving up 15% or 20% as they have in some quarters in the last five years. But, handset penetration is so high in North America and Europe that it drags down the global average.

According to MarketWatch the head of Nokia also believe that his company will be the leader in providing internet-based services to handset: "Nokia’s goal is to be the world No.1 in bringing the Internet to mobile devices. We estimate that in 2010, the total Internet-services market will be approximately 100 billion euros."

Motorola does not have a significant wireless internet initiative. That means it may be left out of the race for all of that money. It is almost certainly creates higher margin revenue than selling handsets. At Nokia, it will probably help keep overall profits relatively high.

But, Motorola doesn’t have the resources to build a news business. It is too busy falling behind.

Douglas A. McIntyre