Sony Ericsson (NASDAQ:ERICY) on Wednesday said cell phone sales growth is slowing, especially for higher-end phones, helping to send shares of handset makers plummeting.
The news came the week after Texas Instruments (NYSE:TXN)
Shares of No. 1 cell phone maker Nokia (NYSE:NOK)
"The slowing growth in the high-end phone market is real," said Jack Gold, principal of research firm J. Gold Associates. "It's driven by recession fears and belt tightening by consumers."
Analysts say the main concern is on the highly profitable higher end of the consumer phone market, Sony Ericsson's focus. Research In Motion (NASDAQ:RIMM) , maker of the BlackBerry smart phone, saw its stock fall 3.7%.
The joint venture of Sweden's Ericsson and Japan's Sony says it now expects to ship about 22 million phones in the first quarter. Research firm Nomura had expected the firm to ship 28 million phones. The Texas Instrument warning had prodded Nomura to cut its estimate to 26.5 million.
Sony Ericsson's average sales price for its phones is $189, compared with $129 for Nokia, which is strongest in the low and midrange markets.
Arguably the most popular high-end phone aimed at consumers is the Apple
Analyst Gold, however, says consumers can buy relatively feature-rich phones for well under $200.
"That's leaving consumers to ask if they really need a $400 or $500 phone," Gold said.
The iPhone's success could be hurting Sony Ericsson, says David Chamberlain, an analyst with research firm In-Stat. Many cell phone makers are scrambling to build Apple-like phones, and consumers might be holding off on purchases as they await the new generation of phones. He says that might especially be the case in Europe, a strong Sony Ericsson market, where iPhone sales began in November.
"We have come to a very strange spot in the global handset market," Chamberlain said. "The iPhone has radically altered expectations at the higher end that other handset vendors have not yet been able to respond to."
In lowering its outlook, Texas Instruments pointed to weaker demand from a major customer for high-end, or 3G, chips. It didn't identify the customer. Many analysts had speculated it was Nokia. Now, many have changed their mind, saying that customer might well be Sony Ericsson.
"Unfortunately for Sony Ericsson, it is not a huge player in the emerging markets (where growth is strongest)," Gold said.
In a statement, Sony Ericsson President Dick Komiyama said, "The market is proving to be challenging. This has been pronounced in the mid- to high-end replacement sector of the market in Europe, where we have a stronger-than-average market share."
The company has been expanding its product lineup and pushing into new markets, aiming to supplant Motorola (NYSE:MOT)
Before the announcements by Texas Instruments and Sony Ericsson, analysts had been upbeat about the high end of the handset market.
"We believe the high-end smart phones and mobile applications are among the best growth opportunities," International Strategy & Investment analyst Bill Whyman wrote in a March 3 report.
Form : http://money.cnn.com/
