Global mobile phone sales drops 6pc, smartphones grow 27pc in Q2-09

MUMBAI, INDIA: Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 percent decrease from the second quarter of 2008, according to Gartner Inc.

Smartphone sales surpassed 40 million units, a 27 percent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market (Table 2).

"Despite the challenging market, some devices sold well as consumers who would usually have purchased standard midrange devices either cut back to less expensive handsets or moved up the range to get more features for their money," said Carolina Milanesi, research director at Gartner.

"Touchscreen and qwerty devices remained a major driver for replacement sales and benefited manufacturers with strong, touch-focused midtier devices. However, the decline in average selling price (ASP) accelerated in the first half of the year and particularly affected manufacturers that focus on midtier and low-end devices, where margins are already slim."

The recession continued to suppress replacement sales in both mature and emerging markets. The distribution channel has dealt with lower demand and financial pressure by using up 13.9 million units of existing stock before ordering more. Gartner expects the gap between sell-in to the channel and sell-through to customers will reduce in the second half of 2009 as the channel starts to restock.

Table 1: Worldwide Mobile Terminal Sales to End Users in 2Q09 (Thousands of Units)Note: This table includes iDEN shipments but excludes ODM-to-OEM shipments.
Source: Gartner (August 2009)

Nokia maintained its leadership position, but its portfolio remained heavily skewed toward low-end devices. Its flagship high-end N97 smartphone met little enthusiasm at its launch in the second quarter of 2009 and has sold just 500,000 units in the channel since it started to ship in June, compared to Apple's iPhone 3G S, which sold 1 million units in its first weekend.

"The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors with a more promising outlook in ASPs and margins," said Ms Milanesi.

Samsung and LG both had a very strong second quarter of 2009 with sales of 55 million units and 30.5 million units, respectively. Samsung's touchscreen devices, qwerty phones and smartphones drove sales in mature markets, and Gartner expects it will continue to gain market share in the second half of 2009 to close the gap with Nokia.

Gartner expects LG to keep moving into lower-tier devices to drive growth in emerging markets and be well-positioned to take advantage of China's 3G rollout as it can deliver good-value-for-money devices.

Table 2: Worldwide Smartphone Sales to End Users in 2Q09 (Thousands of Units)Note: For HTC, Gartner counts only the company's own-branded devices, including the G1.
Note: Totals may not add to 100.0 percent due to rounding.
Source: Gartner (August 2009)

Motorola's sales of 15.9 million units were slightly better than expected, but its presence has rapidly concentrated on the Americas, and it has lost most of its share of the Western European market, where it sold fewer than 1 million units in the second quarter of 2009. Most operators and customers will be waiting for Motorola's new Android-based products planned for the fourth quarter of 2009.

Sony Ericsson's market share dropped 2.8 percentage points year-on-year in the second quarter of 2009 but its volume dropped 41 per cent. Although the market environment was challenging, Gartner attributes Sony Ericsson's poor performance to its uncompetitive range of handsets.

"Sony Ericsson has neglected to exploit key trends such as qwerty products for messaging and e-mail, internet browsing and navigation. If it wants to build the presence of its three new products announced this quarter in the channel and capture Christmas sales, the products need to come to market early in the fourth quarter of 2009," Ms Milanesi added.

"Smartphone sales were strong during the second quarter of 2009, with sales of 40.9 million units in line with Gartner's forecast of 27 per cent year-on-year sales growth for 2009," said Ms Milanesi. "Given the higher margins, smartphones offer the biggest opportunity for manufacturers. It is the fastest-growing market segment and the most resistant to declining ASPs."

Apple's expansion into a larger number of countries in the past year has produced a clear effect on sales volumes, as have the recent price adjustments on the 8GB 3G iPhone. Sales of 5.4 million units in the second quarter of 2009 indicated a 51 percent growth in shipments and helped Apple maintain the No. 3 position in the smartphone market, where it has stayed since the third quarter of 2008.

Apple brought its much-anticipated new device — the iPhone 3G S — to market at the end of the second quarter of 2009, but its full potential will only start to show in the sales figures in the second half of 2009.

At the high end of the smartphone market, HTC remained in the No. 4 position behind Apple, where it has been since the third quarter of 2008. It reported lower expectations for the second half of 2009 due to product delays and now expects 2009 revenue to decline by low- to mid-single digits year-on-year, far below its previous outlook of 10 per cent annual growth.

