Nokia extends lead in handsets as Motorola struggles

Nokia tightened its grip on the global mobile phone market in the second quarter of this year, taking advantage of a stumble by Motorola and strong demand from emerging markets around the world, a market research study said Thursday.

Motorola was the only one of the top five vendors to lose market share when compared against the second quarter of 2006, despite a strategy of cutting prices to save its second-place ranking, according to figures from analyst firm Gartner. The company ended up with a 14.6 percent market share, barely ahead of third-place vendor Samsung Electronics with 13.4 percent, followed by Sony Ericsson with 9 percent and LG Electronics with 6.8 percent.

By contrast, Nokia used its dominant 36.9 percent share of the market to begin selling more-expensive products, such as the N95 it launched in March, a high-end phone with features like built-in GPS (global positioning system), a 5-megapixel camera and a MP3 music player. The company did stumble earlier this month when it issued a massive cell-phone battery recall after reports of overheating and then commit to offering free replacements for up to 46 million batteries.

Overall, the cell-phone market saw sales rise by 17.4 percent to 270.9 million units in the second quarter of 2007, thanks largely to sales growth of 40.7 percent in Asia-Pacific and 24 percent in Latin America. Sales in mature markets were much slower, rising by only 7 percent in North America, 10.3 percent in Japan and 11 percent in Western Europe.

Those trends will probably continue through the third quarter given that Motorola is unlikely to regain its previous market share in the 20 percent range until it makes substantial changes to its product portfolio, according to Carolina Milanesi, Gartner’s research director for mobile devices.

Indeed, Motorola laid off 4,000 workers in May and announced a second-quarter loss of US$28 million in July. Executives promised to increase their investment in product development to recapture lost profits.

However, any future forecast for the mobile phone market will include a new player, Apple, which launched its iPhone in the U.S. on June 29, just two days before the end of the second quarter. Because of that timing, Apple made very little impact on industry rankings for the period. That picture could change fast in the second half of 2007, since the iPhone saw strong sales in the U.S. and could launch in Europe as early as September, Milanesi said.

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