There is plenty of economic gloom to go around this Thanksgiving, and the cell phone sector is not immune.
This week, Gartner reported that sales during the third quarter increased 6 percent compared with the same period of 2007. Worldwide sales were more than 309 million during the quarter. Gartner said Sony Ericsson (8.1 percent market share), Motorola (8 percent) and LG (7.8 percent) are battling for third place behind Nokia (38.2 percent) and Samsung (17.1 percent). The gain is good news -- a small gain, of course, is better than a loss. However, the growth represents less than half the 16 percent increase between the third quarter of 2006 and 2007.
Separately, Reuters Canada reports that Gartner said cell phone sales could fall as much as 4 percent this year. The dire predictions were enough to send BlackBerry vendor Research in Motion's stock down almost 10 percent on the Toronto Stock Exchange. Company shares, which had traded at more than $150 Canadian four months ago, were at about the $50 mark earlier this week.
Of course, it's not difficult to guess that the bad economy will create problems for the cell phone industry. It will be interesting to see precisely how those issues will manifest themselves. Commentary in the Gartner release says both emerging and mature markets are affected, with replacement phones affected most. In other words, people with no phones are still jumping in, while existing owners are holding onto their devices longer.
The take at Forbes is that phone pricing has transformed into a three-tier system featuring free phones, subsidized smartphones with data plans and a middle ground of subsidized feature phones. These are less well supported by carriers because the popular functions-photo sharing and music-are not as profitable as many of the features smartphones offer. The piece, which features much input from Current Analysis' Avi Greengart, says that the middle-level phone segment is being affected more than smartphones and entry-level phones.
Everyone seems to be on about the same page. Samsung said this week that the market likely is slowing down and might shrink next year. The company will not meet its initial projected growth rate of 9 percent. The piece links to a story that cites similar assessments by Nokia. The writer says the bum economy will shift the focus to less-expensive phones, which will directly affect the bottom line and force reductions in discounts offered on other devices.
More alarms sounded earlier this month in The Washington Post by two Barclays analysts. Jeff Kvaal said cell phone sales next year will decline 5 percent. That's particularly disheartening because it represents an 8 percent retrenchment from his initial estimate of 3 percent growth. The other analyst, Ben Reitzes, said Apple would sell 4.5 million iPhones in the quarter ending in December. Initially, he said that 5 million would be sold.
What remains to be seen, of course, is the impact on the enterprise market. RIM's bad results are one sign that the enterprise is not immune to bad times. The smartphone market will, of course, survive. What remains to be seen is whether decision-makers see enough value in the smartphones to continue investments at near the current pace or if they significantly ratchet down spending as the economic downturn continues.