The worldwide mobile-phone market roared to another record finish in the fourth quarter as unit shipments reached a staggering 245 million, according to research and consulting firm IDC. For the full year, the handset industry shipped a total of 825.5 million phones.
“2005 was the year of the emerging market,” said Neil Mawston, an analyst with research and consulting firm Strategy Analytics. “Booming demand in the Southern Hemisphere, in regions such as India and Africa, drove global mobile-phone sales 19-percent higher year-over-year. Emerging markets accounted for one-half of total worldwide sales in 2005.”
Despite the market’s vigorous growth, the world’s top handset makers each exposed various weaknesses and concerns to investors.
Even the world’s largest mobile-phone maker Nokia Corp., which sold a record 83.7 million mobile phones in the fourth quarter, failed to wow Wall Street. Nokia reported $12.6 billion in net sales for the fourth quarter, up 9 percent from the year ago quarter. However, the company’s operating profit declined 6 percent over that same period to $1.7 billion, largely due to declines in the company’s handset and networks businesses. Investors sent the company’s shares down slightly after the news.
“We believe investors could be disappointed as record shipments yielded no earnings upside,” wrote Ittai Kidron, an analyst with CIBC World Markets. The firm makes a market in Nokia securities.
However, most analysts continued their support of Nokia, noting the company’s enormous reach and clout within the industry.
As for Nokia’s failings in the U.S. market-the company currently ranks fourth in market share-analysts predicted Nokia would manage a turnaround.
“We expect Nokia to figure more prominently in both GSM and CDMA carrier marketing campaigns in North America in 2006 compared with last year,” wrote John Bucher with Harris Nesbitt. The firm does not make a market in Nokia securities.
Motorola, which reported its results Jan. 19, faced similar issues. Although the company’s financials were solid, investors expressed concern over the company’s continued reliance on the sales of its Razr phone.
Indeed, Strategy Analytics said that Razrs comprised one-third of Motorola’s shipments in the fourth quarter-which means that Motorola shipped around 15 million of the devices in the quarter.
“Motorola is at risk of becoming a one-trick pony,” Strategy Analytics warned.
Motorola ended the year with a market share of 18.3 percent, according to Strategy Analytics, while Nokia scored a 34.2-percent market share.
As for LG, which reported its results last week, the company shipped 16.2 million mobile phones in the fourth quarter. The figures give LG a worldwide market share of around 6.6 percent, according to Strategy Analytics.
Although the company reported relatively solid results, investors worried that the company is facing increased competition. In order to combat such concerns, LG announced it will soon unveil its “Black Label” line of phones. The company did not provide details on the upcoming phones.
Interestingly, the handset industry’s record fourth quarter seemed to inspire industry watchers on the market’s potential. Although some have warned of slowing sales in 2006, such predictions were nowhere to be found after the fourth-quarter reporting season.
“Although this year’s fourth quarter produced a significant gain over the same quarter one year ago, the fact that this is the second consecutive quarter with shipments over 200 million suggests that the market will continue to enjoy solid growth into 2006,” said Ryan Reith, an analyst with IDC.
