Smartphone Sales Skyrocket

By Tarmo Virki, European technology correspondent

HELSINKI (Reuters) – Global cellphone sales continued to fall in April-June, but at a slower pace than in the previous three months as falling prices boosted demand for advanced smartphones, research firm Gartner said on Wednesday.

Total cellphone sales fell 6 percent in the second quarter as recession-hit consumers in both emerging and developed markets reined in spending, Gartner said, adding it still expects the market to fall 4 percent this year.

In January-March the wireless industry saw its weakest ever quarter, with sales to consumers down 9 percent.

"Things are definitely stabilizing regarding demand," said Gartner analyst Carolina Milanesi.

In addition to weaker consumer demand, the industry was hit by retailers continuing to unwind large inventories of unsold phones as the economic slowdown bit in late 2008.

Gartner said retailers’ stocks fell by some 14 million phones in the latest quarter, compared with a decline of 25 million in the first, and said it expects inventories to have a smaller impact on the overall market in the second half of 2009.

Nokia and Apple Win Smartphone Share

Bucking the slowdown in the wider market, smartphone sales grew 27 percent year-on-year in the quarter, boosted by cheaply priced phones like Nokia’s first touch-screen model, the 5800, which make advanced functions available at a 200-300 euro price range.

Smartphones share many of the functionalities of computers, offering services like e-mail and Internet browsing.

"The concern is: how much money will consumers be ready to spend after the economy improves. Has the market been changed forever as (regards) pricing?" Milanesi said.

Gartner said top handset maker Nokia (NOK1V.HE) increased its smartphone market share — a major issue for investors — to 45 percent, boosted by demand for its cheaper models after its flagship high-end N97 smartphone met with little enthusiasm.

Nokia shipped just 500,000 N97s in June, compared to Apple’s iPhone 3G S, which sold 1 million units in its first weekend in the same month, Gartner said.

Of the top five vendors, Sony Ericsson saw the sharpest drop in sales from the first quarter, with market share falling to just 4.7 percent as the firm has missed key trends like full keyboards, Internet browsing and navigation, Gartner said. Large losses at Sony Ericsson have sparked market speculation of a possible breakup of the 50-50 venture, but both owners have said they are committed to the operation and could inject more money into it if necessary.

Ericsson Chief Executive Carl-Henric Svanberg told Reuters late on Tuesday the venture provided an important part of Ericsson’s overall wireless strategy.

While that benefit does not justify continuing losses at the business, Svanberg said Sony-Ericsson is adjusting to a quickly falling market and is determined to return to profitability.

(Additional reporting by Alexei Oreskovic in San Francisco; editing by John Stonestreet)