Nokia succumbs: Samsung likely to be world's largest handset maker in Q1

According to a number of estimates, South Korea's Samsung will sell more handsets--a mix of both smartphones and feature phones--during the first quarter than Nokia (NYSE:NOK) will. If the forecasts are correct, it would mean that Nokia will lose its position as the world's largest maker of mobile devices, a position the Finnish manufacturer has held for more than a dozen years.

Samsung Nokia first quarter mobile phone shipments

Click here for Samsung vs. Nokia shipment figures from asymco

According to Bloomberg estimates, Samsung will ship 92 million mobile phones during the first quarter. A separate report from Reuters pegged Samsung's quarterly shipments at 88 million. Nokia has said it expects to ship around 83 million phones.

Nokia this week warned its non-IFRS Devices & Services to be around negative 3 percent in the first quarter, compared with the previously expected range of "around breakeven, ranging either above or below by approximately 2 percentage points." Meantime, Samsung last week reported an operating profit that exceeded analyst estimates.

"After 14 years as the largest global mobile phone maker, getting knocked off the top spot will come as a bitter blow to Nokia," Ben Wood, head of research at CCS Insight, told Reuters. "In contrast it will be greeted with euphoria by Samsung--they'll be dancing from the boardroom to the factory floor."

The Nokia-Samsung role reversal represents the culmination of years of market upheavals that has left Nokia struggling for relevancy and Samsung reaping in profits from sales of Android smartphones. After stealing the top spot in the world's cell phone market from Motorola, Nokia for years dominated with sales of low-cost phones to emerging markets. But it was the emergence of the touchscreen smartphone that eventually unseated Nokia: The company didn't evolve fast enough with its Symbian and MeeGo smartphone offerings, and around a year ago changed course with the embrace of Microsoft's (NASDAQ:MSFT) Windows Phone platform for all of its high-end phones.

Samsung, meanwhile, sought to compete at every opportunity: on the low end against Nokia, in thin phones during the world's Razr craze, and more recently with high-end touchscreen smartphones. Samsung has effectively managed to carve out a profitable business on sales of its Galaxy-branded Android smartphones.

Summed asymco analyst Horace Dediu: "The bet Nokia made many years ago was that there would be a continuing, substantial business in the 'low end.' And low end meant feature phones. ... In other words, segmentation of customers by their ability to pay for devices rather than categorization of the jobs they hired mobile devices to do. Perhaps Samsung was no wiser, but they were more pragmatic. Being non-dogmatic meant being flexible. They ran with off-the-shelf technologies and managed a transition to smart devices faster than anyone expected. It may not be a perfect strategy but it beat a bad strategy."

And what of Nokia's plans now? The company's situation is dire enough that some analysts are predicting Nokia could spin out its low-end phone business to a Chinese company, and possibly sell a chunk of its patents as well to generate cash for its comeback bid.

"Why not try to sell its mobile-phone business and hence just remain a smart devices company?" Adnaan Ahmad, an analyst at Berenberg Bank, told Bloomberg.

For more:
- see this Bloomberg article
- see this separate Bloomberg article
- see this asymco post
- see this Reuters article

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