Cell phone orders fall

August 29, 2001 Posted: 1638 GMT

LONDON (Reuters) -- Shipments of mobile phones fell sharply in the second quarter while manufacturers Motorola and Ericsson grabbed market share from leader Nokia, research group Gartner Dataquest said Wednesday.

Global shipments of mobile phones to end-users in the second quarter of 2001 fell for the first time in the history of the world's largest consumer electronics product category. Second-quarter shipments declined by 8.4 percent to 89.76 million units, from 97.98 million in the same period a year ago.

"This is the first year-on-year decline after years of phenomenal growth," said Gartner senior analyst Ben Wood.

Sales also fell from the first quarter, when 96.69 million cell phones were shipped.

Gartner, the only major research group to publish independent statistics on mobile phone market share globally, cut its forecast for global handset sales in 2001 to 450 million units from an earlier estimate of 500 million units.

These numbers include stocks of several tens of millions of cell phones that were built up last year, which means that manufacturers are expected to produce fewer phones than the 450 million number suggests.

Analysts and major mobile phone makers expect global handset sales to fall or remain flat year-on-year, partly due to the lack of new services to tempt consumers to upgrade handsets.

Last year around 410 million phones were sold globally, compared with more than 280 million in 1999. Wood said consumers were delaying the purchase of new handsets until all major manufacturers had mobile Internet-enabled phones using so-called GPRS technology available on the market.

Nokia (NOK: down $0.50 to $16.30, Research, Estimates) is set to launch its first GPRS (General Packet Radio Service – which offers an "always-on" Internet connection) phones this quarter and says it expects to sell millions of them by the fourth quarter, during the key Christmas season.

Market leader Nokia of Finland – which overtook Motorola (MOT: down $0.42 to $18.23, Research, Estimates) as the world's largest maker of mobile phones in 1998 – lost some market share in the second quarter, falling to 34.8 percent from 35.3 percent in the first quarter.

It had a global market share of 27.5 percent in the second quarter of last year.

Tough economic conditions and price pressures from rivals, especially from Ericsson (ERICY: down $0.06 to $5.30, Research, Estimates) and Motorola, has hit Nokia, analysts said. Nokia said in connection with its second-quarter earnings release last month that it was unwilling to sacrifice profit for market share.

U.S.-based Motorola came in second with a 14.8 percent share, versus 13.2 percent last quarter. A new portfolio of handsets and a round of price-cutting to clear inventories helped the company gain share, analysts said.

No. 3 Ericsson from Sweden climbed to 8.3 percent from 6.8 percent and again regained the No. 3 spot after losing it to Germany's Siemens in the previous quarter.

The merger of Ericsson and Japan's Sony's mobile phone units, formally sealed Tuesday, is expected to pose a challenge to Nokia and Motorola.

Numbers four and five, Germany's Siemens and South Korea's Samsung Electronics, also gained share quarter-on-quarter. Siemens climbed to 7.9 percent from 6.9 percent, and Samsung rose to 6.9 percent from 6.3 percent.

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