In the smartphone operating system (OS) market, Symbian held 51 percent share, down from 57 percent a year ago, while RIM and Apple grew their shares year-on-year. Android's share was just under 2 percent of the market and more Android-based devices will come to market in the fourth quarter of 2009, intensifying competition in the smartphone OS market, particularly for Symbian and Windows Mobile. Microsoft's share continued to drop year-on-year to account for 9 percent of the market in the second quarter of 2009.

"Microsoft licensees HTC and Samsung continued to add features to their own interfaces, on top of Windows Mobile, to create more competitive products and make up for the usability constraints of the Microsoft platform," said Roberta Cozza, principal analyst at Gartner.

This quarter also saw the debut of the long-awaited Palm Pre based on the new web operating system. "This device attracted a lot of media attention but showed mixed results at the cash register as sales only reached 205,000 units," said Ms Cozza.

"Palm currently ranks 10th in the smartphone market and Gartner remains concerned about its ability to gain traction outside the US market, where its brand is less strong."

"For the remainder of 2009, manufacturers must offer products with the features that consumers and operators are demanding most strongly — like touchscreens, focus on user interfaces and application/content ecosystems — and work hard to keep operators loyal," concluded Ms Milanesi.

"We expect competition to intensify in the second half of 2009. Mobile operators are likely to drive competition among manufacturers as they start selling e-book readers and mini-notebooks from other manufacturers to foster mobile broadband subscriptions.

"Operators are also starting to subsidise e-book readers and mini notebooks on contract and this means that there will be less subsidy available to drive sales of mobile phones and smartphones. In turn, operators will demand lower prices from phone manufacturers, which will be under even more pressure to deliver strong feature sets at the lowest possible price."

ZTE among 'Top 3' global LTE network infrastructure vendors

SHENZHEN, CHINA: ZTE Corp. has been named a 'Top 3' LTE Network Infrastructure Vendor by Gartner.

In its latest industry report, “Dataquest Insight: Scorecard for Vendors of Long Term Evolution Network Infrastructure,” Gartner uses an item-by-item rating method to comprehensively evaluate the performance of global LTE vendors.

Gartner divides market performance into seven criteria including: Product or Service, Market Understanding, Offering/Product Strategy, Geographic Strategy, Sales and Marketing Strategy, Market Responsiveness and Track Record.

In addition, the report also employs a 5-level rating for each criteria to review the major telecom equipment vendors, including Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens Networks and ZTE and among others. ZTE rated as a strong performer, was at the top of list in “Geographic Strategy” and has zero “Risk” rating.

According to Gartner, ZTE is a strong player in the LTE industry with a quality product portfolio and a growth strategy that is both prudent and sustainable.

ZTE is continually improving its marketing and business reach outside of China, while also strengthening its regional market presence, as Asia/Pacific offers good growth opportunities for mobile infrastructure vendors. In addition, its strong financial position has allowed it to maintain its R&D spending at 10 percent of revenue.

The report also forecasts that 70% of UMTS vendors will gradually upgrade to HSPA+ and LTE, and that most CDMA operators will choose LTE.

Seven steps to make successful mobile money offerings in emerging markets

MUMBAI, INDIA: Mobile money services have huge potential in markets where mobile penetration vastly outpaces the number of people with bank accounts, according to Gartner Inc.

However, service providers, including banks and mobile operators will need to invest substantial efforts in building an "ecosystem" to make the service work within the local regulatory and business environment.

Mobile money refers to mobile banking and payment services and includes functions such as balance and history enquiries, money transfer, bill payment and prepaid top-up.

“Following the popularity of mobile money services in countries such as the Philippines, where 80 percent of the population has mobile access but only 20 percent have bank accounts, we are seeing rising interest from both mobile operators and financial institutions in offering the service in emerging markets,” said Sandy Shen, research director at Gartner.

Gartner has identified seven crucial steps to enable providers to make successful mobile money offerings in emerging markets. These offerings include:

Step 1 — Talk to the Regulator
Regulators must be involved from an early stage to gain their support, especially in markets where mobile money offerings have not been established. Present regulations are centered on banks and may potentially destroy the business case for mobile money, so service providers need to talk to regulators to educate them and gain their support.

