Handset Market Growth Slows as Economy Contracts

HELSINKI (Reuters)- The global economic slowdown has started to crimp demand for newcellphones, leading top handset research house Gartner to lower itsmarket growth forecast, and top phone-charger maker Salcomp to warn onprofits.

Research firm Gartner cut its forecast for the cellphone market to10-11 percent. At the end of May Gartner forecast 10-15 percent morephones would be sold this year.

"In the last month however, the economic environment started tonegatively impact emerging markets as well as mature," CarolinaMilanesi, head of mobile device research at Gartner, told Reuters onMonday.

Last year cellphone market volumes grew 16 percent year on year.

In April Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz),the world’s largest cellphone maker, warned the value of the cellphonemarket would decline in 2008 in euro terms, meaning average prices arefalling more than volumes are increasing.

"Signals for a weaker than expected second quarter have arrived fromSony Ericsson as well as some component manufacturers," Milanesi said.

The world’s fifth largest phone maker, Sony Ericsson (6758.T: Quote, Profile, Research, Stock Buzz),warned on June 27 it would make no profit in the April-June quarter dueto weaker demand for its more expensive phones, and said the market waschallenging.

"Despite expecting a stronger second half, we feel that the weaknessof the first half has pulled the overall year growth down to 10-11percent," Milanesi said.

SHARES

Shares in Nokia and Ericsson (ERICb.ST: Quote, Profile, Research, Stock Buzz)fell after the news, but later reversed the losses. By 1207 GMT Nokiawas up 2 percent at 16.37 euros and Ericsson up 1.2 percent at 65.20Swedish crowns, compared with a 1.6 percent higher Dow Jones Stoxxtechnology index .

Salcomp (SAL1V.HE: Quote, Profile, Research, Stock Buzz),the world’s top maker of cellphone chargers, warned its 2008 operatingprofit would fall from last year’s level, citing expectations of weakervolumes during the second half of the year.

Shares in Salcomp slumped 13.9 percent to 2.84 euros.

"As our clients have lowered their monthly forecasts for theproducts we supply chargers for, our sales growth in the second half isnot as fast as we expected earlier," Salcomp Chief Financial OfficerAntti Salminen told Reuters.

He said the firm — which supplies chargers to the top five vendors– does not expect to lose market share to rivals in the second halfand its stocks are at normal levels, and cautioned against makingdirect conclusions about global cellphone demand from its warning.

Nokia will be the first of the top phone vendors to report,releasing its April-June numbers on July 17, a day before SonyEricsson. LG Electronics will report on July 21, Samsung on July 25 andMotorola on July 31.

Nokia is expected to report a 16 percent earnings rise due to strongdemand in emerging markets, yet its comments on the impact of slowinggrowth is likely to set the tone for its shares.

(Reporting by Tarmo Virki; Editing by Quentin Bryar and Sue Thomas)