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Smartphone Sales Shine Amid Wider Slump

Smartphones
Smartphones continue to grab center stage in the mobile market as worldwide sales keep climbing, while basic cell phones lag behind with recording-breaking drops in purchase volume, according to a Gartner report released on Wednesday.

Sales of smartphones shined in the first quarter, up 12.7 percent to 36 million units worldwide from the same period last year, while mobile phones overall hit an historic low of 269 million sold, a drop of 9.4 percent, according to the report.

Smartphone sales represented 13.5 percent of all mobile device sales in the first quarter of 2009, compared with 11 percent in the first quarter of 2008. Gartner analysts said positive performance by Research in Motion (NASDAQ: RIMM) and Apple (NASDAQ: AAPL) showed that services and applications are now instrumental to smartphone sales success.

"Much of the smartphone growth during the first quarter of 2009 was driven by touchscreen products, both in mid-tier and high-end devices," Roberta Cozza, principal analyst at Gartner said in a statement. "'Touch for the sake of touch' was enough of a driver in the mid-tier space, but tighter integration with applications and services around music, mobile e-mail, and Internet browsing made the difference at the high end of the market."

The latest findings by Gartner come at a time when the industry braces for a smartphone showdown this summer as key players release signature models and update their respective operating systems.

The do-or-die Palm Pre (NASDAQ: PALM) goes on sale June 6, while Apple is expected to debut new iPhones in early June or July.

RIM may introduce its answer to the iPhone, dubbed Storm 2 for now, by early June. On the Android front, Samsung, HTC and Motorola are all on board to bring out new devices based on Google's (NASDAQ: GOOG) open source mobile operating system.

The big names in mobile are wise to focus on smartphones, given Gartner's findings in terms of the overall mobile units bought. Sales into the channel were just short of 244 million units in the first quarter of 2009, while sales to users were just over 269 million units -- a difference of 25 million units, compared with 17 million units in the fourth quarter of 2008, the biggest difference ever recorded. Gartner expects channel inventory reductions to continue into the second quarter of 2009, albeit with lower volumes.

"There were some signs of a recovery in markets such as North America and China, but overall sales in the first quarter of 2009 registered the biggest quarter-on-quarter contraction since Gartner began monitoring the market on a quarterly basis in 2001," Carolina Milanesi, research director for mobile devices at Gartner said in a statement. "This was also the first time the market contracted year over year during the first quarter, a period traditionally helped by strong seasonality in the Asia/Pacific market."

Nokia, which is showing signs of fighting back for U.S. market share, continued to lead the mobile phone market, but its share dropped to 36.2 percent compared to 39.1 percent in the first quarter of 2008.

Samsung retained second place and improved its market share as sales checked in at 51.4 million units. After dropping to the fifth position in the fourth quarter of 2008, Motorola overtook Sony Ericsson to regain fourth place.

In terms of operating systems, Symbian accounted for 49.3 percent of worldwide smartphone platform market share in Q1, down from 56.9 percent from last year. BlackBerry's market share reached 19.9 percent in the first quarter of 2009, up from 13.3 percent in the first quarter of last year. The iPhone OS accounted for 10.8 per cent of the market, up from 5.3 percent market share in the first quarter of 2008.

Nokia's worldwide sales reached 97.4 million units in the first quarter of 2009, thanks to reductions in inventory in markets such as Asia/Pacific and Latin America. This was the first time Nokia's sales dipped below 100 million units since the first quarter of 2007. Still, Nokia managed to grow its sales in the smartphone segment by introducing the Nokia 5800 into more regions, according to the report.

Samsung had a very successful first quarter, the report says, with sales of 51.4 million units, Samsung's market share grew 4.7 percentage points to 19.1 percent. The healthy numbers are attributed to a diverse portfolio.