Wireless

(Credit: Marguerite Reardon/CNET)

Early indications suggest that the Motorola Droid could be the breakout hit phone of the holiday season.

You might not have guessed it from the lack of long lines this past weekend, but analysts believe that Verizon is seeing strong sales of the Motorola Droid. The device went on sale on Friday across the country. And unlike other big launches for phones such as Apple's iPhone or even the Palm Pre, retailers had plenty of devices in stock, and customers didn't have to stand in long lines to get their phones.

Neither Verizon nor Motorola is providing exact sales figures, but David Samberg, a spokesman for Verizon, said sales were very strong over the weekend, with a steady stream of customers Friday, Saturday, and Sunday. Store representatives in Manhattan confirmed this, with one sales associate telling me on Monday afternoon that there had been a steady stream of customers in the store all weekend and even through Monday.

Analysts also believe that the phone is selling well. Mark McKechnie, an analyst at Broadpoint AmTech, who covers Motorola, checked with a small sample of Verizon retailers around the country and said in a research note on Monday that he is encouraged by the anecdotal reports.

"While it is early, and the sample size is small, we are encouraged by our findings," he said.

McKechnie estimates that Verizon had about 200,000 phones in retail channels for the launch, with many stores in larger metropolitan markets, such as New York and Los Angeles, getting about 300 devices. Stores in cities such as San Francisco got more than a 100 devices, and retailers in smaller cities got between 25 and 40 devices each.

Locations were stocked well enough that there were no reports of any stores that were completely sold out. An employee at the Verizon Wireless store on West 34th Street in New York said his store had gotten about 500 Motorola Droids and HTC Android Eris phones for Friday. The store didn't sell out of either phone, but much of its stock is now gone.

That said, the store employee, who didn't want his name used, said his store did sell out of the $29.99 Droid docking station, which charges the device. As of Monday, the company still hadn't restocked its supply of that accessory.

McKechnie reported in his research note that the Droid outsold the HTC Eris, which also went on sale Friday. And checks with Verizon stores in Manhattan back up this claim. While there were plenty of customers looking at the HTC Android Eris in the Verizon stores I visited Monday afternoon, most people said they planned to buy the Droid. The main reasons were the device's higher-resolution screen, better camera, faster processor, and latest Android software.

Still, plenty of customers noted that they preferred the look of the HTC Eris over that of the Droid.

Verizon's marketing may also be paying off. Verizon is spending more money on the Droid advertising campaign than it has on any other device launch. At least one customer at the West 34th Street said Verizon's advertisements had convinced him to get the Droid instead of Apple's iPhone, which runs on AT&T's network.

"I was considering the iPhone," said Henry Goodison of the Bronx borough. "But I saw a commercial about AT&T's 3G coverage. It said, 'Here is AT&T's 3G coverage, and here is ours.' And I thought it would be better to have Verizon, if I travel to another state, where AT&T doesn't have 3G coverage."

AT&T is actually suing Verizon Wireless over this commercial, asserting that Verizon's advertisement is misleading consumers. Verizon dismisses this claim as untrue.

At least two analyst groups have cut their forecasts for global cell phone sales for the coming year due to consumer concerns about the economy.

UBS analyst Maynard Um told Reuters he's cutting his forecast for growth in the sector in half, from 6 percent down to 3 percent, with the North American and European markets being particular slow. JPMorgan analyst Ehud Gelblum cut his forecast as well, from 8.1 percent to 6.1 percent. He also cited Europe as being especially sluggish, and said he expects to see "more modest" growth in China, the report said.

Those figures aren't all that surprising when you consider that so much of the population in Europe and North America already have cell phones. Troubled times might lead some people to put off upgrading to a newer, shinier handset if they have one that already does the trick. But in a less-saturated market like China, people might be more likely to splurge on wireless technology.

A separate report might indirectly suggest those analysts are onto something. MetroPCS on Monday released their quarterly subscriber numbers, saying they've added 935,000 in the third quarter, 39 percent increase over the same period the previous year. Churn, which measures customer turnover rate, dropped 0.4 percent for the quarter. Those figures could indicate that Americans are looking to low-cost, flat-rate cell phone plans as a way to trim expenses.

But if consumer worries about the economy are affecting cell phone sales, the same might not be true for all consumer electronics. Sales of flat-panel TVs and game hardware during the upcoming holiday season should fare just fine, according to the Consumer Electronics Association.

In spite of the economic slowdown, worldwide mobile-phone sales rose nearly 12 percent in the second quarter of 2008 from the same period in 2007, market research firm Gartner said Thursday.

Growth was driven largely by the Asia-Pacific region, in which sales grew 20.5 percent from the second quarter of 2007, and the Middle East and Africa, where handset sales increased 18 percent.

In the United States and Canada, 6.5 percent year-over-year growth was driven largely by sales of replacement handsets, as new subscribers only trickled in, Gartner said. (Fellow research firm NPD Group, by contrast, reported earlier this month that U.S. mobile-phone sales were 13 percent down from the second quarter of 2007.)

Gartner's study did find a decrease in mobile-phone sales in Western Europe: down 8.2 percent down from the second quarter of 2007. And while the research firm forecasts 11 percent industrywide growth in 2008, it expects revenue growth to fall slightly behind that, as the economy and tougher competition take a toll on prices.

"The economic environment continued to negatively impact mobile-phone sales in both mature and emerging markets," Gartner analyst Carolina Milanesi said in a release. "Consumers in mature markets continued to favor midtier devices over high-end devices, while new subscribers continued to join mobile networks in emerging markets during the quarter. However, replacement sales remained weak, as consumers faced higher prices for fuel and food, in addition to higher levels of inflation."

The research firm has not changed its overall 2008 outlook of 1.28 billion handset sales.