Wireless

Finally, some good news from Nokia.

On Wednesday, the world's largest maker of cell phones said it expects sales volumes of mobile handsets to increase 10 percent in 2010 from 2009, as the market rebounds from a worldwide recession.

"Going into 2010, the overall mobile-devices market is stabilizing, and it is growing more in the areas where Nokia has competitive advantages," Nokia's new chief financial officer, Timo Ihamuotila, said in a statement.

Nokia said its worldwide market share of 38 percent would remain unchanged next year but that the company would increase revenue by focusing on stabilizing pricing on handsets. The average selling price of Nokia's phones had slipped over the past year. In the third quarter of 2009, the company's average price for a handset was 62 euros, or about $94. That was price was stable, compared with the previous quarter, but it was down from 72 euros during the same quarter a year ago.

This past year has been a tough one for Nokia and the rest of the cell phone industry. Nokia was hit hard by the economic downturn, as consumers put the brakes on spending. And for the fourth quarter of 2008, it saw sales drop 19 percent during the quarter, compared with the same quarter in 2007. And the company's profit fell about 69 percent.

Nokia slashed its annual forecast for 2009. And to cope with the deteriorating economic situation, it also announced that it would reduce about $905 million from its budget. Much of the cuts resulted in thousands of workers losing their jobs.

Besides the economic downturn, Nokia has been facing increasing competition from companies such as Apple, with its iPhone, and Research In Motion, with its BlackBerry devices. And now the company is facing even more competition in the smartphone market from Google Android phones, which will hit the market en masse in 2010.

Even though Nokia launched a new smartphone in 2009, the N97, the company still managed to lose market share in the high-end smartphone category.

Nokia says it's made improvements to the Symbian operating system that is used to power its high-end phones. But as the market gets more crowded with devices, it won't be easy to compete against popular iconic devices such as the iPhone. What's more, Nokia still hasn't managed to crack the U.S. market, the fastest-growing one for high-end handsets.

Today only a couple of Nokia's higher-end smartphones are subsidized and sold through U.S. carriers. This is a major problem, considering that the vast majority of American cell phone users buy subsidized devices in exchange for service contracts. The iPhone is currently selling for as little as $99 with a two-year contract from AT&T. Meanwhile, the Nokia N97 costs more than $500 at full retail.

Nokia has also been focusing a lot of effort on building up its services business. The company is building a marketplace and selling services through its Ovi online portal, which enables cell phone consumers to buy music, videos, and navigational maps.

The company is expecting to generate 2 billion euros in sales next year from its services unit. And it expects to grow this number in 2011, when it's expected to have more than 300 million active Ovi users. It plans to maintain a focus on applications for its phones, targeting net sales from its services unit of 2 billion euros or more in 2011 from an expected 300 million active users by the end of 2011.

Meanwhile, Nokia's joint venture with Siemens to sell telecommunications equipment has also been struggling. In October, the company was hit with a 908 million euro goodwill write-down on the business unit.

But Nokia now believes that the Nokia Siemens venture will also gain market share in 2010, even as the communications infrastructure market is expected to be flat in euro terms from the previous year, Nokia said.

India has blocked service to all mobile phones without a valid identity code, as part of antiterrorist measures being implemented by the Indian government.

On Monday, any handset without a valid International Mobile Equipment Identity (IMEI) code had its connection cut off, according to the Indian Cellular Association (ICA), which represents mobile operators in the country. The mobile industry is complying with a government directive that arose after discussions between Indian security agencies and the Indian Department of Telecommunications, the ICA added.

The IMEI, a 15-digit number printed inside a phone, can be used to identify a particular device on an operator's network, meaning it can be tracked by security services. In addition, network providers can use the absence of an IMEI to cut off a phone.

Read more of "India blocks service to millions of handsets" at ZDNet UK.

Ericsson is slowly building its wireless business by scooping up parts of struggling Nortel.

Ericsson announced Wednesday that it has won a bid to buy Nortel Networks' North American GSM business for $70 million in cash. The Swedish communications giant went into the deal with a partner, Austria-based Kapsch CarrierCom, which itself spent $33 million to buy Nortel's GSM operations in Europe and Taiwan.

This marks the second major deal in recent months between Ericsson and Nortel. In July, Ericsson won another bid to pay $1.13 billion for Nortel's CDMA and LTE wireless technologies.