Step 2 — Define the Business Model
In general, there are four business models:

Led by the Bank — Banks in this case take most of the responsibility and treat mobile operations as a "bit pipe" that provides mobile access. Banks take care of service development, marketing and promotion, distribution, agent and merchant acquisition, regulatory compliance and technical support. This approach is more likely to be used in developed markets where banks extend the service to existing customers.

Bank-Operator Joint Efforts — Banks and mobile operators establish a partnership or joint venture with each party taking a fair share of responsibilities. Gartner believes that this business model is the most effective as each party performs tasks they are good at with their expertise complementing each other to meet business and regulatory requirements.

Led by the Operator — Operators in this case assume all responsibility, including float accountability and gain the highest returns of all business models, but it also assumes the highest risks.

In essence, the operator provides stored value accounts to the customer and keeps the float with its own bank account. This model relies a lot on regulation because not many countries allow the operator to perform a deposit-taking role. Therefore, this model is likely to be used in only a few markets.

Led by a Third Party — This is usually led by a solution provider that offers the service across operators. Third parties can work with a bank to comply with regulatory requirements and with operators to gain network access, but it assumes most of the responsibility, such as marketing and distribution.

Step 3 — Select a Vendor
Due to the nascent nature of mobile money services, startup companies are sprouting up to chase opportunities in various segments of the market. Gartner recommends vendors with an end-to-end robust solution that is market proven and those with successful deployments of scale. A vendor should also have a solid understanding of the local regulatory and business environment and a proven track record.

Step 4 — Set up the Agent Network
Agents play an essential role in "cash-in" and "cash-out," one of the most valuable elements of the mobile money service. Service providers must chose their agents with care, ensuring that they consult regulation as to which businesses can assumes agent roles, as well as the process of approving and registering the agent. Agents should be trusted by both the customer and service provider, frequently visited by the customer, and readily equipped.

Step 5 — Recruit Service Partners
Service partners are third parties that accept mobile payments offered by the service providers and examples include retail shops, chains, utilities, Internet/broadband providers, transportation companies, governments, schools and charities. By connecting the service partners to mobile money services, the service offers more value and makes it more attractive to the end user, creating stronger loyalty.

Step 6 — Manage Risks
Risk management is key to the success if the service, both for consumer protection and regulatory compliance. It should cover technology risks, operational risks — such as misuse of PINs and theft of handsets — and compliance risks.

Step 7 — Market the Service
For major cities, marketing is not that different to other services and should include above-the-line-advertising, billboards, campaigns and events. The challenge is to market to rural and remote regions where the majority of the target market resides and where there is a lack of marketing channels.

Word of mouth is the best way to advertise in this case and one way is to recruit a community leader, such as a priest or doctor that can impact the wider community. Agents are also an ideal channel to market the service, particularly those in a local store where they are in a natural position to introduce new services.

Consumer LBS market will more than double in 2009

MUMBAI, INDIA: Worldwide consumer location-based services (LBS) subscribers and revenue are on pace to double in 2009, according to Gartner, Inc. Despite an expected 4 per cent decrease in mobile device sales, LBS subscribers are forecast to grow from 41 million in 2008 to 95.7 million in 2009 while revenue is anticipated to increase from $998.3 million in 2008 to $2.2 billion in 2009.

Gartner defines LBS as services that use information about the location of mobile devices, derived from cellular networks, Wi-Fi access points or via satellite links to receivers in (or connected to) the handsets themselves.

Examples are services that enable friends to find each other, parents to locate their children, mapping and navigation. Location-based services may be offered by mobile network carriers or other providers. They are also known as location-aware services.

“The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price/performance of the enabling technologies and compelling location applications,” said Annette Zimmermann, senior research analyst at Gartner. “Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and appearance of application stores.”

Consumer Location-Based Services, Revenue Forecast by Region, 2008-2009 (Millions of Dollars)Source: Gartner (June 2009)

Gartner predicts that advertising-based or ‘free’ LBS (disregarding data charges by mobile carriers) will gain more traction as users adopt it as a way to limit costs.

Mobile carriers that stick to the current predominant business model of charging users $5 to $10 per month plus data plans will experience high churn rates as users will look for free alternatives. In North America and Western Europe, the share of users taking advantage of free services is approximately 10-15 per cent today and is expected to grow to 40-50 per cent in 2013.

