Sony Ericsson and Motorola both reported their results this week, confirming their declining position at the bottom of the pile among the larger cellular handset vendors around the world. The top three handset vendors had already reported during January.
Investors won’t thank them for it, but they both seem to have stopped the rot this quarter, but it is a quarter when their rivals have had turnaround results which outstrip them.
Sony Ericsson shipped 14.6 million units for the quarter, up from 14.1 million in the immediate previous quarter, but down from 24.2 million devices this time last year. But at least units weren’t down sequentially. Revenues went the same way, with €1,750 million for the quarter, with the immediate prior quarter at €1,619 and this time last year at €2,914. Despite previous concerns, the company seems to have plenty of cash to carry on, and the same seems to be true at Motorola.
Motorola has other businesses to keep the mobile arm afloat. As a company it reported sales of $5.7 billion for the quarter and made earnings of $142 million, taking sales to $22 billion for the year, on which it made a loss. But somehow it generated $877 million in cash during the quarter making its year positive in cash terms as well. While investors slagged it off horribly, that achievement didn’t seem possible a year ago, and slowly it is becoming a very tight ship and sits with cash reserves of $8 billion.
Motorola has promised to launch 20 devices around the world, many of them Android and also leveraging off its own UI Motoblur design. Mobile devices were responsible for only $1.8 billion of the quarterly revenue, down 22% with an operating loss of $132 million. For the full year handset sales were only $7.1 billion, compared to $12.1 billion in 2008 and the company shipped 12 million handsets in the quarter and took just 3.7% of the global market. But with new models and now, as it turns out, it has a design win for the Google Nexus Two, Motorola will continue to look bad for perhaps two more quarters, and then comparisons will begin to turn upwards once more, as it compares with other down quarters.
The issue for both of these handset vendors is really whether or not they can continue to hold of the likes of upstarts such as HTC at bay, as well as the Chinese Juggernauts ZTE and Huawei, without conceding yet more ground in the coming price war which Nokia has just triggered. Motorola is especially at risk given the invasion of the US market by Samsung and LG.
That’s why most investors moan when they hear both names and cannot see a recovery for either.
Meanwhile Nokia has just come off a very tidy quarter with revenues at €12 billion down just 5% year on year but up 22% sequentially. Its devices side did even better, off just 0.5% and it shipped 127 million devices out of total global shipments of 329 million, up 8% year on year taking 39% of the market. It was stronger in smart phones, it was stronger in cheap phones, it was stronger virtually everywhere, except for its Nokia Siemens Networks subsidiary and it initiated a war for mapping last week by offering step by step navigation for free on its top end phones, with more to come, as well as dropping the prices of most of its handsets.
This is all seen as a direct attack on Samsung and LG, both of which took market share from it in prior quarters. But a price war between the two Koreans and Nokia will catch Sony Ericsson and Motorola in the crossfire, investors fear.
Samsung Electronics had a strong year across the board up 19% in revenue terms and promised to spend more and more on capex in taking chips to a 30-nanometer process. It found memory pricing recovering and smart phone chip demand higher, and LCD panel shipments only off 1% in the end although prices fell. It sold 227 Million mobile devices, having smashed a target of just 200 million, and mobile revenues were up 12.1%, with growth in the US, Europe and emerging markets.
Earlier in the month LG reported handset revenues 5% lower than the same quarter in 2008, with unit shipments up 32% percent year over year to 118 million units, and it is also doing very well in the US.
While the trend has been to see more and more companies entering the smartphone market, it may be that we are seeing a tightening stranglehold on the large volume handsets among the top three, if not top two, and that only specialists such as Apple and RIM will remain immune, at least in the short term, to increasing function on handsets at lower prices.