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Plunging handset sales hit Motorola market share

Problems at Motorola's handset division result in a 25 percent sequential drop in unit shipments, while rival Nokia goes from strength to strength.

As indicated in its warning last month (see related story), Motorola s mobile handset unit sales nosedived 25 percent in the latest financial quarter.

In the first quarter of 2007, the US company sold 45.4 million handsets, down from 61.1 million in the previous three-month period.

The sudden drop could spell trouble for the industry supply chain, including makers of GaAs-based power amplifier chips.

Industry analyst Aaron Husock of Morgan Stanley Research said, "We believe Motorola s excess inventory should weigh on the supply chain in the second and third quarters of 2007, particularly given Motorola s weak demand outlook."

Husock believes that the impact could be felt at RF Micro Devices. He estimates that one-third of RFMD s sales rely on its Motorola account. Husock also notes that sluggish demand could combine with Motorola s strategic shift towards a single-chip baseband/transceiver, and away from RFMD s Polaris transceivers.

Motorola s problems have already had a big impact on its market share in the mobile phone business. Market research firm Gartner estimated that in 2006, Motorola accounted for 21.1 percent of all mobile phone sales to end users.

Motorola reckons that its market share slumped to just 17.5 percent in the opening quarter of 2007, its lowest figure since 2005.

"Although the [Motorola] RAZR is still doing well in many emerging markets, this has not been enough to sustain its early success," noted Gartner earlier this year in its analysis of the handset business. Gartner added that a muted consumer response and late shipping of some of Motorola s newer phones would inevitably result in a considerable inventory build-up among its distributors.

The better news for RFMD is that its number-one customer - Nokia - is gaining even more ground on its competitors.

Now shipping about one million phones every day, the Finnish company also saw a sequential drop in sales during the first quarter of the year, but its market share remained industry-leading at 36 percent.

Nokia said that it shipped 91.1 million phones in the first quarter, down 14 percent on the prior quarter but up 21 percent when compared with the equivalent period in 2006.

The market leader estimated total industry shipments of 253 million units in the first quarter, also up strongly on last year. Nokia now expects overall industry volumes to grow by "up to" 10 percent this year from its own 2006 estimate of 978 million phones.

Gartner estimated total 2006 shipments at 990 million, although other analysts put the figure at over 1 billion.

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