Amid the global economic meltdown, life was sure miserable for many of the wireless-related companies last week. Many announced some depressing results for a fourth quarter that was usually supposed to be cheery because of the Christmas-selling season.
Sprint Nextel announced 8,000 job cuts, which is about 14 percent of the company's entire workforce, but hasn't given us its fourth-quarter results yet. You can expect millions more customers to walk away as the operator continues its struggles, which will be exacerbated by the economic malaise.
Hit by a global slowdown in handset sales, Texas Instruments said it will lay off 3,400 employees or 12 percent of its workforce, amid declining profits. The chip maker reported revenue of $2.49 billion, down from $3.56 billion last year, and said it had a fourth-quarter net income of $107 million compared with a net income of $756 million in fourth-quarter 2007.
One can usually count on Qualcomm to report stellar numbers, but the company said last week that net income for the three months ended December plummeted 56 percent year on year and 61 percent sequentially to $341 million as mobile-phone shipments fell dramatically.
On the operator side, churn rose for all of the operators that reported: AT&T, Verizon Wireless and T-Mobile. T-Mobile fared the worst in the fourth quarter. The fourth-largest operator in the U.S. reported 621,000 net new subscriber additions in the quarter, down from 670,000 in the third quarter of 2008 and 951,000 in the fourth quarter of 2007. The number was the lowest quarterly net subscriber additions number since the second quarter of 2006. Being the exclusive provider of Google's G1 phone had no impact on the operator's net additions.
Verizon Wireless' introduction of Research In Motion's Storm fared a bit better than the G1, with Verizon Wireless reporting 1 million Storm devices sold since its introduction Nov. 21. (However, there was no mention of how many were sold in the fourth quarter alone.) The iPhone 3G still boosted AT&T's numbers, although profits dropped year on year 23 percent to $2.4 billion. During the fourth quarter AT&T added 2.1 million net wireless subscribers, with 1.9 million being iPhone activations, of which approximately 40 percent were customers new to AT&T.
These results show that the wireless industry is not recession proof, but it certainly is more recession proof than it was during the last downturn in 2002. People see their phones as must-have devices, but obviously are holding off on buying new handsets as seen by the dramatic fall in global handset sales. Strategy Analytics said handset shipments for the fourth quarter fell 10 percent year on year to 295 million.
Still, other trends are encouraging. I've said in the past that smartphones may be what keep the industry propped up during an economic slowdown. With them come growth in wireless data. Both AT&T and Verizon announced increases in data ARPU in the fourth quarter as they continue to load new smartphones on their networks.
And new players appear to be clamoring to come into the smartphone market. Last week, it was revealed that Dell would soon enter the smartphone market, perhaps as early as next month. Nokia has already indicated it will expand the definition of smartphones this year to appeal directly to the consumer. And rumor is that a flurry of smartphone announcements will occur during this month's Mobile World Congress in Barcelona. It's evidence that these new handsets are generating interest within a consumer audience, and it appears smartphone users also see data as a necessity. --Lynnette