Nokia: Handset market will shrink next year

Also revises cell phone sales estimate downward for end of '08

Handset makers will sell fewer mobile phones in 2009 than this year, and sales for 2008 will be lower than previously expected, Nokia Corp. warned today.

However, Nokia doesn't expect smart phone sales to be particularly hard hit.

The world's largest cell phone maker said that it now expects total mobile phone sales across the market for 2008 will be 1.24 billion, instead of its earlier estimate of 1.26 billion. The total is still better than 2007, when 1.14 billion phones were sold. While Nokia didn't give a figure for how many phones it expects to sell next year, it said the total will probably be lower than this year.

Nokia does not typically give specific expectations for its own sales but predicts industry volume and its own market share. For the fourth quarter, Nokia expects its market share to be the same as in the third quarter, when it had 38% of the market.

Despite the overall slowdown, no one particular type of phone will be especially hard hit, said Rick Simonson, Nokia's chief financial officer, in a conference call this morning to discuss the revised outlook.

"I don't think it's about disproportion. The volume impact is primarily in the mass market, but people still desire smart phones, and they will continue to. It is a growing part of the market, so where we see devices that really do add something different and add value, people still have a lot of demand for that," he said.

For example, Nokia's high-end E series phones are doing well, particularly the E71, he said. The company intends to continue to add new types of smart phones, and if the rest of the industry does as well, smart phones should continue to be a growing part of the market even in a down year, he said.

The worldwide economic slowdown is to blame for the expected drop in sales, Nokia said. The mobile device market is also affected by the limited availability of credit, which has affected the purchasing ability of some Nokia's customers, the company said.

The announcement comes about a month after Nokia's third-quarter earnings report, in which it made its original prediction of sales for 2008. At the time, its expectation of 1.26 billion handsets sold for the year was in line with predictions made by analysts at market research firm IDC. Nokia's decision to downgrade that expectation just a month later reflects a probable sharp drop in sales over the past couple of months and portends grim fourth-quarter reports from handset makers.

Copyright © 2008 IDG Communications, Inc.

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