Nokia widens market share lead

Economic trouble in many regions of the world is slowing mobile phone sales, presenting challenges to some phone vendors and opportunity for others, say Gartner researchers.

Worldwide sales of phones reached nearly 305 million in the second quarter, 11.8% over the same period last year, according to research released by Gartner on Wednesday. While that reflects that there are some bright spots, growth was tempered by economic slowdowns in some regions. In mature markets like Europe and the United States, buyers are favoring mid-tier phones over high-end devices, the researchers found. Also, fewer people are choosing to replace their phones as high fuel and food costs compete for dollars.

But some mobile-phone makers are pulling ahead despite the uncertain times. During the second quarter of 2008, Nokia boosted its market share to 39.5% worldwide, compared with 36.7% in the same quarter last year, according to the report. Samsung maintained its No. 2 position, with 15.2% of the market compared with 13.3% in the second quarter 2007. (Read a story about how mobile phone sales are coming off a blockbuster year.)

Their success comes at the expense of struggling Motorola, which just barely hangs on to its third-place position. Motorola dropped from 14.5% market share in the second quarter last year to 10% in the same quarter this year.

People aren't buying Motorola phones because they lack key features such as 3G, GPS and quality Internet browsing, Gartner said

Phone makers have had varying degrees of success depending on the region of the world. In Japan, sales dropped 22.1% in the quarter compared with last year, Gartner found. The researchers blamed a lack of new phone features for the drop in sales.

While overall handset sales in Asia/Pacific were up 20.5% compared to last year, they were down over the first quarter. In the first quarter, operators in Asia/Pacific added 83 million connections, but they added only 75 million in the second quarter, leading to the drop in phone sales, Gartner said. High food prices and inflation contributed to the slowdown in sales, the researchers said.

In Western Europe, sales of mobile phones were down 8.2% compared to last year, but up 16% compared to the first quarter 2008. The region, which has a 121.5% mobile-phone penetration rate, relies heavily on growth through replacement handset sales, so challenging economic conditions affect overall sales there, Gartner said.

Despite poor economic conditions in the United States, phone sales in North America grew 6.58% compared with the second quarter 2007, driven mainly by replacement sales, Gartner said.

For the full year, Gartner expects 11% overall growth in phone sales and sales of 1.28 billion units.

The IDG News Service is a Network World affiliate.