Nokia Slips Up Again

The global cell-phone business keeps booming, but the handset king is giving up market share.
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Surging cell-phone sales continue to defy expectations.

Research shop Gartner boosted its 2005 industry sales-growth estimate to 13% Wednesday, citing strong expansion in new markets.

Meanwhile, No. 1 handset maker

Nokia

(NOK) - Get Report

dropped more than 2 percentage points in the first quarter's market-share table, giving up ground to the No. 2 and No. 3 players,

Motorola

(MOT)

and

Samsung

. The share figures measure change against the previous quarter ended in December.

Worldwide, total mobile handset sales grew 17% from a year ago in the first quarter, according to Gartner. The robust demand for replacement phones combined with the expansion of wireless service in new markets such as Eastern Europe, Africa and the Middle East has kept up a surprisingly resilient growth pace for handsets.

Coming off the industry's peak holiday selling season, the first quarter tends to be the slowest period of the year. But this year the seasonal slump wasn't profound, as handset sales fell just 7% from the prior quarter.

With strong trends in upgrades and emerging markets, Gartner raised its 2005 handset sales estimate to 750 million phones from the 720 million it originally expected. The new target is 13% above the 674 million phones Gartner says were sold last year.

Gartner's upbeat reassessment jibes with an

upward revision last month from Nokia. With only one quarter complete, the Finnish phone giant raised its 2005 handset growth forecast to 15% from 10% originally. Market watchers and analysts had predicted that 2005 cell-phone sales growth could not keep up the torrid 20% growth pace set last year.

But new features such as email, Web browsing and video and music players have made cell phones increasingly popular. This so-called convergence has compelled consumers to trade up to new models faster than before.

Nokia was still clearly behind in the fashion and feature race in the first quarter, as its market share dropped to 31% from 33% in the prior quarter. Nokia's dip was attributable largely to the gains by rivals Motorola and Samsung.

Handset Humble Pie
Nokia gets a thinner slice

Figures in thousands of mobile phonesSource: Gartner Dataquest

Riding the popularity of its thin metal Razr phone, Motorola added half a percentage point to its standing, with 16.8% market share. Meanwhile, Korea's Samsung continued to narrow the spread between itself and Motorola. Samsung jumped a full percentage point from its fourth-quarter level, ending with 13.3% of the market at the end of March.

Motorola

dropped briefly to third place last year after Samsung posted a strong third-quarter performance.

"Motorola must now work hard in 2005 to grow its market share further without sacrificing margins too dramatically, particularly given its commitment to supply ultra low-tier products," Gartner analyst Ben Wood said in a press release Wednesday.

Nokia fell 41 cents to $17.14 Wednesday, while Motorola dropped 31 cents to $17.06.