'Cellphone mkt to shrink 4% in 2009'

3 Mar, 2009,REUTERS

HELSINKI: The ailing cellphone market will contract four per cent this year, hurt as handset sellers try to clear out unsold phones, with no stability seen in demand until 2010, research firm Gartner said.

"Low consumer confidence is forcing distributors and retailers to limit the volume they hold in stock," the information technology research firm said, adding that retailers will have to start restocking handsets in the second half of 2009.

"This will not mark the start of a market recovery -- we do not expect demand to stabilise before 2010," said Gartner's head of cellphone research Carolina Milanesi.

Mobile companies have been hit hard by the financial crisis. For example, the world's top phone maker Nokia is expected to report January-March earnings per share (EPS) falling to 0.08 euros, the weakest level since the third quarter of 2001 when all vendors in total sold just 94 million phones -- less than Nokia alone seen selling this quarter.

The sector decline was clearly visible when it spread to emerging markets in the third quarter of 2008, said analyst Milanesi. "Mobile devices in both emerging and developed markets experienced the lowest quarter-on-quarter growth (2 percent) ever recorded in a fourth quarter," Milanesi said.

"Sales rapidly deteriorated, making 2008 a challenging year for the entire mobile phone industry." Gartner said mobile phone sellers cut inventories in the fourth quarter by some 17 million phones as they expected demand to slow, putting additional pressure on cellphone vendors already hit by weak demand from consumers.

Milanesi said she expects inventories to decline by a further 20 million to 30 million in the first quarter and by slightly more in the second quarter. Due to the recession and resulting inventory de-stocking, Gartner said it expects handset sales to shrink 4 per cent in 2009 compared with a December forecast for a 1-per cent fall.

Nokia and many analysts have forecast the 2009 market to shrink 10 per cent or even more, however they estimate shipments of phones from vendors, not actual sales of phones to consumers like Gartner does.

Gartner said Nokia held 37.7 per cent of the market in the fourth quarter, down from 40.4 per cent a year ago. South Korean vendors won market share, with Samsung Electronics' stake rising to 18.3 per cent from 13.4, and LG Electronics' share rising to 8.9 per cent from 7.1 per cent.

Sony Ericsson saw its market share fall to 7.5 per cent from 9.0 per cent a year earlier, while Motorola's share sank to 6.9 per cent from 11.9 per cent.