Style and innovation matter. So does brand and, of course, size. Carrier relationships help too, though three of the strongest brands continue to exert a gravity of their own. The industry’s two behemoths-need we mention names?-continued to distance themselves from their three lesser rivals with volume in emerging markets. And, like a boa constrictor slowly squeezing the life out of its victim, the top five handset brands all grew shipments while their mutual prey-the “other” category of all remaining handset vendors-gasped for air.
That’s the wild and woolly global handset picture-a mosaic of sorts composed of style, price point, functionality, geography and other factors-painted by numbers posted in third-quarter results by the Tier-One handset vendors. It was a somewhat rare quarter for the Tier-One vendors in that each had record shipment volumes, while each notched significant wins and all suffered some chagrin.
And that boa ain’t made of feathers: according to market analysis by Strategy Analytics, the industry is on track to notch 1 billion handset shipments for the year.
Perhaps the most eye-catching progress in the third quarter belonged to Sony Ericsson Mobile Communications L.P., which decisively overtook LG Electronics Co. in shipment volumes and handset revenue to hold the fourth position in global rankings on the fifth anniversary of its existence. Sony Ericsson shipped nearly 20 million handsets in the quarter, a whopping 43-percent increase from the year-ago quarter, which brought in $3.7 billion in sales, a similarly sized increase, and nearly tripled its net income from the year-ago quarter to $374 million. The joint venture has pursued profitability at the expense of market share, yet managed to garner both.
Though Nokia Corp. posted an industry record of 88.5 million handsets shipped in the quarter-nearly 1 million per day, every single day, for three months running-Sony Ericsson showed the highest year-on-year growth by leveraging its ambition and brand and betting squarely on music and imaging. Motorola Inc., which had danced in the sun last quarter, missed its exuberant guidance but still posted impressive numbers-nearly 54 million handsets shipped, a nearly 40-percent jump from the year-ago quarter-while ushering in its much-awaited lineup of post-Razr-yet-still-in-the-Razr-family phones. Samsung Electronics Co. crossed the 30 million mark for handsets shipped, with surges in Europe and North America. LG climbed back to profitability after two quarters and posted its own record shipments. Perhaps indicative of its innumerable brethren, the world’s sixth-largest vendor, BenQ-Siemens, ceased investment in its German operations, effectively walking away with screaming headlines in its wake.
Nokia garnered a 35-percent global market share for the quarter, according to Strategy Analytics’ Neil Mawston. Overall revenue was up 20 percent (see chart for all vendors’ shipment, revenue and earnings numbers) but net profit lagged from the year-ago quarter; mobile devices drove results as usual. Shipments were strongest in China, one of Nokia’s emerging market cards. At the high end, Nokia’s “multimedia devices”-known to the rest of the planet as smart phones-grew by 45 percent, a category to watch. A giant remains atop the heap.
Although Motorola Chief Executive Officer Ed Zander declared himself “not pleased” with his company’s revenue (up 17 percent from the year-ago quarter but under his guidance to analysts) and earnings (net income dropped 45 percent from the year-ago quarter), analysts hastened to suggest buying Moto stock. Handset shipments also missed guidance, yet reached above 53 million units, nearly 40 percent above last year’s Razr-fueled frenzy. The vendor claimed more than 22 percent global market share. Word is Motorola is not putting carrier branding on its Krazr line of handsets, reflecting its sense that, in the U.S. at least, star handsets attract subscribers to carriers.
Samsung has a comfortable niche-at half Motorola’s market share and double Sony Ericsson’s, it wrestles only with the market’s usual challenges. Still, it lost a half-point of market share and Sony Ericsson may now appear in its rear-view mirror. Samsung’s “Ultra Edition” thin phones grabbed the market in Europe and the U.S., where its sheer portfolio breadth has it well-positioned with key carrier partners.
Sony Ericsson declared itself “on a roll” and the numbers back it up. The vendor’s Walkman and Cyber-shot phones reflected the joint venture’s consumer savvy and effective leveraging of the Sony heritage in consumer electronics. That combo may well have eaten into Nokia’s European sales as well as Nokia’s and Motorola’s sales in Asia, according to CIBC World Markets’ analyst Ittai Kidron. Sony Ericsson also is “bullish on alternative channels,” according to Najmi Jarwala, head of North American operations. Now Sony Ericsson knows how Motorola feels to have a huge quarter, with increased expectations for next quarter.
LG did what it said it would do-regain profitability-and it too recorded a jump in shipments, with 16.5 million handsets, up from 15.5 million in the year-ago quarter. And it conquered the U.S., which accounted for nearly half the company’s total volume, according to IDC, with its Chocolate phone-just as it predicted in the last quarter, a difficult one. Chocolate also performed well in Europe. Yet LG too felt the squeeze; its market share dropped nearly a point from the year-ago quarter.
