Q1 Looking Rough For Handset Vendors
By Carlo Longino, Fri Apr 15 18:15:00 GMT 2005

Sony Ericsson and Samsung have weighed in with their first-quarter verdicts, and things aren't looking so hot. Is it a hangover from the holidays or a sign that 2005 is going to be rough?

The two companies reported a drop in revenues and profits in the quarter, with Sony Ericsson shipping more phones than the same quarter last year, but 25 percent less than the fourth quarter. Samsung shipped a record number of phones in the quarter, 24.5 million, but still saw declines.

Samsung said earlier in the year it puts less emphasis on fourth-quarter sales because it believes shoppers then won't be attracted to its relatively expensive handsets, so it can maintain its average selling price and in turn grab market share in the first quarter. It looks like the strategy may have gained the company share, but the attempt to keep up ASP may not have worked, with average prices and margins still off recent levels. The company didn't give a rosy outlook for the second quarter either, saying the handset market looked to remain competitive.

Sony Ericsson's report held few bright spots, the company feeling the effects of Western European market movement to low-end and prepaid handsets, areas where its portfolio is weak. Its average selling price fell almost 14 percent to 137 euros ($176). Execs there have a bullish outlook for the rest of the year, however, as models announced in the first quarter come to market.

Investors and analysts are looking forward to first-quarter results from Nokia and Siemens later this month to get a better idea of how things played out, but the first quarter is typically weak for mobile phone sales, following the Christmas rush. But companies that can succeed in these down quarters -- or at least control their failures better than competitors -- will be better placed to compete over the balance of the year, when the market should pick up.