Who’s Driving The Growth in Mobile Phones?

Mobile phone sales continue to climb led by market leader Nokia and new technology from Apple  (the iPhone), enticing more consumers to open their wallets.

The latest Gartner figures state worldwide sales of mobile phones grew 17 percent in the second quarter of this year. Gartner forecasts mobile phone sales worldwide will reach 1.13 billion units by the end of 2007.

Sales in North America showed strong growth. More than 41.4 million units were sold in the second quarter of 2007, a 7 percent increase from the same period in 2006.

“AT&T and Verizon, the two largest operators in the region, continued to perform extremely well,” said Hugues De La Vergne, principal analyst for mobile device research at Gartner. “AT&T in particular (did well) thanks to its exclusive deal with Apple’s iPhone in the region.”

The Gartner report notes that Motorola suffered from weak demand because of its “rather dated portfolio,” as well as poor sales into its distribution channels as a result of its attempts to reduce stock. However, aggressive pricing allowed it to reduce inventory in key regions such as Western Europe, selling nearly 39.5 million units worldwide in the quarter.

Motorola’s market share dropped 7.3 percentage points from the second quarter of 2006. Gartner does not expect the company’s market share to return to close to 20 percent until substantial changes are made to its product portfolio. Gartner had Motorola in second place with a worldwide share of 14.6 percent.

Gartner had a much more positive outlook for Nokia, the clear market leader in worldwide sales volume.

“Nokia’s devices business seems to be doing everything right at the moment,” said Carolina Milanesi, Gartner’s research director for mobile devices based in Egham, UK. Nokia’s sales into the channel once again exceeded the 100-million-unit mark in the second quarter of 2007. Gartner said Nokia sold slightly less than 100 million units to end users, gaining 3.2 percentage points compared to the same period last year.

Nokia increased its market share both on a quarterly and annual basis, accounting for 36.9 percent of worldwide sales in the quarter. Even better for the Finnish cell phone giant’s bottom line: Gartner says Nokia experienced strong sales of its high-end phones and the average selling price of its phones are on the rise.

The iPhone Factor

Next quarter’s figures will be of particular interest for those looking for a better read on how Apple’s iPhone has impacted the market. The iPhone generated considerable publicity and sales at launch, but it was only available for the last two days of the second quarter.

Regardless of what the future sales data reveals, Gartner analyst De La Vergne said the iPhone has already had a big impact on the competition.

“You’ll see most vendors take some actions to compete with the iPhone, like make improvements to their device’s user interface,” De La Vergne, told internetnews.com. “What Apple’s pulled together in terms of the user interface and the integration of the Web browser is impressive.”

In some ways, Apple is helping its competitors by energizing the industry with the iPhone and raising price points. “They’re building value back into the mobile phone which, for years, all the operators have been subsidizing,” said De La Vergne. He noted that over 70 percent of mobile phones sold in the U.S. have a retail price of $99 or less.

“The issue for Apple is it’s a premium-priced product and there’s only so much of the market you can grab at those price levels,” he said. The iPhone is currently available for $499 and $599 for the 4 GB and 8 GB versions, respectively.

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