Calling the bottom of the handset market

In these dark days of bad financial news--typically followed by even worse--we perhaps grasp too quickly upon even the slightest glimmer of good news. In this case it's TI stating sales of its chipsets to cellphone manufacturers exceeded expectations in the first two months of this year.

Providing some indication of how this news was greeted by eager stock market traders was the sudden surge of more than 11 per cent in Nokia shares--which have now soared 110 per cent so far this year. A crazy response maybe, but evidence (albeit slim and possibly questionable) that some market analysts believe the handset business has seen the worst of a long decline.

The source, TI, should have little to gain by attempting to falsely puff-up the market, accepting that it's struggling to re-jig its strategic roadmap and has pulled out of the commodity cellphone baseband chip sector. But the crystal-ball gazers assumed TI's "upbeat" comment was related to the custom baseband silicon it supplies to Nokia, and was a shining light of hope that the cellphone manufacturers had cleared themselves of excess inventory and were beginning to restock.

But this optimism goes against a new report released by IDC that states the global market fell by more than 11 per cent in unit terms in Q4/08, compared to a year earlier--the first holiday season quarter since 2001 not to see double-digit growth. "Expectations for 2009 were negative going into the fourth quarter of 2008," said an IDC analyst. "However, worse-than-expected results and a steady flow of negative economic news are indicating that 2009 will be gloomier than predicted."

The industry research firm claims we'll see more than an eight per cent decline in the handset market compared with 2008, with mature markets seeing the steepest fall, adding that even emerging markets, especially the BRIC countries, will have a paltry growth rate of less than one per cent.

But of note, IDC maintained that the mobile phone market still had plenty of room to grow on a global scale and expected recovery to begin in the first half of 2010. Perhaps it's the hope that it is this "global scale" (what is this if it isn't a mature or emerging market?) that is helping Nokia's prospects for a revival later this year or early in 2010. -Paul