Global mobile phone sales slide 15.8% in 1st quarter

MANILA, Philippines – The worldwide mobile phone market started 2009 with an expected sequential downturn, exacerbated by the challenges of the worldwide recession.

According to research firm International Data Corp. (IDC), vendors shipped a total of 244.8 million units in the first quarter of 2009, 15.8 percent lower than the 290.8 million units shipped during the same period in 2008.

The first quarter of a new year is typically characterized by seasonally lower shipment volumes following a busy holiday quarter with channels clearing out excess inventory. However, IDC noted that the first quarter 2009 decline was especially sharp due to weak end-user demand, currency volatility and lack of credit for merchants as consumers and the supply chain adapt to the recession.

“That the worldwide mobile phone market started off 2009 with a year-over-year decline highlights just how much the economic recession has affected all industries, including the wireless market,” IDC senior research analyst Ramon Llamas said.

He added that the market continues to adapt to the new economic reality with both vendors and retailers exercising caution to remain profitable.

“In some cases, this has meant holding less inventory, or even reducing headcount. Fortunately, new features and demand for phones will help the market resist the financial pressure. We expect to see further year-over-year declines worldwide, even as some regions show signs of improvement,” he pointed out.

As the overall market dropped 15.8 percent, converged mobile devices (smartphones) continued to grow year-on-year at four percent. Growth within this segment was evident in Western Europe, North America and Asia Pacific (excluding Japan). “Creativity appears to be the key to success for large mobile operators during this tough time as changes to business practices from past years have become necessary,” according to Ryan Reith, senior research analyst with IDC’s Mobile Phone Tracker

“Some of the big operators in mature markets have shifted product portfolios, and some have smartphones accounting for as much as 50 percent of the entire handset offering. We believe this strategy will continue, along with an increase in devices that are media and messaging centric, to help operators maintain revenues.”

Finnish phone giant Nokia saw its shipment volumes dip below the 100-million unit mark for the first time in two years. Despite these challenges, Nokia posted a healthy 33.8 percent gross margin on its devices and services, with success coming from the 5800 XpressMusic device as well as the launch of several services including Comes With Music, Nokia Messaging, Ovi Store, and Point and Find.

Korea’s Samsung returned to double-digit profitability to start the year, resulting from improved operating efficiencies and a favorable product mix for the quarter. Its strong position in feature phones sustained interest during an otherwise quiet quarter, with touch devices like the F480 and messaging devices like the A767. Samsung also recently announced its first Android-powered device, the i7500, due to hit the European market in June.

Another Korean maker, LG Electronics began the year on a positive note, posting an increase in operating margins despite a year-over-year decrease in shipment volumes.

Driving its improvement was a combination of cost, supply chain, and operational efficiencies as well as warm reception for its touch screen, messaging and digital imaging devices. Even as the recession continues, the company is targeting double-digit sequential growth in the second quarter with the release of high-end models to key regions as well as low-cost devices into emerging markets.

Meanwhile, US firm Motorola, although posting another quarter of operational loss, showed signs of improvement to start 2009. Company officials underscored operational effectiveness and cost savings, noting the reduction in operational loss compared to the previous quarter.

Japanese-Swedish collaboration Sony Ericsson saw its market share decline as several key markets moved away from mid- and high-tier devices towards low-cost devices, where the company does not compete. Meanwhile, the company continued to build its content and services platform, with roll out of PlayNow Plus, Movies and Arena across Europe.