Mobile Phone Market Movements

IDC recently reported that the worldwide mobile phone market grew 11.3% in the fourth quarter of 2009 after five consecutive quarters of decline. The smartphone market, which grew consistently even through the downturn, was up 39% in the quarter. Motorola (NYSE:MOT) returned to the top 5 smartphone vendors list, while in the mobile phone market its share declined. Samsung and LG recorded strong market share gains.

Samsung increased its mobile phone market share from 16.5% in 2008 to 20.1% in 2009. Nokia (NYSE: NOK) leads the mobile phone market with 38.3% share versus 39.4% in 2008, while LG is at No.3 with 10.5% and Sony Ericsson at No.4 with 5.1%. Motorola is at No.5 in the mobile phone market with 4.9% share, down from 8.4% in 2008. Though Motorola posted its twelfth consecutive quarter of shipment declines, this was its lowest decline since the first half of 2008. Its high-margin smartphone mix improved with two Android phones, Droid and Cliq, launched at the end of the year. Motorola has already shipped over 2 million units to more than 20 countries. With the success of its Android phones, it has returned to the top 5 vendors list in the smartphone market at the cost of HTC, whose share declined from 5.6% to 4.4%.

For the full year, Samsung makes an appearance in the top 5 smartphone vendor list with 3.3%, while Motorola doesn’t figure on it. Nokia, Research In Motion (RIM), and Apple maintained their market positions in the fourth quarter with 38.2%, 19.6%, and 16% share respectively. Apple was the only company to post strong market share gain; its market share increased from 11.2% to 16% as it almost doubled its shipments in the fourth quarter and launched the iPhone on China Unicom.

Let’s now look at the recent performances of some of these vendors. We covered Apple and Research In Motion recently. Today’s post focuses on Nokia, Motorola, and Samsung.

Nokia leads the smartphone market with 38.9% share (versus 40% in 2008), but its market share is slowly shrinking due to competition from Apple and RIM in the smartphone market and Samsung in the mobile phone market. However, the company recorded strong smartphone sales in the fourth quarter driven by the success of its X6, 5800, N97, N97 mini, and 5530 models. Nokia recently launched four touchscreen-enabled smartphones, and this shift seems to be paying off.

Nokia last month reported Q4 revenue of €12 billion, up 22% q-o-q and down 5% y-o-y. Its operating profit almost doubled from last year to €1.1 billion. Last quarter, it recorded an operating loss of €426 million. For 2009, Nokia’s net sales decreased 19% to €41.0 billion and operating profit decreased 76% to €1.2 billion.

Mobile device volumes increased 12% y-o-y and 17% q-o-q to 126.9 million units in the quarter. The company’s converged mobile device volumes, comprising smartphones and mobile computers, were 20.8 million units, up 38% y-o-y and 27% q-o-q.

In December, Nokia and New Alliance, which is part of the Shanghai Alliance Investment Ltd, announced plans to form a 50-50 joint venture company to offer a range of mobile services in China and support the local developer ecosystem. Nokia ended the quarter with €8.9 billion in cash. The stock is currently trading around $13 with market cap of about $48 billion. It hit a 52-week low of $8.47 on March 9 last year and has recovered since.

Motorola recently reported Q4 revenue of $5.7 billion, down 19.7% and net income of $142 million or $0.06 per share versus a loss of $3.65 billion or $1.61 per share last year. For the full year, revenue declined 27% to $22 billion and net loss narrowed to $51 million from $4.24 billion last year. The company ended the quarter with $8 billion in cash. Q3 coverage is available here.

During the quarter, the company shipped 12 million handsets and Mobile Devices segment sales were $1.8 billion, down 22%, while GAAP operating loss narrowed to $132 million from $595 million last year. For the full year 2009, sales were down 41% to $7.1 billion and operating loss halved to $1.1 billion.

Motorola plans to launch at least 20 new smartphones in the year. It announced four new Android-based smartphones that will start shipping in the first quarter. Motorola is going forward with its earlier plan to spin off its mobile devices unit, but will be combining its home products division with mobile devices. This spin-off, which will likely take place next year, should enable the mobile devices unit to start afresh without the burden of its debts, and its combination with Motorola’s set-top box business should provide the new division with the stability it needs while it continues with its turnaround.

Motorola expects a first quarter loss of $0.01 to $0.03 per share. Its stock is currently trading around $7 with market cap of about $16.5 billion. Its 52-week high was $9.23 on September 15.

Samsung Electronics (005930.KS) recently reported Q4 revenue of 39.24 trillion Korean won ($34.2 billion), up 9% q-o-q. Net income was down 18% q-o-q to 3.05 trillion won ($2.66 billion) and operating profit decreased 12.5% q-o-q to 3.7 trillion won ($3.2 billion). For the full year, revenue was up 15% to 136.29 trillion Korean won ($11.9 billion) and operating profit doubled to 10.92 trillion Korean won ($9.5 billion). Samsung ended the year with 12.44 trillion Korean won ($10.8 billion) in cash. Q3 coverage is available here.

Samsung’s handset shipments increased 31% to 68.8 million units in the quarter driven by the success of its Omnia2 smartphone and Corby touch phone as well as stronger promotion by carriers in developed markets. In emerging markets, sales were driven by its localized models and and extended distribution channels. Samsung recently introduced the Wave, which is based on its own operating system, Bada. Samsung also plans to make its own tablet PC.

It is interesting that Samsung is one of the players in a position to vertically integrate from phone to chips as Apple is starting to do. I had earlier analyzed the vertical integration strategies of  Apple  and Samsung and analyzed that Samsung is the best positioned company to compete in a vertically integrated convergence device. RIM, Palm, Nokia cannot really do this. Motorola, after the break-up, also cannot do it.