GSM (Global System for Mobile communications) is one of two technologies used for mobile phones. It's the standard in Europe and is dominant around the world, while CDMA (Code Division Multiple Access) is more common in the United States. In recent years, however, GSM has grabbed a larger footprint among North American carriers.

Ericsson already holds a strong slice of the global GSM market, especially in Europe, and has been eager to expand its grasp in North America.

On its end, Nortel has gradually been selling its wireless operations as a way to stay afloat in the midst of declining business and rising debts after declaring bankruptcy almost a year ago. On Tuesday, the company announced it would sell its Metro Ethernet operations to telecom equipment maker Ciena.

As part of the purchase, Ericsson will bring on more than 350 Nortel employees in North America. With the addition of Nortel's business and a recent deal with Sprint, North America will become Ericsson's biggest operation, said the company, jumping to 14,500 employees from just 5,000 at the beginning of 2009.

Ericsson noted that its entire North American business captured revenue of around $2.7 billion in 2008, mostly from sales of GSM and WCDMA (Wideband CDMA) equipment and services. Nortel's North American GSM business generated around $400 million in 2008.

No date was given for closing the deal, which is subject to the usual regulatory approvals in both the U.S. and Canada.

In the race for mobile phone profits, Apple has overtaken Nokia, according to figures for the latest quarter.

Apple earned $1.6 billion in the third quarter from the iPhone, outpacing Nokia's $1.1 billion cell phone profit to grab the top spot among all mobile phone vendors, said research firm Strategy Analytics on Wednesday.

(Credit: Strategy Analytics)

This is the first quarter that Strategy Analytics has seen Apple surge past Nokia in mobile phone profits, according to Alex Spektor, the author of the research, who spoke with CNET News.

The contest between Apple and Nokia for top phone profits has been tight in recent months. ... Read more

Unsurprisingly, the iPhone 3G S is tops in touch-screen phones.

(Credit: CBS Interactive)

Market research firm ComScore reported on Tuesday that touch-screen mobile-phone adoption is not only on the rise, it's growing at a rapid rate.

Touch-screen phone adoption grew by 159 percent between August 2008 and August 2009, according to ComScore. The firm also found that by the end of August 2009, there were 23.8 million users with touch-screen mobile phones in the United States alone. In August 2008, just over 9.2 million people were using touch-screen phones.

But it's not just the touch screen that's enjoying strong growth. ComScore also found that smartphones are gaining traction across the U.S. Between August 2008 and August 2009, smartphone adoption grew by 63 percent. There were 20.7 million mobile subscribers using smartphones in August 2008. More than 33.7 million subscribers had smartphones by August 2009.

Unsurprisingly, it was the iPhone that led the way during that period. According to ComScore, the iPhone was the top touch-screen device for users aged 13 and older, capturing 32.9 percent of the touch-screen market. The LG Dare placed a distant second, accounting for 8.7 percent of the touch-screen phones in the wild. That device was followed up by the LG Voyager, BlackBerry Storm, and Palm Treo, which captured 7.8 percent, 7 percent, and 6.5 percent of the market, respectively.

It's also worth noting that the average user of a touch-screen device is younger than those who use standard mobile phones. According to ComScore, 51.4 percent of smartphone users are under the age of 35. A whopping 57.7 percent of touch-screen users fall within that age range. ComScore also found that 20.6 percent of touch-screen users range in age between 18 and 24. Less than 5 percent of touch-screen users are 65 and older.

Do you fall in line with these stats? Let us know in the comments below.

The cell phone sales slump may soon be over.

The global cell phone industry captured mild gains in the third quarter, with total shipments reaching 287.1 million units, according to a report released Friday from IDC. That number marked a 6 percent decline from the same quarter in 2008 but a 5.6 percent jump over 2009's second quarter.

With the third-quarter figures, the mobile phone business is likely showing the first signs of a rebound since the recession, according to IDC's "Worldwide Mobile Phone Tracker." During the third quarter, the industry pushed older devices at lower prices, leading to greater demand and higher volume, said IDC.

Another report released Friday, this one conducted by Strategy Analytics, offered similar findings and forecasts for the cell phone trade. The report, called "Q3 2009 Global Handset Market Share Update," pegged cell phone shipments for the third quarter at 291 million, slightly higher than IDC's number.

Since the rate of decline was slower than in the previous quarter, Strategy Analytics expects the industry to see positive growth in the fourth quarter as the recession winds down.

