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The Cellphone Slide

The maxim that customers won't give up their cellphones in a recession is proving to be cold comfort for vendors like Sony Ericsson Mobile Communications and Samsung Electronics Co. Ltd. (Korea: SEC) that want to sell new handsets.

Sony Ericsson said today that it sold 6.6 million fewer phones in the fourth quarter than in the same quarter last year. The company has posted a $247 million loss for the quarter, deeper than the €25 million loss ($33 million) reported in the third quarter.

Meanwhile, South Korean press reports indicate that much of Samsung's top management is stepping down and the company is combining its four business units into two -- Device Solution and Digital Media & Communications -- in order to better survive the downturn.

Nokia Corp. (NYSE: NOK) has already revised its fourth-quarter outlook downward. (See Nokia Cuts Device, Networks Outlook and Nokia Revises Outlook .) Motorola Inc. (NYSE: MOT) was struggling even before the extent of the recession became clear. (See Moto Will Lay Off 4,000 More.) Meanwhile, the common wisdom runs that cellphones are now an economic necessity for users. In fact, Allied Business Intelligence Inc. (ABI) recently argued that "displaced workers" will need to be mobile to seek out work. This doesn't offer much comfort, however, for anyone beyond a select handful of mobile operators. (See The Credit Crisis & Wireless.)

It is clear, for instance, that customers are generally less willing to spend on new handsets, even as hot new devices like the High Tech Computer Corp. (HTC) (Taiwan: 2498) G1 Android and the Palm Inc. Pre stir public interest. (See Battle of the Smartphones.)

Meanwhile, Sprint Corp. (NYSE: S) is leading the charge amongst the top four carriers in the U.S. to cut prices on unlimited talk-time offerings. The operator has said it will offer a $50 unlimited plan for its Boost Mobile service on the iDEN network.

The $50 plan might help Sprint bring some users back to the Nextel iDEN network. (See Sprint Bleeds Cellular Customers.) It also puts Sprint firmly in the ring with Leap Wireless International Inc. (Nasdaq: LEAP) and MetroPCS Inc. (NYSE: PCS) in the low-cost wireless game. AT&T Inc. (NYSE: T) and Verizon Wireless are currently offering $100 unlimited plans. (See Verizon Steps Up Unlimited Data Buffet.)

Sprint CEO Dan Hesse has suggested previously that the cellular business is sheltered from downturns because of the essential nature of the cellphone. Sprint, however, is obviously not averse to using a belt-tightening wireless plan to try to take back some of the customers that it's lost to AT&T and Verizon over the previous months. (See Hesse: Cellular 'Relatively Immune' to Downturn.)

— Dan Jones, Site Editor, Unstrung

FredStein 12/5/2012 | 4:13:46 PM
re: The Cellphone Slide I would like to hear someone explain Sprint's aggressive pricing plan. Just a casual look at the their financials (Yahoo financials) says that they are losing money and have very high debt. Note: Their revenue started dropping before the recession In addition their balance sheet shows $26B in intangible assets. So how does increasing the negative earnings gap help?
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