Welcome to the all-new Telco 2.0 weekly update relating to financial wheeling and dealing in the TMT sector
around a specific topic each week. Our aim is not to regurgitate
earnings releases amply covered elsewhere, but to look at the financial
world through the Telco 2.0 telescope. This week we look at the latest
batch of results and data around handsets.
Apple Advancing
Apple released its 1st Quarter results
to a rather mixed review and we’re much of the same opinion. The good
news was that core business of Mac PCs and laptopsgained market share
and produced a mind bending 35% growth in both units and revenues -
amazing growth for such a mature product in a mature market. Obviously,
there is a feel good factor happening from their music business.
iPod unit sales have stalled at 10.6m units for the quarter. iPod
revenue is slightly up, but that is more because of the introduction of
the high-end Touch. The big question is now whether the cellular
handset market will destroy the music player market in much the way as
its destroyed the stand-alone PDA market before it.
We believe Apple’s hedge against this is the iPhone, which shipped
1.7m devices in the quarter. This compares against Nokia’s industry
estimate of 295m shipped in the global market for the quarter. Press
gossip is that the European business model of a share of revenues in
exchange for exclusivity in going away. Either way, the pricing
arbitragers (aka box-breakers) of the mobile industry will ensure
pricing is consistent across Europe.
SonyEricsson Sloth
A veteran of the industry, SonyEricsson, reported a much harder time
with quarter-on-quarter revenue drop of 8% to €2.7bn and a staggering
48% drop in profits. SonyEricsson reported that at the top end there is
a slowdown in demand. Whether this is consumer or operator led, it must
be worrying to the whole of the handset industry. Still they managed to
shift 9m Walkman phones in the quarter out of a total of 22.3m.
Interesting to us is SonyEricsson’s first foray into the Windows
Mobile world with the forthcoming launch of the Xperia range. Will a
change in operating system also invoke a new baseband supplier?
Motorola Misery
Nobody should be surprised with another set of appalling results
from the Motorola handset division. Sales had dropped an incredible 39%
year-on-year to US$3.3bn with US$418m of operating losses and only
shipping 27.4m handsets. Global market share is now below 10%. Compare
this to Q1 of 2006, when Motorola were at the peak of their powers with
46.1m handsets shipped for a 21% share of the global market.
Keen Koreans
In direct contrast both the Korean manufacturers, Samsung and LG seem to continue winning overall market share. Samsung unit sales were up 33% to 46.3m units with a reasonable ASP of US$141, which compares favourably to the Nokia figure of US$123 (€79). LG had smaller growth
in unit volumes to 24.4m, but is now ahead of SonyEricsson in the unit
stakes, although still trails them in revenue terms (approx US$3bn vs
US$4.2bn)
Corporate Credentials
HTC & Microsoft look like to have hit a home run in the corporate market: HTC did 9,918k units in 2007 at a huge ASP of US$375. For comparison in the 12-months to Feb 2008, RIM and its Blackberries shipped 13.8m units , the ASP being US$346. It is interesting that RIM reported
US$860.6m of service revenue, which as far as we are concerned is all
at risk over the next couple of years as messaging charges becomes
included in the general data bundle. It will be hard for RIM to compete with Microsoft if it keeps charging for push-email.
Japanese Jujitsu
The most interesting handset market remains Japan, where the local
players dominate over international manufacturers by working closely
with operator specifications. MMRI have released the latest market data
for 2007 showing Sharp leading with 12.76m shipped out of a total for
Japan of 51m. Sharp is followed by Panasonic, Fujitsu, Toshiba and NEC, before a global player (SonyEricsson) makes an appearance.
The Japanese market only represents around 3% of the total global
market of around 1.15bn and yet local players have managed to carve out
a profitable niche.
Fuzzy Future
The future is always difficult to predict and there is no certainty
that the current status quo will remain especially as we enter a
turbulent period with new generation of wireless standards being
developed. Operators, such as Vodafone, are looking closely at
self-branded phones. New entrants such as Apple and Garmin are
arriving, whilst old players such as Motorola are imploding.
Watch out for further splintering of the market as the traditional IPR barriers
to entry become less important compared to targetting specific market
niches. The days of vertical end-to-end control of the value chain by
the handset manufacturers seem to be over for everyone bar Nokia.
We live in interesting times...
This Blog is republished from
www.Telco2.net/blog. The Telco 2.0 Initiative is a new industry program focused on helping with this thorny question: "How do we (telcos, handset manufacturers, Media companies, IT players, NEPs, etc) make money in an IP-based world?"