Announcement sends mobile sector stocks plummeting

The mobile phone market is seeing some of the poorest sales in recent history with demand for products dropping in many segments of the mobile phone industry. The only segment of the mobile phone industry that is predicted to show strong growth this year is the high-end smartphone market.

The fourth largest mobile phone maker in the world -- Sony Ericsson -- has announced that it will see a massive loss for the quarter with barely half of the handsets sold this quarter as it was able to move in the quarter before.

The announcement by Sony Ericsson sent shares across the wireless sector into a downward spiral reports Reuters. Sony Ericsson expects to sell only 14 million phones in the quarter spanning January to March and cites weak demand and retailers cutting inventories as reasons for the massive decline.

Jari Honko from eQ Bank told Reuters, "Investors are questioning the whole market now, even though I think the issue for Sony Ericsson is more company specific."

Sony Ericcson wasn't alone in announcing declines in sales and shipments -- Palm announced that it was going to see a larger loss than originally reported over the December to February quarter. Revenues for the quarter declined 70% from one year ago according to Palm. Analyst Carolina Milanesi from Gartner said, "The market, overall, continues to be very challenging." Sony Ericsson announced in January that it would cut 5,000 jobs.

The massive losses from mobile phone manufacturers spilled over into fears for the chipmakers building the processors for the mobile phone market. Infineon shares dropped 6.6% and STMicro dropped 5% after the announcements by Sony Ericsson and Palm.

Sony Ericsson is expected to announce a pretax loss of $459 million to $526 million for the quarter. Analyst Greger Johansson from Redeye noted, "It's a real catastrophe. Those are very big losses and they are probably losing a lot of market share. It's obvious that the volumes are much lower than the market had thought. And first and foremost, the losses are much, much bigger."

Sony Ericsson is biggest in the mid-range mobile phone market with integrated cameras. This is one of the segments hardest hit with the current global economy according to Reuters. Analysts expect sales of high-end smartphones to continue to rise as other segments in the category fall. The predicted growth rate for high-end devices is 10% to 20% in 2009.

Qualcomm's Jing Wang told Reuters, "Consumer demand for higher-end smartphones remains strong as the demand for wireless Internet, multimedia, and value-added services continues to grow." He continued saying, "While inventories have contracted, global 3G adoption is continuing to grow as subscribers migrate from second-generation to third-generation networks and manufacturers are shipping more 3G devices this year than last year."

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