Carburton Street, London -- Within the space of ten years, the mobile telephone handset industry has moved from a growth phase to a maturity phase. This maturity stage is likely to persist for a little while longer before it starts to slip into the decline phase.
Product maturity is characterised by a saturation of users. Manufacturers will therefore rely on repeat purchases by satisfied customers to maintain sales. Dissatisfied users will clearly switch to alternative suppliers. The various players within a mature industry will also compete to maintain their share of the market and weaker players will find it increasingly difficult to capture additional market share. This is likely to prompt many of the companies involved to address their costs. Some may even contemplate withdrawing from a saturated market altogether.
The slowdown in the rate of sales growth of mobile handsets has created overcapacity within the industry. This oversupply has led to severe competition between the many of the players, which is often manifested as price reductions or discounts in order to clear excess inventory. Nokia (LSE: NOK), the current market leader in the mobile handset market, has so far been able to avoid severe price discounting by improving its product offering, sharpening product awareness and enhancing customer focus.
These marketing tactics have helped the Finnish telecom company weather the technology downturn. Yesterday, the company reaffirmed its earnings and sales guidance for 2002. Nokia expects to deliver a 15% sales improvement for the full year, helped by a 25% to 35% revenue boost in the fourth quarter, which includes the all-important Christmas season. Nokia's dominance of the mobile handset market will stand it in good stead when the next generation 3G phones make their way into our lives. But valued at a forward price to earnings ratio of 38, there is simply no room for Nokia to disappoint.
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