Wall Street Analyst Provides Day One Highlights from Mobile World Congress

In his research note to yours truly, RBC Capital Markets Managing Director - Mark Sue states:

"The current first quarter for mobile device vendors will not be a pretty one in terms of units as carriers de-stock inventories and monitor sell through data. From Barcelona at the Mobile World Congress, our take is that visibility remains limited resulting in even more heated competition amongst the handset makers. Overall, we're estimating global volumes to decline by approximately -20% sequentially in 1Q09 to approximately 250M units.

"The weak environment didn't slow the new product launches with Nokia, Samsung, LG, Sony Ericsson, and a slew of new entrants unveiling new handsets. Nokia's rhetoric against RIMM seems more heated than usual with new messaging devices such as the E75 and E55 (EUR265 unsubsidized) with predictive text set to add to the successful E71 (over 2M sold). Mindful of the environment, Nokia is also moving lower tier with its product portfolio."

Sue continued, "Samsung is emphasizing touch across all its product range with new models such as the UltraTouch, OmniaHD, and BeatDJ. Despite the projected decline in global units this year, Samsung's new mobile head believes the division can grow its market share from its estimated 17.3% in 4Q08. LG introduced its new Arena and GM730. At the moment the Korean Won relative to the US dollar is providing significant share gain opportunities for Samsung and LG.

"Channel clearing (notably in Latin America and parts of Europe) combined with seasonal improvements may help the sell in data during the second quarter yet CEOs and CFOs we met with contend that visibility remains limited. Some such as Sony Ericsson suggested Q2 volumes may not improve from Q1. Speaking of which, Sony Ericsson only introduced just a few new models (W955 and Idou) and pointed to challenged near term gross margins (17.3% in 4Q08) due to mix and FX."

Sue concluded, "Everyone is smart. At least that's what all the vendors are pointing to with netbook and traditional vendors all going after the smartphone market. While unit wise this sub-segment may outperform the overall industry, pricing seems to be moving lower tier across the many brands limiting value growth. On a side note, everyone seems to be late with their iteration of an "Android" device. So generally a more challenging first quarter seems to be in store, yet cleaner inventories may point to a better second half is our take from day one in Barcelona."

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