Handset Sales Recover in Q4

Nokia extended its lead in the number one spot, taking an estimated 39% share after a more difficult year as the recession hit sales in both developed and developing markets (see World: 29 January 2010: Nokia's Q4 Operating Profits Jump 18.9% Y/Y, Boosts Market Share to 39% on Smartphone Growth). The Middle East and Africa, the Asia-Pacific region and China drove growth, with Europe and the Americas seeing falls in sales. In euro terms, average selling prices (ASPs) are still well down—from 71 euro a year ago to 63 euro—but this marks a slight recovery on the previous quarter as smartphone shipments rose, with Nokia reporting that it sold 20.8 million "converged devices", up from 15.1 million year-on-year (y/y) and 16.4 million quarter-on-quarter (q/q). This included 4.6 million N Series devices (iPhone-like smartphones) and 6.1 million E series (BlackBerry-like emailer) devices. Nokia reports that industry-wide, handset sales totalled 329 million units, up 8% y/y and 14% q/q. Industry "converged devices" (smartphones and handheld computers) sales totalled 52.4 million units q/q from 47.0 million.

The Korean vendors, Samsung and LG, continued to show very strong growth, with Samsung selling more that twice the number of units as LG. Average selling prices have shown some downwards pressure for Samsung, largely as a result of intensified price competition and an increase in the mid-end segment, while developing a stronger presence in emerging markets using localised business models and diversified distribution channels. LG saw a weaker domestic market as it shifted to demand for smartphones, but increased sales in North America, Europe, central and southern America, China and the Middle East and Africa.

Sony Ericsson showed a marginal recovery, but was essentially bouncing back from the bottom after sales dipped badly through the year. Sony Ericsson has suffered from the shift away from high-end feature phones to smartphones, while its touchscreen handset portfolio has been largely overpriced and lacklustre. The adjustment to the lower device volumes continued to cause some financial difficulties, but the rising ASP indicates that the higher-end handsets either benefitted from a holiday sales bounce or are starting to gain some momentum (see World: 22 January 2010: Sony Ericsson's Losses Continue in Q4; Outlook Improves).

Motorola has launched the leading lights for its new Android-led, smartphone-focused strategy, with the Cliq/Dext and Droid launched in the last quarter (see World: 29 January 2010: No Turnaround Yet for Motorola Handset Volume as Split Planned). While not yet at full throttle on a global scale, 2 million out of the 12-million handsets sold used the Android platform and the shift to smartphones was reflected in the large and sudden increase in ASP. However, with unit sales falling ever lower, there is little indication of success as Motorola continues to fall down the tables—it could shortly be threatened for fifth place by smartphone/emailer specialist RIM.

The smartphone specialists, such as RIM and Apple, continue to see impressive sales growth, although RIM has seen prices dip as it targets the consumer market. Despite being the main vendor of Android handsets, HTC still remains low in global handsets sales, but with Google's marketing push behind the Nexus One, this could see a fillip in the first quarter of 2010, although several marketing mistakes are likely to have subdued sales.

Outlook and Implications

The year 2010 will see a continuation of the Smartphone wars. Last year was the Android year, as will 2010 as a slew of products, some with direct Google backing, make it onto the shelves. This is expected to take in Motorola in short order and the combination of well-built, industrial design and Google-led usability and applications could prove strong. However, 2010 will be most pivotal for Microsoft, which will be the key player to watch as the Windows Mobile operating system is due for a new release in Version 7. This was delayed from 2009 and will now not make an appearance until the end of the year, but will need to impress to make an impact on the market.

RIM is working on its browser, which is a key weakness in its offering, and will also need to maintain momentum with its application store portfolio. Palm also has the potential to improve its sales with its WebOS handset gaining strong reviews and with the end of its exclusivity to Sprint, it could pick up in the domestic market. However, it is likely to suffer from a lack of scale and potentially developers' interest in creating applications.