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Wednesday, May 21, 2008

US Cell Phone Sales Drop For First Time Ever

US Cell Phone Sales Drop For First Time Ever

For the first time since it started monitoring mobile phone sales, analyst firm NPD notes a decrease in the number of handsets sold in the United States for the first quarter this year by a significant 22 percent.

The cause has less to do with a mature market than with a squeeze on the economy and consumers' buying power, the firm says. NPD estimates sales of about $2.7 billion during the first quarter of 2008, down from $2.9 billion during the same period last year.

"Cellular phone service has become a practical necessity in modern life; however, with looming economic concerns on the horizon, many consumers may be holding back on new handset purchases, especially those tied to new pre-paid plans," Rubin said.

Market share among the handset makers stayed mostly the same, with Motorola still on top with 27 percent of all units sold, although that's down from 35 percent a year ago. Rounding out the top five are Samsung at 18 percent, LG at 8 percent, Nokia at 8 percent and BlackBerry with 5 percent. Dropping out of the top five was Sanyo.

Smart phones, like BlackBerrys and Palm Treos, continue to make up more of the market, comprising 17 percent of all phone sales, but these higher priced items are often used for business, so the cost is absorbed by a company and not an individual consumer. It's these individual consumers who are causing the dip in sales overall.

Bernstein Research says the U.S. wireless industry added 23% fewer subscribers in the first quarter, compared with the year-earlier period. The slowdown started six months ago, with fewer plans being purchased for kids and by people hit hard by the fallout from the subprime meltdown.

So, does this mean we've reached the peak of cell phone adoption, and with only 1 in 6 US households having eschewed landline service altogether in favor of their wireless handsets? In our opinion, it's not likely. Between the rise of the iPhone/smart phones and the pure convenience and savings that cell phones offer, it looks like this latest sales drop is just a temporary blip on the way to the wireless future