Gartner expects more compelling and useful applications and services to come to market in the next 12 to 18 months such as digital coupons to be redeemed in a nearby shop and points-of-interest search services. Smaller niche players will survive in local markets only when they have an established user base and unique offering that larger players cannot compete with. Other players will be acquisition targets for larger vendors.

Gartner analysts said LBS market dynamics vary by region. For example, North America is the largest market due to mobile carriers' strong efforts in navigation services and family-safety solutions. In Western Europe, navigation is currently the most used application, followed by local search and "friend finder." There is still no significant uptake of safety applications.

Japan will continue to see steady growth as GPS has been required by law in mobile phones since 2007. In Asia/Pacific, during the summer Olympics, location services were for the first time offered in China which is now an advertising-based solution and free to the user.

“The competitive landscape will change and most mobile carriers need to alter their approach toward offering LBS and dealing with developers,” concluded Ms Zimmermann. “Subscriber growth will hinge on "free" - disregarding data charges - services. Mobile operators’ initiatives to open up the application programming interface (API) to third-party developers will help them compete against other players in the market and will also be beneficial to the different parties involved, down to the end user.”

Indian mobile services market to reach $30 billion by 2013

MUMBAI, INDIA: Total mobile services revenue in India is projected to grow at a CAGR of 12.5 percent from 2009-2013 to exceed US$30 billion, according to Gartner Inc.

The India mobile subscriber base is set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 percent in the same period from 452 million in 2009. This growth is poised to continue through the forecast period, and India is expected to remain the world’s second largest wireless market after China in terms of mobile connections.

“The Indian mobile industry has now moved out of its hyper growth mode, but it will continue to grow at double-digit rates for next three years as operators focus on rural parts of the country,” said Madhusudan Gupta, senior research analyst at Gartner. “Growth will also be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets.”

Mobile market penetration is projected to increase from 38.7 percent in 2009 to 63. 5 percent in 2013. Gartner said this growth is primarily attributed to the operators increasing their focus on the rural market, local consumer durable and electronic companies entering the domestic mobile handset segment, and lower handset prices.

The Indian mobile connection market continues to be dominated by prepaid subscribers. Prepaid connections accounted for more than 93 percent of all mobile connections in 2008 and it is expected to grow to more than 96 percent of the connection base by 2013, surpassing 741 million versus 312 million in 2008. The postpaid subscriber base will exceed 29 million subscribers by 2013, grow at 2.5 percent from 23 million in 2008.

The churn rate in India is 53.2 percent in 2009, and despite a maturing market, the ratio is expected to increase to 59.6 percent in 2013.

Data revenues driving growth: Revenue from data services will significantly contribute to the overall growth of mobile services in India, with a CAGR of 16.8 percent from 2009 to 2013. Prepaid subscribers are expected to adopt data services faster than the post-paid segment.

The bulk of revenue will continue to come from voice services. However, with the increased growth in data services, the percentage of revenue coming from voice will reduce from 89 percent in 2008 to 86 percent in 2013.

Expected changes in the Indian telecom landscape: Gartner predicts a significant drop in ARPU as the bulk of new subscribers will come from rural areas that are dominated by prepaid subscribers. Also, voice tariffs will decline substantially in 2009 as new operators join the market.

Growth will be triggered by increased adoption of value-added services, which are relevant to both rural and urban markets. However, the bulk of new connections will come from data cards and multi-SIM use. Voice usage will increase steadily, but data usage will grow more strongly with the increased consumption of value-added services.

Mobile payment users to increase 70pc in 2009

MUMBAI, INDIA: The mobile payment industry will experience steady growth, as the number of mobile payment users worldwide will total 73.4 million in 2009, up 70.4 percent from 2008 when there were 43.1 million users, according to Gartner, Inc.

Gartner predicts that the number of mobile payment users will reach more than 190 million in 2012, representing more than 3 percent of total mobile users worldwide and attaining a level at which it will be considered "mainstream."

“Momentum in the mobile payment market gathered further in 2008 with a number of high-profile launches of mobile money transfer services in multiple markets, participation of major global institutions in near-field communication (NFC) payment trials, as well as new payment solutions entering the market,” said Sandy Shen, research director at Gartner. “However, at the same time, security concerns, an inadequate ‘ecosystem’ and undefined areas in banking regulations remain challenges for mobile payment.”

