They Weren't Kidding
By Carlo Longino, Tue Jun 08 14:45:00 GMT 2004

Nokia meant what it said about a slip in sales -- Gartner's first-quarter figures show it lost nearly 6 points of share, down to about 29%, as its competitors all showed gains.

The total market for handsets in the first quarter of 2004 grew by 34 percent over last year, Gartner says, echoing earlier numbers from other firms, to just over 153 million. The top five vendors all increased unit sales, but Nokia's growth lagged the market, resulting in a pretty hefty loss of 5.7 percentage points of market share. Its loss was spread around fairly evenly to Motorola, Samsung and Siemens -- the number 2, 3 and 4 vendors -- and slightly less to Sony Ericsson and LG.

Gartner analyst Ben Wood puts Nokia's slide down to a weak product portfolio and a poor showing in Western Europe, where operators turned to other manufacturers in large numbers. Sales in the area in general got a boost from sales promotions that continued after Christmas and ongoing strong replacement sales. North American sales increased 30 percent over 2003 as consumers snapped up handsets with color screens and cameras, and sales remained healthy across several Asian markets, including China, where Western manufacturers are gaining on local and regional competitors.

"Another record quarter of mobile phone sales resulted from an Asia/Pacific market buoyed by purchases for the Chinese New Year, healthy growth in emerging markets and surprising numbers of people in mature markets choosing to upgrade their phones," Wood says.

Global End-user Mobile Terminal Sales, Q1 2004
(in thousands of units)

The numbers further underline the common thinking on Nokia -- that there are significant holes in its product line as the company hasn't kept in touch with consumer tastes, and that its struggle with carriers over customized devices isn't working out so well. But the company's slashed prices and softened its approach with a view to regaining that lost share, Wood says, and that number-two Motorola has to keep firing on all cylinders.

"The challenge for Motorola is to maintain this strong performance. Now that it has started to regain the trust of key global operators, it must keep its promises," Wood says. "Given Nokia's recent price cuts and more flexible approach to working with operators, Motorola can't afford to be late with new products in the second half of 2004."