New World For Motorola And Nokia: Slowing Handset Sales

The good news for Motorola (MOT) and Nokia (NOK) is that both picked up market share in 2006. Nokia’s global share of the handset market rose to 35.2%  from 34.1% in 2005. Motorola’s piece of the market rose to 21.8% from 18.2%. Sony-Ericsson (SNE)(ERIC) also picked up share while Samsung and LG were thrashed on their dropping cuts of the market.

But, there was a cloud to go with the silver lining. Research firm Strategy Analytics forecast that the total number of handset sales in 2007 would rise only 12% to 1.14 billion. This is after years of gains in the 20% plus range.

The trend is one that may well hurt even the market leader Nokia. Revenue per phone is already dropping as cheaper phones in emerging markets represent a larger and larger portion of sales for the "Big Five" handset manufacturers. Falling prices are pinching both top line growth and margins. While Motorola’s stock price was pummeled on poor earnings, Nokia held up well when it put out Q4 06 numbers. Its stock trades at $22, nearing its 52-week high and up from below $19 in early January.

With growth decelerating, that move up may not last.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.