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Wireless Sales Up Despite Trouble Signs

Sales of cell phones worldwide were up by 18 percent in the first quarter compared to the same time last year, and Nokia leads the pack in market share, according to new data from technology research company Gartner .

During the first quarter of this year, the mobile phone industry experienced better than expected sales with 112.7 million units shipped, Gartner said in a new report released Monday.

Bryan Prohm, senior analyst with the mobile communications worldwide research group for Gartner, attributed the boost in sales between the first quarter of last year and this year's first quarter to a wave of demand for replacement phones.

Prohm said Gartner's research found significant demand across all geographical regions during the quarter, and said that on an annualized basis, the trend could translate to a double-digit rate increase for the full calendar year.

Nokia held its spot as the dominant maker of cell phones, with a 35 percent market share in the first quarter of 2003, according to Gartner, which is more than double the market share of its nearest competitor, Motorola, which held a 14.7 percent share of the wireless handset market.

Gartner analysts said they expect Nokia to continue growing market share in core markets through the remainder of the year.

Gartner's analysis said as new color screen and camera phones roll into the marketplace, especially in mature wireless markets across Western Europe, many customers will be tempted to replace their existing mobile terminals.

Ben Wood, principal analyst with the mobile communications group for Gartner in Europe, said photo messaging, often referred to as "disposable photography," is expected to be the cornerstone service in mobile network operators' marketing campaigns throughout the year.

"The mobile terminals market in 2003 will be characterised by 'device diversity' as mobile terminal manufacturers launch a wide range of new handsets with features, such as gaming, music and video. However, the majority of worldwide sales will remain in the low-tier, low-function segment," said Wood in the report.

Despite the surge in sales, year over year, two trends are expected to have a leveling effect on the current optimistic sales expectations, Gartner analysts said.

"There is a deepening inventory predicament in China, and there is the economic impact of severe acute respiratory syndrome (SARS) in the Asia/Pacific region and beyond," said Ann Liang, industry analyst with the mobile communications group for Gartner in Asia/Pacific. "Clearly, then, any optimism should be met with an equal measure of prudence."

Gartner analysts said they are concerned over the crowded marketplace of competing vendors -- more than 100 manufacturers are currently competing in the global market, a situation that is expected to exert downward pressure on average prices for mobile terminals as companies resort to competing almost solely on price.