Nokia and Motorola see profits surge

Motorola credited the profit surge to sales of its ultra-thin Razr handset

The mobile phone industry is enjoying a sales surge, with a buoyant Motorola now snapping at the heels of market leader Nokia. 

Nokia's net sales were up 22 per cent to £6.7bn in the second quarter of 2006, compared with £5.5bn in the second quarter of 2005. Upbeat Nokia investors saw their shares go up more than 5.5 per cent.

But the news was even better at Motorola. The US mobile maker's second-quarter profit was £744m, up 48 per cent on a year ago. Revenue was up 29 per cent, far exceeding predictions.

Motorola credited the boost to sales of its ultra-thin Razr handset, which passed the milestone figure of 50 million units since its launch at the end of 2004. 

"Make no mistake about it, Razr has established itself as a brand," said Motorola chief executive Ed Zander. "I believe that it rivals things like Apple's iPod and Microsoft's Xbox 360 as the top consumer electronics brand around the world."

Jusi Hyoty, an analyst at FIM Group, told Reuters: "Motorola is a very tough rival at the moment. It is approaching Nokia, step by step, and that is the problem for Nokia." 

However, Motorola's costs per handset are relatively high. Its margin on mobiles is about 10 per cent, compared with Nokia's 15.2 per cent.

Both companies are bullish about the future of the mobile industry as a whole. Nokia chairman Jorma Ollila said recently that the industry was 20 per cent bigger in the first quarter of 2006 than in 2005.

Another major beneficiary of the growing market is Sony Ericsson, which has increased sales by 33 per cent and now takes the fourth-place spot from LG Electronics. Sony Ericsson now has a seven per cent global market share. 

Mobile sales are particularly buoyant in China, which is now the world's leading market. However, sales in the US and Latin America were disappointing during the quarter, and 3G devices have proved far less popular than predicted.