"We forecast 300 million handsets to be shipped worldwide in Q4 2009, growing 3 percent from 294 million units in Q4 2008," said Strategy Analytics Director Neil Mawston in a statement. "We believe this will be the first time the industry has returned to positive growth since Q3 2008, signaling an end to the handset recession after four quarters of decline. Consumers and handset vendors are gradually regaining a little confidence."

(Credit: Strategy Analytics)

In North America, the U.S. enjoyed solid results in the third quarter, with smartphones and prepaid handsets driving growth. But the Canadian market showed a downturn for the third straight quarter due to a weak economy and sluggish demand for traditional mobile phones.

Latin America's third-quarter recovery was also less than stellar, hit by weak consumer demand and a decrease in cell phone subsidies. The industry suffered in Asia/Pacific as well, with China, India, and Indonesia seeing slight declines, though demand for smartphones remained strong.

The brightest spot was in Western Europe, where third-quarter sales of traditional mobile phones and smartphones grew over both the second quarter and the third quarter of 2008.

"Although some regions are still reeling from problems associated with the economic crisis, the third quarter served to cleanse the channel while providing the signs of stability necessary for additional improvement in the fourth quarter," says Will Stofega, research manager of IDC's mobile devices team, in a statement.

IDC also reported on the quarterly activity of key mobile phone makers.

Nokia continued to struggle, hit by a 20 percent decline in sales for the third quarter. As part of one strategy to stem the tide, the company kept busy with several acquisitions, including Dopplr, Cellity, and part of Plum Ventures, a developer of social networks.

Samsung fared considerably better. The company hit a new quarterly record by shipping more than 60 million cell phones in the third quarter, thanks to demand for both touch-screen and QWERTY messaging devices. During the quarter, Samsung grabbed a 21 percent share of the market, said Strategy Analytics.

LG Electronics also hit a new mark, shipping 30 million units for the quarter. But a paucity of smartphones and prepaid handsets kept the company from benefiting from those segments.

Though Motorola slipped in its ranking among cell phone makers, the company trimmed its operating losses through a restructuring program. Shifting its focus away from traditional cell phones to smartphones, Motorola has high hopes for its new Droid phone, due to hit Verizon stores next week.

Strategy Analytics also tracked Apple's stellar third quarter, reporting a solid 7.4 million iPhones sold worldwide and a record 2.5 percent market share.

Though stung by a higher net loss and lower sales for the third quarter, Sony Ericsson managed to beat expectations.

The mobile phone maker said Friday it lost 164 million euros ($243.7 million) in the quarter, compared with a loss of 25 million euros ($37.1 million) in the third quarter of 2008.

But analysts polled had been eyeing a net loss of 227 million euros. The company's results also showed an improvement over the second quarter when the company had a net loss of 213 million euros.

Sales for the third quarter fell to 1.62 billion euros versus 2.8 billion euros for the prior year's quarter.

Third-quarter results for Sony Ericsson

(Credit: Sony Ericsson)

The latest results were aided by aggressive cuts. Since mid-2008, Sony Ericsson has been on a mission to reduce operating expenses.

Earlier this year, the company announced a series of layoffs to reduce its global workforce by 5,000.

A joint venture between Sony and Ericsson, the company has also received a lifeline in the form of external financing. A total of 455 million euros was made available this year, with 350 million euros guaranteed by its parents.

"Our business in the third quarter started to show the effects of our ongoing transformation program," Dick Komiyama, Sony Ericsson's outgoing president, said Friday in a statement. "We have cleared channel inventories and have continued to realign internal resources and improve efficiency. We have also arranged external financing to strengthen the company's financial position."

The struggling company has been grazed by sluggish consumer demand for mobile phones and intense competition. The company said it expects the global handset market to decline by about 10 percent for the year. And its share of that market has remained small, resting at around 5 percent for the third quarter.

Management at London-based Sony Ericsson is in transition, with Komiyama retiring as president at year's end and handing the reins to Bert Nordberg. The two have already started running the company together as co-presidents.

Sony Chief Executive Officer Howard Stringer has also taken a more active role, replacing Sony Ericsson CEO Carl-Henric Svanberg this week as chairman of the board.

Sony Ericsson leaders say they are optimistic.

"Transforming the business for future growth and returning Sony Ericsson to profitability is the focus of the senior management team and will continue under the new leadership," Komiyama said. "Having refreshed our brand, we are now better positioned to support the launch of new products such as Aino and Satio (phones) in Q4 2009."

