nokialogo.jpg[UPDATED] Sales of Nokia phones in China soared 62% year-on-year to reach 13.8m handsets in the last quarter. But its latest financial results show that profits shrunk as the shift to lower priced handsets in China and other emerging markets ate into margins.

In
Asia Pacific, which excludes China in Nokia's definition, sales rose
slightly faster at 66% to 20.9m handsets. Worldwide sales rose 33%
year-on-year to 88.5m handsets.

In revenue terms, Nokia's handset business grew 14% to €5.9bn in the last quarter but operating profit dropped 11% to €779m.

I
guess you can't have everything, but when even Nokia struggles to make
a consistent profit on its handsets, then I can understand why the
likes of Alcatel, Philips and Siemens have abandoned the business —
see this earlier EngagingChina story.

I
wonder when China's home-grown manufacturers, mostly focussed on the
low-end, will start feeling the same margin pressures and experience
that irresistible urge to go up market — or abandon the mobile phone
business completely.

UPDATE: Scanning through the usual blanket
coverage of Nokia's results by the world's media, the most perceptive
comment, as is often the case, came from the Financial Times' Lex
Column ($):

Nokia
– with volumes almost double its nearest competitor's – appears to
enjoy no relative economies of scale. This is still a growth industry
but returns on capital will not rise with size. As an investment
proposition that is pretty decent: just don't ask what happens when
everyone in China has a phone”

($) subscription required

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