taking on the contract associated with the most attractive products on the market. Consequently, mobile devices in both emerging and developed markets experienced the lowest quarter on quarter growth (2%) ever recorded in a fourth quarter.”

Sales into the channel reached 297.3 million in the fourth quarter of 2008, while sales to users were just short of 314.7 million units. This is the biggest difference recorded since Gartner started measuring the market in 2001, said Milanesi. Such a difference was the result of the channel reducing the inventory it holds. Low consumer confidence is forcing distributors and retailers to limit the volume they hold in stock, because the channel cannot afford significant capital investment, she claimed.

Milanesi continued: “Efforts to reduce inventory will intensify in the first quarter of 2009 and continue into the second quarter of 2009. In the second half of 2009, the channel will have to start re-stocking and this will help sell-in volumes.” However, she added: “This will not mark the start of a market recovery; we do not expect demand to stabilise before 2010.

“From the third quarter of 2008, it became clear that the economic impact was spreading to emerging markets,” added Milanesi. “Sales rapidly deteriorated, making 2008 a challenging year for the entire mobile phone industry.”

Vendor overview

Nokia sold nearly 119 million mobile phones in the fourth quarter of 2008, giving it a market share of 37.7%. This was a decline both sequentially and year on year. With sales in emerging markets slowing due to the economic environment, Nokia felt more pressure in the second half of 2008. Nokia’s delay in rolling out products with touchscreen functionality caused its smartphone sales to suffer.

Samsung finished a strong year with a good performance. In the fourth quarter of 2008, Samsung was able to grow share sequentially and also year on year, as products such as the Tocco, Innov8 and Omnia continued to drive sales in regions such as Western Europe and Asia-Pacific. Samsung’s quick response to demand for touch interfaces was the main reason for its success.

After a blip in the third quarter of 2008, when LG lost its fourth place to Motorola, LG was able to get back on track and jump two places to No. 3 in the fourth quarter of 2008 worldwide market share. In the fourth quarter, LG moved into second place in North America, due to its dominant position at Verizon Wireless and very strong sales at TracFone.

As Gartner predicted, Sony Ericsson was unable to hold on to the third position in the worldwide ranking, which it reached in the third quarter of 2008. In the fourth quarter, its sales dropped to 23.6 million units, putting it in fourth place. Not only did Sony Ericsson fail to reduce stock levels in the fourth quarter, it also built a slight inventory. As both music players and cameras have become more widespread in the competitors’ portfolios, it has been more difficult for Sony Ericsson’s Walkman and Cybershot product ranges to stand out. Lack of pure touchscreen devices also impacted overall performance in 2008.

Motorola’s performance worsened in the fourth quarter of 2008, when it slipped to fifth place in the worldwide ranking. Some reductions in inventory helped Motorola finish the year in third position with sales that were close to 107 million units. The drop in market share on a year to year basis (-5.6 percentage points) is a clear indication of the troubled times the vendor has been facing. Lack of compelling products throughout the portfolio, particularly in 3G and touchscreen devices, has made it impossible for Motorola to slow down its sales decline.

And in Europe…

In EMEA, mobile handsets sales in the fourth quarter of 2008 grew sequentially by 2.5% to 59.3 million units, bringing the market for the full year to 229.5 million. Sales in the fourth quarter of 2008 declined 3.5% year on year, showing users were more conscious of their spending.

Sales in Western Europe reached 53.4 million units in the fourth quarter of 2008, a good quarter considering the difficult year. This was mainly the result of aggressive stock level reduction in the channel. Yet despite the strong performance recorded in 4Q08, overall sales in 2008 were 16.4 million lower than in 2007. This is because consumers locked into 18 and 24 month contracts were unable to upgrade. Touchscreen functionality was the most sought after feature during the quarter.