Worldwide cell phone sales fell in the first quarter of this year, but smartphones continued to grow, despite a deepening recession, according to a report published by Gartner Wednesday.
The news shouldn't come as a big shock. Cell phone manufacturers, such as Nokia, had reported disastrous earnings for the first quarter. But the growth in smartphone sales, which were up 12.7 percent compared to the first quarter of 2008, provides some hope for the industry.
Touchscreen devices seem to be leading the pack in terms of device growth, with Apple's iPhone 3G doubling its market share in the first quarter compared to the first quarter last year. Apple shipped 3.9 million iPhones for a market share of 10.8 percent.
In terms of the overall cell phone market, manufacturers sold about 269 million cell phones, which was about 14.5 percent fewer than were sold during the fourth quarter of 2008 and about 9.4 percent lower compared to the same quarter last year.
Nokia continued in the lead with about 36 percent of the market, a 3 percent dip from the same quarter last year. Samsung's sales grew and it is now the second largest cell phone maker with 19.1 percent of the market. This is up from 14.4 percent during the first quarter last year. LG, Motorola, and Sony Ericsson make up the rest of the top five cell phone makers.
While Apple saw the largest amount of growth on the smartphone side, Nokia managed to hold onto to its position as the world's largest manufacturer of smartphones. The company has 41.2 percent of the smartphone market. But its marketshare has been slipping. At the end of 2008, the company had 45.1 percent of the market. Aside from Apple, Research In Motion also had a big quarter. Its BlackBerry devices made up nearly 20 percent of all smartphone sales in the quarter.
The boost in smartphone sales is particularly good news for companies like Palm, which is banking on the success of upcoming Palm Pre. The phone, which goes on sale June 6, will initially be sold exclusively on Sprint's network. The device was announced in January at the Consumer Electronics Show in Las Vegas and has been hyped ever since. Sprint's CEO Dan Hesse said this week he expects shortages when the device goes on sale in a couple of weeks.
Even though smartphones sales continue to grow, they still only make up about 13.5 percent of total mobile devices sales. This figure is up from 11 percent a year ago, but it still represents a small portion of the overall cell phone market.
The fact that the smartphone market is growing at all during the current recession says a lot about the pent up demand for higher functioning devices. But hefty service fees could derail growth if the economy doesn't pick up or people lose their jobs.
However, there are signs the market is stabilizing. Mark McKechnie, an analyst with Broadpoint AmTech, published a research note earlier this week stating that early indications suggest that Nokia's sales could be up slightly up in terms of total units for the second quarter. Still, even though the market looks like it might be stabilizing, most analysts don't see a recovery until well into 2010. Until then companies will be crossing their fingers that consumers' love affair with smartphones continues.