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IDC: Mobile Phone Shipments Dropped 16%

Proving that even popular technology isn't immune from the recession, IDC research released today said the mobile phone market took a pretty good hit in the first quarter of 2009.

IDC's Worldwide Quarterly Mobile Phone Tracker report says vendors shipped a total of 244.8 million units in the first quarter of 2009 (1Q09), approximately 15.8 percent lower than the 290.8 million units shipped during 1Q08.

Although shipments in the first quarter of a new year are typically lower than the quarter preceding it, since it includes the holiday gift giving season, IDC said this decline was especially sharp due to such factors as weak end-user demand, currency volatility, and lack of credit for merchants as consumers and the supply chain adapt to the recession.

IDC analyst Ryan Reith said the numbers were only "a bit of a surprise," since the company had forecast a 13 percent drop about a month ago. He says the sales problems were particularly acute in North America and Western Europe, where 85 to 90 percent of the population already has handsets.

"The operators have to get creative to get demand back up," Reith told InternetNews.com. "Mobile isn't immune to what's going on with the economy, but there's plenty of upside for this industry and we'll see it rebound faster than others."

Reith also noted North American carriers operate differently than their counterparts in other geographies. "You'd think when times are tough they'd focus on cheaper models, but here the money is in contract fees. So you're seeing more subsidies for phones from Apple (NASDAQ: AAPL), RIM (NASDAQ: RIMM) and others on higher end models, because they need that sustainable revenue."

Smartphones on the grow

In fact the higher end, smartphone segment has fared better than the overall handset market, posting a four percent growth rate in the past year, according to IDC.

Reith said the main focus of the industry in the North American market and Western Europe is on smartphones. "It's pretty obvious Apple is going to take the next step with its iPhone in June," he said, noting the timing of the company's Worldwide Developers Conference.

"I wouldn't be surprised by a phone refresh and some kind of tablet device, but they are facing a tougher landscape. There are more competitors playing in the same end of the market with similar features. So Apple will have to continue to differentiate itself, but they're a very creative company, we'll see what happens," added Reith.

He also noted that "Apple's not a company focused on market share. Right now it only has one device, but it continues to make healthy profit margins and there's a lot to be said for that."

A Top Five roundup

The top five mobile vendors worldwide listed by IDC are: Nokia, Samsung, LG Electronics, Motorola and Sony Ericsson.

In a snapshot of each vendor's performance, IDC noted that Nokia's shipments dip below the 100 million unit mark for the first time in two years and its ASP (average selling price) slid due to pricing pressure and greater emphasis on lower-priced devices.

Still, Nokia held onto 31 percent worldwide share in the first quarter. It also posted a healthy 33.8 percent gross margin on its devices and services, notably the success of its 5800 XpressMusic device as well as the launch of several services, including Comes With Music, Nokia Messaging, the Ovi Store, and Point and Find.

Samsung, the only other one in the top five with double-digit market share (18.8 percent), returned to double-digit profitabily to start the year.

IDC said LG Electronics is targeting double-digit sequential growth in 2Q09 with the release of high-end models to key regions as well as low-cost devices into emerging markets.

It was a rough quarter for Motorola, which reported worse than expected sales and earnings today.

IDC noted the struggling company plans to add more smartphones to its portfolio before the end of the year. During the past quarter, Motorola (NYSE: MOT) launched its Evoke QA4 and MOTOSURF A3100, as well as the industry's first eco-friendly device, the MOTO W233 Renew.

Sony Ericsson saw its market share decline as several key markets moved away from mid- and high-tier devices towards low-cost devices, where IDC said the company does not compete.