Motorola sinks, Sony Ericsson, Samsung take up slack: More than ever, handset makers in race for profitability, market share, mind share

Like a crash by leading contenders in the Tour de France, any stumble by a leading handset vendor creates an opening for competitors.
Nokia Corp., Samsung Electronics Co. Ltd. and Sony Ericsson Mobile Communications apparently have instantly gobbled up the market share ceded by Motorola Inc. in the second quarter. Samsung and Sony Ericsson posted impressive gains in handset ship volumes last week as they carefully expand market share.
Nokia is due to report on its expected share gains and financial numbers this Thursday. LG Electronics Co. and Motorola also report official numbers on Thursday.
Meanwhile, all the top, incumbent handset vendors are glancing over their shoulders as a newcomer wheels onto the track: Apple Inc. essentially sprinted over the Alps in the last days of the second quarter with its iPhone launch, leaving onlookers and competitors alike to gasp for breath.
The upshot-even without firm results yet from Nokia and LG-is a handset industry in tumult, more fascinating to watch than a year ago, when Nokia and Motorola were locked in a head-to-head battle for global supremacy, far ahead of a trio of contenders and a mass of wannabes. Today, with Motorola suffering largely self-inflicted wounds and Apple parachuting in to claim-at least temporarily-an envious slice of “mind share,” the mobile handset industry is brimming with innovation and hyper-competition.
Each top player has impressive credentials to justify optimism, while also carrying liabilities or exposure to fierce competitors that could let the air out of anyone’s tires.
Nokia has the scale, coverage of emerging markets and innovations to maintain its dominant position. More than ever, the Finnish vendor now races along ahead of the pack, with the advantages and the risks that market leadership brings. But Apple’s ability to seize the world’s imagination and an enviable, opening day chunk of business in the United States-a market that has bedeviled Nokia-cannot be ignored. Market observers will sharpen their lookout for signs that Nokia is able to leverage the obvious and the subtle lessons of the iPhone to its advantage in the next six months to a year.
As Motorola works to clear choked channels, deal with Wall Street’s disappointment and, possibly, re-examine its executive leadership, it has plummeted from world-beater one year ago to a case study on how badly a company can stumble. If it can devise a profitable business plan, unleash its talent for innovation and swing its heft in the right directions, the company could well write a new chapter in corporate turnarounds. Events have brought renewed interest to whatever story Motorola will tell financial analysts when they gather in September for a postponed annual ritual.
Samsung and Sony Ericsson, even while they post impressive unit volume gains, must be humming the don’t-discount-at-the-high-end theme song written by Motorola. Of the two, Sony Ericsson appears less enthralled with its globalshare ranking and more devoted to the bottom line, which could ensure that as share points come and go, it remains a steady competitor. Samsung also is a results-oriented company, but it has now expanded its share at some risk to profits. Both vendors face the inevitable erosion of average selling prices as they expand share by selling lower-tier handsets into emerging markets.
Q2 numbers
These dynamics are, to some degree, reflected in the players’ reports on their second-quarter results.
Sony Ericsson continued its blinding streak, posting financial numbers that to a degree reflect its growth and its up-and-coming status, rather than market leadership. The Japanese-Swedish joint venture last week posted $4.3 billion in revenue for the second quarter, a 37% increase from the year-ago quarter. Net income reached $303 million, a 54% jump from the year-ago quarter. Handset volumes reached 25 million units, a nearly 60% jump from the year-ago quarter. ASPs declined, as expected, to $172, down from $199 a year ago.
Samsung reported companywide revenue of $16 billion in the second quarter, a 4% increment over the year-ago quarter; handset-related revenue accounted for $4.6 billion of that, a similar increase over the prior year’s quarter. Net income companywide was $1.5 billion, down 5% from the year-ago quarter. Handset shipments reached 37.4 million, enough to seize the world’s No. 2 ranking. ASPs declined to $148, an abrupt 5% drop from the prior quarter.