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Mobile Phones in First Sales Drop

Worldwide unit sales of wireless phones dropped 3.2 percent in 2001 compared to the previous year, marking the first time sales of mobile phones have dropped, according to a study released Monday by Dataquest, Inc.

The study found Nokia strengthened its worldwide sales lead, Motorola held its own and Siemens and Samsung entered the top tier at the expense of Ericsson. The study also found that sales of GPRS terminals were well below expectations.

Worldwide sales of mobile phones totaled just under 400 million in 2001, the study found. That compares to a compound annual growth rate of close to 60 percent between 1996 and 2000, according to the study.

The study blames much of the downturn in sales on the removal of operator-based subsidies for purchases of new phones and an unexpectedly strong market for subscriber identity module (SIM)-only wireless subscriptions. The latter refers to identity chips that are inserted into GSM phones with all user information and their use, according to the study, led to a stronger-than-expected market in used handsets.

In addition, a large "bubble" of unsold inventory of handsets that developed in the fourth quarter of 2000 also depressed sales figures for 2001, the study notes.

"The distributors and carriers most exposed to the inventory overhang sought out the gray market," said Ann Liang, A Gartner Dataquest industry analyst. "Consequently, the Asia/Pacific region, and in particular the Chinese market, experienced what was arguably the most active period of gray market importing of mobile terminals in several years."

Despite the overall slump in sales, Nokia increased its already-impressive worldwide share lead in 2001, increasing its worldwide market share from 30.6 percent to 35 percent, according to the study. Motorola held on to second place with a 14.8 percent market share, which was a decrease of 1.7 percent. Siemens claimed third place with a 7.4 percent market share, which was just slightly ahead of Samsung's 7.1 percent share.

Most notably, however, Ericsson, which had been the third-leading manufacturer, saw its market share lead drop to fifth with a 6.7 percent share. That decrease led that firm to create a new firm with Sony, Sony Ericsson, which officially launched last fall. The combined company should be a major player in 2002 and could regain the third position, the study said.

The study noted that sales of GPRS handsets were below expectations and put the blame at the feet of wireless operators.

"GPRS network operators were almost universally unprepared to persuade new or existing end users to upgrade to GPRS terminals," said Bryan Prohm, a Gartner Dataquest senior analyst.

The study noted that color terminals have captured the public's fancy and could spur increased sales in 2002, although sales for the first half of this year are unlikely to be strong.

David Haskin is managing editor of sister site allNetDevices.