Mobile: business week's analysis of the dramatic fall of 13-16% in the volume of handsets sold in Q1

[bw] Two market research companies, IDC and Strategy Analytics, released their figures on Apr. 30 for first-quarter mobile phone sales. The message was pretty bleak: Handset sales fell in the first three months of 2009 at the fastest rate in history, according to Strategy Analytics, down 13% from a year earlier. (IDC pegs the figure at minus 15.8%, off a higher base.)

Overall, mobile phone makers shipped somewhere between 245 million and 282 million units in the quarter (the market research firms vary in their estimates), compared with 282 to 290 million in the same quarter a year earlier. The global economy gets most of the blame: While the first quarter of the year is usually weaker than the holiday-driven fourth quarter, this year, to quote IDC, “the decline was especially sharp due to weak end-user demand, currency volatility, and lack of credit for merchants.”

The only bright spot was sales of so-called “smartphones,” or pocket-sized devices that pack the power of a computer and offer users everything from music, cameras, and GPS to full wireless Internet access and downloadable software applications. Leading the charge, of course, is the ubiquitous Apple iPhone, which has redefined what a handheld gizmo is capable of. Overall, IDC says, smartphone sales grew 4% year-over-year in the quarter, even as sales of conventional phones sagged.

Some of the shortfall traces to an inventory bubble that developed at the end of 2008, when consumers slammed on the brakes and stopped buying phones. In the first quarter, vendors like Nokia and Motorola had to sharply curtail production to let phones they’d already shipped to distributors clear out of the channel. But the message is unmistakable: Even must-have items like cell phones are subject to the wider downturn that has affected markets from the U.S. to the U.A.E.

Behind the headline numbers are several interesting trends. Nokia, the world's largest seller of mobile phones, saw its unit sales plunge an alarming 19.3%, to 93.2 million handsets in the quarter. Market share fell from nearly 40% a year earlier to about 38%. Nokia's exposure to emerging markets that haven't escaped the downturn, plus weakness in smartphones in the face of growing challenges from Apple and BlackBerry-maker Research in Motion, condemned it both to a loss of share and a 22-million unit decline in sales. The company's first quarter financial results reported Apr. 16 painted an even more dismal picture, with revenues down 27% and operating profits down 96%. (Translation: Nokia was lucky to report any earnings at all.)

But if Nokia's numbers were tough, results were far worse for Motorola, which logged a 46.4% decline in unit sales, and for the Sony Ericsson joint venture, whose unit sales fell 35%. The troubles of Motorola are well known—with its global market share down to just 6% in the quarter, Motorola risks falling off the map entirely. Sony Ericsson held onto its No. 5 position worldwide, though it sold just 14.5 million phones, but the impact of its losses on parents Ericsson and Sony has prompted nagging questions over whether the venture may be dissolved.

The big "winners" in the quarter, if declining sales can be counted as winning, were Korean electronics giants Samsung and LG. Thanks to a strong lineup of phones, Samsung recorded a decline of less than 1% in unit sales and gained nearly three points in global market share, to 18.8%. LG sold 7.4% fewer handsets in the quarter but gained nearly a percentage point in share as others fared worse.

Mobile Phone Sales Figures Not Pretty