As the economy has improved, consumer and business spending on communications has increased. Furthermore, spending on higher-end communications devices, such as smartphones and tablet PCs, are driving the market’s expansion, as consumers look to purchase the “latest and greatest” technology. Businesses are also spending money on communications technology, including faster and more powerful commercial-grade communications equipment. Municipalities, slowly recovering from the 2008 recession, are also slowly increasing expenditures.
Pricing pressure remains strong due to advances in manufacturing technology which continue to drive down the cost of production. Manufacturers are attempting to keep costs down through more efficient manufacturing and automation and an increasing use of offshore manufacturing capabilities. At the same time, as the price of communications equipment falls, consumers in developing and emerging markets are able to purchase these products, helping to drive sales growth beyond traditional markets.
Networking has been a high-growth area for the computing industry, as both businesses and consumers look to access and function through these channels. The ability to connect communications devices of all types is increasingly important, as consumers and businesses now expect each device to be able to share data now stored in the “cloud”. As a result, even low-cost communications equipment is now equipped with basic wireless or wired networking technology, including Wi-Fi modules or Ethernet ports.1
The worldwide smartphone market reached a new high in Q2’14, moving past the 300 million unit mark for the first time. Vendors shipped a total of 301.3 million smartphones worldwide in Q2’14, up 25% from the 240.5 million units shipped in Q2’13.
The dominant smartphone operating systems, Android and iOS, saw their combined market share swell to 96.4% in the second quarter, leaving little space for competitors. Android was the primary driver with its vendor partners shipping a total of 255.3 million Android-based smartphones in Q2’14, up 33.3% year over year. Meanwhile, iOS saw its market share decline despite posting 12.7% year-over-year shipment growth. 2
Motorola Solutions’ sales declined 7% to US$1.4bn primarily reflecting lower sales in North America as well as in Asia Pacific and the Middle East. Europe, Africa and Latin America sales saw double-digit growth. Product sales declined 10% driven primarily by lower subscriber and systems revenues, while services declined 1%. Gross margins also improved versus 2013 primarily due to cost-reduction initiatives. However, net income declined 70% year over year due to a prior year US$59mn tax benefit.
Nokia completed the sale of its Devices & Services business to Microsoft on April 25, 2014. The transaction also included an agreement to license patents to Microsoft. In connection with the close, Nokia repaid approximately EUR1.5bn convertible bonds issued by Nokia to Microsoft.