Q2 Handset Wrap-up: Adapt or decline

Palm’s new Pre device – a Sprint exclusive for now, but soon to be offered by Verizon as well – came too late for the company, which only shipped 0.4 million devices in Q2. Sprint wouldn’t release details on the handset’s progress, only saying that sales are going strong.

While the Palm Pre and iPhone 3G S stole most of the attention in the quarter, their prominence helped drive shipment volumes for other converged mobile device vendors. Carriers are also helping perpetuate the smartphone trend, with Verizon this week cutting prices on all its smartphones, except the BlackBerry Tour and Samsung Saga, to $99 or less with a contract. IDC predicts that – having begun with Apple’s price cut on the iPhone 3G – this will spark a trend that will continue in upcoming quarters and will effectively maintain competitive pricing within mature markets.

“Verizon is trying to clear out their smartphone inventory,” Llamas said. “That is really compelling. That is huge. It used to be that these devices would command a price for above $300, so $99 will put it out there for a lot people.”

On the other end of the spectrum, prepaid devices – along with their service providers – remained strong. IDC said that even the market for mid-tier and high-end devices began to show improvement with the arrival of new devices from leading vendors.

According to iSuppli, the relative strength of the mobile phone market in Q2 is a signal that the worldwide mobile handset market is bottoming out and will now begin its return to growth. Overall, there were approximately 269 million devices shipped in the quarter, give or take a few million depending on the firm making the forecast. It will take some time for recovery, however, especially considering that Q3 is traditionally a slow quarter as handset makers save their big guns for the Q4 holiday season. Given the traditional Q3 lull, analysts and handset makers agreed that shipments will be down 10% year-on-year overall, but even with this decline for the year, iSuppli expects mobile phone shipments to rise by 6% to 280.9 million in Q3 and by 8.3% to 304.2 million in Q4.