Mobile Wrap-up: Q1 2009

1. Summary

Handset manufacturers reported disappointing fourth-quarter and end-of-year 2008 results. Total shipments for 2008 rested at 1.2 billion handsets, representing a meager 5.4 percent growth from 2007. While year-to-year growth remained relatively strong through third quarter 2008, in the fourth quarter, shipments declined 10 percent compared to fourth quarter 2007.  Nokia, Motorola, and Ericsson all suffered from declining handset sales. Samsung was the only beacon in the night, with fourth-quarter 2008 handset sales increasing 28 percent from fourth-quarter 2007.

The carriers, too, are being impacted by the economy. Sprint reported a loss of $1.62 billion for 2008, is down 4.6 million subscribers and plans to cut 8,000 jobs. T-Mobile announced that it added 621,000 customers during fourth-quarter 2008, representing a 35 percent drop in net adds from the fourth quarter of 2007 and 49,000 fewer subscribers than T-Mobile added in the previous quarter.

Despite the bleak current environment, the mobile industry is thinking toward the future. Carriers are positioning their 4G strategies, and the battle between LTE and WiMAX continues. Despite the potential set-back from the DTV delays, LTE had a positive first quarter, with MetroPCS joining Verizon and AT&T’s ranks in support of the 4G technology. Verizon insists that the deployment schedule will remain largely on track, despite the financial crisis and potential DTV impact. The future of WiMAX is not as certain, with Sprint and Clearwire appearing less than completely committed to the long-term potential of this technology. As more providers join the LTE ranks and WiMAX supporters begin to waiver, it’s further evidence of WiMAX’s weakening position.

While the rest of the device market is weakening, smartphone sales are expected to increase in 2009. BlackBerry has been busy in the first quarter trying to replicate the iPhone model, introducing the touchscreen BlackBerry Storm and launching its own app store. As smartphone penetration increases, the app world is booming with many new announcements in first quarter. Social networks and location-based services were the big news in the first quarter of 2009, as well as strategies to present these applications to the user.

While the economy continues to darken the mobile market, bright spots exist with growing smartphone sales and continued evolution toward 4G networks. This will be a formative time, during which device manufacturers and wireless carriers need to be innovative and respond aggressively to market demands. Those who do not will stand to lose market share or go out of business altogether. The remainder of 2009 promises to lend insight into how the market will develop, fleshing out the winners and losers, both in terms of companies and technologies.