Statistically Positive, Analysts' Cell Phone Wraps Not All Good News

Carl Weinschenk

For vendors, the good and bad news is very clearly delineated in several recent reports on cell phone sales.

 

The good news is that overall cell phone sales are up. Strategy Analytics reports that sales grew 14 percent in the first quarter compared to the year-ago quarter. The raw numbers are 282 million phones shipped in 2008 compared to 247.2 million last year. The bad news for the industry is that the increase is largely in phones sold into emerging markets. Higher-priced, value-based phones sold in Japan, North America and Western Europe "took a hit," according to an analyst quoted at Red Herring.

 

The beneficiaries of the trends were LG and Samsung, while Motorola, Apple and Sony Ericsson had poor results.

 

The biggest loser was Motorola. The company, which is preparing to split into two units, saw a 39 percent drop in cell phone sales compared to last year's first quarter. The company did report that it expects flat or slightly higher sales in the next quarter. Motorola has seen its market share decline from 17.5 percent to 9.5 percent in a year, leading analysts to raise the possibility that it could lose the third overall spot to LG. Nokia and Samsung are first and second in the sector.

 

IDC's cell phone report, which also were reported this week, largely concurred with Strategy Analytics' take. The firm said sales were down from the previous holiday quarter -- a dip is usual -- but up from the first quarter of 2007. The firm said that during the first quarter of 2008, companies shipped 291.6 million units, which was 11.6 percent less than the 330.8 million shipped during the last quarter of 2007. It was, however, 14.3 percent more than the 255 million shipped a year ago.


 

IDC clearly is concerned about the economy, but says that competitive pricing and innovative service plans will enable the market to continue. The company also pointed to strength in developing countries.

 

The issues for the next year are summed up nicely in this report on Gartner's look at the market, which identified the same dynamic as the other two firms. The company said that more than 1 billion phones were sold last year. Another interesting round number was the 40 percent market share the company achieved during the quarter. To maintain this momentum, Gartner says, Nokia must improve its results in North America. That just may happen, as the success of the iPhone primes the market for Nokia's high end N-series and Verizon's pledge to open its network may let it move more units.

 

The key going into the next year is what constitutes healthy results and what constitutes a slowdown. The issue is brought up in this posting at Seeking Alpha, which looks at the issue through the prism of Texas Instrument's reduced revenues.

 

The big questions are whether, and to what extent, the recession will impact the sector's fate. It seems that a cell phone slowdown has begun. How will it affect the financing of the build out of the spectrum won at the recently concluded 700 MHz spectrum auction? Will the cold feet the WiMax industry has suffered during the past year freeze completely? Hopefully, the economy will unexpectedly improve and these and myriad other questions will be put on the shelf. The likelihood is, however, that answers -- some of which will be unpleasant -- are set to emerge by the next set of quarterly analysts' reports.



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