The Associated Press has pointed out that the use of cell phones is improving productivity throughout the developing countries of the world. In Vietnam, there are now 33 phones per 100 people and two-thirds of those are cell phones. Calls from the wireless phones are inexpensive.
The AP says that in the Philippines four million people use cell phone for paying bills.
McKinsey and Company claims that rising cell phone use actually helps improve GDP in many emerging markets. The UN International Telecommunications Union says that there are now 1.4 billion cell phones in the developing world compared to 800 million in the countries with established economies.
Because cell phone unit growth is slowing in the United States and Europe, big cell phone makers like Nokia (NOK), Motorola (MOT), Samsung, and Sony-Ericsson (SNE)(ERIC) need growth in places like Vietnam and the Philippines to keep unit sales moving up.
But, the increasing unit sales come with a price. Motorola sold 66 million handsets in the fourth quarter of 2006, and increase of 48% from the same quarter a year ago. But, the company said that "unfavorable geographical and product-tier mix of sales" hurt margins.
It would appear that companies like Motorola will sell more and more phones at lower prices and with falling margins. The means that the 3,500 job cuts that Motorola recently announced are just the beginning.
Working at Motorola is getting risky.
Douglas A. McIntyre can be reached at douglasamcintyre@a673b.bigscoots-temp.com. He does not own securities in companies that he writes about.
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