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Handset shipments drop 13% in Q1 09

Posted: 06 May 2009 ?? ?Print Version ?Bookmark and Share

Keywords:handset shipment? smart phone? recession economic?

Handset vendors shipped 245 million cellphones worldwide in Q1 09, down a huge 13 percent from 282 million units a year earlier, according to a new report from Strategy Analytics. This was the fastest rate of annual decline in handset shipments since the firm's records began. The global economic recession amplified the effects of a seasonally low quarter, as retailers de-stocked inventory and consumers delayed purchases because of financial fears.

All of the top five handset vendors grew at negative rates, the report said. Samsung performed best, slipping only 1 percent annually, while grabbing a record 19 percent global share. Nokia, Sony Ericsson and Motorola continued to disappoint, prompting workforce reductions from all three.

Smart phone advantage
Nokia Corp. shipped 93.2 million handsets worldwide in Q1 09, down 19 percent from 115.5 million units in Q1 2008. Its growth rate underperformed the industry average for the third quarter in a row. With 38 percent global market share, Nokia lost three points of share compared with the year-ago quarter, due to weak shipments across five of its six major regions. Sales of the flagship Nseries smart phone portfolio halved annually to just five million units. Furthermore, the handset division's operating margin slipped further to 10 percent, beating Q4 08 as the least profitable quarter of this decade. In an effort to curb operational expenditure, Nokia has announced several rounds of layoffs, cutting roughly 2,000 jobs in recent months.

Meanwhile, Samsung shipped 45.8 million handsets worldwide in Q1 09, down 1 percent from 46.3 million units a year earlier and 13 percent from last quarter's 52.8 million. Even with the decline, Samsung was the top-performing vendor, beating the industry's average growth rate and increasing the company's global market share to an all-time high of 19 percent. Profits jumped after Samsung capped its marketing spend, and the company led the top-five players with an operating margin of 12 percent in Q1. Samsung continued its assault on the smart phone market by unveiling an Android-powered smart phone, the I7500, which will launch in June 2009. Samsung is the first of the big five global brands to announce an Android handset and it will provide tough competition for the existing Android leader, HTC of Taiwan.

LG Electronics, on the other hand, shipped 22.6 million handsets worldwide in Q1 09, down 7 percent from 24.4 million units in Q1 08. The company joined South Korean neighbor Samsung with above-average growth and a small improvement in market share. With 9 percent of the global handset business, LG continued to solidify its third place in the industry. A steady stream of attractive devices, an improved retail presence and more visible marketing have been among the secrets of LG's success. LG's operating profit improved to 7 percent during the quarter, although it is still below the double-digit margins from early 2008. Like Samsung, LG did not announce any major layoffs during the period.

Motorola shipped 14.7 million handsets worldwide in Q1 09, down a sizeable 46 percent annually. Its operating loss reached a hefty $0.5 billion. The vendor introduced few new models during the quarter, as it focused its efforts on revamping its portfolio and reducing operational expenses. Motorola has cut around another 3,000 jobs in recent months. New handset introductions, particularly Android models, remain critical for Motorola's recovery over the coming months.

Sony Ericsson sold 14.5 million handsets worldwide in Q1 09, falling a huge 40 percent from 24.2 million units of the previous quarter. Growth remained below the industry average for the fifth consecutive quarter, and operating profits fell to an astonishing minus 21 percent. Sony Ericsson's lack of presence in the high-value smart phone market continues to hamper the firm's prospects. Sony Ericsson joined Motorola in announcing a further workforce reduction of roughly 2k employees in order to diminish its cost base.

Beating the economic crunch, Apple shipped a better-than-expected 3.8 million iPhones worldwide in Q1 09, up a healthy 123 percent from 1.7 million units a year earlier. Its global market share hit 2 percent and it is in 7th position. The increased global availability of the popular iPhone and a quickly-expanding iTunes App Store library drove the growth. Apple's 3.8 million iPhone shipments exceeded those of one of its main touchscreen rivals, the Nokia 5800, which recorded slightly lower global volumes of 2.6 million units during the quarter. Strategy Analytics expect Apple to launch one or more new models in the coming months as it seeks to maintain its breakneck growth rate.

Strategy Analytics forecasts 266 million units in Q2 09, for an annual decline of 10 percent. The firm expects the remainder of 1H 09 to be volatile, as prevailing economic conditions continue to affect consumer spending behavior. Handset industry growth rates should improve gradually in the 2H 09, as retailers rebuild their inventories with compelling new models and consumers slowly regain confidence in their financial position.

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