Nokia, Sony Ericsson Reel from Economic Slowdown

Handset makers are reeling from the blow of economic slowdown. Both Nokia and Sony report losses  during the first quarter but remain optimistic that the worst will soon be over.

The world’s largest cell phone maker, Nokia, reports a 90 percent drop in profits for the first quarter, while Sony Ericsson says it lost $387 in revenues from January to March this year.

“As expected, the first quarter of this year has been extremely challenging for Sony Ericsson due to continued weak global demand. We are aligning our business to the new market reality with the aim of bringing the company back to profitability as quickly as possible.” says Sony Ericsson Dick Komiyama.

Industry watchers have warned cell phone manufacturers of a decline in the mobile market for 2009 as users were unlikely to upgrade their existing handsets during the down economy.

Cell phone companies report about $161 million in profits for the first quarter, down from last year’s $1.6 billion for the same period.

Nokia sold 93.2 million mobile phones during the first quarter, a 19 percent year-over-year decline.
Sony is even faring worse than Nokia. The company will soon resort to retrenchment to save about $522 million in costs.

Sony has posted a 35 percent decline in cell phones shipped for the first quarter compared to the same period last year. Only 14.5 million handsets were shipped from January to March this year.

Unlike Nokia, Samsung and Motorola which offer entry-level handsets that are a big hit in Asia, Sony Ericsson mainly relies on sales of its high-end phones.

Sony foresees that the mobile market will shrink by 10 percent this year, a prediction that was also echoed by other mobile makers.

Despite the current bleak picture, both Nokia and Sony, however, say market stability is in the horizon.

“The market is no longer falling in an uncontrolled manner. I am encouraged by the sign of stabilization seen at the end of the first quarter,” Nokia CEO Olli-Pekka Kallasvuo told Information Week.

Nokia, however, remains the underdog in the smartphone market as Apple’s iPhone, RIMM’s Blackberry, and HTC smartphones continue to hold users spellbound.

Hopefully, the second quarter will see Nokia gaining ground in the smartphone race with its N97 expected to be a major hit globally. Already, the entry-level 5800 XpressMusic smartphone scored 2.6 million units in sales in the first quarter.

Nokia controls 37 percent of the overall mobile market pie, but it still needs to make significant penetration into the U.S. market which is largely dominated by local carriers.

Nokia, however, is set to be a key player in the U.S. mobile landscape by making more CDMA phones. Its E71 smartphone is now being marketed by telecommunications giant AT&T.

Nokia’s revenues are also expected to get a boost with the launch of its over-the-air application store, Ovi. It will be a find, buy, download, and install apps platform for Series 40 and Series 60 users, utilizing social networking and location-based information.

Like Nokia, Sonny is also gearing up to get a fair share of the smartphone market with the upcoming launch of its multiple mobile movie and music services as well as the Idou smartphone.