If there was any lingering doubt about the identity of the 600-pound gorilla in the mobile phone market, today’s earnings announcements from three major mobile players out to put those doubts out of mind. Apple Inc. (NASDAQ: AAPL), soon to start selling its iPhone 4 on Verizon Wireless’ network, has cast a giant shadow from which no company seems able to escape. Today’s casualties are Motorola Mobility Holdings, Inc. (NYSE: MMI), AT&T (NYSE: T), and Nokia Corp. (NYSE: NOK). Google Inc. (NASDAQ: GOOG) and its Android operating system may actually come out ahead, but more about that later.
Motorola Mobility, the mobile handset part of the former Motorola Inc., reported fourth quarter non-GAAP EPS of $0.37 on revenue of $3.43 billion. Analysts had been expecting EPS of $0.36 on revenue of $3.4 billion. Not great, but okay. But Motorola admitted that it has seen some weakness in sales of its handsets at Verizon Wireless. The company shipped 4.9 million smartphones in the quarter, while expectations were for shipments of 5 million or more. Average selling prices were also lower as the company shipped more of its cheaper models than it had anticipated. The company also forecast a first-quarter EPS loss of between -$0.09 and -$0.21, compared with analysts expectations of a break-even quarter.
AT&T joined the parade of gloom. AT&T posted EPS, excluding items, of $0.55, compared with EPS estimates of $0.54. Revenue totaled $31.36 billion, compared with estimates of $31.47 billion. The company also added 2.8 million net wireless subscribers in the quarter, to bring the total subscriber base to 95.5 million. The unspoken hit to AT&T’s results comes from the loss of its exclusive right to sell the iPhone.
Nokia posted fourth quarter earnings that were lower than expected as revenue rose. The company posted EPS of $0.22, better than estimates of $0.18, on revenue of about $17.3 billion, also better than estimates of $16.31 billion. Nokia’s problem is that it continues to fail at bringing in a competitive product at the high-end of the market, all the while facing stiffer competition for shrinking margins at the low end.
In an iPhone-less environment, these earnings would have been sufficient. Now, however, with Verizon due to ship the iPhone 4 in just a few days, all the oxygen is being sucked out of the mobile market by the predictions of absolutely huge sales of the iPhone on just the Verizon network alone.
Most estimates of Verizon’s iPhone sales range between 9 and 12 million units. But as The Wall Street Journal’s All Things Digital blog notes this morning, investment firm R.W. Baird & Co. recently conducted a survey of smartphone users that indicates Verizon could sell more than double the high estimate — a fantastical 25 million units.
Google is relatively immune to fluctuations in handset sales, except that it likes to see more units using its operating system get into the marketplace. It doesn’t care if the device is a high-end or mid-range smartphone or about the average selling price or any other hardware issue. Google only cares about numbers, and as smartphone shipments increase, the market for lower-priced models will expand, and Google’s free Android operating system will continue to spread. That wider advertising platform boosts Google’s mobile ad revenue, and that’s where the company makes its money. All the iPhones in the world won’t change that.
Motorola Mobility shares are off more than -9% in early trading, at $31.64. AT&T shares are down more than -3%, to $27.85, and Nokia shares are down about -2%, to $10.53.
Paul Ausick
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