“There were some signs of a recovery in markets such as North America and China, but overall sales in the first quarter of 2009 registered the biggest quarter-on-quarter contraction since Gartner began monitoring the market on a quarterly basis in 2001,” said Carolina Milanesi, research director for mobile devices at Gartner, based in Egham, UK. “This was also the first time the market contracted year over year during the first quarter, a period traditionally helped by strong seasonality in the Asia/Pacific market.”

Nokia continued to lead the mobile phone market, but its share dropped to 36.2 per cent from 39.1 per cent in the first quarter of 2008. Samsung retained second place and improved its market share as its sales totalled 51.4 million units. After dropping to the fifth position in the fourth quarter of 2008, Motorola overtook Sony Ericsson to regain fourth place.

Smartphone sales represented 13.5 per cent of all mobile device sales in the first quarter of 2009, compared with 11 per cent in the first quarter of 2008. Gartner analysts said positive performance by Research In Motion (RIM) and Apple showed that services and applications are now instrumental to smartphones’ success.

Symbian accounted for 49.3 per cent of worldwide smartphone operating systems (OS) market share in the first quarter of 2009, down from 56.9 per cent share in the first quarter of 2008. RIM’s smartphone OS market share reached 19.9 per cent in the first quarter of 2009, up from 13.3 per cent share in the first quarter of last year. The iPhone OS accounted for 10.8 per cent of the market, up from 5.3 per cent market share in the first quarter of 2008.

“Although current consumer interest in, and usage of, mobile gaming is generally low, the potential for growth remains lucrative, with the market skewed toward lower-income segments, mobile workers and smartphone and personal digital assistant (PDA) users,” said Tuong Huy Nguyen, principal analyst at Gartner.

“The fact that mobile gaming provides good value for the money is one reason for the healthy growth rate,” Mr. Nguyen said. “For a relatively small sum, consumers can enjoy a game over and over again, which is particularly relevant in emerging economies where penetration of consoles and PCs is lower. Video games in their original versions (on PCs or consoles) represent a form of entertainment recognized across a wide population, while portable consoles have also taken the market a step towards gaming on a mobile device. Finally, game publishers and mobile operators are getting better at working together and becoming more active in the mobile gaming space.”

Gartner predicts that mobile gaming revenue will experience a compound annual growth rate of 10.2 percent between 2007 and 2011 with worldwide end-user spending reaching $6.3 billion in 2011. Analysts said mobile operators and other game providers should build usage by offering game demos or advertising-funded games.

The Asia/Pacific region (including Japan) represents by far the largest market for mobile gaming, with end-user spending forecast to total $2.3 billion in 2008 and reach $3.4 billion by 2011. The mobile-game market has outshone the PC and console game market in the emerging territories of Asia largely because of the low penetration of PCs compared with that of mobile devices. India is expected to lead among Asian countries in terms of total mobile gaming revenue generated, with the 2007 figure at approximately $80 million. This is forecast to reach $450 million by 2012.

“Emerging market operators should make the most of the demand for mobile games and the low PC penetration in these regions and push game sales as a viable, albeit imperfect, lower-cost substitute to PC and console games,” said Madhusudan Gupta, senior analyst at Gartner.

The mobile gaming market in Western Europe is expected to grow from $701 million in 2008 to $862 million by 2011. The North American market is projected to grow from $845 million to approximately $1.2 billion in 2011. The gap between North American and Western European mobile-gaming revenues is expected to widen over the forecast period as more users in North America adopt mobile data services in general.

Nokia sold 115.2 million mobile phones in the first quarter of 2008, as its market share slipped slightly to 39.1 per cent (see Table 1). Nokia was able to maintain market leadership thanks to the richness of its portfolio, which appeals to users in both emerging and mature markets. Sales in the ultra-low-cost segment remained strong due to Nokia’s distribution strategy, economies of scale and brand power. However, competition in this segment and at the high end is increasing. To stay ahead, Nokia will have to continue to integrate new technologies in its handsets and improve usability and design.

Samsung maintained its momentum in the first quarter of 2008 with sales reaching 42.4 million units. The South Korean vendor not only held on to its No. 2 position worldwide, but it also widened the gap from third-placed Motorola as its market share grew to 14.4 per cent. Samsung is reacting quickly to the focus on touch-screen devices. “Samsung’s choice to be a quick follower has paid off so far, but it needs to focus on diversifying its designs and strengthening its lower-end portfolio to increase sales in emerging markets,” said Ms Milanesi.

Motorola carried the problems it had in 2007 through to the first quarter of 2008 and sales fell to 29.9 million units. The US manufacturer continues to struggle in finding the successor to its popular Razr. Although it introduced new models, its portfolio is simply not competitive enough. Ms Milanesi said: “Motorola is unlikely to introduce many products in the second half of 2008, a time when most competitors will bring new additions to the market, so it stands little chance of winning back its No. 2 position. It may even have to watch out for a threat from current No. 4 player LG.”

LG had an excellent start to 2008 with sales reaching 23.6 million units and a market share of 8 per cent. As a result, LG overtook Sony Ericsson to become the No. 4 vendor worldwide. With a strengthened portfolio, LG capitalised on the attention the market has given to touch-screen devices since the launch of the Apple iPhone. Although the LG Prada, Shine and KF600 models have proved popular, LG must remember that touch-screen phones do not appeal to everyone. The South Korean vendor needs to build a stronger smartphone portfolio, as consumers and operators have started to place more emphasis on this market segment.

Sony Ericsson was another vendor that had a difficult start to 2008. Its sales reached 22.1 million units, but this was not enough to hold on to the No. 4 spot. Sony Ericsson attributed these weak results to the difficult conditions in the Western European market, which experienced some softness in the high-end segment. With new products for the second half of 2008 and with a stronger mid-tier portfolio, Sony Ericsson is in a good position to win back its fourth place in the market share rankings.