By ReutersInformationWeek
Nokia invested "hundreds of millions of euros" in services
such as mobile music and video downloads in 2007 with an aim to
gain a competitive edge against rivals but it warned that it does
not expect see a big pay-back any time soon.
"We're going to continue to invest at that rate or more as we
are in investment mode in 2008 and 2009. We look for 2010 to start
to see where you go from investment mode ... to getting more out
than you're putting in," Simonson told the Reuters Global
Technology, Media and Telecoms Summit in New York.
Services represented only about 84 million euro revenue ($130
million) for Nokia in the first quarter out of total company net
sales of 12.66 billion euro.
"We've got to get somewhere into the billions in terms of top
line revenue to make this relevant," Simonson said, referring to
the services business.
Asked about Nokia's appetite for acquisitions, Simonson
declined to give specific plans but said that software and
services was where the company was focused as it already has a
strong mobile devices business.
The executive also said Nokia, which leads the global phone
market with a 40% share, was looking to profitably improve
market share on a phone volume and value basis in the global phone
market in 2008.
U.S. BOOST IN A YEAR
But while the company has done well globally, its market share
in North America dropped to 9% at the end of 2007, a year
when U.S. market leader Motorola Inc struggled hugely.
Nokia hopes it can reverse its U.S. fortunes with
custom-designed phones for U.S. operators such as AT&T
and Verizon Wireless, owned by Verizon Communications and
Vodafone Group.
"We have to have double-digit market share to be relevant in
the U.S.," Simonson said, adding that he expects this to happen by
the second quarter of 2009.
"Anything short of that would not be a success," he said.
While Simonson declined to give an update on how economic
conditions were impacting consumer demand, he said growth was
strong for high-end phones and for low-end phones used by
first-time subscribers in emerging markets.
Simonson also said high-end phones that support everything
from e-mail and Web surfing to music and video were growing faster
than overall phone unit sales, which Nokia has forecast to grow at
a 10% rate from 2007.
He said the smartphone market would grow about 50% to
up to 180 million units in 2008, from 120 million in 2007.
"Maybe its 50 or 55 or 45%. Who knows ... That market
is growing at a fast pace compared to the overall market. I don't
see that changing," he said.
Nokia competes with Apple and Research in Motion
as well as Samsung Electronics and LG
Electronics in high-end phones.
Noting that rivals Motorola and LG Sony Ericsson have global
market shares below 10%, Simonson said it was "very
difficult" for them to compete at those levels.
"To play globally and to play across the various markets, I
think it's difficult and unsustainable if you're not at this 15
% and above scale," he said, noting that scale helps in
sales and marketing as well as research and development.
Nokia's U.S. shares were up 2.9% to $30.01 in afternoon
trading on the New York Stock Exchange.
(For summit blog: http://summitnotebook.reuters/)
(For more on the Reuters Global Technology, Media and Telecoms
Summits see [ID:nL1919425]
(Additional reporting by Ritsuko Ando and Tarmo Virki in Paris;
editing by Tim Dobbyn, Phil Berlowitz)
By: Sinead Carew
Copyright 2008 Reuters. See original article on InformationWeek
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