Motorola’s mobile market nose dive continues

7 May 2008

Motorola has continued its free fall in the global mobile marketplace in the first quarter, only just holding onto its No 3 position with a 9.3pc market share, down from 12.1pc in the fourth quarter.

Motorola’s usurper for the No 2 spot, Samsung, re-inforced its position with a rise in market share to 15.6pc from 13.7pc in the fourth quarter, according to research firm iSuppli.

Meanwhile, stalwart at No 1 Nokia easily maintained its position with shipments of 115.5 million to give it a 39pc market share. Shipments were up 26.8pc on the previous year.

ISupply said the global mobile-handset market in the first quarter of 2008 appeared to be unaffected by the economic slowdown, with shipments rising by a double-digit percentage compared to the same period in 2007.

Global mobile-handset shipments reached 296 million units in the first quarter of 2008, up 17pc from 253 million in the first quarter of 2007. While shipments were down 12.4pc compared to 338 million in the fourth quarter of 2007, this decline represents normal seasonality for the mobile-handset business, which typically undergoes a deceleration following the peak selling period in the fourth quarter.

“Nokia managed to defy the seasonal slowdown in the key strategic territory of China, with its shipments to the nation rising 4pc sequentially to reach 21 million units,” noted Tina Teng, analyst, wireless communications, iSuppli. “China in the first quarter of 2008 grew to account for 18.2pc of Nokia’s worldwide shipments, up from 14.5pc during the same quarter in 2007.”

The company also made gains in the Latin American market in the first quarter, with 63pc year-on-year growth to 11.9 million units.

“Despite its progress in China, Nokia is still struggling in the North American market,” Teng added. “Nokia’s shipments to the region in the first quarter declined to 2.6 million units, a historical low, and a 49pc decrease from the fourth quarter of 2007.”

Amid precipitous losses, declining market share and mounting indications of restructuring, US-based Motorola’s mobile-handset business continued to struggle in the first quarter. The No 3-ranked handset supplier retained its position with a 9.3pc share of shipments, down from 12.1pc in the fourth quarter.

“Although Motorola has tried to maintain a lean operation by instituting workforce cuts across all business units, the company’s mobile devices group still suffered a disappointing negative 10.5pc operating profit margin in the first quarter,” Teng observed. “Motorola had narrowed its market share gap with No 2-ranked Samsung Electronics in the fourth quarter. However, Motorola’s underperformance in the first quarter cemented the company’s rank at No 3, only slightly ahead of No 4-ranked LG Electronics by 1pc of market share.”

The South Korean electronics giant Samsung in the first quarter expanded its presence in emerging markets, namely China and India. In developed regions, Samsung also gained traction with its flagship products and the company continued to benefit from refreshing its product portfolio to address all market segments.

In the second quarter of 2007, Samsung passed Motorola to become the No 2 handset brand and the company widened its market share lead by 6.4pc points in the first quarter. Aside from its market share gain, Samsung also cut down on unnecessary marketing expenses to improve profitability.

Sony Ericsson in the first quarter slipped to the fifth spot, down from No 4 in the fourth quarter. Company shipments fell by 27.6pc sequentially and rose by a scant 2.3pc, compared to same period in 2007 – massively underperforming the market by either measure. Sony Ericsson’s global market share declined to 7.5pc, down from 9.1pc in the fourth quarter.

It blamed its weak performance on slow demand for mid- to high-range handsets, areas which have traditionally been strong for the company.

Sony Ericsson suffered its largest quarterly sequential revenue decline in its home market of western Europe, with a drop of 38pc. The company’s handset average selling price (ASP) showed a slight sequential decline of 1.6pc from the first quarter of 2008 in euros.

However, the company’s ASP declined by 9.7pc compared to the same period in 2007, which can be explained by its moves to expand its product portfolio to lower-cost handsets that address emerging markets.

LG Electronics of South Korea managed to outperform the industry in the first quarter, with shipments rising by an industry-leading 3pc compared to the fourth quarter and by 54.4pc compared to a year earlier.

The company not only improved its market share to 8.2pc on unit shipments of 24.4 million, but also boosted its operating profit to 13.9pc, up from 8.8pc last quarter.

The company credited its sales growth to strong results in emerging regions and in its domestic market. LG achieved quarterly sequential growth of 32.4pc in emerging markets with 6.6 million units. However, European regional sales decelerated with a sequential decline of 29pc.

Despite this, the company scored an 8.2pc market share in the first quarter of 2008, allowing it to pass Sony Ericsson to become the No 4 player in the market.

While the top handset brands are in a neck-and-neck race, the industry is keeping an eye on emerging players in the market – particularly China’s Huawei and ZTE.

ZTE ended the first quarter of 2008 with shipments of six million units, up 51.5pc from the same quarter last year. These two original equipment manufacturers’ (OEMs) products can now be found on US operators’ networks, opening up the possibility that the companies could expand their presence in the US in the coming years.

By John Kennedy