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TheStreet Open House

All but Apple Brace for Phone Slump

Stocks in this article: GOOG AAPL NOK MMI

NEW YORK ( TheStreet) -- An early chill has come to the mobile phone sector.

The biggest season for phone sales is just around the corner, and a heaping buffet of beefy Google (GOOG) Androids and an enticing Apple (AAPL - Get Report) iPhone or two await.

But the bountiful supply might not go with what appears to be a shrinking appetite among consumers.

Here are a few recent warning signs.

The hottest potential iPhone killer of the year -- the Motorola (MMI - Get Report) Bionic -- launched Thursday at Verizon (VZ) to a very soggy reception.

Texas Instruments (TXN) -- one of the world's largest mobile chip suppliers -- slashed its sales guidance by nearly 10% Thursday.

No. 3 phone maker LG may or may not be cutting up to 30% of its unprofitable phone operations. The Korean Economic Daily reported the planned cuts, and LG responded via Reuters that no decision has been made.

The overwhelming popularity of smartphones -- on pace to reach the 1 billion-units sold mark in 2015, according to iSuppli -- would seem to defy any notion of a slowdown. But with the global economy dragging and European financial markets in turmoil, it's not exactly hard to see how there might be some cuts in consumer spending.

"We doubt that even smartphones will be spared if consumer demand does falls off rapidly as an increasing number of electronics manufacturers seem to believe," JPMorgan analyst Rod Hall wrote in a note Friday.

A slowdown in phone sales, however, isn't likely to be applied evenly across the broad field of competitors.

New Apple Crop

With its new iPhone 5 and a stripped-down iPhone 4 potentially on its way this month or next, Apple will likely have its own sales party completely detached from the woes of less popular phone makers.

Apple has one iPhone refresh every year and the iPhone 5, delayed as it may be from customary summer launch, promises a new design with a dual-core processor and a higher-resolution camera. For millions of iPhone 3 users, it will be an enticing upgrade option.

And while Apple enjoys a new product cycle, others are lost somewhere in between.

Given that Nokia (NOK - Get Report) is Texas Instruments' largest customer, it would appear that orders from the Finnish phone shop continue to fall. Nokia's rebirth as a Microsoft's (MSFT) partner with Windows 7 phones is still a year away and business is almost all downhill until then.

And cheap phones, the presumed engine of future growth, might be feeling a squeeze in these penny-pinching times.

"One theory is that the feature phone market is now caving in rapidly," said independent analyst Tero Kuittinen. "Low-income households are slamming the breaks on low-end phone purchases. That could lead to weaker overall sales volumes in the second half of this year."

If true, that's certainly not the sort of holiday cheer phone makers were hoping for.

--Written by Scott Moritz in New York.



To contact this writer, click here: Scott Moritz, or email: scott.moritz@thestreet.com.

Follow Scott on Twitter at MoritzDispatch

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