|The Wireless Industry Still Has Plenty of Room to Grow|
Posted: 12-Jan-2001 [Source: Morningstar.com]
[One industry leader projects handset upgrading leaping to 70-80% this year.]
by Todd P. Bernier -- "This was a tough week for investors who love wireless stocks. On Tuesday, bellwether Nokia (NYSE: NOK - news) announced that mobile-handset sales were softer than expected in 2000, just missing even the lowest of analysts' expectations. Two days later, the number two company in the industry, Motorola (NYSE: MOT - news), reported anemic growth in its ailing wireless phone segment during its December quarter. While Wall Street appears to be getting ready to write the eulogy for the wireless industry, and the fat lady is loosening up her vocal chords, I believe that the wireless industry still has plenty of room to grow.
"In 2000, there were 405 million cellular phones sold worldwide, representing unit growth of an impressive 45% over 1999 levels. But because this industry-wide figure is less than the 425-450 million range that analysts were expecting, many observers have concluded that the industry is maturing faster than expected. For 2001, industry watchers are estimating that the handset market will grow nearly 35%, to 550 million units. Skeptics see Nokia's announcement as a sign that the market will not get to the widely-touted forecast of 550 million units this year.
"But the wireless-telephony market is hardly going the way of the buggy whip or the typewriter. One catalyst for growth will be the migration to data-capable phones, as users increasingly use their phones for things other than just talking. Analysts project that the global market for data-ready handsets will grow to 200 million phones this year--up from about 60 million in 2000. European users are already embracing cool new features like short message services (SMS), sending hundreds of millions of text messages each month. As evidence, Nokia's 3310 model has been flying off store shelves, mainly because it offers advanced instant messaging capabilities that allow users to conduct mobile chats. The launch of new technologies, like GPRS (general packet radio service), which offer "always-on" connection and much faster rates of data transmission, should entice users to upgrade their phones. Of course, further down the road, the handset makers can look forward to the growth of third generation (3G) handsets that will eventually lead to yet another cycle of handset upgrading
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