Gartner defines a mobile payment as paying for a product or service using mobile technology such as a short message service (SMS), Wireless Application Protocol (WAP), Unstructured Supplementary Service Data (USSD) and NFC.

It includes transactions that use banking instruments such as cash, bank accounts or debit and credit cards, as well as noncarrier stored value accounts, such as travel cards, gift cards or Paypal. It does not include transactions that use mobile operators’ billing systems, such as purchase of mobile content or telebanking by mobile to the service center via an interactive voice response (IVR) system.

“Mobile payment has very different user cases and impact on developing markets to that of developed markets,” Ms. Shen said. “In developing markets, together with mobile banking, it allows people to use financial services in a more-efficient way — and sometimes the only way -— at more-affordable costs, and can greatly improve standards of living. In developed markets, mobile is more of an extension of the existing payment infrastructure that allows people to deal with their financial needs on the go and in a timely fashion.”

This disparity leads to the presence of different products in different markets. For example, many services in the US rely on a full browser and credit card, but this won’t work in developing markets, as many people don’t even have a bank account or bank card. On the other hand, Ms. Shen said USSD banking wouldn’t be acceptable in the U.S. as mobile operators have never made use of this for customer services and users may find it very awkward to work with.

In terms of both number of users and transaction volumes, Gartner expects Asia/Pacific and Japan to maintain a larger share of the market through 2012.

While mobile payment penetration in Western Europe is expected to rise from 0.9 percent in 2009 to 2.5 percent in 2012, and from 1.7 percent to 3 percent in North America; penetration in Asia/Pacific and Japan will rise from 2 percent in 2009 to 3.8 percent in 2012. Mobile payment penetration in Eastern Europe, the Middle East and Africa (EMEA) and Latin America is also expected to exceed 3 percent by 2012.

“The most profound impact of mobile banking and payment services is that they provide the nonbanking population with access to modern financial services, giving them tools to improve their living standards,” said Ms. Shen. “For mobile operators, mobile payment can help attract and retain users and generate new revenue streams. For financial institutions, mobile payment is an opportunity to reach users who may have been previously unreachable, due to a lack of retail infrastructure.”

Ms. Shen said that overall, the market will see fragmentation in both technologies and business models, meaning that services need to be adapted for individual markets — even when deployed with the same partners — and that long lead times will be needed for deployment. This, together with the time required for creating user awareness, leads Gartner to believe that mobile payment is at least three years away from entering the mainstream market.

Global mobile phone sales drop 9.4pc and smartphones grew 12.7pc in Q1-09

MUMBAI, INDIA: Worldwide mobile phone sales totalled 269.1 million units in the first quarter of 2009, a 9.4 percent decrease from the first quarter of 2008, according to Gartner, Inc. Smartphone sales surpassed 36.4 million units, a 12.7 percent increase from the same period last year.

"There were some signs of a recovery in markets such as North America and China, but overall sales in the first quarter of 2009 registered the biggest quarter-on-quarter contraction since Gartner began monitoring the market on a quarterly basis in 2001," said Carolina Milanesi, research director for mobile devices at Gartner, based in Egham, UK. "This was also the first time the market contracted year over year during the first quarter, a period traditionally helped by strong seasonality in the Asia/Pacific market."

The channel intensified its efforts in the first quarter of 2009 to reduce the levels of stock it holds, as Gartner predicted in the fourth quarter of 2008. Stock reduction is intended to minimize capital investment in response to low consumer confidence.

Sales into the channel were just short of 244 million units in the first quarter of 2009, while sales to users were just over 269 million units —- a difference of 25 million units, compared with 17 million units in the fourth quarter of 2008, the biggest difference ever recorded. Gartner expects channel inventory reductions to continue into the second quarter of 2009, albeit with lower volumes.

Nokia continued to lead the mobile phone market, but its share dropped to 36.2 percent from 39.1 percent in the first quarter of 2008 (see Table 1). Samsung retained second place and improved its market share as its sales totalled 51.4 million units. After dropping to the fifth position in the fourth quarter of 2008, Motorola overtook Sony Ericsson to regain fourth place.

