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Is North America Irrelevant to Nokia Success?

ABI Research estimates that 263.8 million mobile handsets were shipped in 2Q 2007, a year-over-year quarterly increase of 13 percent.

"A 13 percent increase is hardly stellar," says Jake Saunders, vice president at ABI Research, "but it does pay the handset vendor's bills. The second half of the year should prove more robust, ending the year with 15 percent YoY growth at 1.13 billion."

"More dramatic was Nokia's continued consolidation of the handset market," adds wireless research director Stuart Carlaw. "Nokia's market share grew by 1.4 percent to 37.3 percent in the second quarter, the largest increase in market share of all the vendors."

LG and Sony Ericsson also made respectable gains of 0.8 percent and 0.6 percent. Samsung's market share increase was more muted. Since Motorola has retrenched from emerging markets, and is still in the process of revamping its handset portfolio, it should not come as too much of a surprise that Motorola's handset market share shrank to 13.1 percent compared to 17.1 percent in 1Q 2007. It was only two quarters ago that Motorola's market share was 22.1 percent.

The vacuum created by Motorola's loss of market share is creating opportunities for other vendors. Samsung and LG have announced their intentions to penetrate the Indian, Chinese, and Southeast Asian markets. Other vendors are expanding their presences outside their core markets.

Research In Motion reported that 30 percent of its BlackBerry subscribers are now based outside North America. Similarly Sony Ericsson has been able to harness its Cybershot (camera-centric) and Walkman (media-centric) handsets to expand its presence well beyond Europe.

Nokia managed to maintain its handset average selling price (EUR 90 vs EUR 89) through the introduction of a number of mid to high end handset models. In contrast, most other vendors experienced heavy declines in their average sales price.

That said, North America has definitely not been a growth market for Nokia. Despite a number of initiatives by Nokia senior management to bolster its presence in the North American market, handset shipments shrank further, from 4.8 to 4.1 million in 2Q-2007.

While Apple's iPhone is not going to alter the North American competitive landscape radically in the foreseeable future, ABI believes that Nokia's perceived weakness in the CDMA handset market, the iPhone, and a number of other smartphone vendors, such as RIM, are curbing Nokia's traction in the North American market.

However, given the restrictive business practices of the U.S. mobile service providers and the under-performing track record for value-added service growth, I'm wondering if the North American market will become less meaningful to Nokia's forward-looking performance.

More open markets in other parts of the world will likely continue to be more attractive to Nokia, and the other leading handset manufacturers. Moreover, Qualcomm's growing troubles has ensured that the CDMA handset market growth potential will become less important -- as a component of the overall global market opportunity.

Therefore, perhaps the ultimate question needs to be asked -- is the North American market opportunity irrelevant to Nokia's continued success?

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