[Total worldwide handset shipments in the third quarter were down 00.4% from the second quarter. Samsung reached a milestone shipping over fifty million units for the first time.]

Framingham, MA -- The worldwide mobile phone industry felt the impact of the global financial crisis in the third quarter of 2008 (3Q08) as total handset shipments were down significantly over previous quarters. Mobile phone manufacturers shipped a total of 299.0 million handsets in 3Q08, up 3.2% from last year, and down -0.4% over 2Q08. The third quarter of the year has historically been a ramp-up quarter as manufacturers load their sales channels with handsets in preparation for the holiday season, producing year-over-year growth rates as high as 20% as a result. This year has not witnessed a similar ramp up, largely due to the current economic situation.

"Handset vendors felt the pressures of the dismal economy in the third quarter of 2008, and as a result, shipments and revenues were down almost across the board," says Ryan Reith, senior research analyst with IDC's Quarterly Mobile Phone Tracker. "There were two signs of hope from two major players during third quarter earnings. First, as highly anticipated and now confirmed, Apple reported an extremely successful quarter and noted it is on pace to surpass its initial 2008 shipment estimates. Second Nokia's CEO Olli-Pekka Kallasvuo announced a positive outlook for 2008 despite a tough third quarter. This offers reassurance to all industry players as Nokia has been a clear leader in the mobile phone space for quite some time."

Looking forward to the holiday season, mobile phone average selling prices have already begun to drop and marketing campaigns are ramping up, and competition for buyers will remain high as spending will be a concern to consumers. IDC expects tight economic conditions will make 2009 slower and more competitive as well.

"While the overall mobile phone market registered small growth compared to last year, the market for converged mobile devices (commonly known as smartphones) posted strong gains," added Ramon T. Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends. "The worldwide release of the Apple iPhone 3G earlier this summer marked a major step not only for Apple, but also raised the profile of converged mobile devices as a whole. Add on top of that the attention generated by the Google-powered G1, and the converged mobile device suddenly finds itself as the device sought by both seasoned and first-time users."

Regional Analysis

-- In North America, new releases from Apple, Palm, and Research In Motion, along with the highly anticipated release of the HTC G1, pushed the converged mobile device further into the public eye and into users' hands. Conversely, traditional mobile phones were not able to keep up the pace and showed a slight decline from a year ago. Even so, overall growth in the region remained sound heading into 4Q08.

-- In Latin America, the mobile phone market posted slower growth than expected, but the converged mobile device market made terrific strides, especially with the official release of the Apple iPhone in key countries. Although the region is widely known as a key emerging market, that has not stopped carriers and vendors from trying to migrate users to higher-end devices and services.

-- The EMEA market posted mixed results, with continued downturn in Western Europe due to economic challenges but still strong growth from the converged mobile device market. In neighboring CEMA, vendors showed no sign yet of a significant slowdown. While the financial crisis had an impact on sales in Russia and Eastern Europe, emerging markets in general have so far proved resilient to a slowdown in the mobile arena, and this is particularly true of Africa, which is benefiting from lower oil and food prices.

-- The Asia/Pacific market registered mixed fortunes in 3Q08. Although there were signs of growth in emerging markets like China and Indonesia, other developed markets suffered during the quarter. In particular, the Australia market slumped due to a combination of third-quarter seasonality and weak economic sentiment, while the high-end Korea market experienced a double-digit decrease as dueling operators eased away from an expensive subsidy war.

Top Five Mobile Phone Vendors

Nokia remained solidly in the market leadership position, with shipments greater than the next three vendors' total volumes combined, but not even it was immune from challenging market conditions. Citing a key decision not to compete against aggressive pricing strategies of other handset vendors, increased competition around the globe, and a slower ramp up of key devices during the quarter, Nokia posted a drop in overall revenue, profit, and market share. Even so, the company remains in strong position with its brand, cost structure, and operations to assure continued success. As for devices, Nokia is looking to its E71, N95, and its recently announced 5800 XpressMusic to gain attention during the holiday quarter.

Samsung reached a new milestone during the quarter, shipping over fifty million units for the first time in its history. The company saw success across its product portfolio, receiving a warm reception for its feature phones like its popular touchscreen-capable Instinct and entry-level devices like its C260 and B130. In the process, the company posted more than twice the growth of the overall market and realized almost 11% operating margin. Key to its success was an aggressive pricing strategy, increased attention within emerging markets, and massive marketing campaigns.

Sony Ericsson took third place worldwide for the first time in its history, despite ongoing restructuring across the company and a net loss for the quarter. At the same time, Sony Ericsson's ASP's continued to sink, reaching 109 Euros for the quarter. But the quarter was not without its highlights, as the company officially launched its much anticipated XPeria X1 as well as its first 3G phone in North America with the TM506. More operational realignment is expected into the first half of 2009 before results are seen in the second half of the year.

Motorola took another step to reversing its fortunes, hiring Qualcomm's Sanjay Jha to lead its Mobile Devices division this summer. Since then, Jha has sought to rationalize its supply chain, platforms, and research and development in order to restore the company's luster. More challenges remain as Motorola's volumes were still a fraction of what they used to be and the division posted another quarter of operating loss. But the company introduced several key devices before the holiday quarter, including the Krave ZN3, several ROKR devices, Rapture VU30, and the luxurious AURA which address consumer demand for touchscreen and multimedia handsets.

LG Electronics slipped into the number five spot during the quarter, citing unit shipment declines in key emerging markets as well as economic challenges in Europe. Even so, LG has been meeting consumer demand and taste for messaging, touchscreen, and music devices, which have driven strong revenue growth from the same quarter a year ago as well as double digit operating margin. Key devices for LG during the quarter included the Secret and Viewty, while new devices like the Decoy and Dare continued to gain momentum.

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