Sunday 7 December 2008

2009 is crucial for mobile vendors

Some time ago I wrote in my blog about the good results posted by the companies for that particular quarter. At that time I was slightly bullish in terms of future earning of the telecoms giants.

With the new financial results predicting more economic woes, the early signs suggest that the majot telecoms companies might have a rocky ride ahead.

Most of the major vendors have already issued warnings for their handset sales. The news comes amid a week of profit warnings from other handset makers, including Research In Motion and Palm, as the handset market faces declining demand in the midst of a global economic slowdown. The research firm Gartner also released statistics about the smartphone market, which saw its weakest year-on-year growth since the firm started tracking the industry, and Nokia saw its share of the smartphone market fall to 42.4 percent, down from the 48.7 percent share it had a year earlier.

I remember during the year 2000/2001 when we saw the major telecoms burst, Nokia was still holding up and it produced some good results. I expect/expected similar this time as well from Nokia.

I was proven wrong when Nokia issued a market warning for the second time in less than a month, cutting its outlook for global handset sales, as the world's largest handset maker braces for a slowdown in the coming year.The Finnish giant now expects global handset sales to drop below the 330 million units for the fourth quarter it estimated on Nov. 14, and also said its estimate of 1.24 billion units for 2008 would have to be revised down. Those numbers were cuts from previous estimates. The company also said it expects growth to slow in 2009, with the market contracting 5 percent from its 2008 levels.

Indeed these figures coming out of Nokia presents bleak picture and make everybody nervous. It is very much evident by looking at the current climate that year 2009 will be challenging for telecoms industry.

However I still believe that companies like Nokia have a strong, enviable base to build on and I believe even in tough situation it will continue to strengthen its position on many fronts.

There is no doubt that in the face of a global economic downturn and weakening demand, handset makers and vendors affiliated with cell phone components are probably headed toward a large shakeup.

Companies with more high-end portfolios, including Apple, Research In Motion and HTC will be better positioned to handle any turmoil that would affect the handset market. All three have showcase devices that could help propel them through any choppy waters. In the case of RIM, there are multiple devices that could turn into large sellers, most notably the BlackBerry Storm, which Verizon Wireless has already launched.

However, others such as Motorola and Sony Ericsson, which cut 450 jobs from its North American headquarters earlier this fall, are in a weaker position. Motorola has said it is planning on focusing more on phones running on Windows Mobile and Google's Android platform to chart it back to growth, but said an Android phone would not be in the market until the end of 2009.

Most of the handset vendors will develop a strategy where they will concentrate on the market where the handset sales are still on the up. Europe has already been considered saturated in terms of mobile sales and hence this doesn’t come as surprise when Ovum declared in its report that Europe has become the first regional mobile market to be hit by the economic downturn.
But the the US mobile market has to date resisted the downturn and developing markets such as Latin America continue to enjoy double-digit revenue growth rates. Markets such as Latin America which remains overwhelmingly buoyant gives enough hope to vendors hence the expectation that they will be able to ride out the current financial crises.

I guess 2009 is going to be interesting.

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