Handset sales defy consumer slowdown in 3Q07

US-based ABI Research claims that 3Q07 financial results published by leading vendors such as Samsung, LG, Sony Ericsson and Nokia indicate that global handset sales are buoyant in the face of an overall consumer slowdown.

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By  Ronan Shields Published  October 24, 2007

US-based ABI Research claims that 3Q07 financial results published by leading vendors such as Samsung, LG, Sony Ericsson and Nokia indicate that global handset sales are buoyant in the face of an overall consumer slowdown.

With Motorola yet to disclose its 3Q07 results, ABI Research claims 3Q07 has seen strong performance that has gone against the flow of bad news in the global economy and in the wireless infrastructure market, according to Jake Saunders, Asia-Pacific vice-president at the firm.

Overall ABI believes that global mobile devices vendors shipped 288 million units during 3Q07, representing a quarterly increase of 10.5% and a 15.7% annual rise. This result helped the industry recover from a comparatively slow 2Q07 according to the company.

Finnish handset vendor Nokia reported that a surge in demand for entry-level handsets in emerging markets such as the Middle East, Africa and Asia helped drive the industry with its shipments topping 111.7 million units for the quarter, representing a 26% annual increase.

These figures translated into a market share of 39% up from 36% from the year ago period. The company's overall operating margin increased 3.5% to 14.4% despite the company's average selling price (ASP) dropping US$11 annually to US$117.

"In a strong market, we simultaneously gained market share and increased our operating margins. The quality and depth of our device portfolio continues to give us a good competitive edge and we believe our portfolio looks promising for next year," said Nokia CEO Olli-Pekka Kallasvuo.

South Korea's Samsung, which leapfrogged US company Motorola in 2Q07 for the global number two position, continued to flourish in the mobile devices segment selling a record 42.6 million units during 3Q07 and with its telecommunications business netting US$644 million in revenues.

The company also continued its push into cost sensitive markets reporting a 4% rise in its unit shipments to 12%. The company also managed to increase operating margins in its telecommunications division from 4% to 12% based on its success in the premium handset segment.

Joint venture company Sony Ericsson however, reported a slip in its 3Q07 profit figures earning US$377.7 million compared to US$325 million during the year ago period based largely on its efforts to gain traction in the mid-to-low priced tiers of the handset market.

LG's Mobile communication company recorded sales of $2.839 billion during 3Q07 up 4% annually. Handset unit shipments also reached a total of 21.9 million thanks to increase demand in emerging markets such as Latin America, Asia and the Middle East, according to the company.

Despite increased demand for low cost devices and the subsequent average selling price (ASP) drop from mainstream vendors, improvements in cost structure have sustained decent profitability, according to ABI Research.

Saunders also says that most vendors are confident that 4Q07 should deliver promising returns despite some potential concerns regarding North American and European consumer confidence.

ABI Research forecasts that the global handset market will grow 13.5% year-on-year in 2007 translating to a total volume shipment of 1.13 billion.

"The pace of innovation in the mobile devices arena is not abating," says Stuart Carlaw, wireless research director at the company. "The most dynamic sectors within the mobile devices sector can be found within the multimedia and corporate segments."

Key themes in the latest crop of new models from the handset vendors are the prevalence of slider phone form-factors, larger displays with touch screen interactivity, advanced personal entertainment features, and the integration of Wi-Fi for fast data download and fixed mobile convergence.

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