"In mature markets such as Western Europe, converged mobile devices are seen by end users as a good proposition to replace their handsets," said Jeronimo. "Features that enable productivity in both professional and personal lives are leading more users towards mobility and this is what makes the segment unique and unlike the rest of the market. Data attachment rates for these devices is well beyond that of traditional mobile phones, and the devices and services catering to this segment were more readily available than ever before in 2008. As long as operators can continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market."
With clear expectations that 2009 will be more difficult than 2008, handset vendors, chipset manufacturers, and operators will all have to work in sync to rebuild consumer interest in mobile spending.
"Vendors are not taking this situation lightly, and are undertaking plans to run lean and maintain user interest," said Jeronimo. "Cost reduction and operational efficiency have become cornerstones of corporate strategy moving forward and, for some, that will include headcount reduction. At the same time, converged mobile devices and services will become primary targets for vendors to focus their resources. Most vendors have already signaled their intentions to concentrate on the hot converged mobile devices space by aligning with operating systems that fit their strategy. Services, meanwhile, have played only a small role in the overall market, but will see increased importance as vendors compete for the user experience."
A good example of this trend is 3 UK's INQ1 phone being named as the best 2008 mobile handset or device at the Global Mobile Awards, held last week in Barcelona during the 3GSMA Mobile World Congress 2009. Competing with the likes of the Nokia E71, LG KS360, T-Mobile G1, and BlackBerry Storm, the INQ1, which is tightly integrated with Facebook, Skype, Windows Live Messenger, and last.fm, was voted the best device providing a truly mobile social networking experience to the end user. This year, we can expect new products coming to the market with a strong focus on services rather than technology alone.
Top Mobile Phone Vendors
Nokia gave early indications that 4Q08 would be a challenging quarter due to the economic downturn, and by quarter's end its shipments had declined 11% year on year, but increased 41.2% sequentially. Traditional mobile phones were responsible for Nokia's good performance compared to the previous quarter (50.4% sequential increase), a segment where it has been losing market share to Samsung. Nokia ended the quarter with 42.2% market share, a 7% increase on the previous quarter. The low-end 1208, midtier 6300, 5310 XpressMusic, and E71, a strong seller in the smartphone segment, contributed to the good performance. In addition, Nokia reduced headcount in order to lower overall costs, and at the same time announced it would need to innovate to grow. To do this, it will continue to bring the Internet onto more mobile devices and develop five interconnected services — maps, music, messaging, media, and games — for its handsets. A good example of this strategy is the N97, which will be released before the summer. Nokia ended the year in first position with an annual market share of 39.8%.
Samsung experienced lower sales than expected due to the global recession and saw its operating margin suffer. Despite this, the company saw strong demand for products such as touchscreen-enabled phones (F480) and converged mobile devices (Omnia i900), as well as midrange camera phones (J700 and E250). These product segments will continue to be the company's key focus in 2009, along with improving cost competitiveness. Samsung's shipments in Western Europe declined 0.8% year on year, but saw a slight increase of 0.8% sequentially. This impacted market share, which fell to 24.3% in 4Q08 from 28.4% in 3Q08. Samsung ended the year in second position with an annual market share of 25.5%.
Sony Ericsson retained third place in Western Europe during the quarter, but slipped to fourth worldwide. Western Europe continues to be one of the most important regions for Sony Ericsson, but lower profitability due to ongoing corporate restructuring, higher expenses related to sales, and a less favorable product mix led to a 14.8% decrease in shipments in 4Q08 year on year, but 31.1% sequentially. Sony Ericsson had a market share of 17.2% in 4Q08 and it made significant investments to compete in the coming months, most notably announcing its participation in the Open Handset Alliance to build its converged mobile device portfolio. The company also plans to build on its expertise in music and imaging, harness the Internet to bring more integrated mobile entertainment devices, and expand its services arm now that it has launched the PlayNow music service in Sweden and announced PlayNow Movies in Barcelona. Sony Ericsson ended 2008 in third position with an annual market share of 14.9%.
LG Electronics' good performance in previous quarters was not so evident in 4Q08. Shipments declined in Western Europe by 11.8% year on year, but increased 50.2% sequentially. The sequential increase was largely due to the introduction of new models such as the KC910, KP500, and KS360 in 4Q08 in Western Europe. This year, the company will emphasize digital convergence on its handset portfolio and will launch 10 new models, including Windows Mobile, Android, and LiMo devices, most of them touchscreen versions. In addition, its new low-tier platform will enable the company to compete aggressively in low-end markets. LG ended 2008 in fourth position with 5.4% annual market share.
Motorola ended 4Q08 in fifth place, posting another quarter of operating losses driven not only by the global economic crisis but also due to its ongoing restructuring and gaps in its product portfolio. Shipments fell 75.6% year on year to 1.1 million units, with a market share of 2%, its lowest ever in Western Europe. While this could be seen as the latest chapter in Motorola's slide in the market, co-CEO Sanjay Jha pointed out the progress made in terms of cost reduction and platform rationalization, and spoke highly of the company's converged mobile device innovation around Android. IDC believes it will be very difficult for Motorola to regain its market position until 2013. The restructuring could go beyond simple internal reorganization and could lead to a new mobile business mindset. Surviving this process in the next few years could be the major challenge for the company, which reported massive losses in the last few quarters and is losing consumers every day. Even if it manages to survive it will take another few years to regain consumer confidence.
Apple faced a difficult quarter after excellent results in 3Q08. Despite the strong year-on-year increase (due to the small volume in 4Q07, the first quarter in which Apple shipped the iPhone in Western Europe), shipments declined 58.4% sequentially. The iPhone 3G continued to attract new consumers and made a major contribution to the increase in the converged mobile device (smartphone) segment. The lack of a product portfolio will continue to impact Apple's results in the coming quarters if new products are not launched. With only one device (with two versions) Apple is clearly the success story of 2008. The iPhone and iPhone 3G enabled it to take sixth place in the Western European handset market in 2008, with annual market share of 2.3%.
Top Western European Mobile Phone Vendors, 4Q08 (Units in Millions)
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