In January, the Gartner analyst group said that 2009 would be a deciding year for Sony Ericsson between profitability and growth in market share.

Nokia on Thursday reported a loss for its third quarter of 559 million euros ($832 million) compared with a profit of 1.09 billion euros in the same quarter of 2008.

The net loss for the period that ended September 30 was triggered by declining sales, which fell 20 percent to 9.18 billion euros from 12.2 billion euros the prior year's quarter. A write-down of the company's weak Nokia Siemens Networks unit also put a big drag on the bottom line.

Net sales for the third quarter came in at 9.8 billion euros, down 20 percent from 12.2 billion in the year-earlier quarter.

Following the news, shares of Nokia stock fell 6.6 percent to 9.62 euros.

Though Nokia's mobile phone sales managed to eke out some gains, overall revenues were hurt by a shortage of components for many of its products.

"The demand for mobile devices improved in many markets during Q3," Nokia CEO Olli-Pekka Kallasvuo said in a statement. "With the average selling price of our devices holding firm quarter-on-quarter, our higher device volumes translated into increased net sales in our Devices & Services business. Our volumes and net sales were, however, somewhat constrained by component shortages we encountered across the portfolio.

The company said that its share of the mobile device market for the quarter was 38 percent, the same as in the year-earlier period and in the second quarter of 2009.

Nokia Siemens Networks, the network equipment unit formed in 2007 and co-owned by Nokia and Siemens, has struggled to turn a solid profit from the get-go. In a write-down of this failing business, Nokia was forced to spend 908 million euros.

(Credit: Nokia)

"The challenging competitive factors and market conditions in the infrastructure and related services business necessitated non-cash impairment charges at Nokia Siemens Networks," said Kallasvuo.

Despite weakness in the mobile phone sector, Nokia is optimistic about its near-term outlook. The company now sees volume for its phones hitting 1.12 billion units for the year, down 7 percent from 2008, but better than Nokia's earlier estimate of a 10 percent decline.

Nokia expects the market for its mobile infrastructure and related services market to fall 5 percent for the year from 2008 levels, an improvement over earlier estimates of a 10 percent drop.

However, the future remains cloudy for Nokia Siemens Network, which is likely to see its market share drop even further for 2009 than previously forecast, said the company.

During the third quarter, Nokia also completed its acquisition of GPS map specialist Navteq.

The electronics industry is still hurting, but better times could be here before you know it.

Research firm Gartner says it has spotted a recovery already percolating for the sectors including PCs and mobile phones, with a sustained recovery pattern likely to take shape in 2010. What's holding back the optimism for a faster rebound this year, according to Gartner, is continuing uncertainty about the economy as a whole and, more specifically, about the effectiveness of government stimulus plans, especially when the stimulus runs out.

Gartner's forecast on the electronics industry was compiled for a report called "Signs of Improvement for End-User Electronics Recovery," published in late September.

"Almost all sectors of the electronic equipment market have now hit bottom and await signs of 'first growth' in comparison with the same quarter last year," Klaus Rinnen, managing vice president at Gartner's semiconductor manufacturing group, said in a statement. "The first signs of growth will be led by seasonal buying patterns in the PC market during the third quarter of 2009, although other major sectors will not begin to show first growth, year-on-year, until 2010."

Gartner has revised its forecasts for recovery in each of the electronic segments it tracks. Its latest findings:

PCs: After bottoming out in the first quarter of 2009, the PC sector should enjoy a sustainable recovery in the third quarter of 2010. Computer sales will continue to be constrained by slow growth in IT spending, but consumer demand has held up better than expected and is likely continue to rise. Gartner has revised its forecast for PC sales upward, anticipating good performance in the U.S. and China.

Cell phones: The mobile phone sector also hit a low in 2009's first quarter but should be the first area to show sustainable growth by the first quarter of next year. Thanks to the popularity of smartphones and to demand in emerging markets, especially China, Gartner expects mobile phone production to sink only 8 percent in 2009, 4 percentage points less than it predicted in May.

Consumer electronics: Though consumers have scooped up LCD TVs and Blu-ray players, overall sales in most areas of consumer electronics were flat or down throughout 2009. Gartner sees the market in a state of limbo right now, expecting little growth until the second quarter of next year. Beyond that, the segment is unlikely to return to pre-recession levels until the first quarter of 2011.

"Although the first signs of recovery are starting to appear for the electronics industry," Rinnen said in the statement, "the damage from the current industry recession will be felt for a long time."