Mobile Phone Sales Surge Worldwide

Worldwide mobile phone sales surged in the third quarter and some vendors took more advantage of the uptick than others, with Nokia solidifying its hold on first place and onetime market leader Motorola (NYSE: MOT) slumping from second to third place as Samsung became No. 2.

According to a report from Gartner, worldwide sales grew 26 percent in the third quarter to a total of more than 167 million units. The growth came as something of a surprise to analysts because the quarter is usually a seasonally weak one.

"Historically, the third quarter is seldom strong," Gartner analyst Carolina Milanesi said. This year, however, all regions except for Japan posted strong year-to-year growth rates.

Among vendors, there were some changes at the top after a long period of stability. Worldwide leader Nokia regained some of the ground it had lost in some recent quarters and saw its market share rise about 30 percent for the first time since early this year.

Second place changed hands, with Samsung pushing past Motorola to grab 13.8 percent of the market compared to 13.4 percent for Motorola. The difference represents just over a half-million handsets. Motorola also saw its overall share of the market fall, however, from 14.7 percent last year, while Samsung's was higher, up from 11.2 percent last year.

Jockeying for Position

Gartner analyst Ben Wood said the number two and three positions are likely to swap hands again before long, with the vendor that has the most sought-after handset on the market at any given time likely to pull ahead. The Christmas season could easily see the ranking shift again, he added.

However, Samsung might have a short-term advantage because its products are selling well across a range of technological standards, while Motorola has not performed well in some markets where it was late to produce handsets that meet prevailing standards.

"Samsung moved up as a result of strong performance around the world, particularly in North America," Wood said. "But the race with Motorola is very close. We've seen it happen before that companies that slip in market share come back stronger, with better products and marketing plans."

Motorola, which led the worldwide market just five years, still dominates in North America, Wood added, and might be able to jump back into second place on the market share list on the strength of the inventory of units it has placed with carriers and retailers.

Siemens (NYSE: SI) remained in fourth place and expanded its market share slightly to 7.6 percent, including a near-doubling of its North American market share. Fifth and sixth places also swapped, with LG moving ahead of Sony (NYSE: SNE) Ericsson (Nasdaq: ERICY) on the strength of sales to the emerging 3G market in Western Europe.

Fierce Competition Ahead

Such feature-laden phones are likely to drive the market, especially as third-generation, or 3G, wireless networks are built out and provide users more options for ways to use their mobile phones. Higher-end phones will also be important as Nokia uses its dominant market power to drive down prices.

"Handset makers will benefit from the fierce competition to build faster and more robust networks," Jupiter Research analyst Joseph Laszlo said. "It enables them to put a lot more phone models into the market to appeal to more customers."

In fact, Nokia recently unveiled plans for 2005 that include some 40 different models of phones, he noted, though the strategy could backfire if the various models, some of which are aimed at specific niche audiences, don't catch on.