According to the latest data from research firm Gartner, smartphone sales grew 27% year over year in the second quarter, surpassing 40 million units and representing the fastest growing segment in the mobile-devices market.
We believe the volumes were driven by the launch of new devices such as Apple’s (AAPL) iPhone 3G S, Research in Motion’s (RIMM) BlackBerry and Palm’s (PALM) Pre with features such as touchscreen and QWERTY keyboard. Aggressive price cuts led to increased consumer purchases, while ASPs fell.

However, smartphone sales are averse to falling ASPs, which helped increase second quarter revenue. Moreover, the recent stabilization in demand boosted smartphone sales.
Gartner said that the total mobile phone sales fell 6.1% year over year to 286.1 million units in the second quarter of 2009. Sales have been hit by the global recession and weak consumer spending. However, lower prices have boosted sales of advanced smartphones. Gartner expects the mobile phone market to further fall by 4.0% in 2009.
On the negative side, weak spending has led consumers to shift to lower priced models, which are impacting margins. This will hurt profitability at large phone makers such as Apple, Nokia (NOK), Motorola (MOT), LG, Samsung and RIMM, whose sales are heavily skewed towards low-end devices in these difficult times.
Although Nokia maintained its leadership position with a smartphone market share of 45.0% in the second quarter (helped by increased demand for its low-priced models), growth in Apple’s market share is commendable as it increased to 13.3% in the second quarter from 2.8% in the comparable quarter last year maintaining its third position in the smartphone market.

Apple’s sell-through in increased number of countries helped raise revenues. Apart from this, the price cut of the earlier 8GB iPhone 3G has fueled higher sales. Apple sold 5.4 million units in the second quarter, representing a 51% growth in shipments.

According to Gartner, while retail sales of phones declined by 25 million units in the first quarter of 2009, the sales fell only by 14 million phones in the second quarter. Moreover, we believe inventories are expected to have a lower impact on the overall market in the second half of 2009 as the companies are continuously focusing on destocking efforts.

We are, however, worried about the growing price war and intensifying competition, which will further put pressure on phone manufacturers to deliver high-end phones with strong features at low prices.
Read the full analyst report on “AAPL”
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Read the full analyst report on “PALM”
Read the full analyst report on “NOK”
Read the full analyst report on “MOT”
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