Nokia: Market Share is More Important than Profit

Nokia’s financial figures for the third quarter of 2006 are out now and it is found that Nokia is doing great as far as mobile phone sales are concerned. Nokia is the market leader now in the cell phone handset industry. Now, out of 3 cell phones sold in the world, Nokia has one and in some countries, this proportion is even 1 out of 2.

Nokia decision makers want to capture more market share no matter what the price is. Well, the price for capturing market share is perhaps too much than most people thought.

Nokia is increasing its sales by cutting prices on its products. Thus, although sales increased significantly, profits reduced sharply. As a result, Nokia shares have fallen down. Monsters and Critics reported

The Finnish-based group reported turnover of 10.1 billion euros (12.6 billion dollars), compared to 8.4 billion euros for the corresponding business period 2005. Nokia’s share of the global handset market was 36 per cent, up from 34 per cent in second quarter 2006. In third quarter 2005, the group had a 33 per cent share of the handset market. In all, the group said it sold 88.5 million units during July to September. Net profits dropped 4 per cent to 845 million euros (1.05 billion dollars), compared to 881 million euros for third quarter 2005.

So, Nokia sold nearly 90 million sets (88.5 million) in just 3 months. It is quite impressive. I feel that Nokia has taken a very smart strategy. If it can afford to continue this strategy of gaining more market share then it will become the Google of cell phone industry. Google just captured search engine market first and now it is earning a lot of money from the advertisers. If Nokia can capture more than 50% of the market share then it will be in a position to exert its influence in the cell phone industry more and earn more money. Of course, I am not sure if Nokia can afford to continue this way of selling more but making less profit.