Motorola slides to third in mobile phones, study says

A weak mobile phones and inventory problems have resulted in Nokia slipping to third place in third-quarter handset shipments, according to Gartner.

Motorola has dropped to third place behind Samsung in the worldwide mobile phone market because of inventory issues and an unremarkable product lineup, Gartner said on Tuesday.

Motorola accounted for 13 percent of the phones sold to end users in the third quarter, down from 21 percent in the same quarter last year, Gartner said. At the same time, Samsung increased its share to 15 percent, while Nokia extended its lead at the top of the pack, accounting for 38 percent of the market, or more than one in every three mobile phones sold.

The figures will be a blow to Motorola, which lost share amid a strengthening market overall. Total sales to end users last quarter reached 289 million phones, up 15 percent from a year earlier. But Motorola had performed poorly all year, so the results were no great surprise, according to Carolina Milanesi, Gartner's research director for mobile devices.

"Motorola's been struggling since the end of 2006, so it's not just this quarter," she said.

Its problems have been two-fold, according to Milanesi. Motorola hasn't developed a phone to ignite the imagination in the way its popular Razr did a few years ago, she said, leaving it with a weak line-up. "The Razr2 has done okay, but it's not had the same impact that the first Razr did," she said.

In addition, Motorola's sales into the channel -- or the phones it ships to retailers -- have been weak, she said. This was offset in the first half of the year because retailers had a buildup of Motorola stock, which they could sell at low prices to boost shipments, she said. "This quarter the sales into the channel are still weak, but they don't have much inventory to do fire sales like they could in Q1 and Q2."

Motorola is unlikely to reverse the decline before it releases new models in the second half of 2008, Milanesi said. The company has slipped to third position before, but for most of the past few years it has been number two. Motorola officials did not immediately comment on the report.

Samsung was happy to exploit the U.S. company's weakness. It sold 42 million phones in the quarter, managed its inventory well and milked the popularity of its Ultra Edition II phones, Gartner said. Samsung did especially well in Western Europe, where it accounted for about one in every five phones sold.

But it is Nokia, which three years ago was struggling, that is starting to look unassailable. The company sold 110 million phones in the last quarter, according to Gartner, more than twice as many as Samsung and nearly three times as many as Motorola.

"They seem to be doing everything right," Milanesi said. Nokia is wrestling with lower average prices, because it's selling more low-end phones in China and India, but its cost management and distribution strategy mean it is not suffering financially, Gartner said.

The fourth and fifth placed phone makers were Sony Ericsson and LG Electronics, with 9 percent and 7 percent of the market, respectively.

India saw the fastest growth by region, with sales climbing to 24.5 million phones. The Asia-Pacific region grew 26 percent overall, Western Europe 15 percent and North America 10 percent.

In Western Europe, mobile phone penetration is above 100 percent in every country except France, Gartner said, meaning there are more phones than people.

The company predicts continued worldwide growth in the fourth quarter, of between 10 percent and 15 percent.

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