-> Worldwide Mobile Phone Sales Increased 21% in 2003
 

Nokia's share of the global cell phone market fell sharply in the first quarter, hurt by a lack of new models and a rocky relationship with mobile phone service providers, according to a survey released Tuesday.

Though the industry leader shipped more phones than it did during the first three months of 2003, its market share slid to 28.9 percent from 34.6 percent, research company Gartner found, as Nokia lost ground to all of its top six rivals.

Gartner also noted that the overall handset market is growing strongly, with shipments rising 34 percent to 153 million units in the first quarter, as consumers in emerging markets embrace mobile communications for the first time.

"The big story is in Western Europe, where Nokia has lost 10 percentage points of market share," said Gartner analyst Ben Wood. "Nokia has two fundamental problems. One is its relationship with operators to provide them with personalized phones, and the other is a product portfolio that is not competitive with the models offered by its rivals."

Nokia warned in April that it could not match the breakneck growth of the market because of a hole in the midrange of its handset portfolio. The company said it would sacrifice profitability in the short term, until its lineup was more competitive.

Analysts remain worried Nokia's price cuts on some phones may not be enough to halt its market share slide, with some saying it may have to lower its current second-quarter guidance from flat to slightly lower group sales compared with last year.

The first-quarter market share decline marks a sharp deterioration from the 38 percent share that Nokia claimed for 2003 and is a far cry from its goal of 40 percent.

Nokia has said it lost ground in the first quarter but estimated that its market share fell only to 35 percent. Its handset unit sales actually increased in the period because of robust market demand, but it did not grow as fast as that of its rivals.

The Finnish company has lost about a third of its market value since it warned on April 6 that its market share was on the decline.

Gartner measures sales to consumers--instead of sales to retailers--and is considered the industry's best indication for actual consumer demand. Its new market share data is in line with figures released in April by fellow research group Strategy Analytics.

In reaction to Gartner's research, analysts said that, because the data is largely backward-looking, its value is limited, but they expressed surprise at the differences between Nokia's and Gartner's estimates.

"Once again, people will question why there is such a big discrepancy between Nokia numbers and Gartner numbers, really between Nokia and all other figures," said Evli Bank analyst Karri Rinta, who rates Nokia shares "reduce."

Gartner said that Motorola, the No. 2 company, boosted its market share to 16.4 percent from 14.7 percent, while South Korea's Samsung Electronics rose to 12.5 percent from 10.8 percent.

Rounding out the top five, Siemens' share rose to 8 percent from 7.6 percent, and Sony Ericsson was at 5.6 percent versus 4.7 percent.

In mature markets, Gartner said, older handsets were replaced with newer models featuring colour screens and cameras.

"Russia was phenomenal in the first quarter. Brazil is just on fire, and there's strong replacement in mature markets like Western Europe and North America," Wood said.

Gartner raised its forecast for total 2004 mobile phones shipments to 600 million from a March estimate of 580 million, the second upgrade this year.

It started with a forecast of 560 million. The research company says that 520 million handsets were sold in 2003.