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The mobile phone sales slowdown
posted by
Vivek Sharma
19 Apr 2008, 21:14
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labels: companies, telecom, branding/marketing, economy, economic behaviour
I was a bit startled a few months back when I read somewhere that Infosys CEO Kris Gopalakrishnan changes his mobile phone almost every week. That magazine article also mentioned that he shares this habit with his good friend and colleague S D Shibulal, another Infosys co-founder.
Everyone knows that these guys are rich enough to change their mobile phones everyday, or maybe even every hour. But, the Infosys co-founders are known for their relatively frugal lifestyles and this habit was a bit surprising. The bigger puzzle to me was why anyone would ever want to change their mobile handset every other week and go through the hassle of transferring your contact lists, photos, music and whatever else there is in the multi-talented handsets we all carry these days. I can understand teenagers and young professionals changing their phones twice or thrice a year. But, mature corporate leaders in their early fifties?
Later on, I came to know that this is the prevalent behavioural pattern among gizmo-freaks – though one handset a week is quite rare. That is when I realised how Nokia India went from zero to $5 billion in revenues, in less than five years, with very impressive profit margins. The expansion of the mobile subscriber base at the rate of 5-6 million per month brought in the volumes, but it was the gizmo-freaks who flipped their high-end phones very frequently who really buttered Nokia’s bread.
Such good times rarely last very long. As the economy is showing clear signs of a slowdown, the big spenders are not quite sure of their wage increments and bonuses. Unlike earlier, they are thinking twice or even thrice before flashing the plastic to be the proud owner of the most recently launched handset. Major mobile phone retailers in the country have confirmed that there was a drop of 15-20 per cent in high-end phone sales in March – though volumes at the lower ends were steady. This is a global trend as economic growth outlook has weakened considerably.
Nokia officially confirmed the weak trend this week while announcing first quarter results. The company failed to meet profit estimates for the first time in many quarters and lowered its outlook for the rest of the year. Nokia expects average handset price to fall this year, which means weak sales growth for the high-end models. Analysts now expect sales growth of less than 5 per cent for 2008 at Nokia, and the stock crashed 13 per cent.
It appears even the likes of Kris and Shibu cannot help Nokia avoid this slowdown!
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