Mobile’s Q2 success surprises even handset makers

Despite the emphasis on multimedia, feature phones this year, even Motorola surprised investors with a profit in Q2, due largely to sales of its low-cost devices. Nokia, too, maintained its market share by capturing the ultra-low cost handset market, ABI concluded. The leading manufacturer also concentrated on refreshing its portfolio of mid-tier and high end handsets. Furthermore, both ABI and IDC attributed much of this sector’s growth to the emerging markets, where consumers primarily bought entry level handsets. Parts of Asia, Middle East, Africa and South America had the most net subscriber additions in terms of replacement handsets and upgrade sales, according to ABI.

“There’s a flip side to this whole equation,” Reith said. “Overall, when you look at the growth we’re projecting, a lot of it is still being down at the low end. We’re seeing growth moreso, not so much volume, at the high end.”

On the carrier side, even AT&T and Verizon are coming off their latest financial quarter with 1 million-plus net subscribers. Like its handset vendors, Verizon stressed that the economy has not had a negative affect on its financial results. Reith said that economic conditions typically hit the carriers harder, since their revenue comes from repeat services, not the sale of a handset. Still, they are doing exceptionally well at adding subscribers and making a great profit, he added, perhaps by capitalizing on the struggles of their competitors, primarily Sprint.

At the end of the second quarter, the handset vendor matrix remained unchanged from Q1 of this year. Nokia maintained its lead with 122 million phones shipped, making up 40% of the market. Samsung followed with 45.7 million and 15% of the market. Motorola came in third, barely beating out LG, with 9.2% and 9.1% market share, respectively. Sony Ericsson placed fifth again at 8% market share and 24.4 million shipments. The remaining market was made up of smaller vendors – namely Research in Motion, Reith said, shipping 58 million units total, about 19% of the market.

“To keep the momentum going, these vendors will have to look at manufacturing and be as efficient as possible,” Reith said. “That is always obviously a factor, but even more so now because people are looking at the overall price point of the handset. They just don’t have room right now. Palm launched a device with Window Mobile [which came short of expectations this quarter] that came out at a $300 price point, and we told them, those are days are over. When you can get a Blackberry for under $150 or a Palm Treo for $300, it’s a no-brainer in my opinion. They have less leverage in terms of manufacturing because they sell a lot less volume. These vendors are going to have to really focus on cutting down the building material and manufacturing better.”