Nokia yesterday said its new N-Gage games console and mobile phone has been flying off the shelves, with stores running out of stock a week after it was launched.
The world's largest maker of mobile phones is hoping the N-Gage, which allows consumers to play games such as Tomb Raider, will move the business into the fast-growing video games market. It went on sale last week in 30,000 stores across the world and yesterday the company said many outlets sold out on the first day.
But the Finnish company's third-quarter results, released yesterday, showed that the bulk of its sales over the last three months have been of lower-priced handsets as the company battles cut-price Asian manufacturers. Nokia shipped 45.5m phones in the three months to the end of September, up almost a quarter and giving it an estimated 39% share of the global market.
Its overall handset sales were flat at €5.6bn (£3.9bn) and the company warned that this trend is likely to continue for the rest of the year. Nokia makes 80% of its revenue from mobile phones.
Analysts at Banc of America Securities believe the average selling price of Nokia's phones dropped 8% in the quarter, with sales held level only by a reduction in costs which helped push up margins.
"Although currency represented a few points [in the drop in selling prices], poor product mix and pricing pressures led to the decline," the investment bank said.
Dresdner Kleinwort Wasserstein analyst Per Lindberg de scribed the drop in average prices experienced by Nokia as a "colossal erosion" which has pushed Nokia's takings below the average amount made by Motorola on its phones.
Nokia's chief executive, Jorma Ollila, denied it had been forced to cut prices in order to fight off the competition.
Instead, he said, demand for phones from first-time users in the developing world led to an increase in sales of lower-priced handsets. "I do not think there was any undue pressure. What we can see obviously is that the demand of the emerging markets was particularly strong so the share of products on the entry level was a bit higher."
He gave an upbeat assessment of the industry's prospects, saying 460m mobile phones will be sold this year.
Mr Ollila also made positive noises about 2004, when Europe's leading mobile networks will launch their 3G services. "I think it promises to be a year to look forward to for all our industry."
Nokia yesterday reported a third quarter pre-tax profit of €1.2bn, up from €885m a year ago, as its troubled mobile phone networks business which has suffered from declining sales broke back into profit.
