March of the iPhone finds rival mobile giants badly out of tune

By Peter Ranscombe
Published on Friday 27 January 2012 00:00

THE full impact of the success of Apple’s iPhone was laid bare yesterday as three of the world’s biggest technology companies revealed their struggle to compete.

Phone makers NEC and Nokia warned that its global popularity was hitting profits, while video games outfit Nintendo posted its first operating loss as players switch from consoles to mobile games.

News of the trio’s struggles comes just days after Apple posted record quarterly results, with profits up 113 per cent year-on-year to $13.1 billion (£8.3bn).

The firm sold 37 million iPhones worldwide in the run-up to Christmas, boosted by the introduction of its 4S model, along with 15.4 million iPad tablet computers.

Nokia yesterday posted a 73 per cent plunge in profits after the Finnish company’s handsets failed to dent the dominance of the iPhone, despite the switch to Microsoft’s Windows software.

Nokia has sold more than one million Windows “Lumia” phones since the model was launched in November in an attempt to rival Apple and Google’s Android operating system.

Nick Dillon, an analyst at research firm Ovum, said: “It is more than some were expecting, but it’s not going to worry Apple or Google.”

FIM Securities analyst Michael Schroder added: “These are critical times for the future of the company. The next months will be extremely important.”

Rival handset maker NEC unveiled plans to axe 10,000 jobs – about 10 per cent of its workforce – following weak demand for its smartphones amid the popularity of Apple’s brand in NEC’s home market of Japan.

The company also warned that it will make a ¥1.3bn (£829 million) loss for the year to 31 March, tearing up previous predictions for a ¥15bn profit.

About 7,000 of the jobs will be axed in Japan, where NEC has also struggled against foreign competitors entering the domestic IT infrastructure market.

Apple’s dominance of the mobile phone market has also dealt a blow to games console makers such as Nintendo.

The Japanese company – which invented the Super Mario Brothers franchise and has dominated the market with its Wii and 3DS products – warned that it will make a full-year loss of ¥45bn, dwarfing analysts’ estimates of a ¥4.2bn deficit.

Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said: “Their time of growth from consoles is over, and if they don’t move into new categories, they will lose the great scale they’ve amassed.”

As well as the popularity of games played on mobile phones, Nintendo is facing increased competition from social networks such as Facebook and other internet-based entertainment.

Shigeo Sugawara, senior investment manager at Sompo Japan Nipponkoa Asset Management, said: “To say that the days of consoles are over is likely an overstatement, but social network and internet-delivered games are growing and structurally changing the future of the industry, which is a strong wind against Nintendo.”

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