By Marguerite Reardon
Monday, July 21 2008 10:45 AM
URL: http://www.zdnetasia.com/news/communications/0,39044192,62043956,00.htm

Nokia beat sales expectations on its mobile handset business last week when it announced its earnings for the second quarter of 2008.

The Finnish mobile-phone maker sold 122 million mobile phones during the quarter, beating the average analyst forecast of about 120 million phones for the quarter.

As a result, the company increased market share once again, snapping up about 40 percent of the market, up about two percentage points from its second quarter 2007 market share of about 38 percent. This means that roughly one in four handsets sold throughout the world in the second quarter were Nokia handsets.

And Nokia expects to grow handset sales through the rest of this year, predicting about a 10 percent increase in handset volume. This is up from earlier forecasts of between six and seven percent unit growth.

Nokia's increase in mobile handset sales is likely to have come at the expense of some of its competitors, namely Sony Ericsson and Motorola. Sony Ericsson shocked the market in June when it warned that its profits would be down due to slower demand in Europe.

Meanwhile, Motorola, which is in the process of spinning off its handset division, is still struggling to get back on track and is likely to have lost more ground to the dominant Nokia.

Sony Ericsson reported its second quarter results on Friday, while Motorola reports its earnings on 31 July. Other competitors, including LG Electronics and Samsung, will report earnings this week.

The key to Nokia's success appears to be its ability to address developing markets. Countries such as China, India, Russia and Brazil continue to grow, even as sales soften in regions such as Western Europe. The Asia-Pacific region, which includes India, and Latin America saw the biggest growth during the quarter. Nokia shipped 36.4 million handsets to the Asia-Pacific region for an increase of 42.2 percent compared to the same period a year ago. Sales to Latin America were up 39.1 percent.

China, another key market for Nokia, was still up about 11 percent with 17.6 million handsets sold during the quarter, but growth slipped slightly. Meanwhile, Nokia saw sales in Europe remain unchanged from last year's second quarter at 27.1 million. And North American sales were up about 9.8 percent.

Even though Nokia is increasing the volume of phones sold, it's still seeing a decline in the average price of the phones it sells. During the quarter, the average price of a Nokia phone was about 74 euros (US$117.24), down from about 79 euros (US$125.16) during the first quarter.

Nokia plans to announce new, more expensive smartphones later this year that should help boost the average price of its phones. For example, the new N96, a compact follow-on to the successful N95, is expected some time in the third quarter.

Nokia also plans to introduce a range of touchscreen phones that are likely to compete head-to-head with Apple's iPhone. Apple and AT&T stores across the United States have sold out of the new iPhone 3G, as sales of the new iPhone appear to be living up to the hype.

This article was first published as a blog on CNET News.com.