Table 1
Worldwide Mobile Terminal Sales to End Users in 1Q09 (Thousands of Units)Note* This table includes iDEN shipments, but excludes ODM to OEM shipments.
Note: Totals may not add to 100.0 percent due to rounding.
Source: Gartner (May 2009)

Smartphone sales represented 13.5 percent of all mobile device sales in the first quarter of 2009, compared with 11 percent in the first quarter of 2008. Gartner analysts said positive performance by Research In Motion (RIM) and Apple (see Table 2) showed that services and applications are now instrumental to smartphones’ success.

“Much of the smartphone growth during the first quarter of 2009 was driven by touchscreen products, both in midtier and high-end devices,” said Roberta Cozza, principal analyst at Gartner, based in Egham, UK. “’Touch for the sake of touch’ was enough of a driver in the midtier space, but tighter integration with applications and services around music, mobile e-mail, and Internet browsing made the difference at the high end of the market.”

Table 2
Worldwide Smartphone Sales to End Users in 1Q09 (Thousands of Units)Note: For HTC, Gartner counts only the company's own-branded devices including the G1.
Note Totals may not add to 100.0 percent due to rounding.
Source: Gartner (May 2009)

Symbian accounted for 49.3 percent of worldwide smartphone operating systems (OS) market share in the first quarter of 2009, down from 56.9 percent share in the first quarter of 2008. RIM’s smartphone OS market share reached 19.9 percent in the first quarter of 2009, up from 13.3 percent share in the first quarter of last year. The iPhone OS accounted for 10.8 percent of the market, up from 5.3 percent market share in the first quarter of 2008.

Vendor performance
Nokia’s worldwide sales reached 97.4 million units in the first quarter of 2009, thanks to reductions in inventory in markets such as Asia/Pacific and Latin America. This was the first time Nokia’s sales dipped below 100 million units since the first quarter of 2007. The real impact of the current market recession was on the average selling price (ASP), which saw an 18 percent drop year over year. Nokia managed to grow its sales in the smartphone segment by introducing the Nokia 5800 into more regions.

Samsung had a very successful first quarter of 2009. With sales of 51.4 million units, Samsung's market share grew 4.7 percentage points to 19.1 percent. It returned to double-digit profitability due to a good product mix. Sales of its Omnia, Tocco and Pixon handsets continued to benefit from strong consumer interest in touchscreen devices. The arrival of the Tocco Ultra Edition late in the first quarter of 2009, and the announcement of its first Android-based product, the i7500, will help Samsung in a highly competitive second half of 2009.

LG sold 26.5 million units in the first quarter of 2009, growing its market share by 1.9 percentage points year over year. The company benefited from a very strong portfolio of touchscreen, messaging and imaging devices. The new LG Arena device showcases a new user interface that demonstrates a positive focus on improving usability. However, Gartner said LG’s biggest challenge is to become competitive in the smartphone segment as services and applications become more important to customers.

Motorola continued to experience significant difficulties even in its home market, but it had a solid quarter with prepaid operators Boost Mobile and Tracfone. It expects worldwide sales of iDEN handsets to be up 50 percent in 2009 compared with 2008. These factors will help sustain Motorola until it revamps its portfolio in the fourth quarter of 2009.

Motorola has committed to Android not only to revamp its position in the second half of 2009, but also to produce long-term performance improvements. Gartner analysts question how Motorola will be able to differentiate its offering when so many players in the mobile device market will be delivering Android-based products at the same time.

Sony Ericsson lost market share compared both with the fourth quarter of 2008 and the first quarter of 2008, with sales of 14.5 million units. While the recession contributed to this decline, a weak product portfolio was also a factor. The product features that helped Sony Ericsson become one of the world's top vendors — imaging and music — are now too common to serve as a differentiator.

Sony Ericsson is late to catch on to the popularity of touchscreen devices and has a limited smartphone portfolio. While its focus on services through Play Now Arena is important, Sony Ericsson needs to ensure its devices include the most desirable applications and features for consumers.

“With inventory-reduction efforts expected to continue in the second quarter of 2009, although to a lesser extent than what we have seen so far, and better-than-expected figures for the first quarter of 2009, we remain confident that overall sales to users for 2009 will remain considerably higher than the sell-in that many vendors are expecting,” Ms Milanesi said. “Device vendors will focus increasingly on smartphones, improved user interfaces and services to differentiate themselves and fuel consumer demand. We maintain our view that sales to users will decrease by about 4 percent for 2009 compared with 2008, while sell-in will slow to around a 10 percent decrease.”