Analyst: Smartphones Yes, General Handsets, No

When it comes to wireless device sales, smartphone continue to show growth. The rest of the market? Not so much.

That’s the assessment from the IDC, which says the market will continue to see “ongoing challenges stemming from the economic crisis.”

The worldwide mobile phone market recorded another quarter of year-over-year decline in the second quarter of 2009, with vendors shipping a total of 269.6 million units worldwide, down 10.8 percent from last year. That’s less of a loss than the first quarter however, where sales saw a 17.2 percent decrease from last year.

“The challenges from the previous nine months – aggressive channel destocking, foreign exchange volatility, and uncertain demand – continued to plague the mobile phone market in the second quarter, but were not as severe as before,” said Ramon Llamas, senior research analyst with IDC’s mobile devices technology and trends team. “Those vendors who were able to adjust quickly were rewarded with greater shipment volumes. Although this tested the handset vendors’ abilities to hit a moving target, customers reaped the benefits of lower-costs, even on key high-end devices.”

For the full year, IDC believes that the market will decline 13 percent, with small signs of improvement centered around consumer demand for high-end handsets and the manufacturers’ ability to shift portfolio to meet these needs.

“Among the big handset vendors–Nokia, Samsung, Research In Motion and Apple, all beat expectations for smartphones within the second quarter,” said Ryan Reith, senior research analyst with IDC’s Worldwide Quarterly Mobile Phone Tracker. “This demand for high-end mobile phones has created a price war among large mobile operators and handset vendors. Apple’s price cut on the iPhone 3G reflects a trend we expect to continue in the upcoming quarters, and one that will effectively maintain competitive pricing within mature markets.”

Amidst the ongoing economic challenges in North America, the market for converged mobile devices thrived with the arrival of the Palm Pre and the iPhone 3G S towards the end of the quarter, IDC reports. Shipment volumes for other converged mobile device vendors also benefited from increased attention and price adjustments on the segment, pushing the market even higher. At the same time, interest in prepaid devices remained strong for budget-conscious customers. Finally, the market for mid-tier and high-end devices began to show signs of improvement with the arrival of new devices from leading vendors.

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