Global handset sales reached record in Q2: Gartner

AMSTERDAM: Global handset sales rose to record levels in the second quarter, putting the industry on track to ship 650 million cell phones in 2004 as market leader Nokia halted its decline, a survey said.

"This is the biggest quarter on record and even bigger than the first quarter when 153 million mobile phones were sold, which we did not expect," said analyst Ben Wood at research group Gartner, one of the main industry watchers.

"From here, 650 million phones for the year is possible," Wood said. But he warned that sales beyond 650 million phones would be unsustainable and there could be a fall early next year.

Latin America was "on fire", with sales up 20 percent from the first quarter as many consumers there bought their first handset, and subscribers in North America and Europe continued to trade in their old phones for models with a color display and a built-in camera.

The Big Six vendors grabbed some market share from the wide collection of smaller handset makers, and Nokia managed to stop the severe decline in the first quarter. Its market share of 29.7 percent was a notch up from the 28.9 percent in the first quarter, although still well below last years 35.6 percent.

Aggressive price cuts by the Finnish phone behemoth, which have been estimated between five and 20 percent by analysts, buoyed sales, but a lack of attractive expensive models and premium pricing left its brand exposed, Wood said.

"The majority of their phones are low-tier, and there are clearly implications for its brand," he said.

Only a year ago, Nokia was nurturing a target to get its market share up to 40 percent, but then it neglected to prepare a new line-up of phones in a company restructuring.

RIVALS

Rivals who benefited from Nokia's decline were second-placed Motorola, South Korea's Samsung Electronics and LG Electronics and Japanese-Swedish joint venture Sony Ericsson.

Only German's Siemens, the world's No. 4 vendor, slipped a little, to 6.9 percent from 7.0 percent, and is facing a tough second half after it had to recall its new 65 series last week due to a software glitch. "It could not have come at a worse time for them," Wood said.

Motorola's market share rose to 15.8 percent from 14.5 percent after the launch of new models which were especially popular at its home base of North America. It now has to prove that it can deliver more than two good quarters in a row before running into logistics or manufacturing problems, Wood said.

Samsung's strategy to get expensive and different-looking phones in the shops paid off once more and its share rose to 12.1 percent from 10.2 percent.

This could have been much higher, but not all phones it had shipped to shops and operators were sold to consumers. Some 4 million were still in inventory, mainly in North America, and will have to be sold off in the third quarter, which will depress its market share.

A Samsung executive said that earlier this week he expected a slower second half compared with the first.

Gartner measures sales to end-consumers, as opposed to other research groups which measure sales to distributors.

Sony Ericsson at last managed to harvest a strong quarter after a painful two-year restructuring, and saw its market share rise to 6.6 percent from 5.4 percent.

"They show what can be done with the right brand and the right products," said Wood.

LG Electronics rose to a 6.0 percent share from 4.2 percent as it benefited from its company-wide marketing campaigns that boosted the overall brand, like Samsung and Sony Ericsson.