Everyone knows that Nokia ( NOK) sells more cell phones worldwide than anyone else on the planet.

But can you tell me the Nos. 2 and 3 companies? I'll give you a hint: Not Apple ( AAPL) or Research in Motion ( RIMM) or SonyEricsson ( ERIC), and definitely not Motorola ( MOT).

If you said Samsung and LG, then you're on the right track. The South Korean electronics giants have taken second and third places, respectively, in fourth-quarter '08 sales, according to Gartner.

In terms of market share, Samsung and LG were considered to have outperformed rivals in the quarter, Samsung gaining 4.9% over the previous year, and LG rising 1.8%.

That is the good news.

The bad news is that according to the same report, mobile-phone sales dropped almost 5% in the last quarter of 2008. Total worldwide sales to end users totaled only 314.7 million units -- a 4.6% decline from fourth-quarter 2007. The top five handset vendors all registered an overall drop in sales.

Smart Phones

The problem is the decline came in a quarter that is traditionally the strongest for the cellular phone industry due to holiday sales. "Mobile devices in both emerging and developed markets experienced the lowest quarter-on-quarter growth (2%) ever recorded in a fourth quarter," according to Carolina Milanesi, research director for mobile devices at Gartner.

There is a silver lining in all this: Despite the fourth-quarter decline, sales for the full year 2008 reached 1.22 billion units, a 6% increase over 2007.

The research firm noted a widening gap between sales (297.3 million) into the channel in the fourth quarter (and sales to users (314.7 million) -- the largest difference recorded since Gartner started measuring the market in 2001.

"Efforts to reduce inventory will intensify in the first quarter of 2009 and continue into the second quarter of 2009," said Milanesi. "In the second half of 2009, the channel will have to start restocking and this will help sell-in volumes," she said. Gartner does not expect demand to stabilize before 2010."

In actual fourth-quarter '08 numbers:
  • Nokia's share slipped to 37.7% share (down from 40.4%).
  • Samsung's share rose to 18.3% (up from 13.4%)
  • LG's share rose to 8.9% (up from 7.1%)
  • SonyEricsson's share dropped to 7.5% (down from 9%)
  • Motorola's share plummeted to 6.9% (down from 11.9%)

All other manufacturers' percentages rose from 18.2% to 21.7%.
Gary Krakow is TheStreet.com's senior technology correspondent.