Finnish handset manufacturer Nokia reported a 7 percent drop in overall revenues and a 20 percent decline from devices and services as sales of its mobile phones took a dive.

The company shipped 34 percent fewer smartphones during the second quarter. The number of smartphones shipped totaled 16.7 million, putting Nokia behind Apple ? which shipped 20.3 million iPhones during the same period   for the first time

?The big news is that Nokia lost the number one share spot in the smartphone space,? said Jagdish Rebello, senior director and principal analyst of communications and consumer electronics at IHS iSuppli, El Segundo, CA. ?This was expected but the speed at which it happened was remarkable.?

The weakest link
As a result, Nokia is now duking it out with Samsung for the number two spot. Samsung said earlier this year that it will surpass its goal of shipping 60 million smartphones this year.

?The question is can Nokia be number two or they going to drop to third place,? Mr. Rebello said.

The problem is that Nokia has not had a strong strategy in place to address the growing uses for smartphones.

?The smartphone business is becoming Nokia?s weakest link,? said David McQueen, principal analyst at Informa Telecoms & Media, Westborough, MA.

?In a time where Symbian models continue to disappoint, Nokia has attempted to position its N9, powered by MeeGo, as a new ?hero? smartphone despite the fact Nokia stated on several occasions that MeeGo was to remain a research platform for future innovation and is not intended for shipping in commercial products,? Mr. McQueen said.

?This clearly indicates the level of desperation of the company in filling the gap left by Symbian?s bad performance and in waiting for WP7 phones to be released in the fourth quarter of 2011,? he said.

Smartphone sales were down 31 percent for the second quarter compared with a 14 percent decline in the first quarter. 

In addition, the company has not moved fast enough to embrace the new Windows Phone 7 platform.

?Nokia really needs to think of a strategy that accelerates Windows in the market or abandon it and get on Android,? Mr. Rebello said.

?The rest of the world is not standing still and the longer Nokia and Microsoft wait the harder it will be to be a player here,? he said.

Mobile strategy
While the company has taken recent moves to address falling sales such as cutting prices on its smartphones this may not be enough.

?The problem also is that the Symbian platform is ageing and so, in developed markets particularly, mobile operators and consumers are no longer picking out a smartphone owing to a brand, they are also now buying into an ecosystem ? Symbian just can?t compete at present with Apple and Android,? Mr. McQueen said.

It is still unclear how Nokia will tackle emerging markets where it still has a strong hold but increasingly has to compete with low-priced Android handsets.

For example, mobile users in Europe are increasingly switching to low-cost Android handsets from Huawei, per Mr. McQueen.

?It will be interesting to note what their strategy is for Symbian in developed and emerging markets, and how they may push S40 devices in markets such as Latin America, Africa and India where they (still) have a strong brand and leading market share to compete against low-cost Android, or they could even slash the prices of its Symbian devices,? Mr. McQueen said.

With Nokia smartphones powered by Windows Phone 7 not expected to be in market before the fourth quarter, it will take the company some time to regain consumer confidence when the new phones finally come out.

?In the meantime Nokia needs to keep a grip of its leadership in the volume, low end mobile phone market, perhaps lead by S40 and dual-SIM devices, and make sure its Symbian devices can compete effectively on lower smartphone price tiers,? Mr. McQueen said.

Final Take
Chantal Tode is assoc. editor on Mobile Marketer