Dip in Mobile Shipments to Western Europe Causes Concern

BERLIN — The euro zone crisis has mobile users hanging on to their phones a little longer.

With fewer consumers buying, the Continent’s big mobile retailers have been keeping inventories low, which has brought the first-ever quarterly decline in cellphone shipments in Western Europe, said Gartner, the research firm.

The downturn has not hit the United States, where business over the past few years has grown side by side with that in Europe. Worldwide, Gartner said, it expected shipments to grow 12 percent for the year, to a record 1.8 billion phones.

In Western Europe, International Data Corp. is forecasting the number of cellphones shipped will grow 6 percent in 2011 to almost 207 million units, with smartphone shipments expected to rise 44 percent to more than 103 million.

Nevertheless, the dip is causing consternation.

“There is caution around what’s been happening,” Anurag Gupta, the president in Europe of Brightpoint, a U.S. company that handles mobile phone supply, distribution and logistics for operators like Vodafone and Deutsche Telekom. “The euro zone nations are totally consumed with the debt situation. People have been cautious, whether it is the wireless carriers or the retailers, all the way down to the end user.”

The market in Europe for cellphones tightened in the second quarter, according to Gartner, with shipments falling 0.5 percent in Western Europe to 43.57 million from 43.77 million in the first quarter. Carolina Milanesi, a Gartner analyst in London, said sellers of mobile phones were using “channel management” to keep inventories lean and to reduce risk.

“In a normal situation, you might have 100 phones in the back room,” Ms. Milanesi said. “Now you have 50.”

She added that consumers were “fatigued” and holding back on upgrades.

Mr. Gupta, who is based in Barcelona, said mobile operators and other big retailers were keeping three to four weeks’ worth of inventory, whereas, 18 months ago, it was four to six weeks.

The European market is also being weighed down by the restructuring at its longtime market leader, Nokia. In the second quarter, Nokia fell to No. 2 in total shipments in Western Europe, behind Samsung, and to No. 5 in smartphones, where it had a 10.8 percent share, according to International Data Corp.

One year earlier, Nokia led the European smartphone segment with 39.5 percent. Now the Finnish company trails Samsung, Apple, HTC and Research In Motion, the maker of the BlackBerry, which have 22 percent, 21 percent, 14.3 percent and 13.9 percent, respectively, according to I.D.C.

Francisco Jeronimo, an I.D.C. analyst in London, said consumers were shying away from committing to Nokia’s phones using the Symbian operating system, which Nokia plans to phase out in favor of Windows Phone as part of an alliance with Microsoft announced in February.

Stephen Elop, the Nokia chief executive, said then that the company expected to sell 150 million Symbian phones during the transition to Windows. Mr. Jeronimo said he expected Nokia to sell only 100 million such units. Nokia began cutting prices on Symbian devices in the second quarter, Mr. Jeronimo said.

In North America, where Nokia has less than 5 percent market share, the mobile market is still growing, fueled mostly by the iPhone and phones with the Android operating system by Google. Smartphone shipments by Apple rose at an annual rate of 62 percent in the second quarter, according to I.D.C. At HTC, one of the leading makers of Android phones, shipments grew at an annual rate of 125 percent. Over all, shipments to North America rose 3.7 percent to 47.2 million in the second quarter, according to Gartner. Smartphone shipments rose 9.2 percent to 24.7 million, Gartner said.

“The situation at Nokia is affecting the broader market in Europe,” Mr. Jeronimo said.

Nokia said it planned to present its first Microsoft phones this year and ship significant volumes in 2012. The company released a statement saying that the Microsoft transition was progressing well, as were sales of its high-end N9 smartphone and N500 auto navigation device.

“Clearly we are going through a transition,” Nokia said in the statement. “We’ve been very transparent about the challenges we face and the strategy we are implementing to regain global smartphone leadership. The only real measure of progress is delivering truly great products that people around the world want to use.”

Mr. Jeronimo said it might take Nokia two to three years to climb back to being among the top three smartphone makers in Europe. But the European mobile market, with or without Nokia, will keep growing, said Rajeev Chand, an analyst in San Francisco at Rutberg, an investment bank. Smartphone penetration in the European Union is still only 31 percent, he said, so “smartphones still have a long way to go.”

Qualcomm, which makes processors and other components for mobile phones, said it expected the Western Europe market to grow 16 percent this year to 180 million Internet-enabled devices. In July, Qualcomm, based in San Diego, said that Eastern Europe markets remained strong, but “we continue to monitor Western Europe because of the ongoing economic challenges.”

In Europe, at least for a while, the market is likely to remain fluid, tied in part to Nokia as it seeks traction with Microsoft. Ms. Milanesi, the Gartner analyst, said the first Nokia Microsoft phones were likely to be solid devices, but not so different from what is already on the market.

“The new, first Nokia-Microsoft phone is unlikely to blow away the public because the company hasn’t had time to differentiate its line from the competition,” Ms. Milanesi said.

Article source: http://www.nytimes.com/2011/08/22/technology/dip-in-mobile-shipments-to-western-europe-causes-concern.html?partner=rss&emc=rss